The company's 5G and fiber momentum helped
drive high-quality, profitable customer growth, low churn and
improved financial performance
DALLAS, Oct. 19,
2023 /PRNewswire/ -- AT&T Inc. (NYSE: T) again
delivered strong results in the third quarter with solid 5G and
fiber subscriber growth. The company also posted healthy year over
year increases in Mobility service and broadband revenues, driving
higher profitability.
Strong third-quarter results build on
momentum
- Revenues of $30.4 billion,
up 1% year over year
- Cash from operating activities of $10.3 billion, up $0.2
billion or 2.4% year over year; year-to-date, cash from
operating activities is up $1.5
billion versus the same period a year ago.
- Free cash flow* of $5.2
billion, up $1.3 billion
year over year; year-to-date, free cash flow is up $2.4 billion versus the same period a year
ago.
- The company now expects full-year free cash flow* of
about $16.5 billion, versus prior
guidance of $16 billion or
better.
- Operating income of $5.8
billion, with adjusted operating income* of $6.5 billion
"Our investments in best-in-class 5G and fiber connectivity are
fueling our growth engine. We're gaining profitable customer
relationships and becoming more efficient. This is powering
our strong business performance and gives us the confidence to
raise our full-year free cash flow guidance," said John Stankey, AT&T CEO. "We are pleased that
customers are choosing AT&T and staying with us over the long
run as we connect and simplify their digital world."
Sustainable strategy creates foundation for durable,
long-term growth
- Delivered 468,000 postpaid phone net adds with
continued strong ARPU growth and historically low levels of
churn
- Mobility service revenues up 3.7%; achieved
company's best-ever Mobility operating income
- 296,000 AT&T Fiber net adds
- Consumer broadband revenues up 9.8%, driven by AT&T
Fiber revenue growth of 26.9%
- Surpassed 8 million AT&T Fiber subscribers; doubled
customer base in less than 4 years
- Launched AT&T Internet Air fixed wireless
residential service; expect to be in 30+ locations by the end of
the year
A leading investor in America's broadband
infrastructure
- Continued to enhance the largest wireless network in
North America1 and
expand the most reliable 5G network1 as we scale our 5G
standalone; mid-band 5G spectrum now covers more than 190
million people, on track to reach 200 million people or more
with mid-band 5G by year-end
- Grew the nation's largest consumer fiber network, which is now
capable of serving 20.7 million consumers and about 3.3
million business customer locations; on track to pass 30
million+ fiber locations by the end of 2025
- Supported AST SpaceMobile in world's-first direct 5G
voice call between two unmodified smartphones via a low-earth
orbit satellite in space
Becoming more efficient and effective through
innovation
- Strong early progress on achieving an incremental $2
billion+ run-rate cost savings target within the next three
years
Note: AT&T's third-quarter earnings conference call will
be webcast at 8:30 a.m. ET on Thursday,
October 19, 2023. The webcast and related materials,
including financial highlights, will be available on AT&T's
Investor Relations website at
https://investors.att.com.
Consolidated Financial Results
Revenues for the third quarter totaled
$30.4 billion versus
$30.0 billion in the year-ago
quarter, up 1.0%. This increase primarily reflects higher Mobility,
Mexico and Consumer Wireline
revenues, partly offset by lower Business Wireline revenues.
Revenue increases also reflect favorable impacts of foreign
exchange rates in Mexico.
Operating expenses were $24.6 billion versus $24.0 billion in the year-ago quarter, reflecting
higher severance and restructuring charges and continued
inflationary cost increases in the third quarter of 2023, partially
offset by continued transformation efforts. Operating expense
increases also reflect increased depreciation expense, higher
network costs, unfavorable impact of foreign exchange rates, and
increased amortization of deferred customer acquisition costs.
These increases were partially offset by lower Mobility equipment
and associated selling costs from lower wireless sales volumes, and
lower personnel costs.
Operating income was $5.8 billion versus $6.0 billion in the year-ago quarter. When
adjusting for certain items, adjusted operating income* was
$6.5 billion versus $6.2 billion in the year-ago quarter.
The company now expects full-year Adjusted
EBITDA* growth of better than 4%, versus prior guidance of
3%+.
Equity in net income of affiliates was
$0.4 billion, primarily from the
DIRECTV investment. With an adjustment for our proportionate share
of intangible amortization, adjusted equity in net income from the
DIRECTV investment* was $0.7
billion.
Income from continuing operations
was $3.8 billion, versus
$6.3 billion in the year-ago quarter.
Earnings per diluted common share from continuing
operations2 was $0.48
versus $0.79 in the year-ago quarter.
Adjusting for $0.16, which includes
severance and restructuring charges, an impairment of an equity
investment in a Latin America
satellite business, our proportionate share of intangible
amortization from the DIRECTV equity method investment and an
actuarial gain on benefit plans and other items, earnings per
diluted common share from continuing operations* was
$0.64 compared to $0.68 in the year-ago quarter.
Cash from operating activities from
continuing operations was $10.3 billion, up $0.2 billion year over year, reflecting
operational growth and timing of working capital, including lower
device payments partially offset by a lower net impact from
receivable sales. Capital expenditures were $4.6 billion in the quarter versus
$5.9 billion in the year-ago
quarter. Capital investment*, which includes $1.0 billion of cash payments for vendor
financing, totaled $5.6 billion.
Free cash flow* was $5.2 billion for the quarter. Total
debt was $138.0 billion at the
end of the quarter, and net debt* was $128.7 billion. The company expects to achieve
net debt-to-adjusted EBITDA* in the 2.5x range in the first
half of 2025.
Communications Operational Highlights
Third-quarter revenues were $29.2 billion, up 0.4% year over year due to
increases in Mobility and Consumer Wireline, which more than offset
a decline in Business Wireline. Operating income was
$7.3 billion, up 4.1% year over
year, with operating income margin of 24.9%, compared
to 24.0% in the year-ago quarter.
Mobility
-
- Revenues were up 2.0% year over year to $20.7 billion due to higher service revenues.
Service revenues were $15.9 billion, up 3.7% year over year,
primarily driven by subscriber and postpaid phone ARPU growth.
Equipment revenues were $4.8 billion, down 3.2% year over year due
to lower device volumes.
- Operating expenses were $13.9 billion, down 0.9% year over year,
primarily due to lower equipment costs and associated selling
expenses driven by lower device sales, partly offset by higher
network and customer support costs, increased amortization of
deferred customer acquisition costs and higher depreciation
expense.
- Operating income was $6.8 billion, up 8.6% year over year.
Operating income margin was 32.7%, compared to 30.7% in the
year-ago quarter.
- EBITDA* was $8.9 billion, up 7.6% year over year with
EBITDA margin* of 43.0%, up from 40.8% in the year-ago
quarter. This was the company's best-ever quarterly Mobility
EBITDA*. EBITDA service margin* was 55.9%, up from
53.9% in the year-ago quarter.
- Total wireless net adds were 6.6 million, including:
- 550,000 postpaid net adds with:
- 468,000 postpaid phone net adds
- (48,000) postpaid tablet and other branded computing device net
losses
- 130,000 other net adds
- 26,000 prepaid phone net adds
- Postpaid churn improved to 0.95% versus 1.01% in the
year-ago quarter.
- Postpaid phone churn improved to 0.79% versus 0.84% in
the year-ago quarter.
- Prepaid churn was 2.78%, with Cricket substantially
lower, versus 2.83% in the year-ago quarter.
- Postpaid phone ARPU was $55.99, up 0.6% versus the year-ago quarter, due
to pricing actions, higher international roaming and a mix shift to
higher-priced unlimited plans.
- FirstNet connections reached about 5.3 million
across nearly 27,000 agencies. FirstNet is the nationwide
communications platform dedicated to public safety. The AT&T
and FirstNet networks cover more than 99% of the U.S. population,
and FirstNet covers more first responders than any other network in
America.
Business Wireline
-
- Revenues were $5.2 billion, down 7.9% year over year due
to lower demand for legacy voice and data services and product
simplification, partly offset by growth in connectivity services.
This quarter also included approximately $100 million in revenues from intellectual
property sales, which were relatively consistent with the prior
year.
- Operating expenses were $4.9 billion, down 3.5% year over year due
to lower personnel costs associated with ongoing transformation
initiatives, and lower wholesale network access, customer support
and marketing expenses.
- Operating income was $350 million, down 43.6%, with
operating income margin of 6.7% compared to 11.0% in the
year-ago quarter.
- EBITDA* was $1.7 billion, down 13.7% year over year with
EBITDA margin* of 32.5%, compared to 34.6% in the year-ago
quarter. The company now expects full-year Business Wireline
EBITDA* declines in the low-double digits, versus prior guidance of
high-single digit declines.
- AT&T Business serves the largest global companies,
government agencies and small businesses. More than 800,000 U.S.
business buildings are lit with fiber from AT&T, enabling
high-speed fiber connections to approximately 3.3 million U.S.
business customer locations. Nationwide, more than 10 million
business customer locations are on or within 1,000 feet of our
fiber.3
Consumer Wireline
-
- Revenues were $3.3 billion, up 4.6% year over year due to
gains in broadband more than offsetting declines in legacy voice
and data and other services. Broadband revenues increased
9.8% due to fiber growth of 26.9%, partly offset by a 9.0% decline
in non-fiber revenues. The company now expects full-year broadband
revenue growth of 7%+, versus prior guidance of 5%+.
- Operating expenses were $3.2 billion, up 4.2% year over year due to
higher depreciation expense and higher network-related costs,
partly offset by lower customer support costs.
- Operating income was $160 million, up 12.7% year
over year with operating income margin of 4.8%, compared to
4.5% in the year-ago quarter.
- EBITDA* was $1.0 billion, up 9.4% year over year with
EBITDA margin* of 31.0%, up from 29.6% in the year-ago
quarter.
- Total broadband net gains, excluding DSL and
including AT&T Internet Air, were 15,000, reflecting
AT&T Fiber net adds of 296,000, more than offsetting
losses in non-fiber services. AT&T Fiber is now capable of
serving 20.7 million customer locations and offers
symmetrical, multi-gig speeds across parts of its entire footprint
of more than 100 metro areas.
Latin America – Mexico
Operational Highlights
Revenues were $992
million, up 26.4% year over year due to growth in both
service and equipment revenues. Service revenues were
$672 million, up 20.2% year over
year, driven by favorable foreign exchange and essentially stable
subscriber and wholesale revenues. Equipment revenues were
$320 million, up 41.6% year over year
due to higher sales and favorable foreign exchange.
Operating loss was ($29) million compared to ($63) million in the year-ago quarter.
EBITDA* was $155 million
compared to $101 million in the
year-ago quarter.
Total wireless net adds were 65,000,
including 17,000 prepaid net adds, 55,000 postpaid net
adds and 7,000 reseller net losses.
* Further clarification and explanation of non-GAAP measures and
reconciliations to their most comparable GAAP measures can be found
in the "Non-GAAP Measures and Reconciliations to GAAP Measures"
section of the release and at https://investors.att.com.
FirstNet and the
FirstNet logo are registered trademarks and service marks of the
First Responder Network Authority. All other marks are the property
of their respective owners.
|
|
1 Based on
comparison of carrier owned & operated networks. No AT&T
on-net coverage in select countries, including Canada. Details:
https://www.att.com/international/. Destinations covered:
att.com/globalcountries. 5G claim based on nationwide GWS drive
test data. GWS conducts paid drive tests for AT&T and uses the
data in its analysis. AT&T 5G requires compatible plan and
device. 5G coverage not available everywhere. Learn more
at att.com/5Gforyou
|
|
2 Diluted
Earnings per Common Share from continuing operations is
calculated using Income (Loss) from Continuing Operations, less Net
Income Attributable to Noncontrolling Interest and Preferred Stock
Dividends and adjustment for distributions on Mobility II preferred
interests (prior to redemption) and share-based payments (when not
antidilutive), divided by the weighted average common shares
outstanding for the period.
|
|
3 The
approximately 3.3 million U.S. business customer locations are
included within the 10+ million U.S. business customer
locations on or within 1,000 feet of our fiber.
|
About AT&T
We help more than 100 million
U.S. families, friends and neighbors, plus nearly 2.5 million
businesses, connect to greater possibility. From the first phone
call 140+ years ago to our 5G wireless and multi-gig internet
offerings today, we @ATT innovate to improve lives. For more
information about AT&T Inc. (NYSE:T), please
visit us at about.att.com. Investors can learn
more at investors.att.com.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release
contains financial estimates and other forward-looking statements
that are subject to risks and uncertainties, and actual results
might differ materially. A discussion of factors that may affect
future results is contained in AT&T's filings with the
Securities and Exchange Commission. AT&T disclaims any
obligation to update and revise statements contained in this news
release based on new information or otherwise. This news release
may contain certain non-GAAP financial measures. Reconciliations
between the non-GAAP financial measures and the GAAP financial
measures are available on the company's website at
https://investors.att.com.
Non-GAAP Measures and Reconciliations to GAAP
Measures
Schedules and reconciliations of non-GAAP financial
measures cited in this document to the most directly comparable
financial measures under generally accepted accounting principles
(GAAP) can be found at https://investors.att.com and in our Form
8-K dated October 19, 2023. Free cash
flow, EBITDA, adjusted EBITDA, adjusted operating income, adjusted
diluted EPS, net debt and net debt-to-adjusted EBITDA are non-GAAP
financial measures frequently used by investors and credit rating
agencies.
Free cash flow for 3Q23 of $5.2
billion is cash from operating activities from continuing
operations of $10.3 billion,
plus cash distributions from DIRECTV classified as investing
activities of $0.5 billion, minus
capital expenditures of $4.6 billion
and cash paid for vendor financing of $1.0
billion.
For 3Q23 year-to-date, free cash flow of $10.4 billion is cash from operating activities
from continuing operations of $26.9
billion, plus cash distributions from DIRECTV classified as
investing activities of $1.4 billion,
minus capital expenditures of $13.3
billion and cash paid for vendor financing of $4.7 billion.
For 3Q22 year-to-date, free cash flow of
$8.0 billion is cash from operating
activities from continuing operations of $25.5 billion, plus cash distributions from
DIRECTV classified as investing activities of $2.2 billion, minus capital expenditures of
$15.4 billion and cash paid for
vendor financing of $4.2 billion.
Due to high variability and difficulty in
predicting items that impact cash from operating activities, cash
distributions from DIRECTV, capital expenditures and vendor
financing payments, the company is not able to provide a
reconciliation between projected free cash flow and the most
comparable GAAP metric without unreasonable effort.
Adjusted Operating Income is operating income adjusted
for revenues and costs we consider non-operational in nature,
including items arising from asset acquisitions or dispositions.
For 3Q23, adjusted operating income of $6.5 billion is calculated as operating
income of $5.8 billion plus
$737 million of adjustments. For 3Q22, adjusted
operating income of $6.2 billion is
calculated as operating income of $6.0
billion plus $204 million of
adjustments. Adjustments for all periods are detailed in the
Discussion and Reconciliation of Non-GAAP Measures included in our
Form 8-K dated October 19, 2023.
EBITDA is operating income before depreciation and
amortization. EBITDA margin is operating income before
depreciation and amortization, divided by total revenues. EBITDA
service margin is operating income before depreciation and
amortization, divided by total service revenues.
Adjusted EBITDA is calculated by
excluding from operating revenues and operating expenses certain
significant items that are non-operational or non-recurring in
nature, including dispositions and merger integration and
transaction costs, significant abandonments and impairment,
benefit-related gains and losses, employee separation and other
material gains and losses.
Adjusted EBITDA and Business Wireline
EBITDA estimates depend on future levels of revenues and expenses
which are not reasonably estimable at this time. Accordingly, we
cannot provide a reconciliation between projected Business Wireline
EBITDA or projected adjusted EBITDA and the most comparable GAAP
metrics without unreasonable effort.
Adjusted Equity in Net Income from DIRECTV investment of
$0.7 billion for 3Q23 is calculated
as equity income from DIRECTV of $0.4 billion reported in Equity in Net
Income of Affiliates and excludes $0.3 billion of AT&T's proportionate
share of the non-cash depreciation and amortization of fair value
accretion from DIRECTV's revaluation of assets and purchase price
allocation, which we consider to be non-operational in nature.
Adjusted diluted EPS from continuing operations includes
adjusting items to revenues and costs that we consider
non-operational in nature, including items arising from asset
acquisitions or dispositions, including the amortization of
intangible assets. While the expense associated with the
amortization of certain wireless licenses and customer lists is
excluded, the revenue of the acquired companies is reflected in the
measure and those assets contribute to revenue generation. We
adjust for net actuarial gains or losses associated with our
pension and postemployment benefit plans due to the
often-significant impact on our results (we immediately recognize
this gain or loss in the income statement, pursuant to our
accounting policy for the recognition of actuarial gains and
losses). Consequently, our adjusted results reflect an expected
return on plan assets rather than the actual return on plan assets,
as included in the GAAP measure of income. The tax impact of
adjusting items is calculated using the effective tax rate during
the quarter except for adjustments that, given their magnitude, can
drive a change in the effective tax rate, in these cases we use the
actual tax expense or combined marginal rate of approximately
25%.
For 3Q23, Adjusted EPS from continuing operations of
$0.64 is Diluted EPS from continuing
operations of $0.48 adjusted for
$0.11 restructuring and impairments,
$0.03 proportionate share of
intangible amortization at the DIRECTV equity method investment,
and $0.03 benefit-related,
transaction and other costs, minus $0.01 actuarial gain on benefit plans.
For 3Q22, Adjusted EPS from continuing
operations of $0.68 is Diluted EPS
from continuing operations of $0.79
adjusted for $0.04 proportionate
share of intangible amortization at the DIRECTV equity method
investment, $0.06 benefit-related,
transaction and other costs, $0.02
dilutive impact of Accounting Standards Update No. 2020-06, and
$0.01 restructuring and impairments,
minus $0.14 actuarial gain on benefit
plans and $0.10 tax-related
items.
Capital investment is a non-GAAP financial measure that
provides an additional view of cash paid for capital investment to
provide a comprehensive view of cash used to invest in our
networks, product developments and support systems. In connection
with capital improvements, we negotiate with some of our vendors to
obtain favorable payment terms of 120 days or more, referred to as
vendor financing, which are excluded from capital expenditures and
reported in accordance with GAAP as financing activities. Capital
investment includes capital expenditures and cash paid for vendor
financing ($1.0 billion in 3Q23).
Net Debt of $128.7 billion
at September 30, 2023, is calculated
as Total Debt of $138.0 billion less
Cash and Cash Equivalents of $7.5
billion and Time Deposits (i.e. deposits at financial
institutions that are greater than 90 days) of $1.8 billion.
Net debt-to-adjusted EBITDA is calculated by dividing net
debt by the sum of the most recent four quarters of adjusted
EBITDA. Net debt is calculated by subtracting cash and cash
equivalents and deposits at financial institutions that are greater
than 90 days (e.g., certificates of deposit and time deposits),
from the sum of debt maturing within one year and long-term
debt.
Adjusted EBITDA is calculated as defined above. Net debt and
adjusted EBITDA estimates depend on future levels of revenues,
expenses and other metrics which are not reasonably estimable at
this time. Accordingly, we cannot provide a reconciliation between
projected net debt-to-adjusted EBITDA and the most comparable GAAP
metrics and related ratios without unreasonable effort.
Discussion and Reconciliation of Non-GAAP Measures for
Continuing Operations
We believe the following measures are relevant and useful
information to investors as they are part of AT&T's internal
management reporting and planning processes and are important
metrics that management uses to evaluate the operating performance
of AT&T and its segments. Management also uses these measures
as a method of comparing performance with that of many of our
competitors. These measures should be considered in addition to,
but not as a substitute for, other measures of financial
performance reported in accordance with U.S. generally accepted
accounting principles (GAAP).
Free Cash Flow
Free cash flow is defined as cash from operations and cash
distributions from DIRECTV classified as investing activities minus
capital expenditures and cash paid for vendor financing (classified
as financing activities). Free cash flow after dividends is defined
as cash from operations and cash distributions from DIRECTV
classified as investing activities, minus capital expenditures,
cash paid for vendor financing and dividends on common and
preferred shares. Free cash flow dividend payout ratio is defined
as the percentage of dividends paid on common and preferred shares
to free cash flow. We believe these metrics provide useful
information to our investors because management views free cash
flow as an important indicator of how much cash is generated by
routine business operations, including capital expenditures and
vendor financing, and from our continued economic interest in the
U.S. video operations as part of our DIRECTV equity method
investment, and makes decisions based on it. Management also views
free cash flow as a measure of cash available to pay debt and
return cash to shareowners.
Free Cash Flow and
Free Cash Flow Dividend Payout Ratio
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Net cash provided by
operating activities from continuing
operations1
|
$
10,336
|
$
10,094
|
|
$
26,936
|
$
25,464
|
Add: Distributions from
DIRECTV classified as investing activities
|
473
|
567
|
|
1,447
|
2,205
|
Less: Capital
expenditures
|
(4,647)
|
(5,921)
|
|
(13,252)
|
(15,397)
|
Less: Cash paid for
vendor financing
|
(980)
|
(900)
|
|
(4,736)
|
(4,237)
|
Free Cash
Flow
|
5,182
|
3,840
|
|
10,395
|
8,035
|
|
|
|
|
|
|
Less: Dividends
paid
|
(2,019)
|
(2,010)
|
|
(6,116)
|
(7,845)
|
Free Cash Flow after
Dividends
|
$
3,163
|
$
1,830
|
|
$
4,279
|
$
190
|
Free Cash Flow
Dividend Payout Ratio
|
39.0 %
|
52.3 %
|
|
58.8 %
|
97.6 %
|
1 Includes distributions
from DIRECTV of $423 and $1,334 in the third quarter and for the
first nine months of 2023, and $392 and $1,429 in the
third quarter and for the first nine months of 2022.
|
Cash Paid for Capital Investment
In connection with capital improvements, we negotiate with some
of our vendors to obtain favorable payment terms of 120 days or
more, referred to as vendor financing, which are excluded from
capital expenditures and reported in accordance with GAAP as
financing activities. We present an additional view of cash paid
for capital investment to provide investors with a comprehensive
view of cash used to invest in our networks, product developments
and support systems.
Cash Paid for
Capital Investment
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Capital
Expenditures
|
$
(4,647)
|
$
(5,921)
|
|
$
(13,252)
|
$
(15,397)
|
Cash paid for vendor
financing
|
(980)
|
(900)
|
|
(4,736)
|
(4,237)
|
Cash paid for
Capital Investment
|
$
(5,627)
|
$
(6,821)
|
|
$
(17,988)
|
$
(19,634)
|
EBITDA
Our calculation of EBITDA, as presented, may differ from
similarly titled measures reported by other companies. For
AT&T, EBITDA excludes other income (expense) – net, and equity
in net income (loss) of affiliates, as these do not reflect the
operating results of our subscriber base or operations that are not
under our control. Equity in net income (loss) of affiliates
represents the proportionate share of the net income (loss) of
affiliates in which we exercise significant influence, but do not
control. Because we do not control these entities, management
excludes these results when evaluating the performance of our
primary operations. EBITDA also excludes interest expense and the
provision for income taxes. Excluding these items eliminates the
expenses associated with our capital and tax structures. Finally,
EBITDA excludes depreciation and amortization in order to eliminate
the impact of capital investments. EBITDA does not give effect to
cash used for debt service requirements and thus does not reflect
available funds for distributions, reinvestment or other
discretionary uses. EBITDA is not presented as an alternative
measure of operating results or cash flows from operations, as
determined in accordance with GAAP.
EBITDA service margin is calculated as EBITDA divided by service
revenues.
These measures are used by management as a gauge of our success
in acquiring, retaining and servicing subscribers because we
believe these measures reflect AT&T's ability to generate and
grow subscriber revenues while providing a high level of customer
service in a cost-effective manner. Management also uses these
measures as a method of comparing cash generation potential with
that of many of its competitors. The financial and operating
metrics which affect EBITDA include the key revenue and expense
drivers for which management is responsible and upon which we
evaluate performance.
We believe EBITDA Service Margin (EBITDA as a percentage of
service revenues) to be a more relevant measure than EBITDA Margin
(EBITDA as a percentage of total revenue) for our Mobility business
unit operating margin. We also use wireless service revenues to
calculate margin to facilitate comparison, both internally and
externally with our wireless competitors, as they calculate their
margins using wireless service revenues as well.
There are material limitations to using these non-GAAP financial
measures. EBITDA, EBITDA margin and EBITDA service margin, as we
have defined them, may not be comparable to similarly titled
measures reported by other companies. Furthermore, these
performance measures do not take into account certain significant
items, including depreciation and amortization, interest expense,
tax expense and equity in net income (loss) of affiliates. For
market comparability, management analyzes performance measures that
are similar in nature to EBITDA as we present it, and considering
the economic effect of the excluded expense items independently as
well as in connection with its analysis of net income as calculated
in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service
margin should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance
with GAAP.
EBITDA, EBITDA
Margin and EBITDA Service Margin
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Income from
Continuing Operations
|
$
3,826
|
$
6,346
|
|
$
13,041
|
$
16,246
|
Additions:
|
|
|
|
|
|
Income Tax
Expense
|
1,154
|
908
|
|
3,871
|
3,857
|
Interest
Expense
|
1,662
|
1,420
|
|
4,978
|
4,548
|
Equity in Net (Income)
of Affiliates
|
(420)
|
(392)
|
|
(1,338)
|
(1,417)
|
Other (Income) Expense
- Net
|
(440)
|
(2,270)
|
|
(2,362)
|
(6,729)
|
Depreciation and
amortization
|
4,705
|
4,514
|
|
14,011
|
13,426
|
EBITDA
|
10,487
|
10,526
|
|
32,201
|
29,931
|
Transaction and other
costs
|
72
|
58
|
|
72
|
341
|
Benefit-related (gain)
loss
|
40
|
16
|
|
(32)
|
217
|
Asset impairments and
abandonments and
restructuring
|
604
|
114
|
|
604
|
745
|
Adjusted
EBITDA1
|
$
11,203
|
$
10,714
|
|
$
32,845
|
$
31,234
|
1 See "Adjusting
Items" section for additional discussion and reconciliation of
adjusted items.
|
Segment and Business
Unit EBITDA, EBITDA Margin and EBITDA Service Margin
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Communications
Segment
|
Operating
Income
|
$
7,273
|
$
6,989
|
|
$
21,193
|
$
20,159
|
Add:
Depreciation and amortization
|
4,350
|
4,184
|
|
12,952
|
12,423
|
EBITDA
|
$
11,623
|
$
11,173
|
|
$
34,145
|
$
32,582
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
29,244
|
$
29,131
|
|
$
87,241
|
$
86,702
|
Operating Income
Margin
|
24.9 %
|
24.0 %
|
|
24.3 %
|
23.3 %
|
EBITDA
Margin
|
39.7 %
|
38.4 %
|
|
39.1 %
|
37.6 %
|
|
|
|
|
|
|
Mobility
|
Operating
Income
|
$
6,763
|
$
6,226
|
|
$
19,647
|
$
17,963
|
Add:
Depreciation and amortization
|
2,134
|
2,042
|
|
6,355
|
6,118
|
EBITDA
|
$
8,897
|
$
8,268
|
|
$
26,002
|
$
24,081
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
20,692
|
$
20,278
|
|
$
61,589
|
$
60,279
|
Service
Revenues
|
15,908
|
15,337
|
|
47,136
|
45,065
|
Operating Income
Margin
|
32.7 %
|
30.7 %
|
|
31.9 %
|
29.8 %
|
EBITDA
Margin
|
43.0 %
|
40.8 %
|
|
42.2 %
|
39.9 %
|
EBITDA Service
Margin
|
55.9 %
|
53.9 %
|
|
55.2 %
|
53.4 %
|
|
|
|
|
|
|
Business
Wireline
|
Operating
Income
|
$
350
|
$
621
|
|
$
1,124
|
$
1,750
|
Add:
Depreciation and amortization
|
1,345
|
1,342
|
|
4,008
|
3,954
|
EBITDA
|
$
1,695
|
$
1,963
|
|
$
5,132
|
$
5,704
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
5,221
|
$
5,668
|
|
$
15,831
|
$
16,903
|
Operating Income
Margin
|
6.7 %
|
11.0 %
|
|
7.1 %
|
10.4 %
|
EBITDA
Margin
|
32.5 %
|
34.6 %
|
|
32.4 %
|
33.7 %
|
|
|
|
|
|
|
Consumer
Wireline
|
Operating
Income
|
$
160
|
$
142
|
|
$
422
|
$
446
|
Add:
Depreciation and amortization
|
871
|
800
|
|
2,589
|
2,351
|
EBITDA
|
$
1,031
|
$
942
|
|
$
3,011
|
$
2,797
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
3,331
|
$
3,185
|
|
$
9,821
|
$
9,520
|
Operating Income
Margin
|
4.8 %
|
4.5 %
|
|
4.3 %
|
4.7 %
|
EBITDA
Margin
|
31.0 %
|
29.6 %
|
|
30.7 %
|
29.4 %
|
|
|
|
|
|
|
Latin America
Segment
|
|
|
|
|
|
Operating Income
(Loss)
|
$
(29)
|
$
(63)
|
|
$
(98)
|
$
(247)
|
Add:
Depreciation and amortization
|
184
|
164
|
|
544
|
494
|
EBITDA
|
$
155
|
$
101
|
|
$
446
|
$
247
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
992
|
$
785
|
|
$
2,842
|
$
2,283
|
Operating Income
Margin
|
-2.9 %
|
-8.0 %
|
|
-3.4 %
|
-10.8 %
|
EBITDA
Margin
|
15.6 %
|
12.9 %
|
|
15.7 %
|
10.8 %
|
Adjusting Items
Adjusting items include revenues and costs we consider
non-operational in nature, including items arising from asset
acquisitions or dispositions, including the amortization of
intangible assets. While the expense associated with the
amortization of certain wireless licenses and customer lists is
excluded, the revenue of the acquired companies is reflected in the
measure and that those assets contribute to revenue generation. We
also adjust for net actuarial gains or losses associated with our
pension and postemployment benefit plans due to the
often-significant impact on our results (we immediately recognize
this gain or loss in the income statement, pursuant to our
accounting policy for the recognition of actuarial gains and
losses). Consequently, our adjusted results reflect an expected
return on plan assets rather than the actual return on plan assets,
as included in the GAAP measure of income.
The tax impact of adjusting items is calculated using the
effective tax rate during the quarter except for adjustments that,
given their magnitude, can drive a change in the effective tax
rate, in these cases we use the actual tax expense or combined
marginal rate of approximately 25%.
Adjusting
Items
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Operating
Expenses
|
|
|
|
|
|
Transaction and other
costs
|
$
72
|
$
58
|
|
$
72
|
$
341
|
Benefit-related (gain)
loss
|
40
|
16
|
|
(32)
|
217
|
Assets impairments and
abandonment and restructuring
|
604
|
114
|
|
604
|
745
|
Adjustments to
Operations and Support Expenses
|
716
|
188
|
|
644
|
1,303
|
Amortization of intangible
assets
|
21
|
16
|
|
55
|
60
|
Adjustments to
Operating Expenses
|
737
|
204
|
|
699
|
1,363
|
Other
|
|
|
|
|
|
DIRECTV
intangible amortization (proportionate share)
|
310
|
376
|
|
975
|
1,188
|
Benefit-related
(gain) loss, impairment of equity investment
and other
|
507
|
416
|
|
314
|
822
|
Actuarial and
settlement (gain) loss - net
|
(71)
|
(1,440)
|
|
(145)
|
(3,838)
|
Adjustments to
Income Before Income Taxes
|
1,483
|
(444)
|
|
1,843
|
(465)
|
Tax impact of
adjustments
|
325
|
(135)
|
|
406
|
(200)
|
Tax-related
items
|
—
|
727
|
|
—
|
648
|
Adjustments to Net
Income
|
$
1,158
|
$
(1,036)
|
|
$
1,437
|
$
(913)
|
Adjusted Operating Income, Adjusted Operating Income Margin,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service
margin and Adjusted diluted EPS are non-GAAP financial measures
calculated by excluding from operating revenues, operating expenses
and income tax expense, certain significant items that are
non-operational or non-recurring in nature, including dispositions
and merger integration and transaction costs, actuarial gains and
losses, significant abandonments and impairment,
benefit-related gains and losses, employee separation and other
material gains and losses. Management believes that these measures
provide relevant and useful information to investors and other
users of our financial data in evaluating the effectiveness of our
operations and underlying business trends.
Adjusted Operating Revenues, Adjusted Operating Income, Adjusted
Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted EBITDA service margin and Adjusted diluted EPS should be
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with GAAP.
AT&T's calculation of Adjusted items, as presented, may differ
from similarly titled measures reported by other companies.
Adjusted Operating
Income, Adjusted Operating Income Margin,
Adjusted EBITDA, and
Adjusted EBITDA Margin
|
Dollars in
millions
|
|
|
|
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Operating
Income
|
$
5,782
|
$
6,012
|
|
$
18,190
|
$
16,505
|
Adjustments to
Operating Expenses
|
737
|
204
|
|
699
|
1,363
|
Adjusted Operating
Income
|
$
6,519
|
$
6,216
|
|
$
18,889
|
$
17,868
|
|
|
|
|
|
|
EBITDA
|
$
10,487
|
$
10,526
|
|
$
32,201
|
$
29,931
|
Adjustments to
Operations and Support Expenses
|
716
|
188
|
|
644
|
1,303
|
Adjusted
EBITDA
|
$
11,203
|
$
10,714
|
|
$
32,845
|
$
31,234
|
|
|
|
|
|
|
Total Operating
Revenues
|
$
30,350
|
$
30,043
|
|
$
90,406
|
$
89,398
|
|
|
|
|
|
|
Operating Income
Margin
|
19.1 %
|
20.0 %
|
|
20.1 %
|
18.5 %
|
Adjusted Operating
Income Margin
|
21.5 %
|
20.7 %
|
|
20.9 %
|
20.0 %
|
Adjusted EBITDA
Margin
|
36.9 %
|
35.7 %
|
|
36.3 %
|
34.9 %
|
Adjusted Diluted
EPS
|
|
Third
Quarter
|
|
Nine-Month
Period
|
|
2023
|
2022
|
|
2023
|
2022
|
Diluted Earnings Per
Share (EPS)
|
$
0.48
|
$
0.79
|
|
$
1.67
|
$
2.03
|
DIRECTV
intangible amortization (proportionate share)
|
0.03
|
0.04
|
|
0.10
|
0.12
|
Actuarial and
settlement (gain) loss - net1
|
(0.01)
|
(0.14)
|
|
(0.02)
|
(0.38)
|
Restructuring
and impairments
|
0.11
|
0.01
|
|
0.11
|
0.08
|
Benefit-related,
transaction and other costs2
|
0.03
|
0.08
|
|
0.01
|
0.19
|
Tax-related
items
|
—
|
(0.10)
|
|
—
|
(0.09)
|
Adjusted
EPS
|
$
0.64
|
$
0.68
|
|
$
1.87
|
$
1.95
|
Year-over-year
growth - Adjusted
|
-5.9 %
|
|
|
-4.1 %
|
|
Weighted Average
Common Shares Outstanding with
Dilution (000,000)
|
7,185
|
7,647
|
|
7,280
|
7,605
|
1
Includes adjustments for actuarial gains or losses associated with
our pension and postretirement benefit plans, which we
immediately
recognize in the income statement, pursuant to our accounting
policy for the recognition of actuarial gains/losses. We recorded
total net
actuarial gains of $0.1 billion in the third quarter of 2023. As a
result, adjusted EPS reflects an expected return on plan assets of
$0.6
billion (based on an average annual expected return on plan assets
of 7.5% for our pension trust), rather than the actual return on
plan
assets of $(1.5) billion (actual pension return of (5.0)%),
included in the GAAP measure of income.
|
2 As
of January 1, 2022, we adopted Accounting Standards Update (ASU)
No. 2020-06, which requires that instruments which may be
settled in cash or stock to be presumed settled in stock in
calculating diluted EPS. While our intent was to settle the
Mobility II preferred
interests in cash, the ability to settle this instrument in
AT&T shares resulted in additional dilutive impact, the
magnitude of which was
influenced by the fair value of the Mobility II preferred interests
and the average AT&T common stock price during the reporting
period,
which could vary from period-to-period. For these reasons, we
excluded the impact of ASU 2020-06 from our adjusted EPS
calculation.
The per share impact of ASU 2020-06 was to decrease reported
diluted EPS $0.00 and $0.02 for the quarters ended September 30,
2023
and 2022, and $0.01 and $0.05 for the nine months ended September
30, 2023 and 2022, respectively. The Mobility II preferred
interests
were repurchased on April 5, 2023.
|
Net Debt to Adjusted EBITDA
Net Debt to EBITDA ratios are non-GAAP financial measures
frequently used by investors and credit rating agencies and
management believes these measures provide relevant and useful
information to investors and other users of our financial data. Our
Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt by the sum of the most recent four quarters Adjusted EBITDA.
Net Debt is calculated by subtracting cash and cash equivalents and
deposits at financial institutions that are greater than 90 days
(e.g., certificates of deposit and time deposits), from the sum of
debt maturing within one year and long-term debt.
Net Debt to Adjusted
EBITDA - 2023
|
Dollars in
millions
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Dec. 31,
|
|
March 31,
|
|
June 30,
|
|
Sept. 30,
|
|
Four
Quarters
|
|
20221
|
|
20231
|
|
20231
|
|
2023
|
|
Adjusted
EBITDA
|
$
10,231
|
|
$
10,589
|
|
$
11,053
|
|
$
11,203
|
|
$
43,076
|
End-of-period current
debt
|
|
|
|
|
|
|
|
|
11,302
|
End-of-period
long-term debt
|
|
|
|
|
|
|
|
|
126,701
|
Total End-of-Period
Debt
|
|
|
|
|
|
|
|
|
138,003
|
Less: Cash and Cash
Equivalents
|
|
|
|
|
|
|
|
|
7,540
|
Less: Time
Deposits
|
|
|
|
|
|
|
|
|
1,750
|
Net Debt
Balance
|
|
|
|
|
|
|
|
|
128,713
|
Annualized Net Debt
to Adjusted EBITDA Ratio
|
|
|
|
|
|
|
|
|
2.99
|
1 As
reported in AT&T's Form 8-K filed July 26, 2023.
|
Net Debt to Adjusted
EBITDA - 2022
|
Dollars in
millions
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Dec. 31,
|
|
March 31,
|
|
June 30,
|
|
Sept. 30,
|
|
Four
Quarters
|
|
20211
|
|
20221
|
|
20221
|
|
20221
|
|
Adjusted
EBITDA
|
$
9,480
|
|
$
10,190
|
|
$
10,330
|
|
$
10,714
|
|
$
40,714
|
End-of-period current
debt
|
|
|
|
|
|
|
|
|
9,626
|
End-of-period
long-term debt
|
|
|
|
|
|
|
|
|
123,854
|
Total End-of-Period
Debt
|
|
|
|
|
|
|
|
|
133,480
|
Less: Cash and Cash
Equivalents
|
|
|
|
|
|
|
|
|
2,423
|
Net Debt
Balance
|
|
|
|
|
|
|
|
|
131,057
|
Annualized Net Debt
to Adjusted EBITDA Ratio
|
|
|
|
|
|
|
|
|
3.22
|
1 As
reported in AT&T's Form 8-K filed July 26, 2023.
|
Supplemental Operational Measures
As a supplemental presentation to our Communications segment
operating results, we are providing a view of our AT&T Business
Solutions results which includes both wireless and fixed
operations. This combined view presents a complete profile of the
entire business customer relationship and underscores the
importance of mobile solutions to serving our business customers.
Our supplemental presentation of business solutions operations is
calculated by combining our Mobility and Business Wireline
operating units, and then adjusting to remove non-business
operations. The following table presents a reconciliation of our
supplemental Business Solutions results.
Supplemental
Operational Measure
|
|
Third
Quarter
|
|
|
September 30,
2023
|
|
September 30,
2022
|
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
Percent
Change
|
Operating
Revenues
|
|
|
|
|
|
|
|
|
|
|
Wireless
service
|
$
15,908
|
$
—
|
$
(13,530)
|
$
2,378
|
|
$
15,337
|
$
—
|
$ (13,115)
|
$
2,222
|
7.0 %
|
Wireline
service
|
—
|
5,087
|
—
|
5,087
|
|
—
|
5,524
|
—
|
5,524
|
(7.9) %
|
Wireless
equipment
|
4,784
|
—
|
(4,012)
|
772
|
|
4,941
|
—
|
(4,082)
|
859
|
(10.1) %
|
Wireline
equipment
|
—
|
134
|
—
|
134
|
|
—
|
144
|
—
|
144
|
(6.9) %
|
Total Operating
Revenues
|
20,692
|
5,221
|
(17,542)
|
8,371
|
|
20,278
|
5,668
|
(17,197)
|
8,749
|
(4.3) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Operations and
support
|
11,795
|
3,526
|
(9,661)
|
5,660
|
|
12,010
|
3,705
|
(9,886)
|
5,829
|
(2.9) %
|
EBITDA
|
8,897
|
1,695
|
(7,881)
|
2,711
|
|
8,268
|
1,963
|
(7,311)
|
2,920
|
(7.2) %
|
Depreciation and
amortization
|
2,134
|
1,345
|
(1,741)
|
1,738
|
|
2,042
|
1,342
|
(1,685)
|
1,699
|
2.3 %
|
Total Operating
Expenses
|
13,929
|
4,871
|
(11,402)
|
7,398
|
|
14,052
|
5,047
|
(11,571)
|
7,528
|
(1.7) %
|
Operating
Income
|
$
6,763
|
$
350
|
$
(6,140)
|
$ 973
|
|
$ 6,226
|
$
621
|
$
(5,626)
|
$
1,221
|
(20.3) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
Margin
|
|
|
|
11.6 %
|
|
|
|
|
14.0 %
|
(240)
BP
|
1 Non-business wireless
reported in the Communications segment under the Mobility business
unit.
|
Results have been
recast to conform to the current period's
classification.
|
Supplemental
Operational Measure
|
|
Nine-Month
Period
|
|
|
September 30,
2023
|
|
September 30,
2022
|
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
Percent
Change
|
Operating
Revenues
|
|
|
|
|
|
|
|
|
|
|
Wireless
service
|
$
47,136
|
$
—
|
$
(40,104)
|
$
7,032
|
|
$
45,065
|
$
—
|
$ (38,534)
|
$
6,531
|
7.7 %
|
Wireline
service
|
—
|
15,401
|
—
|
15,401
|
|
—
|
16,418
|
—
|
16,418
|
(6.2) %
|
Wireless
equipment
|
14,453
|
—
|
(12,134)
|
2,319
|
|
15,214
|
—
|
(12,582)
|
2,632
|
(11.9) %
|
Wireline
equipment
|
—
|
430
|
—
|
430
|
|
—
|
485
|
—
|
485
|
(11.3) %
|
Total Operating
Revenues
|
61,589
|
15,831
|
(52,238)
|
25,182
|
|
60,279
|
16,903
|
(51,116)
|
26,066
|
(3.4) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Operations and
support
|
35,587
|
10,699
|
(29,297)
|
16,989
|
|
36,198
|
11,199
|
(29,773)
|
17,624
|
(3.6) %
|
EBITDA
|
26,002
|
5,132
|
(22,941)
|
8,193
|
|
24,081
|
5,704
|
(21,343)
|
8,442
|
(2.9) %
|
Depreciation and
amortization
|
6,355
|
4,008
|
(5,186)
|
5,177
|
|
6,118
|
3,954
|
(5,047)
|
5,025
|
3.0 %
|
Total Operating
Expenses
|
41,942
|
14,707
|
(34,483)
|
22,166
|
|
42,316
|
15,153
|
(34,820)
|
22,649
|
(2.1) %
|
Operating
Income
|
$
19,647
|
$ 1,124
|
$
(17,755)
|
$
3,016
|
|
$
17,963
|
$ 1,750
|
$ (16,296)
|
$
3,417
|
(11.7) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
Margin
|
|
|
|
12.0 %
|
|
|
|
|
13.1 %
|
(110)
BP
|
1 Non-business wireless
reported in the Communications segment under the Mobility business
unit.
|
|
Results have been
recast to conform to the current period's
classification.
|
|
© 2023 AT&T Intellectual Property. All rights reserved.
AT&T and the Globe logo are registered trademarks of AT&T
Intellectual Property.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/att-raises-full-year-adjusted-ebitda-and-free-cash-flow-guidance-driven-by-continued-subscriber-and-revenue-growth-301961882.html
SOURCE AT&T