Continued 5G and fiber subscriber gains
- 424,000 postpaid phone net adds, 11 straight quarters with
more than 400,000 net adds with continued low postpaid phone
churn
- 272,000 AT&T Fiber net adds, 13 straight quarters
with more than 200,000 net adds
High-quality customer additions continue to drive revenue
growth
- Domestic wireless service revenues up 5.2%; best-ever
first-quarter Mobility operating income
- Consumer broadband revenues up 7.3% driven by AT&T Fiber
revenue growth of 30.7%
Network enhancement and expansion momentum
- Mid-band 5G spectrum covering more than 160 million people;
reliable, nationwide 5G reaching 290 million people
- Ability to serve fiber to 19.7 million consumer and more
than 3 million business customer locations in more than 100 U.S.
metro areas; remain on track to pass 30 million fiber locations by
the end of 2025
Transformation progress supporting margin
growth
- On track to achieve $6
billion-plus run-rate cost savings target before the end of
the year
First-Quarter Consolidated Results
- Revenues of $30.1 billion
- Diluted EPS from continuing
operations1 of $0.57 compared to $0.65 in the prior year
- Adjusted EPS* from continuing
operations of $0.60 compared to
$0.63 in the prior year
- Cash from operating activities of $6.7 billion
- Capital expenditures of $4.3 billion; capital
investment* of $6.4 billion
- Free cash flow* of $1.0 billion
Note: AT&T's first-quarter earnings conference call will
be webcast at 8:30 a.m. ET on Thursday,
April 20, 2023. The webcast and related materials, including
financial highlights, will be available on AT&T's Investor
Relations website at
https://investors.att.com.
DALLAS, April 20,
2023 /CNW/ -- AT&T Inc. (NYSE: T) reported
first-quarter results that showcased consistent 5G and fiber
customer additions and profitable growth driven by increasing
wireless service and broadband revenues.
"Our teams take pride in connecting more people to greater
possibility through 5G and fiber," said John Stankey, AT&T CEO. "We're winning
thanks to a proven and sustainable playbook that centers on simple,
customer-centric experiences. As a result, we're adding high-value
customers, and when they choose AT&T, they stay with us. The
work we're doing today is establishing a foundation for durable,
long-term growth, and we remain confident in our full-year
guidance."
Consolidated Financial Results
Revenues for the first quarter totaled $30.1 billion versus $29.7 billion in the year-ago quarter, up
1.4%. This increase primarily reflects higher Mobility,
Mexico and Consumer Wireline
revenues, partly offset by lower Business Wireline
revenues.
Operating expenses were $24.1 billion, essentially stable with
$24.2 billion in the year-ago
quarter reflecting the benefits of our continued transformation
efforts. Operating expenses decreased primarily due to lower
domestic wireless equipment and associated selling costs from lower
sales volumes; first-quarter 2022 3G network shutdown costs; lower
personnel costs and higher returns on benefit-related assets. These
decreases were partly offset by higher amortization of deferred
customer acquisition costs, higher bad debt expense and increased
depreciation. Additionally, business unit costs included
year-over-year increases due to inflation.
Operating income was $6.0 billion versus $5.5 billion in the year-ago quarter. When
adjusting for certain items, adjusted operating income* was
$6.0 billion versus $5.8 billion in the year-ago quarter.
Equity in net income of affiliates of $0.5 billion primarily from the DIRECTV
investment. With adjustment for our proportionate share of
intangible amortization, adjusted equity in net income from the
DIRECTV investment* was $0.9 billion.
Income from continuing operations was
$4.5 billion versus $5.1 billion in the year-ago quarter.
Earnings per diluted common share from continuing operations was
$0.57 versus $0.65 in the year-ago quarter. Adjusting for
$0.03, which includes our
proportionate share of intangible amortization from the DIRECTV
equity method investment and other items, earnings per diluted
common share from continuing operations* was
$0.60 compared to $0.63 in the year-ago quarter.
Cash from operating activities from continuing
operations was $6.7 billion,
down nearly $1 billion year over year reflecting timing of
working capital, including lower securitizations. Capital
expenditures were $4.3 billion in the quarter versus
$4.6 billion in the year-ago
quarter. Capital investment*, which includes
$2.1 billion of cash payments
for vendor financing, totaled $6.4 billion.
Free cash flow* was $1.0 billion for the quarter. Total
debt was $137.5 billion at the
end of the quarter, and net debt* was
$134.7 billion. The company continues
to expect to achieve a net debt-to-adjusted EBITDA* ratio in
the 2.5x range by early 2025.
Communications Operational Highlights
(Prior year results for the Communications segment and each
business unit have been recast to remove prior service credits.
Additional information is provided in our Form 8-K dated
March 3, 2023, and included as part
of our earnings materials on the company's Investor Relations
website.)
First-quarter revenues were $29.2 billion, up 1.0% year over year due to
increases in Mobility and Consumer Wireline, which more than offset
a decline in Business Wireline. Operating income was
$6.7 billion, up 3.9% year over
year, with operating income margin of 23.1%,
compared to 22.5% in the year-ago quarter.
Mobility
- Revenues were up 2.5% year over year to $20.6 billion due to higher service revenues,
partially offset by lower equipment revenues. Service
revenues were $15.5 billion,
up 5.2% year over year, primarily driven by subscriber and postpaid
ARPU growth. Equipment revenues were $5.1 billion, down 4.7% year over year,
driven by lower volumes.
- Operating expenses were $14.3 billion, down 0.5% year over year
primarily due to lower equipment costs driven by lower device
sales, first-quarter 2022 3G network shutdown costs and lower
content costs, partly offset by increased amortization of deferred
customer acquisition costs, higher network and customer support
costs, higher marketing costs and higher bad debt expense.
- Operating income was $6.3 billion, up 10.2% year over year.
Operating income margin was 30.5%, compared to 28.3% in the
year-ago quarter.
- EBITDA* was $8.4 billion, up 8.0% year over year with
EBITDA margin* of 40.7%, up from 38.6% a year
ago. This was the company's best-ever first-quarter Mobility
EBITDA*. EBITDA service margin* was 54.1%,
up from 52.6% in the year-ago quarter.
- Total wireless net adds were 5.1 million including:
-
- 542,000 postpaid net adds with:
-
- 424,000 postpaid phone net adds
- (56,000) postpaid tablet and other branded computing device net
losses
- 174,000 other net adds
- 40,000 prepaid phone net adds
- Postpaid churn was 0.99% versus 0.94% in the year-ago
quarter.
- Postpaid phone churn was 0.81% versus 0.79% in the
year-ago quarter.
- Prepaid churn was 2.73%, with Cricket substantially
lower, versus 2.77% in the year-ago quarter.
- Postpaid phone ARPU was $55.05, up nearly 2.0% versus the year-ago
quarter, due to prior-year pricing actions, higher international
roaming and a mix shift to higher-priced unlimited plans.
- FirstNet® connections reached approximately
4.7 million across more than 25,000 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 $5.3 billion, down 5.5% year over year due
to lower demand for legacy voice and data services and product
simplification, partly offset by growth in connectivity
services.
- Operating expenses were $5.0 billion, down 1.0% year over year due
to lower personnel and other costs associated with ongoing
transformation initiatives, lower wholesale network access costs
and lower marketing costs, partly offset by favorable compensation
items in the prior year and increased depreciation expense.
- Operating income was $378 million, down 40.8%, with
operating income margin of 7.1% compared to 11.3% in the
year-ago quarter.
- EBITDA* was $1.7 billion, down 11.9% year over year with
EBITDA margin* of 32.0%, compared to 34.4% in the
year-ago quarter.
- AT&T Business serves the largest global companies,
government agencies and small businesses. More than 750,000 U.S.
business buildings are lit with fiber from AT&T, enabling
high-speed fiber connections to more than 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.2
Consumer Wireline
- Revenues were $3.2 billion, up 2.5% year over year due to
gains in broadband more than offsetting declines in legacy voice
and data and other services. Broadband revenues increased
7.3% due to fiber growth of 30.7%, partly offset by a 13.6% decline
in non-fiber revenues.
- Operating expenses were $3.1 billion, up 4.8% year over year due
to higher depreciation expense, higher network and customer
support costs and increased amortization of deferred customer
acquisition costs, partly offset by lower sales, advertising and
content costs.
- Operating income was $94 million, down 40.9% year
over year with operating income margin of 2.9%, compared to
5.0% in the year-ago quarter.
- EBITDA* was $955 million, up 3.2% year
over year with EBITDA margin* of 29.5%, up from
29.3% in the year-ago quarter.
- Total broadband net losses, excluding
DSL, were 23,000, reflecting AT&T Fiber net adds of
272,000, more than offset by losses in non-fiber services. AT&T
Fiber now has the ability to serve 19.7 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 $883 million,
up 28.0% year over year due to growth in both service and equipment
revenues. Service revenues were $591
million, up 20.6% year over year, driven by favorable
foreign exchange, higher wholesale revenues and growth in
subscribers. Equipment revenues were $292 million, up
46.0% year over year due to higher sales and favorable foreign
exchange.
Operating loss was ($30) million compared to ($102) million in the year-ago quarter.
EBITDA* was $145 million compared to
$59 million in the year-ago quarter.
Total wireless net adds were 10,000, including 58,000
prepaid net losses, 49,000 postpaid net adds and
19,000 reseller net adds.
* 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 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 and
share-based payments (in periods of net income), divided by the
weighted average common shares outstanding for the
period.
|
|
2 The more
than 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 April 20, 2023. Free
cash flow, EBITDA, adjusted operating income and net debt are
non-GAAP financial measures frequently used by investors and credit
rating agencies.
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 1Q23, Adjusted EPS from continuing operations of
$0.60 is Diluted EPS from continuing
operations of $0.57 adjusted
for $0.04 proportionate share of intangible amortization at
the DIRECTV equity method investment and $0.01 impact of Accounting Standards Update (ASU)
No. 2020-06, minus $0.02
benefit-related and other costs.
For 1Q22, Adjusted EPS from continuing
operations of $0.63 is Diluted EPS
from continuing operations of $0.65
adjusted for $0.04 proportionate
share of intangible amortization at the DIRECTV equity method
investment, $0.04 of benefit-related
and other costs, and $0.01 impact of
ASU No. 2020-06, minus $0.11
actuarial gain on benefit plans.
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 ($2.1 billion in
1Q23).
Free cash flow for 1Q23 of $1.0
billion is cash from operating activities from continuing
operations of $6.7 billion, plus
cash distributions from DIRECTV classified as investing activities
of $0.8 billion, minus capital
expenditures of $4.3 billion and
cash paid for vendor financing of $2.1 billion.
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 1Q23, Adjusted Operating Income of
$6.0 billion is calculated as
operating income of $6.0 billion
minus $27 million of adjustments. For 1Q22, Adjusted
Operating Income of $5.8 billion
is calculated as operating income of $5.5 billion plus $218 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 April 20, 2023.
Adjusted Equity in Net Income from DIRECTV
investment of $0.9 billion
for 1Q23 is calculated as equity income from DIRECTV of
$0.5 billion reported in Equity
in Net Income of Affiliates and excludes $0.3 billion of AT&T's proportionate
share of the noncash depreciation and amortization of fair value
accretion from DIRECTV's revaluation of assets and purchase price
allocation.
Net Debt of $134.7 billion
at March 31, 2023, is calculated as
Total Debt of $137.5 billion less
Cash and Cash Equivalents of $2.8
billion.
Net debt-to-adjusted EBITDA ratios are non-GAAP
financial measures that are frequently used by investors and credit
rating agencies to provide relevant and useful information. Our Net
Debt to Adjusted EBITDA ratio is calculated by dividing the Net
Debt (calculated as total debt less cash and cash equivalents) by
the sum of the most recent four quarters of Adjusted EBITDA.
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 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 Adjusted EBITDA
and the most comparable GAAP metrics and related ratios without
unreasonable effort.
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.
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, 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
|
|
|
First
Quarter
|
|
2023
|
2022
|
Net cash provided by
operating activities from continuing
operations1
|
$
6,678
|
$
7,630
|
Add: Distributions from
DIRECTV classified as investing activities
|
774
|
1,315
|
Less: Capital
expenditures
|
(4,335)
|
(4,568)
|
Less: Cash paid for
vendor financing
|
(2,113)
|
(1,566)
|
Free Cash
Flow
|
1,004
|
2,811
|
|
|
|
Less: Dividends
paid
|
(2,014)
|
(3,749)
|
Free Cash Flow after
Dividends
|
$
(1,010)
|
$
(938)
|
Free Cash Flow
Dividend Payout Ratio
|
200.6 %
|
133.4 %
|
1 Includes
distributions from DIRECTV of $534 in the first quarter of 2023 and
$522 in the first quarter 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
|
|
|
|
First
Quarter
|
|
2023
|
2022
|
Capital
Expenditures
|
$
(4,335)
|
$
(4,568)
|
Cash paid for vendor
financing
|
(2,113)
|
(1,566)
|
Cash paid for
Capital Investment
|
$
(6,448)
|
$
(6,134)
|
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
|
|
|
First
Quarter
|
|
2023
|
2022
|
Income from
Continuing Operations
|
$
4,453
|
$
5,149
|
Additions:
|
|
|
Income Tax
Expense
|
1,314
|
1,440
|
Interest
Expense
|
1,708
|
1,626
|
Equity in Net (Income)
of Affiliates
|
(538)
|
(521)
|
Other (Income) Expense
- Net
|
(935)
|
(2,157)
|
Depreciation and
amortization
|
4,631
|
4,462
|
EBITDA
|
10,633
|
9,999
|
Transaction and other
costs
|
—
|
98
|
Benefit-related
(gain) loss
|
(44)
|
93
|
Adjusted
EBITDA1
|
$
10,589
|
$
10,190
|
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
|
|
|
First
Quarter
|
|
2023
|
2022
|
Communications
Segment
|
Operating
Income
|
$
6,743
|
$
6,487
|
Add:
Depreciation and amortization
|
4,289
|
4,124
|
EBITDA
|
$
11,032
|
$
10,611
|
|
|
|
Total Operating
Revenues
|
$
29,152
|
$
28,876
|
Operating Income
Margin
|
23.1 %
|
22.5 %
|
EBITDA
Margin
|
37.8 %
|
36.7 %
|
|
|
|
Mobility
|
Operating
Income
|
$
6,271
|
$
5,689
|
Add:
Depreciation and amortization
|
2,098
|
2,059
|
EBITDA
|
$
8,369
|
$
7,748
|
|
|
|
Total Operating
Revenues
|
$
20,582
|
$
20,075
|
Service
Revenues
|
15,483
|
14,724
|
Operating Income
Margin
|
30.5 %
|
28.3 %
|
EBITDA
Margin
|
40.7 %
|
38.6 %
|
EBITDA Service
Margin
|
54.1 %
|
52.6 %
|
|
|
|
Business
Wireline
|
Operating
Income
|
$
378
|
$
639
|
Add:
Depreciation and amortization
|
1,330
|
1,299
|
EBITDA
|
$
1,708
|
$
1,938
|
|
|
|
Total Operating
Revenues
|
$
5,331
|
$
5,640
|
Operating Income
Margin
|
7.1 %
|
11.3 %
|
EBITDA
Margin
|
32.0 %
|
34.4 %
|
|
|
|
Consumer
Wireline
|
Operating
Income
|
$
94
|
$
159
|
Add:
Depreciation and amortization
|
861
|
766
|
EBITDA
|
$
955
|
$
925
|
|
|
|
Total Operating
Revenues
|
$
3,239
|
$
3,161
|
Operating Income
Margin
|
2.9 %
|
5.0 %
|
EBITDA
Margin
|
29.5 %
|
29.3 %
|
|
|
|
Latin America
Segment
|
|
|
Operating Income
(Loss)
|
$
(30)
|
$
(102)
|
Add:
Depreciation and amortization
|
175
|
161
|
EBITDA
|
$
145
|
$
59
|
|
|
|
Total Operating
Revenues
|
$
883
|
$
690
|
Operating Income
Margin
|
-3.4 %
|
-14.8 %
|
EBITDA
Margin
|
16.4 %
|
8.6 %
|
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. Prior periods have been
recast for consistency to include gains on benefit-related and
other cost investments.
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
|
|
|
First
Quarter
|
|
2023
|
2022
|
Operating
Expenses
|
|
|
Transaction and other
costs
|
$
—
|
$
98
|
Benefit-related
(gain) loss
|
(44)
|
93
|
Adjustments to
Operations and Support Expenses
|
(44)
|
191
|
Amortization of
intangible assets
|
17
|
27
|
Adjustments to
Operating Expenses
|
(27)
|
218
|
Other
|
|
|
DIRECTV
intangible amortization (proportionate share)
|
341
|
416
|
Benefit-related (gain) loss and other
|
(111)
|
92
|
Actuarial (gain)
loss
|
—
|
(1,053)
|
Adjustments to
Income Before Income Taxes
|
203
|
(327)
|
Tax impact of
adjustments
|
46
|
(103)
|
Adjustments to Net
Income
|
$
157
|
$
(224)
|
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
|
|
|
First
Quarter
|
|
2023
|
2022
|
Operating
Income
|
$
6,002
|
$
5,537
|
Adjustments to
Operating Expenses
|
(27)
|
218
|
Adjusted Operating
Income
|
$
5,975
|
$
5,755
|
|
|
|
EBITDA
|
$
10,633
|
$
9,999
|
Adjustments to
Operations and Support Expenses
|
(44)
|
191
|
Adjusted
EBITDA
|
$
10,589
|
$
10,190
|
|
|
|
Total Operating
Revenues
|
$
30,139
|
$
29,712
|
|
|
|
Operating Income
Margin
|
19.9 %
|
18.6 %
|
Adjusted Operating
Income Margin
|
19.8 %
|
19.4 %
|
Adjusted EBITDA
Margin
|
35.1 %
|
34.3 %
|
Adjusted Diluted
EPS
|
|
First
Quarter
|
|
2023
|
2022
|
Diluted Earnings Per
Share (EPS)
|
$
0.57
|
$
0.65
|
DIRECTV
intangible amortization (proportionate share)
|
0.04
|
0.04
|
Actuarial (gain)
loss
|
—
|
(0.11)
|
Benefit-related,
transaction and other costs1
|
(0.01)
|
0.05
|
Adjusted
EPS
|
$
0.60
|
$
0.63
|
Year-over-year
growth - Adjusted
|
-4.8 %
|
|
Weighted Average
Common Shares Outstanding with Dilution (000,000)
|
7,474
|
7,556
|
1 As
of January 1, 2022, we adopted, through retrospective application,
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 is to
settle the Mobility II preferred interests in cash, the ability to
settle this instrument in AT&T shares will result in additional
dilutive
impact, the magnitude of which is 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 have 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 $0.01 and
$0.01 for the quarters ended March 31, 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
certificates of deposit and time deposits that are greater than 90
days, 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
|
|
|
|
June 30,
|
|
Sept. 30,
|
|
Dec. 31,
|
|
March 31,
|
|
Four
Quarters
|
|
20221
|
|
20221
|
|
20221
|
|
2023
|
|
Adjusted
EBITDA
|
$
10,330
|
|
$
10,714
|
|
$
10,231
|
|
$
10,589
|
|
$
41,864
|
End-of-period current
debt
|
|
|
|
|
|
|
|
|
13,757
|
End-of-period
long-term debt
|
|
|
|
|
|
|
|
|
123,727
|
Total End-of-Period
Debt
|
|
|
|
|
|
|
|
|
137,484
|
Less: Cash and Cash
Equivalents
|
|
|
|
|
|
|
|
|
2,821
|
Net Debt
Balance
|
|
|
|
|
|
|
|
|
134,663
|
Annualized Net Debt
to Adjusted EBITDA Ratio
|
|
|
|
|
|
|
|
|
3.22
|
1 As
reported in AT&T's Form 8-K filed January 25, 2023.
|
Net Debt to Adjusted
EBITDA - 2022
|
Dollars in
millions
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
June 30,
|
|
Sept. 30,
|
|
Dec. 31,
|
|
March 31,
|
|
Four
Quarters
|
|
20211
|
|
20221
|
|
20221
|
|
20221
|
|
Adjusted
EBITDA
|
$
11,931
|
|
$
10,803
|
|
$
9,480
|
|
$
10,190
|
|
$
42,404
|
End-of-period current
debt
|
|
|
|
|
|
|
|
|
27,209
|
End-of-period
long-term debt
|
|
|
|
|
|
|
|
|
148,820
|
Total End-of-Period
Debt
|
|
|
|
|
|
|
|
|
176,029
|
Less: Cash and Cash
Equivalents
|
|
|
|
|
|
|
|
|
17,084
|
Net Debt
Balance
|
|
|
|
|
|
|
|
|
158,945
|
Annualized Net Debt
to Adjusted EBITDA Ratio
|
|
|
|
|
|
|
|
|
3.75
|
1 As
reported in AT&T's Form 8-K filed January 25, 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
|
|
First
Quarter
|
|
|
March 31,
2023
|
|
March 31,
2022
|
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
|
Mobility
|
Business
Wireline
|
Adj.1
|
Business
Solutions
|
Percent
Change
|
Operating
Revenues
|
|
|
|
|
|
|
|
|
|
|
Wireless
service
|
$
15,483
|
$
—
|
$
(13,203)
|
$
2,280
|
|
$
14,724
|
$
—
|
$ (12,590)
|
$
2,134
|
6.8 %
|
Wireline
service
|
—
|
5,200
|
—
|
5,200
|
|
—
|
5,478
|
—
|
5,478
|
(5.1) %
|
Wireless
equipment
|
5,099
|
—
|
(4,326)
|
773
|
|
5,351
|
—
|
(4,452)
|
899
|
(14.0) %
|
Wireline
equipment
|
—
|
131
|
—
|
131
|
|
—
|
162
|
—
|
162
|
(19.1) %
|
Total Operating
Revenues
|
20,582
|
5,331
|
(17,529)
|
8,384
|
|
20,075
|
5,640
|
(17,042)
|
8,673
|
(3.3) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Operations and
support
|
12,213
|
3,623
|
(10,196)
|
5,640
|
|
12,327
|
3,702
|
(10,169)
|
5,860
|
(3.8) %
|
EBITDA
|
8,369
|
1,708
|
(7,333)
|
2,744
|
|
7,748
|
1,938
|
(6,873)
|
2,813
|
(2.5) %
|
Depreciation and
amortization
|
2,098
|
1,330
|
(1,712)
|
1,716
|
|
2,059
|
1,299
|
(1,698)
|
1,660
|
3.4 %
|
Total Operating
Expenses
|
14,311
|
4,953
|
(11,908)
|
7,356
|
|
14,386
|
5,001
|
(11,867)
|
7,520
|
(2.2) %
|
Operating
Income
|
$
6,271
|
$
378
|
$
(5,621)
|
$
1,028
|
|
$ 5,689
|
$
639
|
$
(5,175)
|
$
1,153
|
(10.8) %
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
Margin
|
|
|
|
12.3 %
|
|
|
|
|
13.3 %
|
(100) 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.
|
|
|
|
|
|
|
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SOURCE AT&T