AT&T Inc. (NYSE: T) reported first-quarter results that highlighted consistent 5G and fiber customer additions and showcased profitable growth driven by increased Mobility service and broadband revenues.       

First-Quarter Consolidated Results

First-Quarter Highlights

"Our results this quarter reflect continued strong growth in our Mobility and Consumer Wireline connectivity businesses, which represent about 80% of our total revenues," said John Stankey, AT&T CEO. "Customers are choosing AT&T and staying with us. We achieved a record-low first-quarter postpaid phone churn, grew consumer broadband subscribers for the third consecutive quarter, and expanded margins in Mobility and Consumer Wireline. We're also delivering on our commitment to grow and improve the quality and cadence of free cash flow, which increased by more than $2 billion year over year. This consistent, solid performance driven by our investment-led strategy gives us confidence to re-affirm our full-year consolidated financial guidance."

2024 OutlookFor the full year, AT&T reiterates guidance of:

Note: AT&T's first-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, April 24, 2024. The webcast and related materials, including financial highlights, will be available at https://investors.att.com.

Consolidated Financial Results

Segment and Business Unit Results

Communications segment revenues were $28.9 billion, down 1.0% year over year, with operating income essentially flat year over year.

Mobility grew service revenue 3.3% with record-low 1Q postpaid phone churn of 0.72% that contributed to postpaid phone net adds of 349,000 and year-over-year margin expansion.

Mobility revenues were up 0.1% year over year, driven by service revenue growth of 3.3% from subscriber and postpaid ARPU growth, offset by lower equipment revenues due to lower sales volumes. Operating expenses were down 1.3% year over year due to lower equipment expenses resulting from lower device sales, partially offset by higher depreciation expense due to our Open RAN deployment and network transformation. Operating income was $6.5 billion, up 3.1% year over year. EBITDA* was $9.0 billion, up $586 million year over year, reflecting service revenue growth. This was the company's highest first-quarter Mobility EBITDA*. 

Business Wireline revenues and profitability declined year over year, driven by intensifying secular pressures on legacy voice and data services that were partially offset by growth in fiber and other advanced connectivity services.

Business Wireline revenues were down 7.8% year over year, primarily due to lower demand for legacy voice and data services as well as product simplification, partially offset by growth in connectivity services, and non-recurring equipment revenues. Operating expenses were down 2.1% year over year, due to lower personnel costs, and lower marketing and customer support expenses, partially offset by higher equipment costs. Operating income was $64 million, down 83.1% year over year, and EBITDA* was $1.4 billion, down $282 million.

Consumer Wireline achieved positive broadband net adds for the third consecutive quarter, driven by 252,000 AT&T Fiber net additions and the recent launch of AT&T Internet Air.

Consumer Wireline revenues were up 3.4% year over year, driven by growth in broadband revenues attributable to fiber revenues, which grew 19.5%, partially offset by declines in legacy voice and data services and other services. Operating expenses were down 0.3% year over year, largely driven by lower customer support costs that were offset by increased network-related costs and depreciation. Operating income was $213 million versus $94 million in the prior-year quarter, and EBITDA* was $1.1 billion, up $139 million year over year.

Latin America segment revenues were up 20.4% year over year, primarily due to favorable impacts of foreign exchange rates, higher equipment sales and subscriber growth. Operating expenses were up 16.1% due to unfavorable impact of foreign exchange and higher equipment costs attributable to subscriber growth. Operating income was $3 million compared to ($30) million in the year-ago quarter. EBITDA* was $180 million, up $35 million year over year.

About AT&TWe 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 StatementsInformation 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 MeasuresSchedules 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 24, 2024. Adjusted diluted EPS, adjusted operating income, EBITDA, adjusted EBITDA, free cash flow, net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures frequently used by investors and credit rating agencies.

Adjusted diluted EPS is calculated by excluding from operating revenues, operating expenses, other income (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.

Non-operational items arising from asset acquisitions and dispositions include 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 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%.

For 1Q24, adjusted EPS of $0.55 is diluted EPS of $0.47 adjusted for $0.06 restructuring and non-cash impairments, $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, minus $0.01 benefit-related, transaction and other items.

The company expects adjustments to 2024 reported diluted EPS to include our proportionate share of intangible amortization at the DIRECTV equity method investment in the range of $0.5-$0.7 billion, a non-cash mark-to-market benefit plan gain/loss, and other items. The company expects the mark-to-market adjustment, which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Our projected 2024 and 2025 adjusted EPS depend on future levels of revenues and expenses, most of which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between these projected non-GAAP metrics and the reported GAAP metrics 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 1Q24, adjusted operating income of $6.0 billion is calculated as operating income of $5.8 billion plus $167 million of adjustments. For 1Q23, adjusted operating income of $6.0 billion is calculated as operating income of $6.0 billion minus $27 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 24, 2024.

EBITDA is net income plus income tax, interest, and depreciation and amortization expenses minus equity in net income of affiliates and other income (expense) â?? net. Adjusted EBITDA is calculated by excluding from EBITDA certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, significant abandonments and impairments, 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 without unreasonable effort.

At the segment or business unit level, 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.

Free cash flow for 1Q24 of $3.1 billion is cash from operating activities of $7.5 billion, plus cash distributions from DIRECTV classified as investing activities of $0.2 billion, minus capital expenditures of $3.8 billion and cash paid for vendor financing of $0.8 billion. For 1Q23, free cash flow of $1.0 billion is cash from operating activities 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. 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.

Capital investment provides a comprehensive view of cash used to invest in our networks, product developments and support systems. In connection with capital improvements, we have favorable payment terms of 120 days or more with certain vendors, referred to as vendor financing, which are excluded from capital expenditures and reported as financing activities. Capital investment includes capital expenditures and cash paid for vendor financing ($0.8 billion in 1Q24 and $2.1 billion in 1Q23). For 2024, capital investment is expected to be in the $21-$22 billion range. Due to high variability and difficulty in predicting items that impact capital expenditures and vendor financing payments, the company is not able to provide a reconciliation between projected capital investment and the most comparable GAAP metrics without unreasonable effort.

Adjusted equity in net income from DIRECTV investment of $0.6 billion for 1Q24 is calculated as equity income from DIRECTV of $0.3 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 $128.7 billion at March 31, 2024, is calculated as total debt of $132.8 billion less cash and cash equivalents of $3.5 billion and time deposits (i.e. deposits at financial institutions that are greater than 90 days) of $0.5 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 and adjusted EBITDA are 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 

Free Cash Flow

Cash Paid for Capital Investment

EBITDA

 

Adjusting Items

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.

Net Debt to Adjusted EBITDA

Supplemental Operational Measures

 

© 2024 AT&T Intellectual Property. All rights reserved. AT&T and the Globe logo are registered trademarks of AT&T Intellectual Property.

 

SOURCE AT&T

SOURCE: AT&T

Brittany Siwald, AT&T Inc., Phone: (214) 202-6630, Email: brittany.a.siwald@att.com

COMTEX_451332090/2197/2024-04-24T06:30:00