Third-Quarter Consolidated Results
- Consolidated revenues of $39.9 billion
- Diluted EPS of $0.82 compared to $0.39 in the year-ago
quarter
- Adjusted EPS of $0.87 compared to $0.76 in the year-ago
quarter
- Cash from operations of $9.9 billion
- Capital expenditures of $4.7 billion; gross capital
investment1 of $5.7 billion and cash content spend of $4.8
billion
- Free cash flow2 of $5.2 billion
Note: AT&T’s third-quarter earnings conference call will be
webcast at 8:30 a.m. ET on Thursday, October 21, 2021. The webcast
and related materials will be available on AT&T’s Investor
Relations website at https://investors.att.com.
AT&T Inc. (NYSE:T) reported third-quarter results that
showed continuing customer growth in wireless, fiber and HBO
Max.
“We continue to execute well in growing customer relationships,
and we’re on track to meet our guidance for the year,” said John
Stankey, AT&T CEO. “We had our best postpaid phone net add
quarter in more than 10 years, our fiber broadband net adds
increased sequentially, and HBO Max global subscribers neared 70
million. We also have clear line of sight on reaching the halfway
mark by the end of the year of our $6 billion cost-savings
goal.”
Third-Quarter Highlights
Communications
- Mobility:
- 928,000 postpaid phone net adds
- 1,218,000 postpaid net adds
- 249,000 prepaid phone net adds
- Postpaid phone churn of 0.72%
- Revenues up 7.0%; service revenues up 4.6%; equipment revenues
up 15.0%
- Operating income of $6.0 billion, up 4.6% year over year;
EBITDA3 up 3.6%
- Operating income margin of 31.1%; EBITDA service margin4
55.0%
- Consumer Wireline:
- 289,000 AT&T Fiber net adds; penetration about 37%
- Revenues up 3.4%; broadband revenues up 7.6% with ARPU growth
of 5.2%
WarnerMedia
- Total global HBO Max and HBO subscribers5 of 69.4 million, up
12.5 million year over year; domestic subscribers6 of 45.2 million,
up 7.1 million in past year
- Domestic HBO Max and HBO subscriber ARPU7 of $11.82
- Total revenues up 14.2% to $8.4 billion
- Direct-to-Consumer subscription revenues up about 25%
Consolidated Financial Results
Consolidated revenues for the third quarter totaled $39.9
billion versus $42.3 billion in the year-ago quarter, down 5.7%
reflecting our July 31, 2021, separation of the U.S. Video
business, other divested businesses, and lower Business Wireline
revenues. These decreases were partially offset by higher Mobility
and WarnerMedia revenues, which reflect the partial recovery from
the prior-year impacts of the pandemic, and to a lesser extent,
higher Consumer Wireline and Mexico revenues. Excluding impacts of
the U.S. Video business from both quarters, consolidated revenues
totaled $38.1 billion8 compared to $36.4 billion in the year-ago
quarter.
Operating expenses were $32.8 billion versus $36.2 billion in
the year-ago quarter. Expenses declined due to only one month of
U.S. Video results in the third quarter and the impact of other
divested businesses, and lower sports-related programming costs
from timing comparisons with the prior-year quarter. These declines
were partially offset by higher domestic wireless equipment costs,
including 3G network shutdown costs, and higher WarnerMedia
non-sports programming, marketing and selling costs. Additionally,
depreciation and amortization expense was $1.4 billion lower year
over year, largely due to the impairments of long-lived assets
taken in the fourth quarter of 2020 and ceasing depreciation and
amortization of U.S. Video assets prior to its separation and of
the held-for-sale Vrio business.
Operating income was $7.1 billion versus $6.1 billion in the
year-ago quarter due to the impacts of lower depreciation and
amortization expense, partially offset by the impact of having only
one month of U.S. Video results in the quarter. When adjusting for
merger-amortization costs and other items, adjusted operating
income was $8.4 billion9 versus $8.2 billion in the year-ago
quarter. When further excluding the impacts of the U.S. Video
business for both quarters, adjusted operating income totaled $8.1
billion10 compared to $7.8 billion in the year-ago quarter.
Third-quarter net income attributable to common stock was $5.9
billion, or $0.82 per diluted common share, versus $2.8 billion, or
$0.39 per diluted common share in the year-ago quarter. Adjusting
for $0.05, which includes merger-amortization costs, a
proportionate share of intangible amortization at the DIRECTV
equity method investment, a gain on the sale of Playdemic, and an
actuarial gain on benefit plans and other items, earnings per
diluted common share was $0.87. This compares to an adjusted
earnings per diluted common share of $0.76 in the year-ago
quarter.
Cash from operating activities was $9.9 billion, down $2.3
billion year over year, with capital expenditures of $4.7 billion
and content spend of $4.8 billion. Gross capital investment totaled
$5.7 billion, which includes $1.0 billion of cash payments for
vendor financing. Free cash flow was $5.2 billion for the quarter.
Net debt decreased by $10.0 billion sequentially, and net
debt-to-adjusted EBITDA at the end of the third quarter was
3.17x.11
Communications Operational Highlights
Third-quarter revenues were $28.2 billion, up 3.8% year
over year due to increases in Mobility and Consumer Wireline more
than offsetting a decline in Business Wireline. Operating
contribution was $7.1 billion, up 0.8% year over year, with
operating income margin of 25.2%, compared to 26.0% in the
year-ago quarter.
Mobility
- Revenues were up 7.0% year over year to $19.1 billion
due to higher service and equipment revenues. Service
revenues were $14.5 billion, up 4.6% year over year due to
subscriber gains and the lapping of pandemic impacts on
international roaming revenues. Equipment revenues were $4.6
billion, up 15.0% year over year, driven by higher smartphone sales
including the quarterly shift in product launch timing versus the
prior year.
- Operating expenses were $13.2 billion, up 8.0% year over
year due to higher equipment costs, including 3G network shutdown
costs of nearly $200 million, higher costs due to the iPhone launch
returning to the third quarter and HBO Max bundling, partially
offset by lower costs for sales and support.
- Operating income was $6.0 billion, up 4.6% year over
year. Operating income margin was 31.1%, compared to 31.8%
in the year-ago quarter.
- EBITDA was $8.0 billion, up 3.6% year over year with
EBITDA margin of 41.7%, down from 43.1% from a year
ago. EBITDA service margin was 55.0%, compared
to 55.5% in the year-ago quarter.
- Total net adds were 4.9 million including:
- 1,218,000 postpaid net adds, with
- 928,000 postpaid phone net adds
- (3,000) postpaid tablet and other branded computing
device net losses
- 293,000 other net adds
- 249,000 prepaid phone net adds
- Postpaid churn was 0.92% versus 0.85% in the year-ago
quarter but improved year over year when adjusted for the Keep
America Connected program in the prior year. Postpaid phone
churn was 0.72% versus 0.69% in the year-ago quarter but
improved year over year when adjusted for the Keep America
Connected program in the prior year. Prepaid churn was less
than 3%.
- Postpaid phone-only ARPU was $54.37, down 0.6% versus
the year-ago quarter, due to the impacts of promotional discount
amortization, but was up sequentially.
Business Wireline
- Revenues were $5.9 billion, down 5.2% year over year
from lower service revenues, primarily due to the prior-year
increase for pandemic-related connectivity and lower demand for
legacy voice and data services as the company proactively
rationalizes its product portfolio.
- Operating expenses were $5.0 billion, down 2.4% year
over year due to ongoing operational cost efficiencies.
- Operating income was $1.0 billion, down 16.8% with
operating income margin of 16.6%, compared to 18.9% in the
year-ago quarter.
- EBITDA was $2.3 billion, down 8.3% year over year with
EBITDA margin of 38.5%, compared to 39.9% in the year-ago
quarter.
- More than 650,000 U.S. business buildings are lit with fiber
from AT&T, enabling high-speed fiber connections to more than
2.5 million U.S. business customer locations. Nationwide, more than
9.0 million business customer locations are on or within 1,000 feet
of our fiber.12
Consumer Wireline
- Revenues were $3.1 billion, up 3.4% year over year due
to gains in broadband more than offsetting declines in legacy voice
and data services and other services. Broadband revenues
increased 7.6%, which reflects fiber subscriber growth and higher
ARPU resulting from increases in fiber customers and pricing.
- Operating expenses were $3.0 billion, up 3.8% year over
year largely driven by higher technology and depreciation,
partially offset by lower amortization of deferred customer
acquisition costs.
- Operating income was $183 million, down 3.2% year over
year, with operating income margin of 5.8%, compared to 6.2%
in the year-ago quarter.
- EBITDA was $1.0 billion, up 3.8% year over year with
EBITDA margin of 30.5%, compared to 30.4% in the year-ago
quarter.
- Total broadband and DSL subscriber net adds were 6,000,
reflecting growth in fiber subscribers offsetting losses in
slower-speed services. AT&T Fiber net adds were 289,000.
AT&T Fiber is marketed to more than 15 million customer
locations.
WarnerMedia Operational Highlights
Revenues for the third quarter were $8.4 billion, up
14.2% versus the year-ago quarter, driven by higher content and
other revenues, including the partial recovery from prior-year
impacts of the pandemic and higher subscription revenues, partially
offset by lower advertising revenues. Subscription revenues
were $4.0 billion, up 14.7%, primarily reflecting growth of HBO
Max. Content and Other revenues were $3.1 billion, up 31.7%,
driven by higher TV licensing and higher theatrical. Advertising
revenues were $1.4 billion, down 12.4% when compared to the
prior year due to timing of the NBA season in the year-ago quarter
and lower political ad spending year over year.
- Operating expenses totaled $6.4 billion, up 13.8% when
compared to the third quarter of 2020, driven by higher film and
non-sports programming costs, as well as higher marketing costs,
and incremental selling costs associated with DIRECTV advertising
revenue sharing arrangements. These increases were partially offset
by lower sports programming costs from the timing of the NBA season
in the prior-year quarter.
- Operating contribution was $1.9 billion, up 10.3%.
Operating income was $2.0 billion, up 15.2% year over year,
as higher revenues and lower sports programming costs were
partially offset by continued HBO Max investment and incremental
advertising revenue sharing costs. Operating income margin
was 23.8%, compared to 23.6% in the year-ago quarter.
- At the end of the quarter, there were 69.4 million
global HBO Max and HBO subscribers. Global HBO Max
and HBO subscribers increased 12.5 million year over year and were
up 1.9 million sequentially, as international and ad-supported
subscriber gains were partially offset by HBO Max being
discontinued on the Amazon wholesale platform. At the end of the
quarter, there were 45.2 million domestic HBO Max and HBO
subscribers versus 38.0 million in the year-ago quarter, up 7.1
million year over year. Domestic subscriber ARPU was
$11.82.
Latin America Operational Highlights
(AT&T has reached an agreement to sell its Vrio operations
to Grupo Werthein. The companies expect the transaction to close
during the fourth quarter of 2021.)
Revenues were $1.5 billion, up 6.0% year over year due to
growth in Mexico. Operating contribution was ($25) million
compared to ($177) million in the year-ago quarter, with operating
income margin of (2.3)%, compared to (13.7)% in the prior-year
quarter.
Vrio
- Revenues were $756 million, essentially stable year over
year. Operating income was $96 million compared to an
operating loss of ($48) million in the year-ago quarter, reflecting
ceasing depreciation on these held-for-sale assets. Operating
income margin was 12.7%, compared to (6.4)% in the prior-year
quarter.
- Vrio subscriber net losses of 178,000 were driven
primarily by secular declines and economic pressures in Brazil, and
lower sales in other parts of the region.
Mexico
- Revenues were $724 million, up 12.6% year over year
primarily due to increased growth in service revenues. Service
revenues were $463 million, up 20.3% year over year, driven by
favorable foreign exchange impact, growing subscriber base and
growth in other services. Equipment revenues were $261
million, up 1.2% year over year, driven by foreign exchange
benefits. Operating loss was ($130) million versus ($143)
million in the year-ago quarter.
- Total wireless net adds were 427,000 including 389,000
prepaid net adds, 36,000 postpaid net adds and 2,000
reseller net adds.
Outlook
The company now expects full-year adjusted EPS13 to be at the
high end of the low- to mid-single digit growth range and is on
track with its free cash flow14 target of $26 billion range. The
company also expects to reach the higher end of the end-of-year HBO
Max/HBO global subscriber target of 70-73 million subscribers.
1 Gross capital investment includes capital expenditures and
cash payments for vendor financing and excludes FirstNet
reimbursements. In 3Q21, gross capital investment included $1.0
billion in vendor financing payments.
2 Free cash flow is a non-GAAP financial measure that is
frequently used by investors and credit rating agencies to provide
relevant and useful information. Free cash flow is cash from
operating activities of $9.9 billion, plus cash distributions from
DIRECTV classified as investing activities of $0, minus capital
expenditures of $4.7 billion.
3 EBITDA is operating income before depreciation and
amortization. EBITDA margin is operating income before depreciation
and amortization, divided by total revenues.
4 EBITDA service margin is operating income before depreciation
and amortization, divided by total service revenues.
5 Global HBO Max and HBO subscribers consist of domestic and
international HBO Max and HBO subscribers, and exclude free trials,
basic and Cinemax subscribers.
6 Domestic HBO Max and HBO subscribers consist of U.S. accounts
with access to HBO Max (including wholesale subscribers that may
not have signed in) and HBO accounts, and exclude free trials and
Cinemax subscribers.
7 Domestic subscriber ARPU is defined as domestic HBO Max and
HBO subscriber revenues during the period divided by average
domestic HBO Max and HBO subscribers during the period, excluding
HBO Commercial and other bulk-billed revenues and subscribers
during the period.
8 Operating Revenues, excluding impacts of the U.S. Video
business, of $38.1 billion for 3Q21 is calculated as Operating
Revenues of $39.9 billion minus Video operating revenues of $2.1
billion, plus WarnerMedia sales for content and advertising of $0.3
billion that are external after close of the transaction. Further
information is included in our Forms 8-K dated September 9 and
October 21, 2021.
9 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. Adjusted
Operating Income for 3Q21 of $8.4 billion is calculated as
Operating Income of $7.1 billion plus $1.3 billion of adjustments
as detailed in the Discussion and Reconciliation of Non-GAAP
Measures included in our Form 8-K dated October 21, 2021.
10 Adjusted Operating Income, excluding impacts of the U.S.
Video business, of $8.1 billion for 3Q21 is calculated as Adjusted
Operating Income of $8.4 billion minus $0.3 billion of adjustments
to reflect the impacts of the July 31, 2021 separation. Further
detail of these adjustments and information is included in our
Forms 8-K dated September 9 and October 21, 2021.
11 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 of
$157.9 billion (Total Debt of $179.2 billion at September 30, 2021
less Cash and Cash Equivalents of $21.3 billion) by the sum of the
most recent four quarters of Pro Forma Adjusted EBITDA of $49.8
billion ($12.3 billion for December 31, 2020; $12.6 billion for
March 31, 2021; $12.3 billion for June 30, 2021; and $12.6 billion
for September 30, 2021).
12 The more than 2.5 million U.S. business customer locations
are included within the 9.0+ million U.S. business customer
locations on or within 1,000 feet of our fiber.
13 The company expects adjustments to 2021 reported diluted EPS
to include merger-related amortization in the range of $4.2 billion
and other adjustments, the proportionate share of intangible
amortization at the DIRECTV equity method investment, 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 2021 EPS depends on future
levels of revenues and expenses 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.
14 Free cash flow is cash from operating activities plus cash
distributions from DIRECTV classified as investing activities,
minus capital expenditures. Due to high variability and difficulty
in predicting items that impact cash from operating activities and
capital expenditures, the company is not able to provide a
reconciliation between projected free cash flow and the most
comparable GAAP metric without unreasonable effort.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology.
AT&T Communications provides more than 100 million U.S.
consumers with entertainment and communications experiences across
mobile and broadband. Plus, it serves high-speed, highly secure
connectivity and smart solutions to nearly 3 million business
customers. WarnerMedia is a leading media and entertainment company
that creates and distributes premium and popular content to global
audiences through its consumer brands, including: HBO, HBO Max,
Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line,
Cartoon Network, Adult Swim and Turner Classic Movies. Xandr, now
part of WarnerMedia, provides marketers with innovative and
relevant advertising solutions for consumers around premium video
content and digital advertising through its platform. AT&T
Latin America provides pay-TV services across 10 countries and
territories in Latin America and the Caribbean and wireless
services to consumers and businesses in Mexico.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc. Additional information is available
at about.att.com. © 2021 AT&T Intellectual Property. All rights
reserved. AT&T, the Globe logo and other marks are trademarks
and service marks of AT&T Intellectual Property and/or AT&T
affiliated companies. All other marks contained herein are the
property of their respective owners.
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.
Discussion and Reconciliation of Non-GAAP Measures
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. Free cash flow after dividends is defined as
cash from operations minus capital expenditures 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 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
2021
2020
2021
2020
Net cash provided by operating
activities1
$
9,866
$
12,123
$
30,703
$
33,048
Add: Distributions from DIRECTV classified
as investing
activities
—
—
—
—
Less: Capital expenditures
(4,704)
(3,851)
(12,696)
(13,283)
Free Cash Flow
5,162
8,272
18,007
19,765
Less: Dividends paid
(3,748)
(3,741)
(11,319)
(11,215)
Free Cash Flow after Dividends
$
1,414
$
4,531
$
6,688
$
8,550
Free Cash Flow Dividend Payout
Ratio
72.6
%
45.2
%
62.9
%
56.7
%
1
Includes distributions from DIRECTV of
$130 in the third quarter and for the nine months ended September
30, 2021.
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
2021
2020
2021
2020
Capital Expenditures
$
(4,704)
$
(3,851)
$
(12,696)
$
(13,283)
Cash paid for vendor financing
(1,019)
(611)
(4,013)
(1,965)
Cash paid for Capital
Investment
$
(5,723)
$
(4,462)
$
(16,709)
$
(15,248)
FirstNet reimbursement
—
(64)
—
(143)
Gross Capital Investment
$
(5,723)
$
(4,526)
$
(16,709)
$
(15,391)
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.
When discussing our segment, business unit and supplemental
results, EBITDA excludes equity in net income (loss) of affiliates,
and depreciation and amortization from operating contribution.
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 operating performance 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
2021
2020
2021
2020
Net Income
$
6,273
$
3,168
$
16,089
$
9,694
Additions:
Income Tax Expense
1,539
766
4,412
3,003
Interest Expense
1,667
1,972
5,221
6,031
Equity in Net (Income) Loss of
Affiliates
(91)
(5)
(184)
11
Other (Income) Expense - Net
(2,279)
231
(7,499)
(1,589)
Depreciation and amortization
5,619
7,030
17,189
21,537
EBITDA
12,728
13,162
35,228
38,687
Merger costs
130
38
167
431
Employee separation costs and
benefit-related (gain) loss
—
40
57
924
Impairments
161
73
$
4,716
2,515
Gain on spectrum transaction
—
—
—
(900)
Adjusted EBITDA 1
$
13,019
$
13,313
$
40,168
$
41,657
1
See page 5 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
2021
2020
2021
2020
Communications Segment
Operating Contribution
$
7,123
$
7,064
$
21,828
$
21,953
Additions:
Depreciation and amortization
4,114
4,068
12,253
12,154
EBITDA
11,237
11,132
34,081
34,107
Total Operating Revenues
28,218
27,195
84,524
80,479
Operating Income Margin
25.2
%
26.0
%
25.8
%
27.3
%
EBITDA Margin
39.8
%
40.9
%
40.3
%
42.4
%
Mobility
Operating Contribution
$
5,955
$
5,691
$
17,959
$
17,284
Additions:
Depreciation and amortization
2,035
2,021
6,072
6,078
EBITDA
7,990
7,712
24,031
23,362
Total Operating Revenues
19,138
17,894
57,108
52,445
Service Revenues
14,527
13,883
42,921
41,520
Operating Income Margin
31.1
%
31.8
%
31.4
%
33.0
%
EBITDA Margin
41.7
%
43.1
%
42.1
%
44.5
%
EBITDA Service Margin
55.0
%
55.5
%
56.0
%
56.3
%
Business Wireline
Operating Contribution
$
985
$
1,184
$
3,093
$
3,567
Additions:
Depreciation and amortization
1,304
1,313
3,875
3,900
EBITDA
2,289
2,497
6,968
7,467
Total Operating Revenues
5,938
6,261
18,036
18,832
Operating Income Margin
16.6
%
18.9
%
17.1
%
18.9
%
EBITDA Margin
38.5
%
39.9
%
38.6
%
39.7
%
Consumer Wireline
Operating Contribution
$
183
$
189
$
776
$
1,102
Additions:
Depreciation and amortization
775
734
2,306
2,176
EBITDA
958
923
3,082
3,278
Total Operating Revenues
3,142
3,040
9,380
9,202
Operating Income Margin
5.8
%
6.2
%
8.3
%
12.0
%
EBITDA Margin
30.5
%
30.4
%
32.9
%
35.6
%
Segment and Business Unit
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Third Quarter
Nine-Month Period
2021
2020
2021
2020
WarnerMedia Segment
Operating Contribution
$
1,935
$
1,755
$
5,704
$
5,681
Additions:
Equity in Net (Income) of Affiliates
73
(12)
(44)
(31)
Depreciation and amortization
163
169
491
494
EBITDA
2,171
1,912
6,151
6,144
Total Operating Revenues
8,442
7,395
25,759
21,888
Operating Income Margin
23.8
%
23.6
%
22.0
%
25.8
%
EBITDA Margin
25.7
%
25.9
%
23.9
%
28.1
%
Segment and Business Unit
EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
Third Quarter
Nine-Month Period
2021
2020
2021
2020
Latin America Segment
Operating Contribution
$
(25)
$
(177)
$
(350)
$
(562)
Additions:
Equity in Net (Income) of Affiliates
(9)
(14)
(7)
(26)
Depreciation and amortization
157
250
683
773
EBITDA
123
59
326
185
Total Operating Revenues
1,480
1,396
4,291
4,218
Operating Income Margin
-2.3
%
-13.7
%
-8.3
%
-13.9
%
EBITDA Margin
8.3
%
4.2
%
7.6
%
4.4
%
Vrio
Operating Contribution
$
105
$
(34)
$
43
$
(101)
Additions:
Equity in Net (Income) of Affiliates
(9)
(14)
(7)
(26)
Depreciation and amortization
—
126
231
400
EBITDA
96
78
267
273
Total Operating Revenues
756
753
2,248
2,392
Operating Income Margin
12.7
%
-6.4
%
1.6
%
-5.3
%
EBITDA Margin
12.7
%
10.4
%
11.9
%
11.4
%
Mexico
Operating Contribution
$
(130)
$
(143)
$
(393)
$
(461)
Additions:
Equity in Net (Income) Loss of
Affiliates
—
—
—
—
Depreciation and amortization
157
124
452
373
EBITDA
27
(19)
59
(88)
Total Operating Revenues
724
643
2,043
1,826
Operating Income Margin
-18.0
%
-22.2
%
-19.2
%
-25.2
%
EBITDA Margin
3.7
%
-3.0
%
2.9
%
-4.8
%
Adjusting Items
Adjusting items include revenues and costs we consider
non-operational in nature, including items arising from asset
acquisitions or dispositions. 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
2021
2020
2021
2020
Operating Expenses
Merger costs
$
130
$
38
$
167
$
431
Employee separation costs and
benefit-related (gain) loss1
—
40
57
924
Assets impairments and abandonment
161
73
4,716
2,515
Gain (loss) on spectrum transaction
—
—
—
(900)
Adjustments to Operations and Support
Expenses
291
151
4,940
2,970
Amortization of intangible assets
1,012
1,921
3,212
6,122
Adjustments to Operating
Expenses
1,303
2,072
8,152
9,092
Other
DIRECTV intangible amortization
(proportionate share)
392
—
392
—
(Gain) loss on sale of assets
(768)
—
(832)
—
Debt redemption, impairments and other
68
1,263
213
1,670
Actuarial (gain) loss
(374)
63
(3,021)
63
Employee benefit-related (gain) loss1
—
(64)
—
(22)
Adjustments to Income Before Income
Taxes
621
3,334
4,904
10,803
Tax impact of adjustments
72
648
620
1,791
Tax-related items
123
—
241
—
Impairment attributable to noncontrolling
interest
—
—
81
105
Adjustments to Net Income
$
426
$
2,686
$
3,962
$
8,907
1
Mark-to-market gains and losses on
benefit-related investments were adjusted in 2020 reflecting more
significant market volatility and uncertainty experienced as a
result of the onset of the COVID-19 pandemic. Benefit-related
investment gains (losses) were $(3) and $256 in the third quarter
and for the first nine months of 2021 and $123 and $125 in the
third quarter and for the first nine months of 2020.
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, severance 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
2021
2020
2021
2020
Operating Income
$
7,109
$
6,132
$
18,039
$
17,150
Adjustments to Operating Expenses
1,303
2,072
8,152
9,092
Adjusted Operating Income
8,412
8,204
26,191
26,242
EBITDA
12,728
13,162
35,228
38,687
Adjustments to Operations and Support
Expenses
291
151
4,940
2,970
Adjusted EBITDA
13,019
13,313
40,168
41,657
Total Operating Revenues
39,922
42,340
127,906
126,069
Operating Income Margin
17.8
%
14.5
%
14.1
%
13.6
%
Adjusted Operating Income Margin
21.1
%
19.4
%
20.5
%
20.8
%
Adjusted EBITDA Margin
32.6
%
31.4
%
31.4
%
33.0
%
Adjusted Diluted EPS
Third Quarter
Nine-Month Period
2021
2020
2021
2020
Diluted Earnings Per Share
(EPS)
$
0.82
$
0.39
$
2.07
$
1.19
Amortization of intangible assets
0.11
0.22
0.35
0.68
DIRECTV intangible amortization
(proportionate share)
0.04
—
0.04
—
Impairments
0.02
0.01
0.54
0.35
(Gain) loss on sale of assets
(0.08)
—
(0.09)
—
Actuarial (gain) loss 1
(0.04)
0.01
(0.32)
0.01
Debt redemption and other adjustments
0.02
0.13
0.06
0.20
Tax-related items
(0.02)
—
(0.03)
—
Adjusted EPS
$
0.87
$
0.76
$
2.62
$
2.43
Year-over-year growth - Adjusted
14.5
%
7.8
%
Weighted Average Common Shares
Outstanding with Dilution (000,000)
7,202
7,173
7,197
7,186
1
Includes adjustments for actuarial gains
or losses associated with our pension benefit plan, 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 gain of $0.4 billion in the third
quarter of 2021. As a result, adjusted EPS reflects an expected
return on plan assets of $0.9 billion (based on an average expected
return on plan assets of 6.75% for our pension trust), rather than
the actual return on plan assets of $1.0 billion (actual pension
return of 6.3%), included in the GAAP measure of income.
Net Debt to Pro Forma 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 Pro Forma Adjusted EBITDA ratio is calculated by
dividing the Net Debt by the sum of the most recent four quarters
Pro Forma 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 Pro Forma Adjusted
EBITDA - 2021
Dollars in millions
Three Months Ended
Dec. 31,
March. 31
June 30,
Sept. 30,
Four Quarters
2020 1
2021 1
2021 1
2021
Adjusted EBITDA
$
12,889
$
13,564
$
13,585
$
13,019
$
53,057
Less: Historical Video
(710)
(1,065)
(1,364)
(418)
(3,557)
Add: WarnerMedia sale of DIRECTV
advertising
565
349
372
99
1,385
Add: WarnerMedia/DIRECTV revenue share
(422)
(271)
(287)
(78)
(1,058)
Pro Forma Adjusted EBITDA
12,322
12,577
12,306
12,622
49,827
End-of-period current debt
23,755
End-of-period long-term debt
155,406
Total End-of-Period Debt
179,161
Less: Cash and Cash Equivalents
21,270
Net Debt Balance
157,891
Annualized Net Debt to Pro
Forma
Adjusted EBITDA Ratio
3.17
1
As reported in AT&T's Form 8-K filed
January 27, 2021, April 22, 2021, July 22, 2021, and September 9,
2021.
Net Debt to Adjusted EBITDA -
2020
Dollars in millions
Three Months Ended
Dec. 31,
March. 31
June 30,
Sept. 30,
Four Quarters
2019 1
2020 1
2020 1
2020 1
Adjusted EBITDA
$
14,365
$
14,232
$
14,112
$
13,313
$
56,022
End-of-period current debt
5,898
End-of-period long-term debt
152,980
Total End-of-Period Debt
158,878
Less: Cash and Cash Equivalents
9,758
Net Debt Balance
149,120
Annualized Net Debt to Adjusted EBITDA
Ratio
2.66
1
As reported in AT&T's Form 8-K filed
January 29, 2020, April 22, 2020, and July 23, 2020.
Supplemental Operational
Measures
We provide a supplemental discussion of our business solutions
operations that 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, 2021
September 30, 2020
Mobility
Business Wireline
Adjustments1
Business Solutions
Mobility
Business Wireline
Adjustments1
Business Solutions
Operating Revenues
Wireless service
$
14,527
$
—
$
(12,468)
$
2,059
$
13,883
$
—
$
(11,933)
$
1,950
Wireline service
—
5,765
—
5,765
—
6,079
—
6,079
Wireless equipment
4,611
—
(3,798)
813
4,011
—
(3,349)
662
Wireline equipment
—
173
—
173
—
182
—
182
Total Operating Revenues
19,138
5,938
(16,266)
8,810
17,894
6,261
(15,282)
8,873
Operating Expenses
Operations and support
11,148
3,649
(9,194)
5,603
10,182
3,764
(8,505)
5,441
EBITDA
7,990
2,289
(7,072)
3,207
7,712
2,497
(6,777)
3,432
Depreciation and amortization
2,035
1,304
(1,688)
1,651
2,021
1,313
(1,702)
1,632
Total Operating Expenses
13,183
4,953
(10,882)
7,254
12,203
5,077
(10,207)
7,073
Operating Income
5,955
985
(5,384)
1,556
5,691
1,184
(5,075)
1,800
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
5,955
$
985
$
(5,384)
$
1,556
$
5,691
$
1,184
$
(5,075)
$
1,800
1
Non-business wireless reported in the
Communication 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, 2021
September 30, 2020
Mobility
Business Wireline
Adjustments1
Business Solutions
Mobility
Business Wireline
Adjustments1
Business Solutions
Operating Revenues
Wireless service
$
42,921
$
—
$
(36,868)
$
6,053
$
41,520
$
—
$
(35,736)
$
5,784
Wireline service
—
17,497
—
17,497
—
18,271
—
18,271
Wireless equipment
14,187
—
(11,803)
2,384
10,925
—
(8,968)
1,957
Wireline equipment
—
539
—
539
—
561
—
561
Total Operating Revenues
57,108
18,036
(48,671)
26,473
52,445
18,832
(44,704)
26,573
Operating Expenses
Operations and support
33,077
11,068
(27,330)
16,815
29,083
11,365
(24,001)
16,447
EBITDA
24,031
6,968
(21,341)
9,658
23,362
7,467
(20,703)
10,126
Depreciation and amortization
6,072
3,875
(5,044)
4,903
6,078
3,900
(5,116)
4,862
Total Operating Expenses
39,149
14,943
(32,374)
21,718
35,161
15,265
(29,117)
21,309
Operating Income
17,959
3,093
(16,297)
4,755
17,284
3,567
(15,587)
5,264
Equity in Net Income (Loss) of
Affiliates
—
—
—
—
—
—
—
—
Operating Contribution
$
17,959
$
3,093
$
(16,297)
$
4,755
$
17,284
$
3,567
$
(15,587)
$
5,264
1
Non-business wireless reported in
the Communication segment under the Mobility business unit.
Results have been recast to
conform to the current period's classification.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211021005511/en/
Fletcher Cook AT&T Inc. Phone: (214) 912-8541 Email:
fletcher.cook@att.com Daphne Avila AT&T Inc. Phone: (972)
266-3866 Email: daphne.avila@att.com
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