AT&T Raises Full-Year Adjusted EBITDA and Free Cash Flow Guidance Driven by Continued Subscriber and Revenue Growth

Rhea-AI Summary

AT&T Inc. reports strong Q3 results with solid 5G and fiber subscriber growth.

Positive

• Revenues of $30.4 billion, up 1% YoY
• Cash from operating activities of $10.3 billion, up 2.4% YoY
• Free cash flow of $5.2 billion, up $1.3 billion YoY
• Full-year free cash flow guidance raised to about $16.5 billion
• AT&T Fiber net adds of 296,000
• Consumer broadband revenues up 9.8%
• Mid-band 5G spectrum now covers more than 190 million people
• 8 million AT&T Fiber subscribers

Negative

• Operating income decreased from $6.0 billion to $5.8 billion YoY
• Income from continuing operations decreased from $6.3 billion to $3.8 billion YoY
• Earnings per diluted common share from continuing operations decreased from $0.79 to $0.48 YoY
• Business Wireline revenues down 7.9% YoY
• Business Wireline operating income decreased from $620 million to $350 million YoY

The company's 5G and fiber momentum helped drive high-quality, profitable customer growth, low churn and improved financial performance

DALLAS, Oct. 19, 2023 /PRNewswire/ -- AT&T Inc. (NYSE: T) again delivered strong results in the third quarter with solid 5G and fiber subscriber growth. The company also posted healthy year over year increases in Mobility service and broadband revenues, driving higher profitability.

Strong third-quarter results build on momentum 

• Revenues of $30.4 billion, up 1% year over year
• Cash from operating activities of $10.3 billion, up $0.2 billion or 2.4% year over year; year-to-date, cash from operating activities is up $1.5 billion versus the same period a year ago.
• Free cash flow* of $5.2 billion, up $1.3 billion year over year; year-to-date, free cash flow is up $2.4 billion versus the same period a year ago.
• The company now expects full-year free cash flow* of about $16.5 billion, versus prior guidance of $16 billion or better.
• Operating income of $5.8 billion, with adjusted operating income* of $6.5 billion

"Our investments in best-in-class 5G and fiber connectivity are fueling our growth engine. We're gaining profitable customer relationships and becoming more efficient. This is powering our strong business performance and gives us the confidence to raise our full-year free cash flow guidance," said John Stankey, AT&T CEO. "We are pleased that customers are choosing AT&T and staying with us over the long run as we connect and simplify their digital world."

Sustainable strategy creates foundation for durable, long-term growth

• Delivered 468,000 postpaid phone net adds with continued strong ARPU growth and historically low levels of churn
• Mobility service revenues up 3.7%; achieved company's best-ever Mobility operating income 
• 296,000 AT&T Fiber net adds
• Consumer broadband revenues up 9.8%, driven by AT&T Fiber revenue growth of 26.9%
• Surpassed 8 million AT&T Fiber subscribers; doubled customer base in less than 4 years
• Launched AT&T Internet Air fixed wireless residential service; expect to be in 30+ locations by the end of the year

A leading investor in America's broadband infrastructure 

• Continued to enhance the largest wireless network in North America¹ and expand the most reliable 5G network¹ as we scale our 5G standalone; mid-band 5G spectrum now covers more than 190 million people, on track to reach 200 million people or more with mid-band 5G by year-end
• Grew the nation's largest consumer fiber network, which is now capable of serving 20.7 million consumers and about 3.3 million business customer locations; on track to pass 30 million+ fiber locations by the end of 2025
• Supported AST SpaceMobile in world's-first direct 5G voice call between two unmodified smartphones via a low-earth orbit satellite in space

Becoming more efficient and effective through innovation 

• Strong early progress on achieving an incremental $2 billion+ run-rate cost savings target within the next three years

Note: AT&T's third-quarter earnings conference call will be webcast at 8:30 a.m. ET on Thursday, October 19, 2023. The webcast and related materials, including financial highlights, will be available on AT&T's Investor Relations website at https://investors.att.com.

Consolidated Financial Results

Revenues for the third quarter totaled $30.4 billion versus $30.0 billion in the year-ago quarter, up 1.0%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues. Revenue increases also reflect favorable impacts of foreign exchange rates in Mexico. 

Operating expenses were $24.6 billion versus $24.0 billion in the year-ago quarter, reflecting higher severance and restructuring charges and continued inflationary cost increases in the third quarter of 2023, partially offset by continued transformation efforts. Operating expense increases also reflect  increased depreciation expense, higher network costs, unfavorable impact of foreign exchange rates, and increased amortization of deferred customer acquisition costs. These increases were partially offset by lower Mobility equipment and associated selling costs from lower wireless sales volumes, and lower personnel costs.

Operating income was $5.8 billion versus $6.0 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.5 billion versus $6.2 billion in the year-ago quarter. 

The company now expects full-year Adjusted EBITDA* growth of better than 4%, versus prior guidance of 3%+.

Equity in net income of affiliates was $0.4 billion, primarily from the DIRECTV investment. With an adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment* was $0.7 billion.

Income from continuing operations was $3.8 billion, versus $6.3 billion in the year-ago quarter. Earnings per diluted common share from continuing operations² was $0.48 versus $0.79 in the year-ago quarter. Adjusting for $0.16, which includes severance and restructuring charges, an impairment of an equity investment in a Latin America satellite business, our proportionate share of intangible amortization from the DIRECTV equity method investment and an actuarial gain on benefit plans and other items, earnings per diluted common share from continuing operations* was $0.64 compared to $0.68 in the year-ago quarter. 

Cash from operating activities from continuing operations was $10.3 billion, up $0.2 billion year over year, reflecting operational growth and timing of working capital, including lower device payments partially offset by a lower net impact from receivable sales. Capital expenditures were $4.6 billion in the quarter versus $5.9 billion in the year-ago quarter. Capital investment*, which includes $1.0 billion of cash payments for vendor financing, totaled $5.6 billion.

Free cash flow* was $5.2 billion for the quarter. Total debt was $138.0 billion at the end of the quarter, and net debt* was $128.7 billion. The company expects to achieve net debt-to-adjusted EBITDA* in the 2.5x range in the first half of 2025.

Communications Operational Highlights

Third-quarter revenues were $29.2 billion, up 0.4% year over year due to increases in Mobility and Consumer Wireline, which more than offset a decline in Business Wireline. Operating income was $7.3 billion, up 4.1% year over year, with operating income margin of 24.9%, compared to 24.0% in the year-ago quarter.

Mobility

• • Revenues were up 2.0% year over year to $20.7 billion due to higher service revenues. Service revenues were $15.9 billion, up 3.7% year over year, primarily driven by subscriber and postpaid phone ARPU growth. Equipment revenues were $4.8 billion, down 3.2% year over year due to lower device volumes.
  • Operating expenses were $13.9 billion, down 0.9% year over year, primarily due to lower equipment costs and associated selling expenses driven by lower device sales, partly offset by higher network and customer support costs, increased amortization of deferred customer acquisition costs and higher depreciation expense.
  • Operating income was $6.8 billion, up 8.6% year over year. Operating income margin was 32.7%, compared to 30.7% in the year-ago quarter.
  • EBITDA* was $8.9 billion, up 7.6% year over year with EBITDA margin* of 43.0%, up from 40.8% in the year-ago quarter. This was the company's best-ever quarterly Mobility EBITDA*. EBITDA service margin* was 55.9%, up from 53.9% in the year-ago quarter.
  • Total wireless net adds were 6.6 million, including:
    • 550,000 postpaid net adds with:
      • 468,000 postpaid phone net adds
      • (48,000) postpaid tablet and other branded computing device net losses
      • 130,000 other net adds
    • 26,000 prepaid phone net adds
  • Postpaid churn improved to 0.95% versus 1.01% in the year-ago quarter.
  • Postpaid phone churn improved to 0.79% versus 0.84% in the year-ago quarter.
  • Prepaid churn was 2.78%, with Cricket substantially lower, versus 2.83% in the year-ago quarter.
  • Postpaid phone ARPU was $55.99, up 0.6% versus the year-ago quarter, due to pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
  • FirstNet connections reached about 5.3 million across nearly 27,000 agencies. FirstNet is the nationwide communications platform dedicated to public safety. The AT&T and FirstNet networks cover more than 99% of the U.S. population, and FirstNet covers more first responders than any other network in America.

Business Wireline

• • Revenues were $5.2 billion, down 7.9% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services. This quarter also included approximately $100 million in revenues from intellectual property sales, which were relatively consistent with the prior year.
  • Operating expenses were $4.9 billion, down 3.5% year over year due to lower personnel costs associated with ongoing transformation initiatives, and lower wholesale network access, customer support and marketing expenses.
  • Operating income was $350 million, down 43.6%, with operating income margin of 6.7% compared to 11.0% in the year-ago quarter.
  • EBITDA* was $1.7 billion, down 13.7% year over year with EBITDA margin* of 32.5%, compared to 34.6% in the year-ago quarter. The company now expects full-year Business Wireline EBITDA* declines in the low-double digits, versus prior guidance of high-single digit declines.
  • AT&T Business serves the largest global companies, government agencies and small businesses. More than 800,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to approximately 3.3 million U.S. business customer locations. Nationwide, more than 10 million business customer locations are on or within 1,000 feet of our fiber.³

Consumer Wireline

• • Revenues were $3.3 billion, up 4.6% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 9.8% due to fiber growth of 26.9%, partly offset by a 9.0% decline in non-fiber revenues. The company now expects full-year broadband revenue growth of 7%+, versus prior guidance of 5%+.
  • Operating expenses were $3.2 billion, up 4.2% year over year due to higher depreciation expense and higher network-related costs, partly offset by lower customer support costs.
  • Operating income was $160 million, up 12.7% year over year with operating income margin of 4.8%, compared to 4.5% in the year-ago quarter.
  • EBITDA* was $1.0 billion, up 9.4% year over year with EBITDA margin* of 31.0%, up from 29.6% in the year-ago quarter.
  • Total broadband net gains, excluding DSL and including AT&T Internet Air, were 15,000, reflecting AT&T Fiber net adds of 296,000, more than offsetting losses in non-fiber services. AT&T Fiber is now capable of serving 20.7 million customer locations and offers symmetrical, multi-gig speeds across parts of its entire footprint of more than 100 metro areas.

Latin America – Mexico Operational Highlights 

Revenues were $992 million, up 26.4% year over year due to growth in both service and equipment revenues. Service revenues were $672 million, up 20.2% year over year, driven by favorable foreign exchange and essentially stable subscriber and wholesale revenues. Equipment revenues were $320 million, up 41.6% year over year due to higher sales and favorable foreign exchange.

Operating loss was ($29) million compared to ($63) million in the year-ago quarter. EBITDA* was $155 million compared to $101 million in the year-ago quarter.

Total wireless net adds were 65,000, including 17,000 prepaid net adds, 55,000 postpaid net adds and 7,000 reseller net losses.

* Further clarification and explanation of non-GAAP measures and reconciliations to their most comparable GAAP measures can be found in the "Non-GAAP Measures and Reconciliations to GAAP Measures" section of the release and at https://investors.att.com.

FirstNet and the FirstNet logo are registered trademarks and service marks of the First Responder Network Authority. All other marks are the property of their respective owners.

1 Based on comparison of carrier owned & operated networks. No AT&T on-net coverage in select countries, including Canada. Details: https://www.att.com/international/. Destinations covered: att.com/globalcountries. 5G claim based on nationwide GWS drive test data. GWS conducts paid drive tests for AT&T and uses the data in its analysis. AT&T 5G requires compatible plan and device. 5G coverage not available everywhere. Learn more at att.com/5Gforyou

2 Diluted Earnings per Common Share from continuing operations is calculated using Income (Loss) from Continuing Operations, less Net Income Attributable to Noncontrolling Interest and Preferred Stock Dividends and adjustment for distributions on Mobility II preferred interests (prior to redemption) and share-based payments (when not antidilutive), divided by the weighted average common shares outstanding for the period.

3 The approximately 3.3 million U.S. business customer locations are included within the 10+ million U.S. business customer locations on or within 1,000 feet of our fiber.

About AT&T
We help more than 100 million U.S. families, friends and neighbors, plus nearly 2.5 million businesses, connect to greater possibility. From the first phone call 140+ years ago to our 5G wireless and multi-gig internet offerings today, we @ATT innovate to improve lives. For more information about AT&T Inc. (NYSE:T), please visit us at about.att.com. Investors can learn more at investors.att.com.

Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at https://investors.att.com.

Non-GAAP Measures and Reconciliations to GAAP Measures
Schedules and reconciliations of non-GAAP financial measures cited in this document to the most directly comparable financial measures under generally accepted accounting principles (GAAP) can be found at https://investors.att.com and in our Form 8-K dated October 19, 2023. Free cash flow, EBITDA, adjusted EBITDA, adjusted operating income, adjusted diluted EPS, net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures frequently used by investors and credit rating agencies.

Free cash flow for 3Q23 of $5.2 billion is cash from operating activities from continuing operations of $10.3 billion, plus cash distributions from DIRECTV classified as investing activities of $0.5 billion, minus capital expenditures of $4.6 billion and cash paid for vendor financing of $1.0 billion. 

For 3Q23 year-to-date, free cash flow of $10.4 billion is cash from operating activities from continuing operations of $26.9 billion, plus cash distributions from DIRECTV classified as investing activities of $1.4 billion, minus capital expenditures of $13.3 billion and cash paid for vendor financing of $4.7 billion. 

For 3Q22 year-to-date, free cash flow of $8.0 billion is cash from operating activities from continuing operations of $25.5 billion, plus cash distributions from DIRECTV classified as investing activities of $2.2 billion, minus capital expenditures of $15.4 billion and cash paid for vendor financing of $4.2 billion.

Due to high variability and difficulty in predicting items that impact cash from operating activities, cash distributions from DIRECTV, capital expenditures and vendor financing payments, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.

Adjusted Operating Income is operating income adjusted for revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. For 3Q23, adjusted operating income of $6.5 billion is calculated as operating income of $5.8 billion plus $737 million of adjustments. For 3Q22, adjusted operating income of $6.2 billion is calculated as operating income of $6.0 billion plus $204 million of adjustments. Adjustments for all periods are detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated October 19, 2023.

EBITDA is operating income before depreciation and amortization. EBITDA margin is operating income before depreciation and amortization, divided by total revenues. EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues. 

Adjusted EBITDA is calculated by excluding from operating revenues and operating expenses certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, significant abandonments and impairment, benefit-related gains and losses, employee separation and other material gains and losses.

Adjusted EBITDA and Business Wireline EBITDA estimates depend on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between projected Business Wireline EBITDA or projected adjusted EBITDA and the most comparable GAAP metrics without unreasonable effort.

Adjusted Equity in Net Income from DIRECTV investment of $0.7 billion for 3Q23 is calculated as equity income from DIRECTV of $0.4 billion reported in Equity in Net Income of Affiliates and excludes $0.3 billion of AT&T's proportionate share of the non-cash depreciation and amortization of fair value accretion from DIRECTV's revaluation of assets and purchase price allocation, which we consider to be non-operational in nature.

Adjusted diluted EPS from continuing operations includes adjusting items to revenues and costs that we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including the amortization of intangible assets. While the expense associated with the amortization of certain wireless licenses and customer lists is excluded, the revenue of the acquired companies is reflected in the measure and those assets contribute to revenue generation. We adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income. The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%. 

For 3Q23, Adjusted EPS from continuing operations of $0.64 is Diluted EPS from continuing operations of $0.48 adjusted for $0.11 restructuring and impairments, $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, and $0.03 benefit-related, transaction and other costs, minus $0.01 actuarial gain on benefit plans.

For 3Q22, Adjusted EPS from continuing operations of $0.68 is Diluted EPS from continuing operations of $0.79 adjusted for $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment, $0.06 benefit-related, transaction and other costs, $0.02 dilutive impact of Accounting Standards Update No. 2020-06, and $0.01 restructuring and impairments, minus $0.14 actuarial gain on benefit plans and $0.10 tax-related items.

Capital investment is a non-GAAP financial measure that provides an additional view of cash paid for capital investment to provide a comprehensive view of cash used to invest in our networks, product developments and support systems. In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. Capital investment includes capital expenditures and cash paid for vendor financing ($1.0 billion in 3Q23).

Net Debt of $128.7 billion at September 30, 2023, is calculated as Total Debt of $138.0 billion less Cash and Cash Equivalents of $7.5 billion and Time Deposits (i.e. deposits at financial institutions that are greater than 90 days) of $1.8 billion.

Net debt-to-adjusted EBITDA is calculated by dividing net debt by the sum of the most recent four quarters of adjusted EBITDA. Net debt is calculated by subtracting cash and cash equivalents and deposits at financial institutions that are greater than 90 days (e.g., certificates of deposit and time deposits), from the sum of debt maturing within one year and long-term debt.

Adjusted EBITDA is calculated as defined above. Net debt and adjusted EBITDA estimates depend on future levels of revenues, expenses and other metrics which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between projected net debt-to-adjusted EBITDA and the most comparable GAAP metrics and related ratios without unreasonable effort.

Discussion and Reconciliation of Non-GAAP Measures for Continuing Operations 

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

Free Cash Flow

Free cash flow is defined as cash from operations and cash distributions from DIRECTV classified as investing activities minus capital expenditures and cash paid for vendor financing (classified as financing activities). Free cash flow after dividends is defined as cash from operations and cash distributions from DIRECTV classified as investing activities, minus capital expenditures, cash paid for vendor financing and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures and vendor financing, and from our continued economic interest in the U.S. video operations as part of our DIRECTV equity method investment, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Net cash provided by operating activities from continuing operations1	$           10,336	$            10,094		$           26,936	$            25,464
Add: Distributions from DIRECTV classified as investing activities	473	567		1,447	2,205
Less: Capital expenditures	(4,647)	(5,921)		(13,252)	(15,397)
Less: Cash paid for vendor financing	(980)	(900)		(4,736)	(4,237)
Free Cash Flow	5,182	3,840		10,395	8,035
Less: Dividends paid	(2,019)	(2,010)		(6,116)	(7,845)
Free Cash Flow after Dividends	$             3,163	$              1,830		$             4,279	$                 190
Free Cash Flow Dividend Payout Ratio	39.0 %	52.3 %		58.8 %	97.6 %
1    Includes distributions from DIRECTV of $423 and $1,334 in the third quarter and for the first nine months of 2023, and $392 and $1,429 in the third quarter and for the first nine months of 2022.

 

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems. 

Cash Paid for Capital Investment
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Capital Expenditures	$               (4,647)	$               (5,921)		$             (13,252)	$             (15,397)
Cash paid for vendor financing	(980)	(900)		(4,736)	(4,237)
Cash paid for Capital Investment	$               (5,627)	$               (6,821)		$             (17,988)	$             (19,634)

 

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing cash generation potential with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Income from Continuing Operations	$                 3,826	$                 6,346		$               13,041	$               16,246
Additions:
Income Tax Expense	1,154	908		3,871	3,857
Interest Expense	1,662	1,420		4,978	4,548
Equity in Net (Income) of Affiliates	(420)	(392)		(1,338)	(1,417)
Other (Income) Expense - Net	(440)	(2,270)		(2,362)	(6,729)
Depreciation and amortization	4,705	4,514		14,011	13,426
EBITDA	10,487	10,526		32,201	29,931
Transaction and other costs	72	58		72	341
Benefit-related (gain) loss	40	16		(32)	217
Asset impairments and abandonments and     restructuring	604	114		604	745
Adjusted EBITDA1	$               11,203	$               10,714		$               32,845	$               31,234
1     See "Adjusting Items" section for additional discussion and reconciliation of adjusted items.

   

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Communications Segment
Operating Income	$             7,273	$              6,989		$           21,193	$            20,159
Add: Depreciation and amortization	4,350	4,184		12,952	12,423
EBITDA	$           11,623	$            11,173		$           34,145	$            32,582
Total Operating Revenues	$           29,244	$            29,131		$           87,241	$            86,702
Operating Income Margin	24.9 %	24.0 %		24.3 %	23.3 %
EBITDA Margin	39.7 %	38.4 %		39.1 %	37.6 %
Mobility
Operating Income	$             6,763	$              6,226		$           19,647	$            17,963
Add: Depreciation and amortization	2,134	2,042		6,355	6,118
EBITDA	$             8,897	$              8,268		$           26,002	$            24,081
Total Operating Revenues	$           20,692	$            20,278		$           61,589	$            60,279
Service Revenues	15,908	15,337		47,136	45,065
Operating Income Margin	32.7 %	30.7 %		31.9 %	29.8 %
EBITDA Margin	43.0 %	40.8 %		42.2 %	39.9 %
EBITDA Service Margin	55.9 %	53.9 %		55.2 %	53.4 %
Business Wireline
Operating Income	$                350	$                 621		$             1,124	$              1,750
Add: Depreciation and amortization	1,345	1,342		4,008	3,954
EBITDA	$             1,695	$              1,963		$             5,132	$              5,704
Total Operating Revenues	$             5,221	$              5,668		$           15,831	$            16,903
Operating Income Margin	6.7 %	11.0 %		7.1 %	10.4 %
EBITDA Margin	32.5 %	34.6 %		32.4 %	33.7 %
Consumer Wireline
Operating Income	$                160	$                 142		$                422	$                 446
Add: Depreciation and amortization	871	800		2,589	2,351
EBITDA	$             1,031	$                 942		$             3,011	$              2,797
Total Operating Revenues	$             3,331	$              3,185		$             9,821	$              9,520
Operating Income Margin	4.8 %	4.5 %		4.3 %	4.7 %
EBITDA Margin	31.0 %	29.6 %		30.7 %	29.4 %
Latin America Segment
Operating Income (Loss)	$                (29)	$                 (63)		$                (98)	$               (247)
Add: Depreciation and amortization	184	164		544	494
EBITDA	$               155	$                101		$               446	$                247
Total Operating Revenues	$               992	$                785		$            2,842	$             2,283
Operating Income Margin	-2.9 %	-8.0 %		-3.4 %	-10.8 %
EBITDA Margin	15.6 %	12.9 %		15.7 %	10.8 %

 

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including the amortization of intangible assets. While the expense associated with the amortization of certain wireless licenses and customer lists is excluded, the revenue of the acquired companies is reflected in the measure and that those assets contribute to revenue generation. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.   

Adjusting Items
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Operating Expenses
Transaction and other costs	$                      72	$                      58		$                      72	$                    341
Benefit-related (gain) loss	40	16		(32)	217
Assets impairments and abandonment and restructuring	604	114		604	745
Adjustments to Operations and Support Expenses	716	188		644	1,303
Amortization of intangible assets	21	16		55	60
Adjustments to Operating Expenses	737	204		699	1,363
Other
DIRECTV intangible amortization (proportionate share)	310	376		975	1,188
Benefit-related (gain) loss, impairment of equity investment       and other	507	416		314	822
Actuarial and settlement (gain) loss - net	(71)	(1,440)		(145)	(3,838)
Adjustments to Income Before Income Taxes	1,483	(444)		1,843	(465)
Tax impact of adjustments	325	(135)		406	(200)
Tax-related items	—	727		—	648
Adjustments to Net Income	$                 1,158	$               (1,036)		$                 1,437	$                  (913)

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense, certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, actuarial gains and losses, significant abandonments and impairment, benefit-related gains and losses, employee separation and other material gains and losses. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, and Adjusted EBITDA Margin
Dollars in millions
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Operating Income	$             5,782	$             6,012		$           18,190	$            16,505
Adjustments to Operating Expenses	737	204		699	1,363
Adjusted Operating Income	$             6,519	$             6,216		$           18,889	$            17,868
EBITDA	$           10,487	$           10,526		$           32,201	$            29,931
Adjustments to Operations and Support Expenses	716	188		644	1,303
Adjusted EBITDA	$           11,203	$           10,714		$           32,845	$            31,234
Total Operating Revenues	$           30,350	$           30,043		$           90,406	$            89,398
Operating Income Margin	19.1 %	20.0 %		20.1 %	18.5 %
Adjusted Operating Income Margin	21.5 %	20.7 %		20.9 %	20.0 %
Adjusted EBITDA Margin	36.9 %	35.7 %		36.3 %	34.9 %

 

Adjusted Diluted EPS
	Third Quarter			Nine-Month Period
	2023	2022		2023	2022
Diluted Earnings Per Share (EPS)	$                 0.48	$                   0.79		$                 1.67	$                   2.03
DIRECTV intangible amortization (proportionate share)	0.03	0.04		0.10	0.12
Actuarial and settlement (gain) loss - net1	(0.01)	(0.14)		(0.02)	(0.38)
Restructuring and impairments	0.11	0.01		0.11	0.08
Benefit-related, transaction and other costs2	0.03	0.08		0.01	0.19
Tax-related items	—	(0.10)		—	(0.09)
Adjusted EPS	$                 0.64	$                   0.68		$                 1.87	$                   1.95
Year-over-year growth - Adjusted	-5.9 %			-4.1 %
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,185	7,647		7,280	7,605
1  Includes adjustments for actuarial gains or losses associated with our pension and postretirement benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gains of $0.1 billion in the third quarter of 2023. As a result, adjusted EPS reflects an expected return on plan assets of $0.6 billion (based on an average annual expected return on plan assets of 7.5% for our pension trust), rather than the actual return on plan assets of $(1.5) billion (actual pension return of (5.0)%), included in the GAAP measure of income.
2  As of January 1, 2022, we adopted Accounting Standards Update (ASU) No. 2020-06, which requires that instruments which may be settled in cash or stock to be presumed settled in stock in calculating diluted EPS. While our intent was to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares resulted in additional dilutive impact, the magnitude of which was influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period. For these reasons, we excluded the impact of ASU 2020-06 from our adjusted EPS calculation. The per share impact of ASU 2020-06 was to decrease reported diluted EPS $0.00 and $0.02 for the quarters ended September 30, 2023 and 2022, and $0.01 and $0.05 for the nine months ended September 30, 2023 and 2022, respectively. The Mobility II preferred interests were repurchased on April 5, 2023.

 

Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and deposits at financial institutions that are greater than 90 days (e.g., certificates of deposit and time deposits), from the sum of debt maturing within one year and long-term debt.

Net Debt to Adjusted EBITDA - 2023
Dollars in millions
	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20221		20231		20231		2023
Adjusted EBITDA	$           10,231		$           10,589		$           11,053		$          11,203		$            43,076
End-of-period current debt									11,302
End-of-period long-term debt									126,701
Total End-of-Period Debt									138,003
Less: Cash and Cash Equivalents									7,540
Less: Time Deposits									1,750
Net Debt Balance									128,713
Annualized Net Debt to Adjusted EBITDA Ratio									2.99
1       As reported in AT&T's Form 8-K filed July 26, 2023.

 

Net Debt to Adjusted EBITDA - 2022
Dollars in millions
	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20211		20221		20221		20221
Adjusted EBITDA	$             9,480		$           10,190		$           10,330		$          10,714		$            40,714
End-of-period current debt									9,626
End-of-period long-term debt									123,854
Total End-of-Period Debt									133,480
Less: Cash and Cash Equivalents									2,423
Net Debt Balance									131,057
Annualized Net Debt to Adjusted EBITDA Ratio									3.22
1       As reported in AT&T's Form 8-K filed July 26, 2023.

 

Supplemental Operational Measures

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers. Our supplemental presentation of business solutions operations is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
	Third Quarter
	September 30, 2023					September 30, 2022
	Mobility	Business Wireline	Adj.1	Business Solutions		Mobility	Business Wireline	Adj.1	Business Solutions	Percent Change
Operating Revenues
Wireless service	$    15,908	$          —	$ (13,530)	$   2,378		$    15,337	$          —	$ (13,115)	$   2,222	7.0 %
Wireline service	—	5,087	—	5,087		—	5,524	—	5,524	(7.9) %
Wireless equipment	4,784	—	(4,012)	772		4,941	—	(4,082)	859	(10.1) %
Wireline equipment	—	134	—	134		—	144	—	144	(6.9) %
Total Operating Revenues	20,692	5,221	(17,542)	8,371		20,278	5,668	(17,197)	8,749	(4.3) %
Operating Expenses
Operations and support	11,795	3,526	(9,661)	5,660		12,010	3,705	(9,886)	5,829	(2.9) %
EBITDA	8,897	1,695	(7,881)	2,711		8,268	1,963	(7,311)	2,920	(7.2) %
Depreciation and amortization	2,134	1,345	(1,741)	1,738		2,042	1,342	(1,685)	1,699	2.3 %
Total Operating Expenses	13,929	4,871	(11,402)	7,398		14,052	5,047	(11,571)	7,528	(1.7) %
Operating Income	$      6,763	$        350	$   (6,140)	$      973		$      6,226	$        621	$   (5,626)	$   1,221	(20.3) %
Operating Income Margin				11.6 %					14.0 %	(240) BP
1    Non-business wireless reported in the Communications segment under the Mobility business unit.
Results have been recast to conform to the current period's classification.

 

Supplemental Operational Measure
	Nine-Month Period
	September 30, 2023					September 30, 2022
	Mobility	Business Wireline	Adj.1	Business Solutions		Mobility	Business Wireline	Adj.1	Business Solutions	Percent Change
Operating Revenues
Wireless service	$    47,136	$          —	$ (40,104)	$   7,032		$    45,065	$          —	$ (38,534)	$   6,531	7.7 %
Wireline service	—	15,401	—	15,401		—	16,418	—	16,418	(6.2) %
Wireless equipment	14,453	—	(12,134)	2,319		15,214	—	(12,582)	2,632	(11.9) %
Wireline equipment	—	430	—	430		—	485	—	485	(11.3) %
Total Operating Revenues	61,589	15,831	(52,238)	25,182		60,279	16,903	(51,116)	26,066	(3.4) %
Operating Expenses
Operations and support	35,587	10,699	(29,297)	16,989		36,198	11,199	(29,773)	17,624	(3.6) %
EBITDA	26,002	5,132	(22,941)	8,193		24,081	5,704	(21,343)	8,442	(2.9) %
Depreciation and amortization	6,355	4,008	(5,186)	5,177		6,118	3,954	(5,047)	5,025	3.0 %
Total Operating Expenses	41,942	14,707	(34,483)	22,166		42,316	15,153	(34,820)	22,649	(2.1) %
Operating Income	$    19,647	$     1,124	$ (17,755)	$   3,016		$    17,963	$     1,750	$ (16,296)	$   3,417	(11.7) %
Operating Income Margin				12.0 %					13.1 %	(110) BP
1    Non-business wireless reported in the Communications segment under the Mobility business unit.
Results have been recast to conform to the current period's classification.

© 2023 AT&T Intellectual Property. All rights reserved. AT&T and the Globe logo are registered trademarks of AT&T Intellectual Property.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/att-raises-full-year-adjusted-ebitda-and-free-cash-flow-guidance-driven-by-continued-subscriber-and-revenue-growth-301961882.html

SOURCE AT&T

FAQ

What were AT&T's Q3 revenues?

AT&T reported revenues of $30.4 billion in Q3, up 1% YoY.

How much cash from operating activities did AT&T generate in Q3?

AT&T generated $10.3 billion in cash from operating activities in Q3, up 2.4% YoY.

What is AT&T's full-year free cash flow guidance?

AT&T raised its full-year free cash flow guidance to about $16.5 billion.

How many AT&T Fiber net adds were there in Q3?

AT&T had 296,000 AT&T Fiber net adds in Q3.

What was the growth rate of consumer broadband revenues in Q3?

Consumer broadband revenues grew by 9.8% in Q3.