HomeFashionAT&T's Sustainable Growth Strategy Pays off with Strong 2Q Results

AT&T’s Sustainable Growth Strategy Pays off with Strong 2Q Results

The company continues to attract high quality customers with the most reliable 5G network1 and the country’s largest consumer fiber network

DALLAS, July 26, 2023 /PRNewswire/ — AT&T Inc. (NYSE: T) delivered strong second-quarter results with profitable subscriber growth and year over year increases in Mobility service and broadband revenues.

Consistent strategy driving strong second-quarter results

  • Revenues of $29.9 billion, up 0.9% year over year
  • Cash from operating activities of $9.9 billion, up 28.2% year over year and up $1.2 billion in first-half 2023 compared to first-half 2022
  • Free cash flow* of $4.2 billion, up $1.0 billion in first-half 2023 compared to first-half 2022; confident in full-year free cash flow* of $16 billion or better
  • Operating income of $6.4 billion, up 29.3% year over year
  • On track for full-year Adjusted EBITDA* growth of more than 3%

“The direction we set three years ago is sound, and we’re on the right trajectory. Compared to last year, Mobility service and broadband revenues are up, Adjusted EBITDA is up, free cash flow is up, Mobility and Consumer Wireline margins are up and customer lifetime values are up,” said John Stankey, AT&T CEO. “We’re focused on growing the right way, adding profitable 5G and fiber customers. We are also committing to an incremental $2 billion-plus in cost savings beyond the $6 billion we have accomplished over this period, reflecting our continued march to operating the company in a more focused and streamlined fashion. Our results give us full confidence in delivering our full-year financial guidance.”

Establishing a foundation for durable, long-term growth

  • Delivered 326,000 postpaid phone net adds with continued strong ARPU growth and historically low levels of churn
  • Mobility service revenues up 4.9%; achieved company’s best-ever second-quarter Mobility operating income
  • 251,000 AT&T Fiber net adds; 14 straight quarters with more than 200,000 net adds
  • Consumer broadband revenues up 7.0%, driven by AT&T Fiber revenue growth of 28.0%
  • Surpassed 5 million FirstNet® connections; FirstNet continues to be the leading choice for the first responder community
  • Named #1 in wireless customer satisfaction by the American Customer Satisfaction Index

A leading investor in America’s broadband infrastructure 

  • Expanded most reliable 5G network1; mid-band 5G spectrum now covers more than 175 million people; remain on track to reach 200 million people with mid-band 5G by the end of the year
  • Grew country’s largest consumer fiber network; ability to serve 20.2 million consumer and more than 3 million business customer locations with fiber; remain on track to pass 30 million-plus fiber locations by the end of 2025
  • Closed joint venture with BlackRock to form Gigapower to provide a state-of-the-art fiber network to an initial 8 new areas
  • Collaborated with AST SpaceMobile to achieve world-first direct voice call from space between unmodified everyday 4G LTE smartphones, connected via a low-earth orbit satellite; a key step in allowing us to provide even more expansive connectivity

Becoming more efficient and effective

  • Achieved $6 billion-plus run-rate cost savings target six months ahead of schedule
  • Increased target to $8 billion-plus run-rate cost savings with expectation of achieving incremental $2 billion-plus in run-rate cost savings over three years
  • Accelerated cost-savings across the company with AI; collaborated with Microsoft to launch custom-built generative AI tool, Ask AT&T

Note: AT&T’s second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, July 26, 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 second quarter totaled $29.9 billion versus $29.6 billion in the year-ago quarter, up 0.9%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues. 

Operating expenses were $23.5 billion versus $24.7 billion in the year-ago quarter reflecting prior year non-cash impairment charges of $0.6 billion and benefits of our continued transformation efforts, partially offset by inflationary cost increases. Operating expenses decreased primarily due to lower domestic wireless equipment and associated selling costs from lower sales volumes and lower personnel costs and higher returns on benefit-related assets. These decreases were partly offset by increased depreciation and higher amortization of deferred customer acquisition costs.

Operating income was $6.4 billion versus $5.0 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.4 billion versus $5.9 billion in the year-ago quarter.

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 $4.8 billion, essentially stable with the year-ago quarter. Earnings per diluted common share from continuing operations2 was $0.61 versus $0.59 in the year-ago quarter. Adjusting for $0.02, which includes our proportionate share of intangible amortization from the DIRECTV equity method investment, net actuarial and settlement gains on benefit plans and other items, earnings per diluted common share from continuing operations* was $0.63 compared to $0.65 in the year-ago quarter. 

Cash from operating activities from continuing operations was $9.9 billion, up $2.2 billion year over year, reflecting higher cash receipts from improved operations as well as timing of working capital, including higher receivable sales and lower device payments. Capital expenditures were $4.3 billion in the quarter versus $4.9 billion in the year-ago quarter. Capital investment*, which includes $1.6 billion of cash payments for vendor financing, totaled $5.9 billion.

Free cash flow* was $4.2 billion for the quarter. Total debt was $143.3 billion at the end of the quarter, and net debt* was $132.0 billion. The company expects to achieve a net debt-to-adjusted EBITDA* ratio in the 3.0x range by the end of this year and in the 2.5x range in the first half of 2025.

Communications Operational Highlights

Second-quarter revenues were $28.8 billion, up 0.5% year over year due to increases in Mobility and Consumer Wireline, which more than offset a decline in Business Wireline. Operating income was $7.2 billion, up 7.4% year over year, with operating income margin of 24.9%, compared to 23.3% in the year-ago quarter.

Mobility

  • Revenues were up 2.0% year over year to $20.3 billion due to higher service revenues, partially offset by lower equipment revenues. Service revenues were $15.7 billion, up 4.9% year over year, primarily driven by subscriber and postpaid ARPU growth. Equipment revenues were $4.6 billion, down 7.2% year over year, driven by lower volumes.
  • Operating expenses were $13.7 billion, down 1.3% year over year primarily due to lower equipment costs driven by lower device sales and lower content costs. These decreases were partly offset by increased amortization of deferred customer acquisition costs, higher network and customer support costs and higher depreciation expense.
  • Operating income was $6.6 billion, up 9.3% year over year. Operating income margin was 32.6%, compared to 30.4% in the year-ago quarter.
  • EBITDA* was $8.7 billion, up 8.3% year over year with EBITDA margin* of 43.0%, up from 40.5% in the year-ago quarter. This was the company’s best-ever second-quarter Mobility EBITDA*. EBITDA service margin* was 55.5%, up from 53.8% in the year-ago quarter.
  • Total wireless net adds were 6.2 million, including:
    • 464,000 postpaid net adds with:
      • 326,000 postpaid phone net adds
      • (70,000) postpaid tablet and other branded computing device net losses
      • 208,000 other net adds
    • 123,000 prepaid phone net adds
  • Postpaid churn was 0.95% versus 0.93% in the year-ago quarter.
  • Postpaid phone churn was 0.79% versus 0.75% in the year-ago quarter.
  • Prepaid churn was 2.50%, with Cricket substantially lower, versus 2.59% in the year-ago quarter.
  • Postpaid phone ARPU was $55.63, up 1.5% versus the year-ago quarter, due to prior-year pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
  • FirstNet connections reached more than 5.0 million across more than 26,000 agencies. FirstNet is the nationwide communications platform dedicated to public safety. The AT&T and FirstNet networks cover more than 99% of the U.S. population, and FirstNet covers more first responders than any other network in America.

Business Wireline

  • Revenues were $5.3 billion, down 5.6% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services.
  • Operating expenses were $4.9 billion, down 4.3% year over year due to ongoing operational cost efficiencies, including lower personnel, lower wholesale network access costs, one-time cost benefits and lower marketing expenses.
  • Operating income was $396 million, down 19.2%, with operating income margin of 7.5% compared to 8.8% in the year-ago quarter.
  • EBITDA* was $1.7 billion, down 4.1% year over year with EBITDA margin* of 32.8%, compared to 32.2% in the year-ago quarter.
  • AT&T Business serves the largest global companies, government agencies and small businesses. More than 750,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 3 million U.S. business customer locations. Nationwide, more than 10 million business customer locations are on or within 1,000 feet of our fiber.3

Consumer Wireline

  • Revenues were $3.3 billion, up 2.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 7.0% due to fiber growth of 28.0%, partly offset by a 13.7% decline in non-fiber revenues.
  • Operating expenses were $3.1 billion, up 1.8% year over year due to higher depreciation expense, higher network and maintenance costs and increased amortization of deferred customer acquisition costs, partly offset by lower customer support costs, including one-time cost benefits and lower content costs.
  • Operating income was $168 million, up 15.9% year over year with operating income margin of 5.2%, compared to 4.6% in the year-ago quarter.
  • EBITDA* was $1.0 billion, up 10.2% year over year with EBITDA margin* of 31.5%, up from 29.3% in the year-ago quarter.
  • Total broadband net losses, excluding DSL, were 35,000, reflecting AT&T Fiber net adds of 251,000, more than offset by losses in non-fiber services. AT&T Fiber now has the ability to serve 20.2 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 $967 million, up 19.7% year over year due to growth in both service and equipment revenues. Service revenues were $635 million, up 18.9% year over year, driven by favorable foreign exchange, higher wholesale revenues and growth in subscribers. Equipment revenues were $332 million, up 21.2% year over year due to favorable foreign exchange and higher sales.

Operating loss was ($39) million compared to ($82) million in the year-ago quarter. EBITDA* was $146 million compared to $87 million in the year-ago quarter.

Total wireless net adds were 76,000, including 50,000 prepaid net adds, 56,000 postpaid net adds and 30,000 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 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 more than 3 million U.S. business customer locations are included within the 10+ million U.S. business customer locations on or within 1,000 feet of our fiber.

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

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

Non-GAAP Measures and Reconciliations to GAAP Measures
Schedules and reconciliations of non-GAAP financial measures cited in this document to the most directly comparable financial measures under generally accepted accounting principles (GAAP) can be found at https://investors.att.com and in our Form 8-K dated July 26, 2023. Free cash flow, EBITDA, adjusted EBITDA, adjusted operating income, adjusted diluted EPS and net debt are non-GAAP financial measures frequently used by investors and credit rating agencies.

Free cash flow for 2Q23 of $4.2 billion is cash from operating activities from continuing operations of $9.9 billion, plus cash distributions from DIRECTV classified as investing activities of $0.2 billion, minus capital expenditures of $4.3 billion and cash paid for vendor financing of $1.6 billion

Free cash flow for 2Q23 year-to-date of $5.2 billion is cash from operating activities from continuing operations of $16.6 billion, plus cash distributions from DIRECTV classified as investing activities of $1.0 billion, minus capital expenditures of $8.6 billion and cash paid for vendor financing of $3.8 billion

Free cash flow for 2Q22 year-to-date of $4.2 billion is cash from operating activities from continuing operations of $15.4 billion, plus cash distributions from DIRECTV classified as investing activities of $1.6 billion, minus capital expenditures of $9.5 billion and cash paid for vendor financing of $3.3 billion

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

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

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

Adjusted EBITDA estimates depend on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between projected EBITDA and projected Adjusted EBITDA and the most comparable 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 2Q23, Adjusted Operating Income of $6.4 billion is calculated as operating income of $6.4 billion minus $11 million of adjustments. For 2Q22, Adjusted Operating Income of $5.9 billion is calculated as operating income of $5.0 billion plus $941 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 July 26, 2023.

Adjusted Equity in Net Income from DIRECTV investment of $0.7 billion for 2Q23 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 2Q23, Adjusted EPS from continuing operations of $0.63 is Diluted EPS from continuing operations of $0.61 adjusted for $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, minus $0.01 net actuarial and settlement gains on benefit plans.

For 2Q22, Adjusted EPS from continuing operations of $0.65 is Diluted EPS from continuing operations of $0.59 adjusted for $0.06 non-cash restructuring and impairments, $0.06 benefit-related, transaction and other costs, $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment, $0.02 dilutive impact of Accounting Standards Update No. 2020-06 and $0.01 tax-related item, minus $0.13 actuarial gain on benefit plans.

Capital investment is a non-GAAP financial measure that provides an additional view of cash paid for capital investment to provide a comprehensive view of cash used to invest in our networks, product developments and support systems. In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. Capital investment includes capital expenditures and cash paid for vendor financing ($1.6 billion in 2Q23).

Net Debt of $132.0 billion at June 30, 2023, is calculated as Total Debt of $143.3 billion less Cash and Cash Equivalents of $9.5 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 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 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, 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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Net cash provided by operating activities from continuing operations1

$            9,922

$             7,740


$           16,600

$           15,370

Add: Distributions from DIRECTV classified as investing activities

200

323


974

1,638

Less: Capital expenditures

(4,270)

(4,908)


(8,605)

(9,476)

Less: Cash paid for vendor financing

(1,643)

(1,771)


(3,756)

(3,337)

Free Cash Flow

4,209

1,384


5,213

4,195







Less: Dividends paid

(2,083)

(2,086)


(4,097)

(5,835)

Free Cash Flow after Dividends

$            2,126

$              (702)


$            1,116

$           (1,640)

Free Cash Flow Dividend Payout Ratio

49.5 %

150.7 %


78.6 %

139.1 %

1 Includes distributions from DIRECTV of $377 and $911 in the second quarter and for the first six months of 2023, and $515 and $1,037 in the second quarter and for the first six 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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Capital Expenditures

$              (4,270)

$              (4,908)


$              (8,605)

$              (9,476)

Cash paid for vendor financing

(1,643)

(1,771)


(3,756)

(3,337)

Cash paid for Capital Investment

$              (5,913)

$              (6,679)


$             (12,361)

$             (12,813)

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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Income from Continuing Operations

$                4,762

$                4,751


$                9,215

$                9,900

Additions:






Income Tax Expense

1,403

1,509


2,717

2,949

Interest Expense

1,608

1,502


3,316

3,128

Equity in Net (Income) of Affiliates

(380)

(504)


(918)

(1,025)

Other (Income) Expense – Net

(987)

(2,302)


(1,922)

(4,459)

Depreciation and amortization

4,675

4,450


9,306

8,912

EBITDA

11,081

9,406


21,714

19,405

Transaction and other costs

185


283

  Benefit-related (gain) loss

(28)

108


(72)

201

Assets impairments and abandonment and

    restructuring

631


631

Adjusted EBITDA1

$              11,053

$              10,330


$              21,642

$              20,520

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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Communications Segment

Operating Income

$             7,177

$             6,683


$           13,920

$           13,170

  Add: Depreciation and amortization

4,313

4,115


8,602

8,239

EBITDA

$           11,490

$           10,798


$           22,522

$           21,409







Total Operating Revenues

$           28,845

$           28,695


$           57,997

$           57,571

Operating Income Margin

24.9 %

23.3 %


24.0 %

22.9 %

EBITDA Margin

39.8 %

37.6 %


38.8 %

37.2 %







Mobility

Operating Income

$             6,613

$             6,048


$           12,884

$           11,737

  Add: Depreciation and amortization

2,123

2,017


4,221

4,076

EBITDA

$             8,736

$             8,065


$           17,105

$           15,813







Total Operating Revenues

$           20,315

$           19,926


$           40,897

$           40,001

Service Revenues

15,745

15,004


31,228

29,728

Operating Income Margin

32.6 %

30.4 %


31.5 %

29.3 %

EBITDA Margin

43.0 %

40.5 %


41.8 %

39.5 %

EBITDA Service Margin

55.5 %

53.8 %


54.8 %

53.2 %







Business Wireline

Operating Income

$               396

$                490


$               774

$             1,129

  Add: Depreciation and amortization

1,333

1,313


2,663

2,612

EBITDA

$            1,729

$             1,803


$            3,437

$             3,741







Total Operating Revenues

$            5,279

$             5,595


$           10,610

$           11,235

Operating Income Margin

7.5 %

8.8 %


7.3 %

10.0 %

EBITDA Margin

32.8 %

32.2 %


32.4 %

33.3 %







Consumer Wireline

Operating Income

$               168

$                145


$               262

$                304

  Add: Depreciation and amortization

857

785


1,718

1,551

EBITDA

$            1,025

$                930


$            1,980

$             1,855







Total Operating Revenues

$            3,251

$             3,174


$            6,490

$             6,335

Operating Income Margin

5.2 %

4.6 %


4.0 %

4.8 %

EBITDA Margin

31.5 %

29.3 %


30.5 %

29.3 %







Latin America Segment






Operating Income (Loss)

$                (39)

$                 (82)


$                (69)

$               (184)

  Add: Depreciation and amortization

185

169


360

330

EBITDA

$               146

$                  87


$               291

$                146







Total Operating Revenues

$               967

$                808


$            1,850

$             1,498

Operating Income Margin

-4.0 %

-10.1 %


-3.7 %

-12.3 %

EBITDA Margin

15.1 %

10.8 %


15.7 %

9.7 %

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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Operating Expenses






Transaction and other costs

$                     —

$                   185


$                     —

$                   283

   Benefit-related (gain) loss

(28)

108


(72)

201

Assets impairments and abandonment and restructuring

631


631

Adjustments to Operations and Support Expenses

(28)

924


(72)

1,115

   Amortization of intangible assets

17

17


34

44

Adjustments to Operating Expenses

(11)

941


(38)

1,159

Other






 DIRECTV intangible amortization (proportionate share)

324

396


665

812

  Benefit-related (gain) loss and other

(82)

314


(193)

406

Actuarial and settlement (gain) loss – net

(74)

(1,345)


(74)

(2,398)

Adjustments to Income Before Income Taxes

157

306


360

(21)

Tax impact of adjustments

35

38


81

(65)

Tax-related items

(79)


(79)

Adjustments to Net Income

$                   122

$                   347


$                   279

$                   123

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






Second Quarter


Six-Month Period


2023

2022


2023

2022

Operating Income

$             6,406

$             4,956


$           12,408

$           10,493

Adjustments to Operating Expenses

(11)

941


(38)

1,159

Adjusted Operating Income

$             6,395

$             5,897


$           12,370

$           11,652







EBITDA

$           11,081

$             9,406


$           21,714

$           19,405

Adjustments to Operations and Support Expenses

(28)

924


(72)

1,115

Adjusted EBITDA

$           11,053

$           10,330


$           21,642

$           20,520







Total Operating Revenues

$           29,917

$           29,643


$           60,056

$           59,355







Operating Income Margin

21.4 %

16.7 %


20.7 %

17.7 %

Adjusted Operating Income Margin

21.4 %

19.9 %


20.6 %

19.6 %

Adjusted EBITDA Margin

36.9 %

34.8 %


36.0 %

34.6 %

Adjusted Diluted EPS


Second Quarter


Six-Month Period


2023

2022


2023

2022

Diluted Earnings Per Share (EPS)

$                0.61

$                  0.59


$                1.19

$                  1.23

 DIRECTV intangible amortization (proportionate share)

0.03

0.04


0.07

0.08

Actuarial and settlement (gain) loss – net1

(0.01)

(0.13)


(0.01)

(0.24)

  Restructuring and impairments

0.06


0.06

  Benefit-related, transaction and other costs2

0.08


(0.02)

0.13

Tax-related items

0.01


0.01

Adjusted EPS

$                0.63

$                  0.65


$                1.23

$                  1.27

Year-over-year growth – Adjusted

-3.1 %



-3.1 %


Weighted Average Common Shares Outstanding with
Dilution (000,000)

7,180

7,611


7,327

7,584

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 and settlement gains of $0.1 billion in the second quarter of 2023. As a result, adjusted EPS reflects an expected return on plan
assets of $0.7 billion (based on an average expected return on plan assets of 7.50% for our pension trust), rather than the actual return on
plan assets of $0.9 billion (actual pension return of 4.1%), 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 June 30, 2023 and
2022, and $0.01 and $0.02 for the six months ended June 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




Sept. 30,


Dec. 31,


March 31,


June 30,


Four Quarters


20221


20221


20231


2023


Adjusted EBITDA

$          10,714


$          10,231


$          10,589


$         11,053


$           42,587

End-of-period current debt









15,268

End-of-period long-term debt









128,012

Total End-of-Period Debt









143,280

Less: Cash and Cash Equivalents









9,528

Less: Time Deposits









1,750

Net Debt Balance









132,002

Annualized Net Debt to Adjusted EBITDA Ratio









3.10

1 As reported in AT&T’s Form 8-K filed January 25, 2023 and April 20, 2023.

Net Debt to Adjusted EBITDA – 2022

Dollars in millions







Three Months Ended




Sept. 30,


Dec. 31,


March 31,


June 30,


Four Quarters


20211


20211


20221


20221


Adjusted EBITDA

$          10,803


$            9,480


$          10,190


$         10,330


$           40,803

End-of-period current debt









6,210

End-of-period long-term debt









129,747

Total End-of-Period Debt









135,957

Less: Cash and Cash Equivalents









4,018

Net Debt Balance









131,939

Annualized Net Debt to Adjusted EBITDA Ratio









3.23

1 As reported in AT&T’s Form 8-K filed January 25, 2023.

Supplemental Operational Measures

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

Supplemental Operational Measure



Second Quarter



June 30, 2023


June 30, 2022



Mobility

Business

Wireline

Adj.1

Business

Solutions


Mobility

Business

Wireline

Adj.1

Business

Solutions

Percent
Change

Operating Revenues











Wireless service

$    15,745

$         —

$ (13,371)

$  2,374


$    15,004

$         —

$ (12,829)

$   2,175

9.1 %

Wireline service

5,114

5,114


5,416

5,416

(5.6) %

Wireless equipment

4,570

(3,796)

774


4,922

(4,048)

874

(11.4) %

Wireline equipment

165

165


179

179

(7.8) %

Total Operating Revenues

20,315

5,279

(17,167)

8,427


19,926

5,595

(16,877)

8,644

(2.5) %












Operating Expenses











Operations and support

11,579

3,550

(9,440)

5,689


11,861

3,792

(9,718)

5,935

(4.1) %

EBITDA

8,736

1,729

(7,727)

2,738


8,065

1,803

(7,159)

2,709

1.1 %

Depreciation and amortization

2,123

1,333

(1,733)

1,723


2,017

1,313

(1,664)

1,666

3.4 %

Total Operating Expenses

13,702

4,883

(11,173)

7,412


13,878

5,105

(11,382)

7,601

(2.5) %

Operating Income

$      6,613

$       396

$   (5,994)

$  1,015


$      6,048

$       490

$   (5,495)

$   1,043

(2.7) %












Operating Income Margin




12.0 %





12.1 %

    (10) 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



Six-Month Period



June 30, 2023


June 30, 2022



Mobility

Business

Wireline

Adj.1

Business

Solutions


Mobility

Business

Wireline

Adj.1

Business

Solutions

Percent
Change

Operating Revenues











Wireless service

$    31,228

$         —

$ (26,574)

$  4,654


$    29,728

$         —

$ (25,419)

$  4,309

8.0 %

Wireline service

10,314

10,314


10,894

10,894

(5.3) %

Wireless equipment

9,669

(8,122)

1,547


10,273

(8,500)

1,773

(12.7) %

Wireline equipment

296

296


341

341

(13.2) %

Total Operating Revenues

40,897

10,610

(34,696)

16,811


40,001

11,235

(33,919)

17,317

(2.9) %












Operating Expenses











Operations and support

23,792

7,173

(19,636)

11,329


24,188

7,494

(19,887)

11,795

(4.0) %

EBITDA

17,105

3,437

(15,060)

5,482


15,813

3,741

(14,032)

5,522

(0.7) %

Depreciation and amortization

4,221

2,663

(3,445)

3,439


4,076

2,612

(3,362)

3,326

3.4 %

Total Operating Expenses

28,013

9,836

(23,081)

14,768


28,264

10,106

(23,249)

15,121

(2.3) %

Operating Income

$    12,884

$       774

$ (11,615)

$  2,043


$    11,737

$    1,129

$ (10,670)

$  2,196

(7.0) %












Operating Income Margin




12.2 %





12.7 %

    (50) 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.

SOURCE AT&T

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