Upgrade to SI Premium - Free Trial

AT&T Announces 3-Year Financial Guidance and Capital Allocation Plan

October 28, 2019 6:51 AM

2020 Outlook1

AT&T expects in 2020:

Third-Quarter Results

Note: AT&T's third-quarter earnings conference call will be webcast at 8:30 a.m. ET on Monday, October 28, 2019. The webcast and related materials will be available on AT&T’s Investor Relations website at https://investors.att.com.

DALLAS--(BUSINESS WIRE)-- AT&T Inc. (NYSE:T) announced its 3-year financial outlook and capital allocation plan, which it expects to drive significant growth in EBITDA margins and EPS, and allow the company to invest in growth areas, retire shares and continue to pay down debt.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” said Randall Stephenson, AT&T chairman and CEO. “Our 3-year plan delivers both substantial and consistent financial improvements over the next 3 years. We grow revenues, EBITDA and EPS every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well. And all of this is inclusive of our investment in HBO Max.”

The 3-year financial guidance calls for 1% to 2% per year consolidated revenue growth and by 2022 an adjusted EBITDA margin of 35%, 200 bps higher than 2019 levels. Adjusted EBITDA margins are expected to be stable in 2020 and grow in 2021 and 2022, driven by our companywide cost-reduction plan, WarnerMedia synergies, continued Mobility growth and AT&T Mexico EBITDA growth. By targeting 35% EBITDA margins with revenue growth of 1% to 2%, the company expects about $6 billion of EBITDA growth in 2022, above 2019 EBITDA levels.

3-Year Capital Allocation Plan

The company’s capital allocation plan for the next 3 years includes:

When combining AT&T’s current dividend yield along with planned share repurchases averaging more than 3% per year for the next 3 years, that provides shareholders a yield of about 8.5% per year — and a solid double-digit return when expected EPS growth is included.

The company said it will continue to actively review its portfolio, analyze the merits of each business and monetize non-core assets. In 2019, the company expects to close about $14 billion from monetizing non-core assets. In 2020, the company expects to monetize $5 billion to $10 billion of non-strategic assets.

In addition, the company said it will continue to refresh its Board as two directors retire over the next 18 months. Subject to Board approval, the company expects to add a new director at its next Board meeting, followed by another director in 2020. In both cases, the Board will continue to select directors with skill sets that align with the objectives laid out today. The company also said that it expects Stephenson to remain CEO through at least 2020.

With its 3-year financial outlook and the benefits of its capital allocation plan, AT&T expects adjusted EPS in the $3.60 to $3.70 range in 2020 and by 2022 expects adjusted EPS to be between $4.50 and $4.80. These EPS expectations include HBO Max investment of about 15¢ to 20¢ per share in 2020, and then about 10¢ per share investment in 2021 and 2022.

“The objectives we have outlined today have been central to our plans for many months, even before we closed our acquisition of Time Warner. But, as you would expect, our thinking has also benefited from our engagement with our owners, including Elliott Management,” said Stephenson. “I’ve found our engagement with Elliott to be constructive and helpful, and I look forward to continuing those conservations. These are smart people who very much appreciate the opportunity we have to create tremendous shareholder value.”

Third-Quarter Results

Communications Highlights

WarnerMedia Highlights

Consolidated Financial Results

AT&T's consolidated revenues for the third quarter totaled $44.6 billion versus $45.7 billion in the year-ago quarter. Declines in revenues from legacy wireline services, WarnerMedia and domestic video, were partially offset by growth in strategic and managed business services, domestic wireless services and IP broadband. Operating expenses were $36.7 billion versus $38.5 billion in the year-ago quarter, down 4.6% due to lower intangible asset amortization, lower Entertainment Group costs, lower Warner Bros. film and TV production costs, and cost efficiencies.

Operating income was $7.9 billion versus $7.3 billion in the year-ago quarter, due to lower expenses outpacing revenue declines, with operating income margin of 17.7% versus 15.9%. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $9.9 billion versus $10.0 billion in the year-ago quarter, and operating income margin was 22.2% versus 21.9% in the year-ago quarter.

Third-quarter net income attributable to AT&T was $3.7 billion, or $0.50 per diluted share, versus $4.7 billion, or $0.65 per diluted share, in the year-ago quarter. Adjusting for $0.44, which includes a non-cash actuarial loss on benefit plans, merger-amortization costs, merger- and integration-related expenses and other items, earnings per diluted share was $0.94 compared to an adjusted $0.90 in the year-ago quarter.

Cash from operating activities was $11.4 billion, and capital expenditures were $5.2 billion. Capital investment – which consists of capital expenditures plus cash payments for vendor financing – totaled $6.0 billion, which includes about $800 million of cash payments for vendor financing. Free cash flow – cash from operating activities minus capital expenditures – was $6.2 billion for the quarter.

The company completed or announced $3.5 billion in non-core asset monetizations in the third quarter. For the full year, the company expects to close about $14 billion of asset monetizations and working capital initiatives. Net debt was reduced by $3.6 billion in the quarter and reduced by $12.7 billion year to date. Net-debt-to-adjusted EBITDA at the end of the third quarter was 2.66x.

2Compounded annual revenue growth
3EBITDA margin is operating income before depreciation and amortization, divided by total revenues
4Free cash flow dividend payout ratio is dividends divided by free cash flow
5Net Debt to 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 Adjusted EBITDA.
6Excludes expected FirstNet reimbursements in the $1 billion range; includes potential vendor financing.
7Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q3 2019
8Based on GWS OneScore Sept. 2019

*About AT&T

AT&T Inc. (NYSE:T) is a diversified, global leader in telecommunications, media and entertainment, and technology. It executes in the market under four operating units. WarnerMedia is a leading media and entertainment company that creates and distributes premium and popular content to global audiences through its consumer brands including: HBO, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim, Turner Classic Movies and others. AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. Plus, it serves nearly 3 million business customers with high-speed, highly secure connectivity and smart solutions. AT&T Latin America provides pay-TV services across 11 countries and territories in Latin America and the Caribbean, and is the fastest growing wireless provider in Mexico, serving consumers and businesses. Xandr provides marketers with innovative and relevant advertising solutions for consumers around premium video content and digital advertising through its AppNexus platform.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2019 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise.

This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at https://investors.att.com.

Discussion and Reconciliation of Non-GAAP Measures

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

Free Cash Flow

Free cash flow is defined as cash from operations minus capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the percentage of dividends paid 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 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

2019

2018

2019

2018

Net cash provided by operating activities

$

11,389

$

12,346

$

36,725

$

31,522

Less: Capital expenditures

(5,189

)

(5,873

)

(15,843

)

(17,099

)

Free Cash Flow

6,200

6,473

20,882

14,423

Less: Dividends paid

(3,726

)

(3,631

)

(11,162

)

(9,775

)

Fee Cash Flow after Dividends

$

2,474

$

2,842

$

9,720

$

4,648

Free Cash Flow Dividend Payout Ratio

60.1

%

56.1

%

53.5

%

67.8

%

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

2019

2018

2019

2018

Capital Expenditures

$

(5,189

)

$

(5,873

)

$

(15,843

)

$

(17,099

)

Cash paid for vendor financing

(765

)

(90

)

(2,601

)

(347

)

Cash paid for Capital Investment

$

(5,954

)

$

(5,963

)

$

(18,444

)

$

(17,446

)

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 U.S. generally accepted accounting principles (GAAP).

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

When discussing our segment, business unit and supplemental results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from operating contribution.

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

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

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

EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Net Income

$

3,949

$

4,816

$

12,271

$

14,823

Additions:

Income Tax Expense

937

1,391

3,059

4,305

Interest Expense

2,083

2,051

6,373

5,845

Equity in Net (Income) Loss of Affiliates

(3

)

64

(36

)

71

Other (Income) Expense - Net

935

(1,053

)

967

(5,108

)

Depreciation and amortization

6,949

8,166

21,256

20,538

EBITDA

14,850

15,435

43,890

40,474

Total Operating Revenues

44,588

45,739

134,372

122,763

Service Revenues

40,317

41,297

122,024

109,849

EBITDA Margin

33.3

%

33.7

%

32.7

%

33.0

%

EBITDA Service Margin

36.8

%

37.4

%

36.0

%

36.8

%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Communications Segment

Operating Contribution

$

8,036

$

8,150

$

24,718

$

24,498

Additions:

Equity in Net (Income) Loss of Affiliates

-

1

-

3

Depreciation and amortization

4,598

4,575

13,740

13,724

EBITDA

12,634

12,726

38,458

38,225

Total Operating Revenues

35,401

36,007

105,837

106,498

Operating Income Margin

22.7

%

22.6

%

23.4

%

23.0

%

EBITDA Margin

35.7

%

35.3

%

36.3

%

35.9

%

Mobility

Operating Contribution

$

5,742

$

5,575

$

16,817

$

16,144

Additions:

Equity in Net (Income) of Affiliates

-

(1

)

1

-

Depreciation and amortization

2,011

2,057

6,027

6,218

EBITDA

7,753

7,631

22,845

22,362

Total Operating Revenues

17,701

17,735

52,356

51,965

Service Revenues

13,930

13,828

41,383

40,594

Operating Income Margin

32.4

%

31.4

%

32.1

%

31.1

%

EBITDA Margin

43.8

%

43.0

%

43.6

%

43.0

%

EBITDA Service Margin

55.7

%

55.2

%

55.2

%

55.1

%

Entertainment Group

Operating Contribution

$

1,085

$

1,104

$

4,077

$

3,888

Additions:

Equity in Net (Income) Loss of Affiliates

(1

)

(1

)

(1

)

1

Depreciation and amortization

1,316

1,331

3,978

3,986

EBITDA

2,400

2,434

8,054

7,875

Total Operating Revenues

11,197

11,589

33,893

34,498

Operating Income Margin

9.7

%

9.5

%

12.0

%

11.3

%

EBITDA Margin

21.4

%

21.0

%

23.8

%

22.8

%

Business Wireline

Operating Contribution

$

1,209

$

1,471

$

3,824

$

4,466

Additions:

Equity in Net (Income) Loss of Affiliates

1

3

-

2

Depreciation and amortization

1,271

1,187

3,735

3,520

EBITDA

2,481

2,661

7,559

7,988

Total Operating Revenues

6,503

6,683

19,588

20,035

Operating Income Margin

18.6

%

22.1

%

19.5

%

22.3

%

EBITDA Margin

38.2

%

39.8

%

38.6

%

39.9

%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

WarnerMedia Segment

Operating Contribution

$

2,544

$

2,528

$

6,879

$

2,992

Additions:

Equity in Net (Income) of Affiliates

(15

)

39

(137

)

55

Depreciation and amortization

150

134

384

166

EBITDA

2,679

2,701

7,126

3,213

Total Operating Revenues

7,846

8,204

24,575

9,709

Operating Income Margin

32.2

%

31.3

%

27.4

%

31.4

%

EBITDA Margin

34.1

%

32.9

%

29.0

%

33.1

%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Latin America Segment

Operating Contribution

$

(166

)

$

(201

)

$

(548

)

$

(462

)

Additions:

Equity in Net (Income) of Affiliates

(13

)

(9

)

(25

)

(24

)

Depreciation and amortization

284

297

868

942

EBITDA

105

87

295

456

Total Operating Revenues

1,730

1,833

5,205

5,809

Operating Income Margin

-10.3

%

-11.5

%

-11.0

%

-8.4

%

EBITDA Margin

6.1

%

4.7

%

5.7

%

7.8

%

Vrio

Operating Contribution

$

13

$

66

$

43

$

281

Additions:

Equity in Net (Income) of Affiliates

(13

)

(9

)

(25

)

(24

)

Depreciation and amortization

162

168

496

559

EBITDA

162

225

514

816

Total Operating Revenues

1,013

1,102

3,112

3,710

Operating Income Margin

0.0

%

5.2

%

0.6

%

6.9

%

EBITDA Margin

16.0

%

20.4

%

16.5

%

22.0

%

Mexico

Operating Contribution

$

(179

)

$

(267

)

$

(591

)

$

(743

)

Additions:

Depreciation and amortization

122

129

372

383

EBITDA

(57

)

(138

)

(219

)

(360

)

Total Operating Revenues

717

731

2,093

2,099

Operating Income Margin

-25.0

%

-36.5

%

-28.2

%

-35.4

%

EBITDA Margin

-7.9

%

-18.9

%

-10.5

%

-17.2

%

Segment EBITDA, EBITDA Margin and EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Xandr

Operating Contribution

$

327

$

333

$

905

$

952

Additions:

Depreciation and amortization

15

3

41

4

EBITDA

342

336

946

956

Total Operating Revenues

504

445

1,415

1,174

Operating Income Margin

64.9

%

74.8

%

64.0

%

81.1

%

EBITDA Margin

67.9

%

75.5

%

66.9

%

81.4

%

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

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

Adjusting Items

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Operating Revenues

Time Warner merger adjustment

$

-

$

-

$

72

$

-

Adjustments to Operating Revenues

-

-

72

-

Operating Expenses

Time Warner and other merger costs

190

361

579

792

Employee separation costs

39

76

381

260

Natural disaster costs

-

-

-

104

Adjustments to Operations and Support Expenses

229

437

960

1,156

Amortization of intangible assets

1,771

2,329

5,719

4,669

Adjustments to Operating Expenses

2,000

2,766

6,679

5,825

Other

Merger-related interest and fees1

-

-

-

1,029

(Gains) losses on sale of investments

-

(357

)

(638

)

(357

)

Special termination charges, debt redemption costs and other adjustments

11

30

362

78

Actuarial (gain) loss

1,917

-

4,048

(2,726

)

Adjustments to Income Before Income Taxes

3,928

2,439

10,523

3,849

Tax impact of adjustments

755

548

2,183

765

Tax-related items

-

-

141

(96

)

Adjustments to Net Income

$

3,173

$

1,891

$

8,199

$

3,180

1 Includes interest expense incurred on debt issued, redemption premiums and interest income earned on cash held prior to the close of merger transactions.

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. 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, Adjusted EBITDA Margin and Adjusted EBITDA Service Margin

Dollars in millions

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Operating Income

$

7,901

$

7,269

$

22,634

$

19,936

Adjustments to Operating Revenues

-

-

72

-

Adjustments to Operating Expenses

2,000

2,766

6,679

5,825

Adjusted Operating Income

9,901

10,035

29,385

25,761

EBITDA

14,850

15,435

43,890

40,474

Adjustments to Operating Revenues

-

-

72

-

Adjustments to Operations and Support Expenses

229

437

960

1,156

Adjusted EBITDA

15,079

15,872

44,922

41,630

Total Operating Revenues

44,588

45,739

134,372

122,763

Adjustments to Operating Revenues

-

-

72

-

Total Adjusted Operating Revenue

44,588

45,739

134,444

122,763

Service Revenues

40,317

41,297

122,024

109,849

Adjustments to Service Revenues

-

-

72

-

Adjusted Service Revenue

40,317

41,297

122,096

109,849

Operating Income Margin

17.7

%

15.9

%

16.8

%

16.2

%

Adjusted Operating Income Margin

22.2

%

21.9

%

21.9

%

21.0

%

Adjusted EBITDA Margin

33.8

%

34.7

%

33.4

%

33.9

%

Adjusted EBITDA Service Margin

37.4

%

38.4

%

36.8

%

37.9

%

Adjusted Diluted EPS

Third Quarter

Nine-Month Period

2019

2018

2019

2018

Diluted Earnings Per Share (EPS)

$

0.50

$

0.65

$

1.57

$

2.19

Amortization of intangible assets

0.19

0.25

0.62

0.55

Merger integration items1

0.02

0.04

0.08

0.22

(Gain) loss on sale of assets, impairments and other adjustments2

0.02

(0.04

)

(0.01

)

0.02

Actuarial (gain) loss3

0.21

-

0.44

(0.31

)

Tax-related items

-

-

(0.02

)

-

Adjusted EPS

$

0.94

$

0.90

$

2.68

$

2.67

Year-over-year growth - Adjusted

4.4

%

0.4

%

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

7,356

7,320

7,350

6,630

1Includes combined merger integration items and merger-related interest income and expense, and redemption premiums.

2Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs.

3Includes adjustments for actuarial gains or losses (losses of $1.9 billion in the third quarter and $4.0 billion for the first nine months of 2019) associated with our pension benefit plan. As a result, adjusted EPS reflects an expected return on plan assets of $905 million in the third quarter and $2.6 billion for the first nine months (based on an expected return on plan assets of 7.00%), rather than the actual return of $792 million in the quarter and $4.2 billion for the first nine months (actual return of 3.4% for the quarter and 13.4% for the first nine months), included in the GAAP measure of income.

Constant Currency

Constant Currency is a non-GAAP financial measure that management uses to evaluate the operating performance of certain international subsidiaries by excluding or otherwise adjusting for the impact of changes in foreign currency exchange rates between comparative periods. We believe constant currency enhances comparison and is useful to investors to evaluate the performance of our business without taking into account the impact of changes to the foreign exchange rates to which our business is subject. To compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates. In calculating amounts on a constant currency basis, for our Vrio business unit, we exclude our Venezuela subsidiary in light of the hyperinflationary conditions in Venezuela, which we do not believe are representative of the macroeconomics of the rest of the region in which we operate.

Constant Currency

Dollars in millions

Third Quarter

2019

2018

AT&T Inc.

Total Operating Revenues

$

44,588

$

45,739

Exclude Venezuela

(6

)

(18

)

Impact of foreign exchange translation

234

-

Operating Revenues on Constant Currency Basis

44,816

45,721

Year-over-year growth

-2.0

%

Adjusted EBITDA

15,079

15,872

Exclude Venezuela

8

13

Impact of foreign exchange translation

85

-

Adjusted EBITDA on Constant Currency Basis

15,172

15,885

Year-over-year growth

-4.5

%

WarnerMedia Segment

Total Operating Revenues

$

7,846

$

8,204

Impact of foreign exchange translation

71

-

Warner Media Operating Revenues on Constant Currency Basis

7,917

8,204

Year-over-year growth

-3.5

%

EBITDA

2,679

2,701

Impact of foreign exchange translation

18

-

Warner Media EBITDA on Constant Currency Basis

2,697

2,701

Year-over-year growth

-0.1

%

Latin America Segment

Total Operating Revenues

$

1,730

$

1,833

Exclude Venezuela

(6

)

(18

)

Impact of foreign exchange translation

163

-

Latin America Operating Revenues on Constant Currency Basis

1,887

1,815

Year-over-year growth

4.0

%

EBITDA

105

87

Exclude Venezuela

8

13

Impact of foreign exchange translation

67

-

Latin America EBITDA on Constant Currency Basis

180

100

Year-over-year growth

80.0

%

Net Debt to Adjusted EBITDA

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

Net Debt to Adjusted EBITDA

Dollars in millions

Three Months Ended

Dec. 31,

Mar. 31

June 30,

Sept. 30,

Four

20181

20191

2019

2019

Quarters

Adjusted EBITDA2

$

15,029

$

14,802

$

15,041

$

15,079

$

59,951

Add back severance

(327

)

-

-

-

(327

)

Net Debt Adjusted EBITDA

14,702

14,802

15,041

15,079

59,624

End-of-period current debt

11,608

End-of-period long-term debt

153,568

Total End-of-Period Debt

165,176

Less: Cash and Cash Equivalents

6,588

Net Debt Balance

158,588

Annualized Net Debt to Adjusted EBITDA Ratio

2.66

1 As reported in AT&T's Form 8-K filed January 30, 2019 and April 24, 2019.

2 Includes the purchase accounting reclassification of released content amortization of $545 million in the fourth quarter of 2018, $150 million, $112 million, and $108 million in the first, second and third quarters of 2019, respectively.

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure

Third Quarter

September 30, 2019

September 30, 2018

Mobility

Business
Wireline

Adjustments1

Business
Solutions

Mobility

Business
Wireline

Adjustments1

Business
Solutions

Operating Revenues

Wireless service

$

13,930

$

-

$

(11,921

)

$

2,009

$

13,828

$

-

$

(11,971

)

$

1,857

Strategic and managed services

-

3,900

-

3,900

-

3,677

-

3,677

Legacy voice and data services

-

2,252

-

2,252

-

2,602

-

2,602

Other services and equipment

-

351

-

351

-

404

-

404

Wireless equipment

3,771

-

(3,077

)

694

3,907

-

(3,321

)

586

Total Operating Revenues

17,701

6,503

(14,998

)

9,206

17,735

6,683

(15,292

)

9,126

Operating Expenses

Operations and support

9,948

4,022

(8,327

)

5,643

10,104

4,022

(8,551

)

5,575

EBITDA

7,753

2,481

(6,671

)

3,563

7,631

2,661

(6,741

)

3,551

Depreciation and amortization

2,011

1,271

(1,709

)

1,573

2,057

1,187

(1,759

)

1,485

Total Operating Expenses

11,959

5,293

(10,036

)

7,216

12,161

5,209

(10,310

)

7,060

Operating Income

5,742

1,210

(4,962

)

1,990

5,574

1,474

(4,982

)

2,066

Equity in Net Income (Loss) of Affiliates

-

(1

)

-

(1

)

1

(3

)

(1

)

(3

)

Operating Contribution

$

5,742

$

1,209

$

(4,962

)

$

1,989

$

5,575

$

1,471

$

(4,983

)

$

2,063

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

Supplemental Operational Measure

Nine-Month Period

September 30, 2019

September 30, 2018

Mobility

Business
Wireline

Adjustments1

Business
Solutions

Mobility

Business
Wireline

Adjustments1

Business
Solutions

Operating Revenues

Wireless service

$

41,383

$

-

$

(35,482

)

$

5,901

$

40,594

$

-

$

(35,154

)

$

5,440

Strategic and managed services

-

11,513

-

11,513

-

10,849

-

10,849

Legacy voice and data services

-

6,973

-

6,973

-

8,176

-

8,176

Other services and equipment

-

1,102

-

1,102

-

1,010

-

1,010

Wireless equipment

10,973

-

(9,071

)

1,902

11,371

-

(9,634

)

1,737

Total Operating Revenues

52,356

19,588

(44,553

)

27,391

51,965

20,035

(44,788

)

27,212

Operating Expenses

Operations and support

29,511

12,029

(24,770

)

16,770

29,603

12,047

(24,926

)

16,724

EBITDA

22,845

7,559

(19,783

)

10,621

22,362

7,988

(19,862

)

10,488

Depreciation and amortization

6,027

3,735

(5,119

)

4,643

6,218

3,520

(5,330

)

4,408

Total Operating Expenses

35,538

15,764

(29,889

)

21,413

35,821

15,567

(30,256

)

21,132

Operating Income

16,818

3,824

(14,664

)

5,978

16,144

4,468

(14,532

)

6,080

Equity in Net Income (Loss) of Affiliates

(1

)

-

1

-

-

(2

)

-

(2

)

Operating Contribution

$

16,817

$

3,824

$

(14,663

)

$

5,978

$

16,144

$

4,466

$

(14,532

)

$

6,078

1 Non-business wireless reported in the Communication segment under the Mobility business unit.

Erin McGrath

AT&T Inc.

Phone: (214) 862-0651

Email: [email protected]

Source: AT&T Inc.

Categories

Business Wire Press Releases

Next Articles