AT&T Inc. (NYSE: T) reported fourth-quarter results that showed sustained momentum in customer additions across 5G and fiber and solid growth in wireless service and broadband revenues.
“We’re committed to connecting people to greater possibility, and our results demonstrate that our customers are responding to this,” said John Stankey, AT&T CEO. “Our consistent go-to-market strategy and the simplicity of our offerings drove continued robust, high-quality wireless and fiber customer additions in the fourth quarter. Over the last 10 quarters, we’ve demonstrated sustainable momentum in growing customer relationships, with 7.5 million postpaid phone net adds and 2.9 million AT&T Fiber net adds.
“We met or surpassed all of our profitability targets for the year all while investing at record levels to bring the benefits of our 5G and fiber technologies to even more people. As we enter 2023, I’m confident in the trajectory of our business and in our team’s ability to deliver profitable and durable growth for our shareholders.”
Consolidated Financial Results
Revenues from continuing operations for the fourth quarter totaled $31.3 billion versus $31.1 billion in the year-ago quarter, up 0.8%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues.
Operating expenses from continuing operations were $52.4 billion versus $26.2 billion in the year-ago quarter. Operating expenses increased primarily due to non-cash goodwill impairments and asset abandonments and restructuring charges in the current quarter totaling $26.8 billion. Goodwill impairments of $24.8 billion were associated with our Business Wireline, Consumer Wireline and Mexico reporting units and were driven by higher interest rates consistent with the macroeconomic environment, with secular declines also impacting Business Wireline growth rates. Asset abandonments of $1.4 billion were associated with certain wireline conduits no longer required to support our copper and fiber networks. To a lesser extent, the year-over-year increase also reflected higher bad debt expense and increased depreciation, partly offset by lower wireless equipment costs from lower volumes and the lack of 3G network shutdown costs in the fourth quarter of 2022.
Operating income (loss) from continuing operations was ($21.1) billion versus $4.9 billion in the year-ago quarter. When adjusting for the asset impairments and abandonments, and other items, adjusted operating income* from continuing operations was $5.7 billion versus $5.0 billion in the year-ago quarter.
Equity in net income of affiliates of $0.4 billion primarily from the DIRECTV investment. With adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment* was $0.7 billion.
Income (loss) from continuing operations was ($23.1) billion versus $5.2 billion in the year-ago quarter. Earnings per common share from continuing operations was ($3.20) versus $0.66 in the year-ago quarter. Adjusting for ($3.81), which includes asset impairments and abandonments, an actuarial loss on benefit plans, our proportionate share of intangible amortization from the DIRECTV equity method investment and other items, earnings per diluted common share* from continuing operations was $0.61 compared to $0.56 in the year-ago quarter.
Cash from operating activities from continuing operations was $10.3 billion, up $2.3 billion year over year. Capital expenditures from continuing operations were $4.2 billion in the quarter versus $3.5 billion in the year-ago quarter. Capital investment* from continuing operations, which includes $0.5 billion of cash payments for vendor financing, totaled $4.7 billion.
Free cash flow* from continuing operations was $6.1 billion for the quarter.
Full-Year Results
Revenues from continuing operations for the full year totaled $120.7 billion versus $134.0 billion in 2021, down 9.9% reflecting the impact of the U.S. Video separation in July 2021. Excluding the impact of U.S. Video, operating revenues for standalone AT&T* were up 2.1%, from $118.2 billion, primarily driven by higher revenues from Mobility, and, to a lesser extent, Mexico and Consumer Wireline, partially offset by lower Business Wireline revenues.
Operating expenses from continuing operations were $125.3 billion compared with $108.1 billion in 2021 primarily due to higher non-cash asset impairments and abandonments, and restructuring charges, partly offset by the inclusion in the prior year of U.S. Video results for seven months as well as other divested businesses. To a lesser extent, the year-over-year increase reflects higher bad debt expense, the elimination of CAF II government credits and increased wholesale network access charges. Wireless equipment costs were up slightly year over year as the impacts of higher sales volumes and the sale of higher-priced smartphones were largely offset by lower 3G network shutdown costs.
Operating income (loss) from continuing operations was ($4.6) billion versus $25.9 billion in 2021. When adjusting for asset impairments, abandonments, restructuring, and other items, adjusted operating income* from continuing operations was $23.5 billion versus $26.2 billion a year ago. When excluding the impacts of prior-year dispositions, standalone AT&T* adjusted operating income totaled $22.3 billion for full year 2021.
Equity in net income of affiliates of $1.8 billion primarily from the DIRECTV investment. With adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment* for full year 2022 was $3.4 billion.
Income (loss) from continuing operations was ($6.9) billion versus $23.8 billion a year ago. Earnings per common share from continuing operations was ($1.10) versus $3.02 for full-year 2021. With adjustments for both years, adjusted earnings per diluted common share from continuing operations* was $2.57 versus $2.63 for full-year 2021. On a standalone AT&T* comparative basis, adjusted earnings per diluted common share was $2.41 for 2021.
Cash from operating activities from continuing operations was $35.8 billion, down from $37.2 billion in the prior year due to inclusion of U.S. Video in 2021. Capital expenditures from continuing operations were $19.6 billion for the full year, versus $15.5 billion for full-year 2021. Capital investment* from continuing operations, which includes $4.7 billion of cash payments for vendor financing, totaled $24.3 billion.
Free cash flow* from continuing operations was $14.1 billion for the full year. Total debt was $135.9 billion at the end of the fourth quarter, and net debt* was $132.2 billion.
Communications Operational Highlights
Fourth-quarter revenues were $30.4 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 12.7% year over year, with operating income margin of 23.8%, compared to 21.2% in the year-ago quarter. Operating income in the quarter reflects the lower costs associated with a third-quarter 2022 retirement benefit plan change of about $115 million, with about $50 million for Business Wireline, $40 million for Consumer Wireline and $20 million for Mobility.
Mobility
- Revenues were up 1.7% year over year to $21.5 billion due to higher service revenues. Service revenues were $15.4 billion, up 5.2% year over year, primarily driven by subscriber and postpaid ARPU growth. Equipment revenues were $6.1 billion, down 6.3% year over year, driven by lower volumes.
- Operating expenses were $15.5 billion, down 2.3% year over year primarily due to lower equipment costs including the absence of 3G network shutdown costs, gains from tower transactions, decreased advertising costs and lower content costs. These decreases were partially offset by higher bad debt expense, increased amortization of customer acquisition costs and the elimination of CAF II government credits.
- Operating income was $6.0 billion, up 13.4% year over year. Operating income margin was 28.1%, compared to 25.2% in the year-ago quarter.
- EBITDA* was $8.1 billion, up 10.1% year over year with EBITDA margin* of 37.8%, up from 34.9% a year ago. EBITDA service margin* was 52.6%, up from 50.3% in the year-ago quarter.
- Total wireless net adds were 6.4 million including:
- 1.1 million postpaid net adds with:
- 656,000 postpaid phone net adds
- 39,000 postpaid tablet and other branded computing device net adds
- 409,000 other net adds
- (13,000) prepaid phone net adds
- Postpaid churn was 1.01% versus 1.02% in the year-ago quarter.
- Postpaid phone churn was 0.84% versus 0.85% in the year-ago quarter.
- Prepaid churn was less than 3%, with Cricket substantially lower.
- Postpaid phone-only ARPU was $55.43, up 2.5% versus the year-ago quarter, due to pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
- FirstNet® connections reached approximately 4.4 million across more than 24,000 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 $5.6 billion, down 4.5% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services. The quarter also included approximately $90 million in revenues from intellectual property sales, an increase of about $15 million year over year.
- Operating expenses were $4.8 billion, down 3.8% year over year due to ongoing operational cost efficiencies, credits associated with a retirement benefit plan change in the third quarter of 2022 and lower amortization of deferred fulfillment costs, partly offset by higher wholesale network access costs and higher depreciation expense.
- Operating income was $801 million, down 8.6%, with operating income margin of 14.2% compared to 14.8% in the year-ago quarter.
- EBITDA* was $2.2 billion, down 1.5% year over year with EBITDA margin* of 38.3%, compared to 37.2% in the year-ago quarter. EBITDA margin for both periods includes the impacts from intellectual property sales.
- 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 $3.2 billion, up 2.2% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 7.2% due to fiber growth of more than 31%, partly offset by non-fiber revenue declines of 12.6%.
- Operating expenses were $2.9 billion, down 3.5% year over year due to lower network and customer support costs, decreased advertising costs, credits associated with a retirement benefit plan change in the third quarter of 2022, and lower content costs, partly offset by the elimination of CAF II government credits, higher depreciation expense and higher bad debt expense.
- Operating income was $376 million, up 86.1% year over year with operating income margin of 11.6%, compared to 6.4% in the year-ago quarter.
- EBITDA* was $1.2 billion, up 20.5% year over year with EBITDA margin* of 37.0%, up from 31.4% in the year-ago quarter.
- Total broadband losses, excluding DSL, were 43,000, reflecting AT&T Fiber net adds of 280,000, more than offset by losses in non-fiber services. AT&T Fiber now has the ability to serve more than 19 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 Highlights4
Revenues were $861 million, up 22.3% year over year primarily due to growth in both service and equipment revenues, including favorable foreign exchange impacts. Service revenues were $579 million, up 19.4% year over year, driven by growth in wholesale revenue and subscribers. Equipment revenues were $282 million, up 28.8% year over year due to higher sales.
Operating loss was ($79) million compared to ($117) million in the year-ago quarter. EBITDA* was $85 million compared to $36 million in the year-ago quarter.
Total wireless net adds were 605,000, including 515,000 prepaid net adds, 71,000 postpaid net adds and 19,000 reseller net adds.
* 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.
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1 With the closing of the WarnerMedia transaction in April 2022, historical financial results have been recast to present WarnerMedia and other divested businesses, including Vrio, Xandr and Playdemic, as discontinued operations. Consolidated results reflect AT&T’s remaining continuing operations, which include U.S. Video and certain other dispositions in the prior year.
2 Reported 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 and share-based payments (in periods of net income) or adjustment of carrying value of noncontrolling interest (in periods of net loss), 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.
4 Latin America segment results have been recast to classify Vrio as a discontinued operation. Segment results consist solely of AT&T Mexico operations.
Source: https://about.att.com/story/2023/q4-earnings-2022.html