AT&T Announces Second-Quarter 2021 Results
Friday, July 23, 2021 | Comments

AT&T reported second-quarter results that showed continuing customer growth in wireless and fiber, as well as strong cash flows.

“We’re pleased with our performance and our momentum is strong,” said John Stankey, AT&T CEO. “For the fourth consecutive quarter, we saw good subscriber growth across wireless, fiber and HBO Max. Mobility delivered strong service revenue, EBITDA and postpaid phone growth.”

Consolidated revenues for the second quarter totaled $44 billion versus $41 billion in the year-ago quarter, up 7.6%, reflecting partial recovery from the prior-year impacts of COVID-19. Higher WarnerMedia, mobility, Mexico and consumer wireline revenues more than offset declines in domestic video and business wireline.

Additionally, consolidated revenues were impacted by divestitures of previously held-for-sale businesses, including the fourth-quarter 2020 sale of AT&T’s wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands.

Operating expenses were $40.8 billion versus $37.4 billion in the year-ago quarter. Expenses increased due to $4.6 billion in impairments at Vrio compared to $2.2 billion in the prior year, higher domestic wireless equipment costs, higher sports-related programming costs, and higher direct-to-consumer programming and marketing costs. Those increases were partially offset by severance charges in the prior year quarter and lower video costs in the current year.

Additionally, depreciation and amortization expense was $1.5 billion lower year over year, largely due to the impairments of long-lived assets taken in the fourth quarter of 2020 and ceasing depreciation and amortization on held-for-sale video assets.

Operating income was $3.3 billion versus $3.5 billion in the year-ago quarter due to higher impairments at Vrio and higher programming costs from the return of sports, partially offset by the impacts of higher revenues, lower depreciation and amortization expense, and prior-year severance charges. When adjusting for the non-cash Vrio impairments, merger-amortization costs and other items, operating income was $8.9 billion versus $9 billion in the year-ago quarter.

Second-quarter net income attributable to common stock was $1.5 billion, or $0.21 per diluted common share, versus $1.2 billion, or $0.17 per diluted common share, in the year-ago quarter. Adjusting for $0.68, which includes the non-cash Vrio impairments, merger-amortization costs, an actuarial loss on benefit plans and other items, earnings per diluted common share was $0.89. This compares to an adjusted earnings per diluted common share of $0.83 in the year-ago quarter. Items affecting year-over-year comparability include about $200 million of pretax gains, principally from mark-to-market gains on benefit-plan investments.

Cash from operating activities was $10.9 billion, down $1.1 billion year over year, with capital expenditures of $4 billion and content spend of $5.3 billion. Gross capital investment totaled $5.3 billion, which includes $1.3 billion of cash payments for vendor financing. Free cash flow was $7 billion for the quarter. Net debt decreased by $0.9 billion sequentially, and net debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at the end of the second quarter was 3.15.

Second-quarter revenues for the communications division were $28.1 billion, up 6.1% year over year due to increases in mobility and consumer wireline to offset a decline in business wireline. Operating contribution was $7.3 billion, down 2% year over year, with operating income margin of 26.1%, compared to 28.3% in the year-ago quarter.

Revenues for mobility were up 10.4% year over year to $18.9 billion due to higher equipment and service revenues. Service revenues were $14.3 billion, up 5% year over year due to subscriber gains and the lapping of COVID-19 impacts on international roaming revenues and waived fees. Equipment revenues were $4.6 billion, up 31.9% year over year, driven by smartphone sales and a mix of higher priced postpaid smartphones and higher sales of postpaid data devices. Prior year equipment revenues included the impact of COVID-19 related store closures.

Operating expenses for mobility were $12.9 billion, up 14% year over year due to higher equipment costs, higher network costs, higher content costs associated with bundling HBO Max and higher commission expense, partially offset by lower sales and support costs.

Operating income for the division was $6 billion, up 3.4% year over year. Operating income margin was 31.7%, compared to 33.9% in the year-ago quarter. EBITDA was $8 billion, up 2.7% year over year with EBITDA margin of 42.4%, down from 45.6% a year ago. EBITDA service margin was 55.9%, compared to 57.2% in the year-ago quarter. Total net adds were 5.5 million.

Postpaid churn was 0.87% versus 1.05% in the year-ago quarter and postpaid phone churn was 0.69% versus 0.84% in the year-ago quarter, equaling the lowest quarter ever, the carrier said. Prepaid churn was a record low of less than 3%.

Revenues were $6.1 billion, down 4% year over year from lower service revenues, primarily due to lower demand for legacy voice and data services in the current year and higher demand for pandemic-related connectivity in the prior-year. Operating expenses were $5 billion, essentially flat year over year due to ongoing operational cost efficiencies.

Operating income was $1.1 billion, down 18.6% with operating income margin of 17.3%, compared to 20.5% in the year-ago quarter. EBITDA was $2.3 billion, down 9.6% year over year with EBITDA margin of 38.7%, compared to 41.1% in the year-ago quarter.

The company has updated its 2021 guidance. On a comparative basis, the company now expects consolidated revenue growth in the 2% to 3% range; adjusted earnings per share (EPS) to grow in the low- to-mid single digits; gross capital investment in the $22 billion range, with capital expenditures in the $17 billion range, and free cash flow in the $27 billion range, with a full-year total dividend payout ratio in the high 50’s percentage range.

AT&T said it expects reimbursements from the First Responder Network Authority (FirstNet Authority) to be about $1 billion.

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