What was the primary driver of the significant revenue and net income increase in the reported periods?

The primary driver was the completion of the Time Warner acquisition on June 14, 2018. The results of Time Warner have been included in AT&T's financial statements from the acquisition date onwards, significantly boosting total operating revenues and net income. Additionally, a lower effective tax rate resulting from the Tax Cuts and Jobs Act of 2017 contributed positively to net income.

How did the acquisition of Time Warner impact AT&T's debt and interest expense?

The acquisition of Time Warner was financed through a combination of cash and stock, leading to an increase in AT&T's debt levels. This resulted in a higher interest expense, which increased by 21.6% in the third quarter of 2018 compared to the prior year. The company's debt ratio also increased.

What is the outlook for the Communications segment, particularly Mobility and Entertainment Group?

The Communications segment saw a slight overall revenue decrease in Q3 2018, with the Mobility business showing growth (3.3% in Q3) driven by equipment sales, while the Entertainment Group experienced a revenue decline (-7.0% in Q3) due to pressures from legacy services and shifts to over-the-top (OTT) video offerings. Mobility's operating income margin improved, while the Entertainment Group's operating income margin decreased.

How has the adoption of new accounting standards affected AT&T's financial reporting?

AT&T adopted ASC 606 (Revenue Recognition) effective January 1, 2018. This led to adjustments in revenue recognition, including the policy election to record Universal Service Fund (USF) fees on a net basis and changes in how bundled equipment and service revenues are allocated. The company also adopted ASU 2017-07 and ASU 2016-15/2016-18, impacting the presentation of pension costs and cash flow classifications. These adoptions have resulted in a modified retrospective application, affecting period-over-period comparability in some instances, and are detailed in the Notes to the Consolidated Financial Statements.

AT&T INC. 10-Q Quarterly Report Q3 FY2018

Summary

AT&T Inc. reported strong revenue growth for the third quarter and nine months ended September 30, 2018, largely driven by the inclusion of Time Warner's results following its acquisition in June 2018. Total operating revenues increased by 15.3% in the third quarter and 3.3% year-to-date. Net income attributable to AT&T saw a significant increase of 55.8% in the third quarter and 39.4% year-to-date, bolstered by the acquisition and a lower effective tax rate due to U.S. corporate tax reform. The company's Communications segment experienced a slight revenue decline due to pressure on legacy services, though Mobility showed growth. The new WarnerMedia segment, encompassing Time Warner's assets, is now a significant contributor to revenue and operating income. Despite increased interest expenses related to debt financing for the Time Warner acquisition, AT&T's operating income improved, reflecting strong performance across its segments, particularly the newly integrated WarnerMedia. The company continues to invest in network upgrades and expansion while managing its debt levels.

Financial Highlights

51 data points

Beta

Revenue

$45.74B

0.8% Gross Margin

Net Income

$4.72B

0.1% Net Margin

EPS (Diluted)

$0.65

Total Assets

$534.87B

Cash & Equivalents

$8.66B

Free Cash Flow

$12.35B

Financial Statements

Beta

Revenue	$45.74B
Cost of Revenue	$8.65B
Gross Profit	$37.09B
SG&A Expenses	$9.60B
Operating Expenses	$38.47B
Operating Income	$7.27B
Interest Expense	$2.05B
Net Income	$4.72B
EPS (Basic)	$0.65
EPS (Diluted)	$0.65
Shares Outstanding (Basic)	7.28B
Shares Outstanding (Diluted)	7.32B

Key Highlights

1Acquisition of Time Warner completed on June 14, 2018, significantly impacting revenue and operating results, with Time Warner's contribution included from the acquisition date.
2Total operating revenues increased by 15.3% year-over-year in Q3 2018 and 3.3% year-to-date, driven primarily by the WarnerMedia and Xandr segments.
3Net income attributable to AT&T surged by 55.8% in Q3 2018 and 39.4% year-to-date, benefiting from the Time Warner acquisition and a lower effective tax rate due to U.S. corporate tax reform.
4The Communications segment saw a 2.4% revenue decrease in Q3 2018, influenced by declines in legacy services, though Mobility revenue grew.
5The WarnerMedia segment contributed significantly to revenue and operating income in its first partial periods post-acquisition.
6Interest expense increased by 21.6% in Q3 2018 due to higher debt levels associated with the Time Warner acquisition.
7The company reported strong subscriber growth in its Mobility segment, with a 8.5% increase in total wireless subscribers year-over-year.

AT&T INC. Quarterly Report for Q3 Ended Sep 30, 2018

Summary

Financial Highlights

Key Highlights

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