10-QPeriod: Q2 FY2020

AT&T INC. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) reported its second quarter and first six months of 2020 results, a period significantly impacted by the COVID-19 pandemic. Total operating revenues for the second quarter decreased by 8.9% to $40.95 billion compared to the prior year, and for the first six months, revenue decreased by 6.7% to $83.73 billion. This decline was primarily driven by reduced revenues across all segments, particularly WarnerMedia and Communications, impacted by advertising revenue drops due to event cancellations, postponed theatrical releases, and reduced wireless service revenue from travel restrictions and store closures. Net income attributable to AT&T for the second quarter was $1.28 billion, a substantial decrease from $3.71 billion in the prior year, resulting in diluted EPS of $0.17 compared to $0.51. For the first six months, net income attributable to AT&T decreased to $5.89 billion from $7.81 billion, with diluted EPS of $0.81 compared to $1.06. The company incurred incremental costs and revenue pressures related to the pandemic, including employee protection measures and disruptions to production and sales, impacting profitability. Despite these challenges, AT&T continued to manage its debt, with significant refinancing activities and a focus on investing in its network, including the expansion of its 5G services.

Financial Highlights

48 data points
Beta

Revenue

$40.95B

Net Income

$1.28B

3.1% Net Margin

EPS (Diluted)

$0.17

Total Assets

$547.90B

Cash & Equivalents

$17.03B

Free Cash Flow

$12.06B

Financial Statements
Beta
Revenue$40.95B
SG&A Expenses$9.83B
Operating Expenses$37.42B
Operating Income$3.53B
Interest Expense$2.04B
Net Income$1.28B
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)7.14B
Shares Outstanding (Diluted)7.17B

Key Highlights

  • 1Total operating revenues declined by 8.9% year-over-year in Q2 2020 to $40.95 billion, and by 6.7% for the first six months to $83.73 billion, largely due to COVID-19 impacts.
  • 2Net income attributable to AT&T significantly decreased in Q2 2020 to $1.28 billion ($0.17 EPS) from $3.71 billion ($0.51 EPS) in Q2 2019, reflecting the challenging operating environment.
  • 3The Communications segment experienced a 4.7% revenue decline in Q2 2020, with decreases across Mobility, Entertainment Group, and Business Wireline, driven by shifts away from legacy services and pandemic-related impacts.
  • 4WarnerMedia segment revenues fell 22.9% in Q2 2020 due to decreased advertising revenue from postponed sports events and lower theatrical revenues from cinema closures.
  • 5Latin America segment revenues decreased by 29.9% in Q2 2020, impacted by foreign exchange rates and COVID-19 related pressures.
  • 6The company incurred approximately $320 million in incremental COVID-19 related costs in Q2 2020 and an estimated $510 million in COVID-19 related operational pressures.
  • 7AT&T continued its debt management activities, issuing $21.06 billion in long-term debt and repaying $17.28 billion during the first six months of 2020.

Frequently Asked Questions

COVID-19 significantly impacted AT&T's performance. The company reported incremental costs of approximately $320 million in Q2 2020 related to employee protection and production disruptions. Additionally, operational pressures like cancellation of sporting events, closure of movie theaters, reduced international roaming, and lower equipment sales led to an estimated $510 million impact on operations and comparability. These factors contributed to the decline in revenues and net income.

The Communications segment's revenue decline of 4.7% in Q2 2020 was driven by continued decreases in video and legacy services, as well as lower wireless service revenues. The latter was influenced by a reduction in international travel leading to lower roaming revenue, and COVID-19 related store closures impacting equipment sales. Growth in the prepaid subscriber base partially offset these declines.

AT&T continued to manage its significant debt load. During the first six months of 2020, the company issued $21.06 billion in long-term debt and repaid $17.28 billion. It also engaged in significant refinancing activities, including issuing new global notes and repaying existing debt. The company also issued preferred stock and repurchased shares, though it paused some repurchases to maintain flexibility and focus on network investment.

AT&T expects operating results and cash flows to continue to be adversely impacted by COVID-19 for at least the duration of the pandemic. Specific impacts in the third quarter are anticipated from the shift in advertising revenue timing, lower theatrical revenues, continued decline in international roaming, higher employee protection expenses, and the ongoing transition to fiber broadband and away from linear TV services.