10-QPeriod: Q3 FY2020

AT&T INC. Quarterly Report for Q3 Ended Sep 30, 2020

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

Summary

AT&T Inc. reported its third-quarter and nine-month results for 2020, demonstrating resilience amidst the ongoing COVID-19 pandemic. While total operating revenues saw a decline compared to the previous year, primarily due to impacts on the WarnerMedia and Latin America segments, the Communications segment showed stability with slight growth in Mobility. Key financial indicators such as Net Income Attributable to Common Stock and Diluted Earnings Per Share experienced a decrease year-over-year, reflecting the challenging economic environment and increased investment in areas like HBO Max. However, the company maintained a strong focus on operational efficiency and cost management across its segments. Liquidity remained robust, supported by significant cash flows from operations and proactive debt management, including strategic issuances and repayments. AT&T continued to invest in its network infrastructure, particularly in 5G, positioning itself for future growth.

Financial Highlights

47 data points
Beta

Revenue

$42.34B

Net Income

$2.82B

6.7% Net Margin

EPS (Diluted)

$0.39

Total Assets

$538.55B

Cash & Equivalents

$9.85B

Free Cash Flow

$12.12B

Financial Statements
Beta
Revenue$42.34B
SG&A Expenses$9.27B
Operating Expenses$36.21B
Operating Income$6.13B
Interest Expense$1.97B
Net Income$2.82B
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)7.15B
Shares Outstanding (Diluted)7.17B

Key Highlights

  • 1Total operating revenues decreased by 5.0% to $42.34 billion for the third quarter and by 6.2% to $126.07 billion for the first nine months of 2020 compared to the prior year periods.
  • 2Net Income Attributable to Common Stock decreased by 25.4% to $2.76 billion for the third quarter and by 25.5% to $8.57 billion for the first nine months of 2020, with Diluted Earnings Per Share falling to $0.39 and $1.19 respectively.
  • 3The Communications segment revenue saw a 3.1% decrease in Q3 and 3.5% decrease in the nine months, with Mobility revenue remaining relatively stable.
  • 4WarnerMedia segment revenues declined by 10.0% in Q3 and 14.7% in the nine months, significantly impacted by pandemic-related postponements of theatrical and home entertainment releases.
  • 5Operating income for the total company decreased by 22.4% in Q3 and 24.2% in the nine months, reflecting lower revenues and increased investments.
  • 6The company reported strong cash flow from operations of $33.05 billion for the first nine months of 2020, enabling continued investment in capital expenditures, including network upgrades and 5G deployment.
  • 7AT&T maintained a strong focus on debt management, with strategic debt issuances and repayments during the period, and remained compliant with its credit facility covenants.

Frequently Asked Questions

The COVID-19 pandemic had a significant impact, leading to a 5.0% decrease in total operating revenues to $42.34 billion for the third quarter. This was driven by impacts on the WarnerMedia and Latin America segments, with lower theatrical and licensing revenues and reduced international roaming services. Incremental costs were also incurred to protect employees and contractors. The company also noted that subscriber counts excluded customers under the 'Keep Americans Connected Pledge'.

The Communications segment saw a 3.1% decrease in Q3 revenues, with Mobility revenue showing resilience and slight growth. WarnerMedia experienced a 10.0% revenue decline due to pandemic-related disruptions in film and TV production and releases. The Latin America segment declined by 19.3%, primarily due to foreign exchange rates and COVID-19 impacts. Overall, segment operating contribution decreased by 14.0% in the third quarter.

AT&T reported $9.76 billion in cash and cash equivalents at the end of September 2020. The company generated $33.05 billion in cash from operating activities for the first nine months, demonstrating strong operational cash flow. During the period, AT&T actively managed its debt through issuances and repayments, totaling significant amounts, while remaining compliant with its credit facility covenants. The company maintained significant liquidity and capital resources, with no material impact from COVID-19 on its liquidity and capital resources during the first nine months of 2020.

AT&T continues to invest in its networks, particularly its 5G deployment, which began nationwide in July 2020. The company emphasizes bundled product offerings and leveraging its premier 5G network for future growth. It also highlights the importance of the HBO Max platform. However, AT&T expects operating results and cash flows to be adversely impacted by COVID-19 for the duration of the pandemic, anticipating ongoing challenges from lower revenues in entertainment and international roaming, and higher expenses to protect employees.