10-QPeriod: Q2 FY2021

AT&T INC. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 5, 2021For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported solid revenue growth in the second quarter of 2021, driven by increases across its Communications and WarnerMedia segments, with a notable surge in Mobility equipment and service revenue, and strong Direct-to-Consumer (DTC) subscription and advertising revenue from WarnerMedia. The company demonstrated resilience with overall operating revenues up 7.6% year-over-year to $44.0 billion. Despite a slight decrease in operating income due to higher operating expenses, particularly related to asset impairments in the Vrio business, net income saw a significant increase of 19.9% to $1.87 billion, and net income attributable to common stock rose by 23.2% to $1.51 billion. The company also continued to strategically manage its debt, with interest expense decreasing due to lower rates and capitalized interest. Significant strategic moves are underway, including the pending combination of WarnerMedia with Discovery, Inc., and the recent close of the transaction forming DIRECTV (New DTV) by combining AT&T's U.S. Video business with TPG Capital. The company also made substantial investments in C-Band spectrum licenses, totaling $23.4 billion, positioning itself for future 5G network enhancements. These strategic actions underscore AT&T's focus on optimizing its business portfolio and investing in future growth areas.

Financial Highlights

46 data points
Beta

Revenue

$35.74B

Net Income

$1.57B

4.4% Net Margin

EPS (Diluted)

$0.22

Total Assets

$544.71B

Cash & Equivalents

$11.87B

Free Cash Flow

$10.91B

Financial Statements
Beta
Revenue$35.74B
SG&A Expenses$7.58B
Operating Expenses$28.17B
Operating Income$7.57B
Interest Expense$1.64B
Net Income$1.57B
EPS (Basic)$0.21
EPS (Diluted)$0.22
Shares Outstanding (Basic)7.17B
Shares Outstanding (Diluted)7.48B

Key Highlights

  • 1Total operating revenues increased by 7.6% to $44.0 billion for the three months ended June 30, 2021, compared to $40.9 billion in the prior year period.
  • 2Net income attributable to AT&T increased by 22.6% to $1.57 billion for the three months ended June 30, 2021, compared to $1.28 billion in the prior year period.
  • 3The Communications segment saw a 6.1% revenue increase, primarily driven by a 10.4% surge in the Mobility business.
  • 4WarnerMedia segment revenues grew by 30.7% to $8.8 billion, fueled by strong subscription, advertising, and content revenues.
  • 5Significant progress on strategic transactions, including the agreement to combine WarnerMedia with Discovery and the recent close of the DIRECTV (New DTV) transaction.
  • 6Acquisition of C-Band spectrum licenses for $23.4 billion, aimed at enhancing 5G network capabilities.
  • 7Interest expense decreased by 17.5% to $1.68 billion due to lower interest rates and capitalized interest.

Frequently Asked Questions

AT&T's revenue growth was driven by strong performance across multiple segments. The Communications segment saw a 6.1% increase, largely due to a 10.4% rise in Mobility revenue from increased wireless equipment and service sales. The WarnerMedia segment experienced a significant 30.7% revenue jump, propelled by higher subscription revenues (especially from HBO Max), advertising, and content sales. Growth in Mexico's wireless operations and favorable foreign exchange impacts also contributed positively.

AT&T has entered into an agreement to combine its WarnerMedia segment with a subsidiary of Discovery, Inc. This transaction is structured as a Reverse Morris Trust and is expected to close in mid-2022, subject to customary closing conditions, including Discovery shareholder approval and regulatory approvals. AT&T anticipates receiving approximately $43 billion in cash, debt securities, and WarnerMedia's retained debt as part of the transaction, with AT&T shareholders receiving stock in the new combined company.

AT&T actively managed its debt, resulting in a decrease in interest expense by 17.5% to $1.68 billion for the quarter. This reduction was attributed to lower overall interest rates and capitalized interest associated with spectrum acquisitions. The company's debt ratio was 50.0% at June 30, 2021, indicating a slight increase from prior periods due to recent debt issuances.

AT&T made a substantial investment in C-Band spectrum licenses, winning bids totaling $23.4 billion. This acquisition is a strategic move to enhance its 5G network capabilities and meet growing demand for data services. The company also incurred capital expenditures of $7.99 billion for network improvements and related support systems during the first six months of the year.