10-QPeriod: Q3 FY2021

AT&T INC. Quarterly Report for Q3 Ended Sep 30, 2021

Filed November 4, 2021For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its financial results for the third quarter and first nine months of 2021. The company saw a notable increase in total operating revenues for the nine-month period, driven by growth in the Communications and WarnerMedia segments, although third-quarter revenues were impacted by the separation of its U.S. video business. Net income attributable to AT&T saw a significant increase year-over-year for both periods, largely due to improved operational performance and strategic divestitures. The company is actively managing its capital structure, with ongoing debt management and a strong focus on strategic transactions, including the significant pending combination of its WarnerMedia segment with Discovery Inc., expected to close mid-2022. This period marks a transition phase for AT&T as it refines its business portfolio.

Financial Highlights

46 data points
Beta

Revenue

$31.33B

Net Income

$5.92B

18.9% Net Margin

EPS (Diluted)

$0.80

Total Assets

$547.11B

Cash & Equivalents

$18.48B

Free Cash Flow

$9.87B

Financial Statements
Beta
Revenue$31.33B
SG&A Expenses$7.09B
Operating Expenses$25.09B
Operating Income$6.24B
Interest Expense$1.63B
Net Income$5.92B
EPS (Basic)$0.82
EPS (Diluted)$0.80
Shares Outstanding (Basic)7.17B
Shares Outstanding (Diluted)7.51B

Key Highlights

  • 1Total operating revenues increased by 1.5% to $127.9 billion for the first nine months of 2021 compared to the same period in 2020.
  • 2Net income attributable to AT&T common stock rose significantly, reaching $15.0 billion for the first nine months of 2021, up from $8.6 billion in the prior year.
  • 3The Communications segment showed revenue growth of 3.8% for the third quarter and 5.0% for the nine months, driven by Mobility and Consumer Wireline.
  • 4WarnerMedia segment revenues grew by 14.2% in the third quarter and 17.7% for the nine months, fueled by subscription and content revenues.
  • 5The company completed the separation of its U.S. video business to form a new company, DIRECTV, effective July 31, 2021, and began accounting for its investment under the equity method.
  • 6A significant strategic development is the agreement to combine WarnerMedia with Discovery Inc., expected to close in mid-2022, which will result in AT&T receiving approximately $43 billion.
  • 7Capital expenditures for the first nine months of 2021 were $12.7 billion, with a significant portion dedicated to network upgrades and expansion, including C-Band spectrum acquisition.

Frequently Asked Questions

Revenue growth in the first nine months of 2021 was primarily driven by increases in the Communications segment (Mobility and broadband service) and the WarnerMedia segment (Direct-to-Consumer subscription and content revenues). Growth in Mexico wireless operations also contributed positively due to favorable foreign exchange impacts.

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 regulatory approvals and Discovery shareholder approval. AT&T anticipates receiving approximately $43 billion in cash, debt securities, and WarnerMedia's retention of certain debt upon closing.

The separation of the U.S. Video business, effective July 31, 2021, led to a decrease in third-quarter total operating revenues as those results are no longer consolidated. However, it also resulted in ceased depreciation and amortization on those assets, contributing to improved operating income margins and a cleaner financial profile for the remaining businesses. The company now accounts for its investment in the new DIRECTV entity under the equity method.

As of September 30, 2021, AT&T's total debt obligations were $179.2 billion. The company is actively managing its debt through issuances and repayments. Key debt activities in the first nine months of 2021 included significant note and debenture issuances. AT&T's weighted average interest rate on its long-term debt was approximately 3.8%. The company's debt ratio was 49.7%, and its net debt ratio was 43.8% at the end of the quarter. Covenants in credit agreements require AT&T to maintain a net debt-to-EBITDA ratio of not more than 4.0-to-1 through June 30, 2023.