8-KOther EventsExhibits & Filings

AT&T INC. 8-K Report, Corporate Update (Apr 25, 2018)

Filed April 25, 2018For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its first-quarter 2018 financial results, with net income attributable to AT&T totaling $4.7 billion ($0.75 per diluted share), a significant increase from $3.5 billion ($0.56 per diluted share) in the prior year. This boost was attributed to favorable impacts from U.S. corporate tax reform and the adoption of new revenue accounting rules. However, total revenues decreased by 3.4% to $38.0 billion, primarily due to the adoption of a new revenue standard that excluded Universal Service Fund (USF) fees from revenue and continued declines in legacy services and domestic video. Despite the revenue dip, AT&T demonstrated subscriber growth in key areas. The company added a net of 3.2 million North American wireless subscribers, reaching approximately 159.5 million by the end of the quarter. Growth was particularly strong in connected devices, largely driven by wholesale connected cars (2.7 million net adds). The company also saw a slight increase in total video subscribers due to its over-the-top service, DIRECTV NOW, adding 109,000 subscribers for a total of 39.0 million. Broadband connections also saw modest growth, adding 56,000 subscribers.

Key Highlights

  • 1Q1 2018 net income surged to $4.7 billion ($0.75/share) from $3.5 billion ($0.56/share) in Q1 2017, boosted by tax reform and new accounting standards.
  • 2Total revenues decreased by 3.4% to $38.0 billion, influenced by the adoption of new revenue recognition accounting rules (ASC 606) and lower legacy service revenues.
  • 3North American wireless subscribers grew by a net 3.2 million, reaching 159.5 million, with strong growth in connected devices (2.7 million net adds).
  • 4Total video subscribers reached 39.0 million, with a net gain of 109,000 driven by the DIRECTV NOW platform.
  • 5Broadband connections increased by 56,000 to 15.8 million.
  • 6Operating income margin improved slightly to 16.3% from 16.1% in the prior year.
  • 7The company realigned its reporting segments into Consumer Mobility, Business Solutions, Entertainment Group, and International.

Frequently Asked Questions

The increase in net income was primarily driven by the positive impacts of U.S. corporate tax reform and the adoption of new revenue accounting rules (ASC 606), which also influenced the presentation of revenues and expenses.

Total revenues declined by 3.4% due to the adoption of new revenue accounting standards, which led to the exclusion of Universal Service Fund (USF) fees from revenue recognition, and ongoing decreases in legacy services and domestic video revenues. This accounted for approximately $900 million less in reported revenues.

AT&T added a net of 3.2 million North American wireless subscribers. Video subscribers saw a modest increase of 109,000, largely due to growth in DIRECTV NOW, while broadband connections also grew by 56,000.

The adoption of ASC 606 changed how revenue is recognized, notably by no longer recording USF fees in revenue, which reduced reported revenues and expenses. It also impacted operating expenses through mechanisms like commission deferrals.