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AT&T INC. 8-K Report, Corporate Update (Jul 24, 2019)

Filed July 24, 2019For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its second-quarter 2019 financial results, with total revenues reaching $45.0 billion, a significant 15.3% increase driven primarily by the acquisition of Time Warner Inc. Despite this revenue growth, net income attributable to AT&T declined to $3.7 billion ($0.51 per diluted share) from $5.1 billion ($0.81 per diluted share) in the prior year's quarter. This shift in profitability is attributed to acquisition-related costs and other factors associated with the Time Warner integration. Operating expenses also increased by 15.2% due to the acquisition. Operationally, the Communications segment showed modest revenue growth of 0.3% to $35.5 billion, with its operating contribution rising by 3.8%. Within Communications, the Mobility unit saw a 1.3% revenue increase, driven by higher service revenues and subscriber gains, though equipment sales declined. The Entertainment Group experienced a slight revenue dip of 1.0%, primarily due to video subscriber losses, while broadband connections remained stable. The newly formed WarnerMedia segment reported $8.4 billion in revenues for its initial comparable period, reflecting the impact of the Time Warner acquisition.

Key Highlights

  • 1Total revenues increased by 15.3% to $45.0 billion, largely due to the acquisition of Time Warner.
  • 2Net income attributable to AT&T decreased to $3.7 billion ($0.51/share) from $5.1 billion ($0.81/share) in Q2 2018.
  • 3Operating income increased to $7.5 billion from $6.5 billion year-over-year, with the operating income margin slightly improving to 16.7%.
  • 4Cash from operating activities surged by $4.1 billion to $14.3 billion, significantly boosted by the securitization of WarnerMedia receivables.
  • 5Communications segment revenue grew 0.3% to $35.5 billion, with Mobility revenues up 1.3% driven by service revenue and subscriber gains.
  • 6Entertainment Group revenue declined 1.0% due to video subscriber losses, though broadband connections were stable.
  • 7WarnerMedia segment revenue was $8.4 billion for its first full comparable period post-acquisition.

Frequently Asked Questions

The primary driver of AT&T's significant 15.3% revenue increase to $45.0 billion in the second quarter of 2019 was the acquisition of Time Warner Inc. This acquisition contributed substantially to the overall revenue figures for the period.

Net income attributable to AT&T decreased to $3.7 billion from $5.1 billion in the prior year. This was mainly due to increased operating expenses, acquisition-related costs associated with the Time Warner integration, and a different mix of revenues and expenses compared to the previous year.

The Mobility segment saw a 1.3% revenue increase to $17.5 billion, driven by a 2.4% rise in service revenues due to subscriber gains and higher postpaid phone average revenue per subscriber (ARPU). However, equipment revenues declined due to lower postpaid smartphone sales. The segment's operating income margin improved to 33.3%.

The Entertainment Group's revenues decreased slightly by 1.0% to $11.4 billion, primarily due to a significant decline in video subscribers (down 946,000 in the quarter, including 168,000 from DIRECTV NOW). Broadband connections remained relatively stable. Despite revenue challenges, the operating income margin for this segment improved to 13.3%.