Did AT&T's first-quarter free cash flow improve meaningfully?

Yes. Free cash flow was $3.1 billion versus $1.0 billion a year earlier. The improvement came from $7.5 billion of operating cash flow (up $0.9 billion), lower capital expenditures ($3.8 billion versus $4.3 billion), and lower vendor financing payments ($0.8 billion versus $2.1 billion). Part of the operating cash gain reflected timing of working capital, including higher receivable sales, so some of it may not repeat.

Why did adjusted EPS decline even though operations showed growth in key areas?

Adjusted EPS fell to $0.55 from $0.60 mainly because of lower equity income from DIRECTV, lower other income, and higher depreciation from fiber and 5G investment and Open RAN transformation. Operating income was $5.8 billion, down 2.6%, and adjusted operating income was flat at about $6.0 billion. Equity in net income of affiliates fell 45% to $0.3 billion, and net income attributable to common stock fell 18.7%.

Is Business Wireline a concern for investors?

Yes. Business Wireline revenue fell 7.8% to $4.9 billion, and operating income dropped 83% to $64 million, with the margin falling to 1.3% from 7.1%. Management attributes this to declining demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services. This segment is the main drag on the Communications segment's otherwise stable profitability.

How is AT&T's balance sheet and leverage trending?

Total debt was $132.8 billion and net debt was $128.7 billion at March 31, 2024. The company repaid $4.7 billion of long-term debt in the quarter. Annualized net debt to adjusted EBITDA was 2.94x, improved from 3.22x a year earlier. Management expects to reach about 2.5x in the first half of 2025, and the company continues to rely on free cash flow to reduce debt.

Does AT&T's guidance reflect any uncertainty?

Yes. AT&T reaffirmed its full-year 2024 targets, but adjusted EPS excludes a non-cash mark-to-market pension and benefit plan item that management says it cannot reasonably estimate in advance. The DIRECTV intangible amortization adjustment is also expected to be $0.5 to $0.7 billion. Reported GAAP EPS could therefore differ materially from adjusted EPS, and the guidance depends on future revenues, expenses, and interest rates.

AT&T INC. 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 24, 2024. Cited figures are marked; the original filing is the authoritative source.

AT&T reported first-quarter 2024 results on April 24, 2024, with revenues of $30.0 billion^a (down 0.4% year over year) and adjusted EPS of $0.55 versus $0.60 a year earlier.

GAAP diluted EPS was $0.47^b, down from $0.57. The headline story for investors is cash generation: free cash flow of $3.1 billion rose $2.1 billion year over year, and cash from operations increased $0.9 billion to $7.5 billion. Capital expenditures fell 13% to $3.8 billion, and capital investment including vendor financing dropped to $4.6 billion from $6.4 billion.

Operating performance was mixed. Mobility service revenue grew 3.3%^c, and postpaid phone churn hit a record-low first-quarter level of 0.72%, supporting 349,000 postpaid phone net adds and a 90 basis point margin improvement. Consumer Wireline posted positive broadband net adds for a third straight quarter, with 252,000 fiber net adds and 7.7% broadband revenue growth.

Business Wireline weakened sharply, with revenue down 7.8% and operating income down 83% to $64 million^d. Mobility equipment revenue fell 9.8% on lower device volumes, which weighed on total revenue. AT&T reaffirmed full-year 2024 guidance, including adjusted EPS of $2.15 to $2.25, free cash flow of $17 to $18 billion, and capital investment of $21 to $22 billion.

Total debt was $132.8 billion and net debt was $128.7 billion, with net debt to adjusted EBITDA at 2.94x on an annualized basis. Management continues to target about 2.5x by the first half of 2025. Investors should note that the company's 2024 adjusted EPS outlook depends on a non-cash mark-to-market pension item and DIRECTV-related amortization that are not reasonably estimable in advance.

02—Key points

Key Highlights

Revenue of $30.0 billion, down 0.4% year over year, as Mobility equipment (-9.8%) and Business Wireline (-7.8%) declines offset service growth.
Adjusted EPS of $0.55 versus $0.60 a year ago (-8.3%); GAAP diluted EPS of $0.47 versus $0.57.
Free cash flow of $3.1 billion, up $2.1 billion year over year, driven by higher operating cash flow and lower capital investment.
Mobility service revenue up 3.3% to $16.0 billion, with record-low Q1 postpaid phone churn of 0.72% and 349,000 postpaid phone net adds.
Consumer Wireline broadband revenue up 7.7% to $2.7 billion, with 252,000 fiber net adds and a third consecutive quarter of positive broadband net adds.
Business Wireline operating income fell 83% to $64 million and EBITDA fell 16.5%, reflecting secular pressure on legacy voice and data services.
Full-year 2024 guidance reaffirmed, including adjusted EPS of $2.15 to $2.25, free cash flow of $17 to $18 billion, and capital investment of $21 to $22 billion.

03—Questions

Frequently Asked Questions

Did AT&T's first-quarter free cash flow improve meaningfully?
Yes. Free cash flow was $3.1 billion versus $1.0 billion a year earlier. The improvement came from $7.5 billion of operating cash flow (up $0.9 billion), lower capital expenditures ($3.8 billion versus $4.3 billion), and lower vendor financing payments ($0.8 billion versus $2.1 billion). Part of the operating cash gain reflected timing of working capital, including higher receivable sales, so some of it may not repeat.
Why did adjusted EPS decline even though operations showed growth in key areas?
Adjusted EPS fell to $0.55 from $0.60 mainly because of lower equity income from DIRECTV, lower other income, and higher depreciation from fiber and 5G investment and Open RAN transformation. Operating income was $5.8 billion, down 2.6%, and adjusted operating income was flat at about $6.0 billion. Equity in net income of affiliates fell 45% to $0.3 billion, and net income attributable to common stock fell 18.7%.
Is Business Wireline a concern for investors?
Yes. Business Wireline revenue fell 7.8% to $4.9 billion, and operating income dropped 83% to $64 million, with the margin falling to 1.3% from 7.1%. Management attributes this to declining demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services. This segment is the main drag on the Communications segment's otherwise stable profitability.
How is AT&T's balance sheet and leverage trending?
Total debt was $132.8 billion and net debt was $128.7 billion at March 31, 2024. The company repaid $4.7 billion of long-term debt in the quarter. Annualized net debt to adjusted EBITDA was 2.94x, improved from 3.22x a year earlier. Management expects to reach about 2.5x in the first half of 2025, and the company continues to rely on free cash flow to reduce debt.
Does AT&T's guidance reflect any uncertainty?
Yes. AT&T reaffirmed its full-year 2024 targets, but adjusted EPS excludes a non-cash mark-to-market pension and benefit plan item that management says it cannot reasonably estimate in advance. The DIRECTV intangible amortization adjustment is also expected to be $0.5 to $0.7 billion. Reported GAAP EPS could therefore differ materially from adjusted EPS, and the guidance depends on future revenues, expenses, and interest rates.

04—Continue

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