AT&T Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Comparisons are with Q1 2023 unless otherwise noted. Amounts are in millions of dollars, except per-share data and where stated.
Business context
AT&T operates through Communications (Mobility, Business Wireline and Consumer Wireline) and Latin America (Mexico). Its strategy includes expanding fiber and 5G networks and deploying Open RAN. In Q1, the company began offering fixed wireless access over its 5G network in available markets.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Operating revenue | $30,028 | $30,139; down 0.4% |
| Service revenue | $24,842 | $24,617; up 0.9% |
| Operating income / margin | $5,847 / 19.5% | $6,002 / 19.9% |
| Net income attributable to AT&T | $3,445 | $4,228; down 18.5% |
| Net income attributable to common stock / diluted EPS | $3,395 / $0.47 | $4,176 / $0.57 diluted EPS |
| Operating cash flow | $7,547 | $6,678 |
| Capital expenditures | $3,758 | $4,335 |
| Operating cash flow less capital expenditures | $3,789 | $2,343; calculated from reported figures |
| Cash and cash equivalents at period end | $3,520 | $6,722 at Dec. 31, 2023 |
| Total debt | $132,764 | $137,331 at Dec. 31, 2023 |
Consolidated EBITDA, defined by AT&T as operating income before depreciation and amortization, was $10,894, or approximately 36.3% of revenue, versus $10,633, or approximately 35.3%, in Q1 2023. The company paid $2,034 in dividends; the declared common dividend was $0.2775 per share.
Cash used in investing was $2,961 and cash used in financing was $7,815. Cash declined by $3,202 from year-end. Capital investment including $841 of vendor-financing payments was $4,599. Current assets were $30,445 versus current liabilities of $44,834. AT&T had an undrawn $12 billion revolving credit agreement and reported compliance with its credit-facility covenants, including a maximum net debt-to-EBITDA ratio of 3.75-to-1. Debt maturing within one year was $7,060; the weighted-average rate on short-term borrowings was approximately 5.5%.
Material changes versus the prior period
- Service revenue growth was offset by lower equipment revenue and declining Business Wireline revenue. Business Wireline service revenue fell 9.6%, reflecting lower legacy-service demand and product simplification.
- Mobility revenue was nearly flat at $20,594. Service revenue rose 3.3%, while equipment revenue fell 9.8%; Mobility operating income increased 3.1% to $6,468. Postpaid phone net additions were 349,000 versus 424,000, while postpaid phone churn improved to 0.72% from 0.81%.
- Consumer Wireline revenue increased 3.4% to $3,350, with broadband revenue up 7.7%. Fiber broadband connections grew 14.3% to 8.559 million; fiber net additions were 252,000 versus 272,000.
- Mexico revenue increased 20.4% to $1,063, and the segment moved from a $30 operating loss to $3 of operating income.
- Operating expenses were broadly stable, but depreciation and amortization rose 9.0% to $5,047, principally due to network investment and shortened estimated useful lives for wireless equipment to be replaced under Open RAN deployment.
- Net income declined as equity income from affiliates and other net income were lower. Equity income included a smaller contribution from DIRECTV, which had recorded a roughly $100 million sale-leaseback gain in Q1 2023. Other net income also reflected lower pension and postretirement credits and noncash impairments.
Outlook, commentary and risks
- The filing provides no specific consolidated full-year earnings or revenue guidance. Management expects continued Business Wireline service-revenue pressure and said transformation-related operating-cost improvements, fiber investment, and network upgrades are expected to continue through the remainder of 2024.
- AT&T cited operational growth, working-capital timing and expanded receivables-sale programs as contributors to higher operating cash flow. Q1 cash flow included $397 of net cash from receivables sales, versus a net outflow of $104 in Q1 2023; direct supplier financing reduced operating cash flow by $1,584, versus $432 in the prior-year quarter.
- Management noted that the Affordable Connectivity Program was expected to be fully funded only through April 2024 absent additional funding. The filing also discusses uncertainty around broadband regulation, net neutrality, privacy and digital-discrimination rules, spectrum availability, competition, supply chains, cybersecurity, litigation, and the costs and execution of network transformation.
- Other notable items include $159 of asset impairments, abandonments and restructuring charges, compared with none in Q1 2023, and a $266 cash payment related to FirstNet sustainability. The filing reports no material risk-factor developments for Q1.
- AT&T’s first-quarter subscriber reporting excludes connected devices, consistent with its revised metric; this affects comparability with previously reported subscriber totals. The company also repurchased its Mobility preferred interests in April 2023, affecting prior-year diluted EPS comparability.
Key facts for investors to verify
- Whether operating cash flow and the calculated cash flow after capital expenditures remain durable, given working-capital timing, receivables sales and supplier-financing activity.
- Debt repayment capacity, near-term maturities, borrowing costs and continued compliance with the credit agreement’s leverage covenant.
- Progress in fiber and wireless customer growth against legacy wireline declines, and the margin trajectory in Business Wireline.
- The cost, timing and depreciation effects of Open RAN deployment and continued network investment.
- Effects of regulatory changes, including the end of ACP funding absent further appropriations, and any resulting customer or revenue impacts.