Fourth-Quarter Consolidated Results

Consolidated revenues of $41.0 billion
Reported EPS of $0.69 compared to ($1.95) in the year-ago quarter, which included non-cash charges
Adjusted EPS of $0.78 compared to $0.75 in the year-ago quarter
Cash from operations of $11.3 billion
Capital expenditures of $3.8 billion; gross capital investment¹of $4.9 billion and cash content spend of $4.6 billion
Free cash flow² of $8.7 billion

Full-Year Consolidated Results

Consolidated revenues of $168.9 billion
Reported EPS of $2.76 compared to ($0.75) in the prior year, which included non-cash charges
Adjusted EPS of $3.40 compared to $3.18 in the prior year
Cash from operations of $42.0 billion
Capital expenditures of $16.5 billion; gross capital investment¹ of $21.6 billion
Free cash flow² of $26.8 billion; total dividend payout ratio³ of 56%

Note: AT&T's fourth-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, January 26, 2022. The webcast and related materials will be available on AT&T's Investor Relations website at https://investors.att.com.

AT&T Inc. (NYSE:T) reported fourth-quarter results that showed continuing customer growth in wireless, fiber and HBO Max. For the full year, AT&T continued to lead the industry in postpaid phone net adds, gaining more subscribers than in the prior 10 years combined; added more than 1 million fiber subscribers — the fourth consecutive year in which it has added 1 million or more subscribers; and surpassed the high end of its guidance for global HBO Max and HBO subscribers with nearly 74 million subscribers at the end of 2021.

"A year and a half ago, we began simplifying our business to reposition AT&T for growth and we're extremely pleased with how we've executed on that commitment," said John Stankey, AT&T CEO. "We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we're confident there is more opportunity to continue to grow our customer base and drive costs from the business.

"We're at the dawn of a new age of connectivity. Our focus now is to be America's best connectivity provider and also ensure our media assets are positioned to grow and truly become a global media distribution leader. Once we do this, we'll unlock the true value of these businesses and provide a great opportunity for shareholders."

Fourth-Quarter Highlights

Communications

Mobility:
- 884,000 postpaid phone net adds; 3.2 million for full year
- 1.3 million postpaid net adds; 4.5 million for full year
- Postpaid phone churn of 0.85%; 0.76% for full year
- Revenues up 5.1%; service revenues up 4.6%; equipment revenues up 6.2%
- Operating income of $5.4 billion, up 5.2% year over year; EBITDA⁴ up 4.3%
- Operating income margin of 25.3%; EBITDA service margin⁵ 50.5%

Business Wireline
- Operating income margin of 15.2%; EBITDA margin⁴ 37.5%, up 50 basis points due to cost efficiencies

Consumer Wireline:
- 271,000 AT&T Fiber net adds; 1.0 million for full year
- Revenues up 1.4%; broadband revenues up 5.4% with ARPU growth of 4.2%

WarnerMedia

Total global HBO Max and HBO subscribers⁶of 73.8 million, up 13.1 million year over year; domestic subscribers⁷ of 46.8 million, up 5.3 million for full year
Domestic HBO Max and HBO subscriber ARPU⁸ of $11.15
Total revenues up 15.4% in fourth quarter to $9.9 billion
Direct-to-Consumer subscription revenues up 11.5% in fourth quarter

Consolidated Financial Results

Consolidated revenues for the fourth quarter totaled $41.0 billion versus $45.7 billion in the year-ago quarter, down 10.4% reflecting the impact of divested businesses, mainly U.S. Video in the third quarter and Vrio in the fourth quarter, and lower Business Wireline revenues. Decreases were partially offset by higher WarnerMedia revenues, including a partial recovery from prior-year pandemic impacts, and higher Mobility and Consumer Wireline revenues. Excluding impacts of the U.S. Video business and Vrio from both quarters, consolidated revenues totaled $40.6 billion⁹ compared to $39.0 billion in the year-ago quarter.

Operating expenses were $35.7 billion versus $56.4 billion in the year-ago quarter. Expenses declined due to $16.4 billion of non-cash asset impairments in the prior year, the separation of the U.S. Video operations, and impacts of Vrio and other divested businesses. These declines were partially offset by higher WarnerMedia programming, marketing and selling costs, and higher domestic wireless equipment costs, including 3G network shutdown costs. Additionally, depreciation and amortization expense was $1.3 billion lower year over year, largely due to the impairments of long-lived assets taken in 2020 and ceasing depreciation and amortization of held-for-sale businesses.

Operating income (loss) was $5.3 billion versus ($10.7) billion in the year-ago quarter primarily due to non-cash asset impairments in the prior year. When adjusting for merger-amortization costs and other items, adjusted operating income was $6.6 billion¹⁰ versus $7.8 billion in the year-ago quarter. Adjusted operating income was comparable when excluding the U.S. Video business and Vrio from both quarters.

Fourth-quarter net income (loss) attributable to common stock was $5.0 billion, or $0.69 per diluted common share, versus ($13.9) billion, or ($1.95) per common share in the year-ago quarter. Adjusting for $0.09, which includes merger-amortization costs, a proportionate share of intangible amortization at the DIRECTV equity method investment, an actuarial gain on benefit plans, and other items, earnings per diluted common share was $0.78 compared to $0.75 in the year-ago quarter.

Cash from operating activities was $11.3 billion, up $1.2 billion year over year, including content spend of $4.6 billion. Capital expenditures were $3.8 billion in the quarter. Gross capital investment totaled $4.9 billion, which includes $0.6 billion of cash payments for vendor financing and excludes $0.5 billion of FirstNet reimbursements. Free cash flow, including $1.3 billion of distributions from DIRECTV classified as investing activities, was $8.7 billion for the quarter. Net debt decreased by $1.7 billion sequentially, and net debt-to-adjusted EBITDA at the end of the fourth quarter was 3.22x.¹¹

Full-Year Results

For full-year 2021 when compared with 2020 results, AT&T's consolidated revenues totaled $168.9 billion versus $171.8 billion, reflecting the separation of the U.S. Video business in the third quarter of 2021, and the impacts from other divested businesses. These decreases were partially offset by higher revenues in WarnerMedia and Communications. Excluding impacts of U.S. Video and Vrio from both years, consolidated revenues totaled $153.2 billion⁹ compared to $144.6 billion in 2020.

Operating expenses were $145.5 billion in 2021 compared with $165.4 billion in 2020. Expenses declined due to $14.0 billion lower non-cash asset impairments year over year, a partial year of U.S. Video in 2021, and impacts of other divested businesses. These declines were partially offset by higher WarnerMedia programming, marketing and selling costs, and higher domestic wireless equipment costs. Additionally, depreciation and amortization expense was $5.7 billion lower year over year, largely due to the impairments of long-lived assets taken in 2020 and ceasing depreciation and amortization of held-for-sale businesses.

Operating income was $23.3 billion compared to $6.4 billion in the prior year, and operating income margin was 13.8% versus 3.7%. With adjustments for both years, operating income was $32.8 billion¹⁰ versus $34.1 billion in 2020, and operating income margin was 19.4% versus 19.8%. Excluding impacts of U.S. Video and Vrio from both years, adjusted operating income totaled $30.5 billion¹² compared to $32.4 billion in 2020.

Equity in net income (loss) of affiliates of $0.6 billion includes $0.6 billion from the DIRECTV investment for the five months after separation. With adjustment for a proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment was $1.4 billion.¹³

2021 net income (loss) attributable to common stock was $19.9 billion, or $2.76 per diluted common share, versus ($5.4) billion, or ($0.75) per common share, in 2020. With adjustments for both years, earnings per diluted common share was $3.40 compared to $3.18 in 2020.

Cash from operating activities was $42.0 billion, down $1.2 billion year over year, including content spend of $19.2 billion, which was up $4.3 billion year over year. Capital expenditures were $16.5 billion for the year. Gross capital investment totaled $21.6 billion, which includes $4.6 billion of cash payments for vendor financing and excludes $0.5 billion of FirstNet reimbursements. Full-year free cash flow², which includes $1.3 billion of distributions from DIRECTV classified as investing activities, was $26.8 billion for the year compared to $27.5 billion in 2020. The company's free cash flow to total dividend payout ratio³ for the full year was 56%. Net debt increased by $8.7 billion in the year.

Communications Operational Highlights

Fourth-quarter revenues were $30.2 billion, up 2.4% year over year due to increases in Mobility and Consumer Wireline more than offsetting a decline in Business Wireline. Operating contribution was $6.5 billion, up 1.4% year over year, with operating income margin of 21.4%, compared to 21.6% in the year-ago quarter.

Mobility

Revenues were up 5.1% year over year to $21.1 billion due to higher service and equipment revenues. Service revenues were $14.7 billion, up 4.6% year over year due to subscriber gains and the lapping of pandemic impacts on international roaming revenues. Equipment revenues were $6.5 billion, up 6.2% year over year, driven by increased sales of higher-priced smartphones.
Operating expenses were $15.8 billion, up 5.1% year over year due to higher equipment costs, including 3G network shutdown costs of approximately $130 million, and higher HBO Max bundling costs, partially offset by lower marketing and support.
Operating income was $5.4 billion, up 5.2% year over year. Operating income margin was 25.3%, flat with the year-ago quarter.
EBITDA was $7.4 billion, up 4.3% year over year with EBITDA margin of 35.0%, down from 35.3% in the year-ago quarter. EBITDA service margin was 50.5%, compared to 50.6% in the year-ago quarter.
Total net adds were 5.3 million including:
- 1,285,000 postpaid net adds, with
  - 884,000 postpaid phone net adds
  - 31,000 postpaid tablet and other branded computing device net adds
  - 370,000 other net adds
- 24,000 prepaid phone net adds
Postpaid churn was 1.02% versus 0.94% in the year-ago quarter. Postpaid phone churn was 0.85% versus 0.76% in the year-ago quarter . Prepaid phone churn was less than 3% with Cricket substantially lower.
Postpaid phone-only ARPU was $54.06, down 0.7% versus the year-ago quarter, due to the impacts of promotional discount amortization.

Business Wireline

Revenues were $5.9 billion, down 5.6% year over year, partially due to the prior-year increase for pandemic-related connectivity, lower demand for legacy voice and data services, and a strategic decision to deemphasize non-core services.
Operating expenses were $5.0 billion, down 4.8% year over year due to the impact of ongoing operational cost efficiencies.
Operating income was $0.9 billion, down 10.0% with operating income margin of 15.2%, compared to 15.9% in the year-ago quarter.
EBITDA was $2.2 billion, down 4.3% year over year with EBITDA margin of 37.5%, compared to 37.0% in the year-ago quarter.
More than 675,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 2.75 million U.S. business customer locations. Nationwide, more than 9.5 million business customer locations are on or within 1,000 feet of AT&T fiber.¹⁴

Consumer Wireline

Revenues were $3.2 billion, up 1.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data services and other services. Broadband revenues increased 5.4%, which reflects fiber subscriber growth and higher ARPU resulting from increases in higher-revenue fiber customers.
Operating expenses were $3.0 billion, up 4.1% year over year largely driven by higher advertising, network and technology, and higher depreciation costs, partially offset by lower amortization of deferred fulfillment costs.
Operating income was $201 million, down 26.9% year over year, with operating income margin of 6.4%, compared to 8.8% in the year-ago quarter.
EBITDA was $1.0 billion, down 2.3% year over year with EBITDA margin of 31.3%, compared to 32.5% in the year-ago quarter.
Total broadband and DSL subscriber net losses were 20,000, reflecting growth in fiber subscribers mostly offsetting losses in slower-speed services. Full-year 2021 fiber net adds totaled about 1.0 million, the fourth consecutive year in which the company added 1 million or more fiber subscribers. AT&T Fiber is marketed to about 16 million customer locations.

WarnerMedia Operational Highlights

Revenues were $9.9 billion, up 15.4% versus the year-ago quarter, driven by higher content and other revenues, including the partial recovery from prior-year impacts of the pandemic and higher subscription revenues, partially offset by lower advertising revenues. Subscription revenues were $3.8 billion, up 5.4%, primarily reflecting growth of HBO Max. Content and Other revenues were $4.4 billion, up 45.0%, driven by higher TV licensing and theatrical. Advertising revenues were $1.6 billion, down 12.9% when compared to the prior year due to lower audiences with tough comparisons to the prior year political environment.

Operating expenses totaled $8.3 billion, up 38.0% when compared to the fourth quarter of 2020, driven by higher programming and marketing costs, and incremental selling costs associated with DIRECTV advertising revenue sharing arrangements.
Operating contribution was $1.6 billion, down 37.8%. Operating income was $1.6 billion, down 37.9% year over year, as continued HBO Max investments and incremental advertising revenue sharing costs were partially offset by higher revenues and cost savings initiatives. Operating income margin was 16.0%, compared to 29.7% in the year-ago quarter.
At the end of the quarter, there were 73.8 million global HBO Max and HBO subscribers, up 13.1 million year over year and up 4.3 million sequentially, driven by international as well as domestic retail subscriber gains. At the end of the quarter, there were 46.8 million domestic HBO Max and HBO subscribers versus 41.5 million in the year-ago quarter, up 5.3 million year over year. Domestic subscriber ARPU was $11.15.

Latin America Operational Highlights

Revenues were $1.1 billion, down 29.0% year over year due to the sale of Vrio on November 15, 2021. Operating contribution was ($80) million compared to ($167) million in the year-ago quarter reflecting ceasing depreciation on Vrio held-for-sale assets. Operating income margin was (7.4%), compared to (11.0%) in the prior-year quarter.

Mexico

Revenues were $704 million, down 4.3% year over year primarily due to lower equipment revenues partially offset by increased growth in service revenues. Service revenues were $485 million, up 5.7% year over year, driven by a growing subscriber base and growth in other services. Equipment revenues were $219 million, down 20.9% year over year driven by lower volumes. Operating loss was ($117) million versus ($126) million in the year-ago quarter.
Total wireless net adds were 889,000 including 858,000 prepaid net adds, 26,000 postpaid net adds, and 5,000 reseller net adds.

2022 Outlook

The company is planning to host a virtual analyst event in the first half of March. At that event, the company expects to provide additional insight and expectations for financial and operational performance of the Communications Company following the close of the pending WarnerMedia transaction, which the company now expects to close in the second quarter.

For the full year, including WarnerMedia and Xandr, the company expects:

Consolidated revenue growth in the low-single digits range compared to 2021 consolidated revenues of $153.2 billion⁹, which excludes U.S. Video and Vrio.
Adjusted EPS¹⁵ from $3.10 to $3.15.
Gross capital investment¹ in the $24 billion range with capital expenditures in the $20 billion range.
2022 free cash flow¹⁶in the $23 billion range.

For the full year, the company expects the contribution for WarnerMedia and Xandr to be:

Revenues in the $37 to $39 billion range.
EBITDA in the $6 to $7 billion range.
Free cash flow¹⁶ of approximately $3 billion.

¹Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes FirstNet reimbursements. In 4Q21, gross capital investment included $0.6 billion in vendor financing payments and excluded $0.5 billion in FirstNet reimbursements. In 2021, gross capital investment included $4.6 billion in vendor financing payments and excluded $0.5 billion in FirstNet reimbursements. In 2022, vendor financing payments are expected to be in the $4 billion range.

² Free cash flow is a non-GAAP financial measure that is frequently used by investors and credit rating agencies to provide relevant and useful information. In 4Q21, free cash flow is cash from operating activities of $11.3 billion, plus cash distributions from DIRECTV classified as investing activities of $1.3 billion, minus capital expenditures of $3.8 billion. In 2021, free cash flow is cash from operating activities of $42.0 billion, plus cash distributions from DIRECTV classified as investing activities of $1.3 billion, minus capital expenditures of $16.5 billion.

³Free cash flow total dividend payout ratio is total dividends paid divided by free cash flow. For full-year 2021, dividends paid totaled $15.1 billion.

⁴EBITDA is operating income before depreciation and amortization. EBITDA margin is operating income before depreciation and amortization, divided by total revenues.

⁵EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.

⁶Global HBO Max and HBO subscribers consist of domestic and international HBO Max and HBO subscribers, and exclude free trials, basic and Cinemax subscribers.

⁷Domestic HBO Max and HBO subscribers consist of U.S. accounts with access to HBO Max (including wholesale subscribers that may not have signed in) and HBO accounts, and exclude free trials and Cinemax subscribers.

⁸Domestic subscriber ARPU is defined as domestic HBO Max and HBO subscriber revenues during the period divided by average domestic HBO Max and HBO subscribers during the period, excluding HBO Commercial and other bulk-billed revenues and subscribers during the period.

⁹Operating Revenues, excluding impacts of the U.S. Video business and Vrio, of $40.6 billion for 4Q21 is calculated as Operating Revenues of $41.0 billion minus Vrio operating revenues of $0.4 billion. For full-year 2021, Operating Revenues, excluding impacts of the U.S. Video business and Vrio, of $153.2 billion is calculated as Operating Revenues of $168.9 billion minus Video operating revenues of $15.5 billion, minus Vrio operating revenues of $2.6 billion, plus WarnerMedia sales for content and advertising of $2.5 billion that are external after close of the transactions. Further information is included in our Form 8-K dated January 26, 2022.

¹⁰Adjusted Operating Income is Operating Income adjusted for revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. Adjusted Operating Income for 4Q21 of $6.6 billion is calculated as Operating Income of $5.3 billion plus $1.3 billion of adjustments as detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated January 26, 2022. Adjusted Operating Income for 2021 of $32.8 billion is calculated as Operating Income of $23.3 billion plus $9.5 billion of adjustments.

¹¹Net Debt to adjusted EBITDA ratios are non-GAAP financial measures that are frequently used by investors and credit rating agencies to provide relevant and useful information. Our Net Debt to Adjusted EBITDA ratio is calculated by dividing the Net Debt of $156.2 billion (Total Debt of $177.4 billion at December 31, 2021 less Cash and Cash Equivalents of $21.2 billion) by the sum of the most recent four quarters of Pro Forma Adjusted EBITDA of $48.5 billion ($12.5 billion for March 31, 2021; $12.2 billion for June 30, 2021; $12.5 billion for September 30, 2021; and $11.3 billion for December 31, 2021).

¹²Adjusted Operating Income, excluding impacts of the U.S. Video business and Vrio, of $30.5 billion for 2021 is calculated as Adjusted Operating Income of $32.8 billion minus $2.4 billion of adjustments to reflect the impacts of the July 31, 2021 U.S. Video separation and the November 15, 2021 Vrio sale. Further detail of these adjustments and information is included in our Form 8-K dated January 26, 2022.

¹³ Adjusted equity in net income from DIRECTV investment is calculated as equity income from DIRECTV reported in Equity in Net Income (Loss) of Affiliates and excludes AT&T's proportionate share of the noncash depreciation and amortization of fair value accretion from DIRECTV's revaluation of assets and purchase price allocation.

¹⁴The more than 2.75 million U.S. business customer locations are included within the 9.5+ million U.S. business customer locations on or within 1,000 feet of AT&T fiber.

¹⁵ The company expects adjustments to 2022 reported diluted EPS (that excludes impact of adoption of new accounting standards) to include merger-related amortization in the range of $1 billion per quarter (prior to close of the WarnerMedia-Discovery transaction) and other adjustments, the proportionate share of intangible amortization at the DIRECTV equity method investment in the range of $1.5 billion, a non-cash mark-to-market benefit plan gain/loss, and other items. The company expects the mark-to-market adjustment, which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Our 2022 EPS depends on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between these projected non-GAAP metrics and the reported GAAP metrics without unreasonable effort.

¹⁶Free cash flow is cash from operating activities plus cash distributions from DIRECTV classified as investing activities, minus capital expenditures. Due to high variability and difficulty in predicting items that impact cash from operating activities, cash distributions from DIRECTV, and capital expenditures, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.

*About AT&T

AT&T Inc. ((T) is a diversified, global leader in telecommunications, media and entertainment, and technology. AT&T Communications provides more than 100 million U.S. consumers with communications and entertainment experiences across mobile and broadband. Plus, it serves high-speed, highly secure connectivity and smart solutions to nearly 3 million business customers. WarnerMedia is a leading media and entertainment company that creates and distributes premium and popular content to global audiences through its consumer brands, including: HBO, HBO Max, Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim and Turner Classic Movies. AT&T Latin America provides wireless services to consumers and businesses in Mexico.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information is available at about.att.com. © 2022 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise.

This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at https://investors.att.com.

Discussion and Reconciliation of Non-GAAP Measures

We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal management reporting and planning processes and are important metrics that management uses to evaluate the operating performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of many of our competitors. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

Free Cash Flow

Free cash flow is defined as cash from operations and cash distributions from DIRECTV (classified as investing activities) minus capital expenditures. Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares to free cash flow. We believe these metrics provide useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures, and from our continued economic interest in the U.S. video operations as part of our DIRECTV equity method investment, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Net cash provided by operating activities¹	$	11,254		$	10,082		$	41,957		$	43,130
Add: Distributions from DIRECTV classified as investing
activities		1,323			—			1,323			—
Less: Capital expenditures		(3,831	)		(2,392	)		(16,527	)		(15,675	)
Free Cash Flow		8,746			7,690			26,753			27,455

Less: Dividends paid		(3,749	)		(3,741	)		(15,068	)		(14,956	)
Free Cash Flow after Dividends	$	4,997		$	3,949		$	11,685		$	12,499
Free Cash Flow Dividend Payout Ratio		42.9	%		48.6	%		56.3	%		54.5	%

Includes distributions from DIRECTV of $489 in the fourth quarter and $619 for the year ended December 31, 2021. Total distributions from DIRECTV were $1,812 in the fourth quarter and $1,942 for the year ended December 31, 2021.

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems.

Cash Paid for Capital Investment
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Capital Expenditures	$	(3,831	)	$	(2,392	)	$	(16,527	)	$	(15,675	)
Cash paid for vendor financing		(583	)		(1,001	)		(4,596	)		(2,966	)
Cash paid for Capital Investment	$	(4,414	)	$	(3,393	)	$	(21,123	)	$	(18,641	)
FirstNet reimbursement		(515	)		(920	)		(515	)		(1,063	)
Gross Capital Investment	$	(4,929	)	$	(4,313	)	$	(21,638	)	$	(19,704	)

EBITDA

Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T, EBITDA excludes other income (expense) – net, and equity in net income (loss) of affiliates, as these do not reflect the operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant influence, but do not control. Because we do not control these entities, management excludes these results when evaluating the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

When discussing our segment, business unit and supplemental results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and amortization from operating contribution.

These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing operating performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA Margin (EBITDA as a percentage of total revenue) for our Mobility business unit operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as well.

There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates. For market comparability, management analyzes performance measures that are similar in nature to EBITDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Net Income (Loss)	$	5,390		$	(13,515	)	$	21,479		$	(3,821	)
Additions:
Income Tax Expense		1,056			(2,038	)		5,468			965
Interest Expense		1,663			1,894			6,884			7,925
Equity in Net (Income) Loss of Affiliates		(447	)		(106	)		(631	)		(95	)
Other (Income) Expense - Net		(2,354	)		3,020			(9,853	)		1,431
Depreciation and amortization		5,673			6,979			22,862			28,516
EBITDA		10,981			(3,766	)		46,209			34,921
Merger costs and revenue adjustments		132			37			299			468
Employee separation costs and benefit-related (gain) loss		—			253			57			1,177
Impairments		188			16,365			4,904			18,880
Gain on spectrum transactions		—			—			—			(900	)
Adjusted EBITDA¹	$	11,301		$	12,889		$	51,469		$	54,546

See page 5 for additional discussion and reconciliation of adjusted items.

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Communications Segment
Operating Contribution	$	6,451		$	6,360		$	28,279		$	28,313
Additions:
Depreciation and amortization		4,156			4,062			16,409			16,216
EBITDA		10,607			10,422			44,688			44,529

Total Operating Revenues		30,206			29,486			114,730			109,965

Operating Income Margin		21.4	%		21.6	%		24.6	%		25.7	%
EBITDA Margin		35.1	%		35.3	%		39.0	%		40.5	%
*Mobility*
Operating Contribution	$	5,353		$	5,088		$	23,312		$	22,372
Additions:
Depreciation and amortization		2,050			2,008			8,122			8,086
EBITDA		7,403			7,096			31,434			30,458

Total Operating Revenues		21,146			20,119			78,254			72,564
Service Revenues		14,669			14,022			57,590			55,542

Operating Income Margin		25.3	%		25.3	%		29.8	%		30.8	%
EBITDA Margin		35.0	%		35.3	%		40.2	%		42.0	%
EBITDA Service Margin		50.5	%		50.6	%		54.6	%		54.8	%
*Business Wireline*
Operating Contribution	$	897		$	997		$	3,990		$	4,564
Additions:
Depreciation and amortization		1,317			1,316			5,192			5,216
EBITDA		2,214			2,313			9,182			9,780

Total Operating Revenues		5,901			6,251			23,937			25,083

Operating Income Margin		15.2	%		15.9	%		16.7	%		18.2	%
EBITDA Margin		37.5	%		37.0	%		38.4	%		39.0	%
*Consumer Wireline*
Operating Contribution	$	201		$	275		$	977		$	1,377
Additions:
Depreciation and amortization		789			738			3,095			2,914
EBITDA		990			1,013			4,072			4,291

Total Operating Revenues		3,159			3,116			12,539			12,318

Operating Income Margin		6.4	%		8.8	%		7.8	%		11.2	%
EBITDA Margin		31.3	%		32.5	%		32.5	%		34.8	%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
WarnerMedia Segment
Operating Contribution	$	1,573		$	2,529		$	7,277		$	8,210
Additions:
Equity in Net (Income) Loss of Affiliates		6			13			(38	)		(18	)
Depreciation and amortization		165			177			656			671
EBITDA		1,744			2,719			7,895			8,863

Total Operating Revenues		9,873			8,554			35,632			30,442

Operating Income Margin		16.0	%		29.7	%		20.3	%		26.9	%
EBITDA Margin		17.7	%		31.8	%		22.2	%		29.1	%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Latin America Segment
Operating Contribution	$	(80	)	$	(167	)	$	(430	)	$	(729	)
Additions:
Equity in Net (Income) Loss of Affiliates		1			2			(6	)		(24	)
Depreciation and amortization		153			260			836			1,033
EBITDA		74			95			400			280

Total Operating Revenues		1,063			1,498			5,354			5,716

Operating Income Margin		-7.4	%		-11.0	%		-8.1	%		-13.2	%
EBITDA Margin		7.0	%		6.3	%		7.5	%		4.9	%
*Mexico*
Operating Contribution	$	(117	)	$	(126	)	$	(510	)	$	(587	)
Additions:
Depreciation and amortization		153			140			605			513
EBITDA		36			14			95			(74	)

Total Operating Revenues		704			736			2,747			2,562

Operating Income Margin		-16.6	%		-17.1	%		-18.6	%		-22.9	%
EBITDA Margin		5.1	%		1.9	%		3.5	%		-2.9	%

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often-significant impact on our results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses). Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.

The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for adjustments that, given their magnitude, can drive a change in the effective tax rate, in these cases we use the actual tax expense or combined marginal rate of approximately 25%.

Adjusting Items
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Operating Expenses
Merger costs		132			37			299			468
Employee separation costs and benefit-related (gain) loss¹		—			253			57			1,177
Asset impairments and abandonment		188			16,365			4,904			18,880
Gain (loss) on spectrum transaction		—			—			—			(900	)
Adjustments to Operations and Support Expenses		320			16,655			5,260			19,625
Amortization of intangible assets		1,021			1,890			4,233			8,012
Impairments		—			14			—			14
Adjustments to Operating Expenses		1,341			18,559			9,493			27,651
Other
DIRECTV intangible amortization (proportionate share)		434			—			826			—
(Gain) loss on sale of assets		172			43			(660	)		(50	)
Debt redemption, impairments and other adjustments		22			(29	)		235			1,735
Actuarial (gain) loss		(1,119	)		4,106			(4,140	)		4,169
Employee benefit-related (gain) loss¹		—			(149	)		—			(172	)
Adjustments to Income Before Income Taxes		850			22,530			5,754			33,333
Tax impact of adjustments		(40	)		3,186			580			4,977
Tax-related items		264			41			505			41
Impairment attributable to noncontrolling interest		—			—			81			105
Adjustments to Net Income	$	626		$	19,303		$	4,588		$	28,210

Mark-to-market gains and losses on benefit-related investments were adjusted in 2020 reflecting more significant market volatility and uncertainty experienced as a result of the onset of the COVID-19 pandemic. Benefit-related investment gains were approximately $160 and $430 in the fourth quarter and for the year ended December 31, 2021, and $205 and $330 in the fourth quarter and for the year ended December 31, 2020.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, actuarial gains and losses, significant abandonments and impairment, severance and other material gains and losses. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA and Adjusted EBITDA Margin
Dollars in millions
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Operating Income	$	5,308		$	(10,745	)	$	23,347		$	6,405
Adjustments to Operating Expenses		1,341			18,559			9,493			27,651
Adjusted Operating Income		6,649			7,814			32,840			34,056

EBITDA		10,981			(3,766	)		46,209			34,921
Adjustments to Operations and Support Expenses		320			16,655			5,260			19,625
Adjusted EBITDA		11,301			12,889			51,469			54,546

Total Operating Revenues		40,958			45,691			168,864			171,760

Operating Income Margin		13.0	%		(23.5	) %		13.8	%		3.7	%
Adjusted Operating Income Margin		16.2	%		17.1	%		19.4	%		19.8	%
Adjusted EBITDA Margin		27.6	%		28.2	%		30.5	%		31.8	%

Adjusted Diluted EPS
	Fourth Quarter						Year Ended
		2021			2020			2021			2020
Diluted Earnings Per Share (EPS)	$	0.69		$	(1.95	)	$	2.76		$	(0.75	)
Amortization of intangible assets		0.12			0.22			0.47			0.90
DIRECTV intangible amortization (proportionate share)		0.05			—			0.09			—
Impairments		0.02			2.02			0.56			2.37
(Gain) loss on sale of assets		0.04			0.03			(0.05	)		0.02
Actuarial (gain) loss ¹		(0.12	)		0.43			(0.43	)		0.44
Debt redemption, merger and other adjustments		0.02			0.01			0.07			0.21
Tax-related items		(0.04	)		(0.01	)		(0.07	)		(0.01	)
Adjusted EPS	$	0.78		$	0.75		$	3.40		$	3.18
Year-over-year growth - Adjusted		4.0	%					6.9	%
Weighted Average Common Shares Outstanding
with Dilution (000,000)		7,204			7,176			7,199			7,183

Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gain of $4.1 billion in 2021. As a result, adjusted EPS reflects an expected return on plan assets of $3.7 billion (based on an average expected return on plan assets of 6.75% for our pension trust and 4.50% for our VEBA trusts), rather than the actual return on plan assets of $5.9 billion gain (actual pension return of 11.4% and VEBA return of 6.3%), included in the GAAP measure of income.

Net Debt to Pro Forma Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. Our Net Debt to Pro Forma Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Pro Forma Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

Net Debt to Pro Forma Adjusted EBITDA - 2021
Dollars in millions
	Three Months Ended
	March 31,			June 30,			Sept. 30,			Dec. 31,			Four Quarters
		2021¹			2021¹			2021¹			2021		Four Quarters
Adjusted EBITDA	$	13,564		$	13,585		$	13,019		$	11,301		$	51,469
Less: Historical Video		(1,065	)		(1,364	)		(418	)		—			(2,847	)
Add: WarnerMedia sale of DIRECTV advertising		349			372			99			—			820
Add: WarnerMedia/DIRECTV revenue share		(271	)		(287	)		(78	)		—			(636	)
Less: Historical Vrio		(82	)		(89	)		(96	)		(38	)		(305	)
Pro Forma Adjusted EBITDA		12,495			12,217			12,526			11,263			48,501
End-of-period current debt														24,630
End-of-period long-term debt														152,724
Total End-of-Period Debt														177,354
Less: Cash and Cash Equivalents														21,169
Net Debt Balance														156,185
Annualized Net Debt to Pro Forma
Adjusted EBITDA Ratio ²														3.22

¹		Adjusted EBITDA as reported in AT&T's Form 8-K filed April 22, 2021, July 22, 2021 and October 21, 2021.
²		Annualized Net Debt to Adjusted EBITDA Ratio of 3.03 (excluding pro forma).

Net Debt to Adjusted EBITDA - 2020
Dollars in millions
	Three Months Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,		Four Quarters
		2020 ¹		2020 ¹		2020 ¹		2020	Four Quarters
Adjusted EBITDA	$	14,232	$	14,112	$	13,313	$	12,889	$	54,546
End-of-period current debt										3,470
End-of-period long-term debt										153,775
Total End-of-Period Debt										157,245
Less: Cash and Cash Equivalents										9,740
Net Debt Balance										147,505
Annualized Net Debt to Adjusted EBITDA Ratio										2.70

As reported in AT&T's Form 8-K filed April 22, 2020, July 23, 2020, and October 22, 2020.

Supplemental Operational Measures

We provide a supplemental discussion of our business solutions operations that is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
	Fourth Quarter
	December 31, 2021									December 31, 2020
	Mobility		Business Wireline		Adjustments¹			Business Solutions		Mobility		Business Wireline		Adjustments¹			Business Solutions
Operating Revenues
Wireless service	$	14,669	$	—	$	(12,561	)	$	2,108	$	14,022	$	—	$	(12,074	)	$	1,948
Wireline services		—		5,727		—			5,727		—		6,042		—			6,042
Wireless equipment		6,477		—		(5,447	)		1,030		6,097		—		(5,172	)		925
Wireline equipment		—		174		—			174		—		209		—			209
Total Operating Revenues		21,146		5,901		(18,008	)		9,039		20,119		6,251		(17,246	)		9,124

Operating Expenses
Operations and support		13,743		3,687		(11,419	)		6,011		13,023		3,938		(10,926	)		6,035
EBITDA		7,403		2,214		(6,589	)		3,028		7,096		2,313		(6,320	)		3,089
Depreciation and amortization		2,050		1,317		(1,700	)		1,667		2,008		1,316		(1,686	)		1,638
Total Operating Expenses		15,793		5,004		(13,119	)		7,678		15,031		5,254		(12,612	)		7,673
Operating Income		5,353		897		(4,889	)		1,361		5,088		997		(4,634	)		1,451
Equity in Net Income (Loss) of Affiliates		—		—		—			—		—		—		—			—
Operating Contribution	$	5,353	$	897	$	(4,889	)	$	1,361	$	5,088	$	997	$	(4,634	)	$	1,451

Non-business wireless reported in the Communication segment under the Mobility business unit.

Supplemental Operational Measure
	Year Ended
	December 31, 2021									December 31, 2020
	Mobility		Business Wireline		Adjustments¹			Business Solutions		Mobility		Business Wireline		Adjustments¹			Business Solutions
Operating Revenues
Wireless service	$	57,590	$	—	$	(49,429	)	$	8,161	$	55,542	$	—	$	(47,810	)	$	7,732
Wireline service		—		23,224		—			23,224		—		24,313		—			24,313
Wireless equipment		20,664		—		(17,250	)		3,414		17,022		—		(14,140	)		2,882
Wireline equipment		—		713		—			713		—		770		—			770
Total Operating Revenues		78,254		23,937		(66,679	)		35,512		72,564		25,083		(61,950	)		35,697

Operating Expenses
Operations and support		46,820		14,755		(38,749	)		22,826		42,106		15,303		(34,927	)		22,482
EBITDA		31,434		9,182		(27,930	)		12,686		30,458		9,780		(27,023	)		13,215
Depreciation and amortization		8,122		5,192		(6,744	)		6,570		8,086		5,216		(6,802	)		6,500
Total Operating Expenses		54,942		19,947		(45,493	)		29,396		50,192		20,519		(41,729	)		28,982
Operating Income		23,312		3,990		(21,186	)		6,116		22,372		4,564		(20,221	)		6,715
Equity in Net Income (Loss) of Affiliates		—		—		—			—		—		—		—			—
Operating Contribution	$	23,312	$	3,990	$	(21,186	)	$	6,116	$	22,372	$	4,564	$	(20,221	)	$	6,715

Non-business wireless reported in the Communication segment under the Mobility business unit.

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AT&T Reports Fourth-Quarter and Full-Year Results