Third-Quarter Consolidated Results

Consolidated revenues of $39.9 billion
Diluted EPS of $0.82 compared to $0.39 in the year-ago quarter
Adjusted EPS of $0.87 compared to $0.76 in the year-ago quarter
Cash from operations of $9.9 billion
Capital expenditures of $4.7 billion; gross capital investment¹of $5.7 billion and cash content spend of $4.8 billion
Free cash flow² of $5.2 billion

Note: AT&T's third-quarter earnings conference call will be webcast at 8:30 a.m. ET on Thursday, October 21, 2021. 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 third-quarter results that showed continuing customer growth in wireless, fiber and HBO Max.

"We continue to execute well in growing customer relationships, and we're on track to meet our guidance for the year," said John Stankey, AT&T CEO. "We had our best postpaid phone net add quarter in more than 10 years, our fiber broadband net adds increased sequentially, and HBO Max global subscribers neared 70 million. We also have clear line of sight on reaching the halfway mark by the end of the year of our $6 billion cost-savings goal."

Third-Quarter Highlights

Communications

Mobility:
- 928,000 postpaid phone net adds
- 1,218,000 postpaid net adds
- 249,000 prepaid phone net adds
- Postpaid phone churn of 0.72%
- Revenues up 7.0%; service revenues up 4.6%; equipment revenues up 15.0%
- Operating income of $6.0 billion, up 4.6% year over year; EBITDA³ up 3.6%
- Operating income margin of 31.1%; EBITDA service margin⁴ 55.0%

Consumer Wireline:
- 289,000 AT&T Fiber net adds; penetration about 37%
- Revenues up 3.4%; broadband revenues up 7.6% with ARPU growth of 5.2%

WarnerMedia

Total global HBO Max and HBO subscribers⁵of 69.4 million, up 12.5 million year over year; domestic subscribers⁶ of 45.2 million, up 7.1 million in past year
Domestic HBO Max and HBO subscriber ARPU⁷ of $11.82
Total revenues up 14.2% to $8.4 billion
Direct-to-Consumer subscription revenues up about 25%

Consolidated Financial Results

Consolidated revenues for the third quarter totaled $39.9 billion versus $42.3 billion in the year-ago quarter, down 5.7% reflecting our July 31, 2021, separation of the U.S. Video business, other divested businesses, and lower Business Wireline revenues. These decreases were partially offset by higher Mobility and WarnerMedia revenues, which reflect the partial recovery from the prior-year impacts of the pandemic, and to a lesser extent, higher Consumer Wireline and Mexico revenues. Excluding impacts of the U.S. Video business from both quarters, consolidated revenues totaled $38.1 billion⁸ compared to $36.4 billion in the year-ago quarter.

Operating expenses were $32.8 billion versus $36.2 billion in the year-ago quarter. Expenses declined due to only one month of U.S. Video results in the third quarter and the impact of other divested businesses, and lower sports-related programming costs from timing comparisons with the prior-year quarter. These declines were partially offset by higher domestic wireless equipment costs, including 3G network shutdown costs, and higher WarnerMedia non-sports programming, marketing and selling costs. Additionally, depreciation and amortization expense was $1.4 billion lower year over year, largely due to the impairments of long-lived assets taken in the fourth quarter of 2020 and ceasing depreciation and amortization of U.S. Video assets prior to its separation and of the held-for-sale Vrio business.

Operating income was $7.1 billion versus $6.1 billion in the year-ago quarter due to the impacts of lower depreciation and amortization expense, partially offset by the impact of having only one month of U.S. Video results in the quarter. When adjusting for merger-amortization costs and other items, adjusted operating income was $8.4 billion⁹ versus $8.2 billion in the year-ago quarter. When further excluding the impacts of the U.S. Video business for both quarters, adjusted operating income totaled $8.1 billion¹⁰ compared to $7.8 billion in the year-ago quarter.

Third-quarter net income attributable to common stock was $5.9 billion, or $0.82 per diluted common share, versus $2.8 billion, or $0.39 per diluted common share in the year-ago quarter. Adjusting for $0.05, which includes merger-amortization costs, a proportionate share of intangible amortization at the DIRECTV equity method investment, a gain on the sale of Playdemic, and an actuarial gain on benefit plans and other items, earnings per diluted common share was $0.87. This compares to an adjusted earnings per diluted common share of $0.76 in the year-ago quarter.

Cash from operating activities was $9.9 billion, down $2.3 billion year over year, with capital expenditures of $4.7 billion and content spend of $4.8 billion. Gross capital investment totaled $5.7 billion, which includes $1.0 billion of cash payments for vendor financing. Free cash flow was $5.2 billion for the quarter. Net debt decreased by $10.0 billion sequentially, and net debt-to-adjusted EBITDA at the end of the third quarter was 3.17x.¹¹

Communications Operational Highlights

Third-quarter revenues were $28.2 billion, up 3.8% year over year due to increases in Mobility and Consumer Wireline more than offsetting a decline in Business Wireline. Operating contribution was $7.1 billion, up 0.8% year over year, with operating income margin of 25.2%, compared to 26.0% in the year-ago quarter.

Mobility

Revenues were up 7.0% year over year to $19.1 billion due to higher service and equipment revenues. Service revenues were $14.5 billion, up 4.6% year over year due to subscriber gains and the lapping of pandemic impacts on international roaming revenues. Equipment revenues were $4.6 billion, up 15.0% year over year, driven by higher smartphone sales including the quarterly shift in product launch timing versus the prior year.
Operating expenses were $13.2 billion, up 8.0% year over year due to higher equipment costs, including 3G network shutdown costs of nearly $200 million, higher costs due to the iPhone launch returning to the third quarter and HBO Max bundling, partially offset by lower costs for sales and support.
Operating income was $6.0 billion, up 4.6% year over year. Operating income margin was 31.1%, compared to 31.8% in the year-ago quarter.
EBITDA was $8.0 billion, up 3.6% year over year with EBITDA margin of 41.7%, down from 43.1% from a year ago. EBITDA service margin was 55.0%, compared to 55.5% in the year-ago quarter.
Total net adds were 4.9 million including:
- 1,218,000 postpaid net adds, with
  - 928,000 postpaid phone net adds
  - (3,000) postpaid tablet and other branded computing device net losses
  - 293,000 other net adds
- 249,000 prepaid phone net adds

Postpaid churn was 0.92% versus 0.85% in the year-ago quarter but improved year over year when adjusted for the Keep America Connected program in the prior year. Postpaid phone churn was 0.72% versus 0.69% in the year-ago quarter but improved year over year when adjusted for the Keep America Connected program in the prior year. Prepaid churn was less than 3%.
Postpaid phone-only ARPU was $54.37, down 0.6% versus the year-ago quarter, due to the impacts of promotional discount amortization, but was up sequentially.

Business Wireline

Revenues were $5.9 billion, down 5.2% year over year from lower service revenues, primarily due to the prior-year increase for pandemic-related connectivity and lower demand for legacy voice and data services as the company proactively rationalizes its product portfolio.
Operating expenses were $5.0 billion, down 2.4% year over year due to ongoing operational cost efficiencies.
Operating income was $1.0 billion, down 16.8% with operating income margin of 16.6%, compared to 18.9% in the year-ago quarter.
EBITDA was $2.3 billion, down 8.3% year over year with EBITDA margin of 38.5%, compared to 39.9% in the year-ago quarter.
More than 650,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 2.5 million U.S. business customer locations. Nationwide, more than 9.0 million business customer locations are on or within 1,000 feet of our fiber.¹²

Consumer Wireline

Revenues were $3.1 billion, up 3.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data services and other services. Broadband revenues increased 7.6%, which reflects fiber subscriber growth and higher ARPU resulting from increases in fiber customers and pricing.
Operating expenses were $3.0 billion, up 3.8% year over year largely driven by higher technology and depreciation, partially offset by lower amortization of deferred customer acquisition costs.
Operating income was $183 million, down 3.2% year over year, with operating income margin of 5.8%, compared to 6.2% in the year-ago quarter.
EBITDA was $1.0 billion, up 3.8% year over year with EBITDA margin of 30.5%, compared to 30.4% in the year-ago quarter.
Total broadband and DSL subscriber net adds were 6,000, reflecting growth in fiber subscribers offsetting losses in slower-speed services. AT&T Fiber net adds were 289,000. AT&T Fiber is marketed to more than 15 million customer locations.

WarnerMedia Operational Highlights

Revenues for the third quarter were $8.4 billion, up 14.2% 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 $4.0 billion, up 14.7%, primarily reflecting growth of HBO Max. Content and Other revenues were $3.1 billion, up 31.7%, driven by higher TV licensing and higher theatrical. Advertising revenues were $1.4 billion, down 12.4% when compared to the prior year due to timing of the NBA season in the year-ago quarter and lower political ad spending year over year.

Operating expenses totaled $6.4 billion, up 13.8% when compared to the third quarter of 2020, driven by higher film and non-sports programming costs, as well as higher marketing costs, and incremental selling costs associated with DIRECTV advertising revenue sharing arrangements. These increases were partially offset by lower sports programming costs from the timing of the NBA season in the prior-year quarter.
Operating contribution was $1.9 billion, up 10.3%. Operating income was $2.0 billion, up 15.2% year over year, as higher revenues and lower sports programming costs were partially offset by continued HBO Max investment and incremental advertising revenue sharing costs. Operating income margin was 23.8%, compared to 23.6% in the year-ago quarter.
At the end of the quarter, there were 69.4 million global HBO Max and HBO subscribers. Global HBO Max and HBO subscribers increased 12.5 million year over year and were up 1.9 million sequentially, as international and ad-supported subscriber gains were partially offset by HBO Max being discontinued on the Amazon wholesale platform. At the end of the quarter, there were 45.2 million domestic HBO Max and HBO subscribers versus 38.0 million in the year-ago quarter, up 7.1 million year over year. Domestic subscriber ARPU was $11.82.

Latin America Operational Highlights

(AT&T has reached an agreement to sell its Vrio operations to Grupo Werthein. The companies expect the transaction to close during the fourth quarter of 2021.)

Revenues were $1.5 billion, up 6.0% year over year due to growth in Mexico. Operating contribution was ($25) million compared to ($177) million in the year-ago quarter, with operating income margin of (2.3)%, compared to (13.7)% in the prior-year quarter.

Vrio

Revenues were $756 million, essentially stable year over year. Operating income was $96 million compared to an operating loss of ($48) million in the year-ago quarter, reflecting ceasing depreciation on these held-for-sale assets. Operating income margin was 12.7%, compared to (6.4)% in the prior-year quarter.
Vrio subscriber net losses of 178,000 were driven primarily by secular declines and economic pressures in Brazil, and lower sales in other parts of the region.

Mexico

Revenues were $724 million, up 12.6% year over year primarily due to increased growth in service revenues. Service revenues were $463 million, up 20.3% year over year, driven by favorable foreign exchange impact, growing subscriber base and growth in other services. Equipment revenues were $261 million, up 1.2% year over year, driven by foreign exchange benefits. Operating loss was ($130) million versus ($143) million in the year-ago quarter.
Total wireless net adds were 427,000 including 389,000 prepaid net adds, 36,000 postpaid net adds and 2,000 reseller net adds.

Outlook

The company now expects full-year adjusted EPS¹³ to be at the high end of the low- to mid-single digit growth range and is on track with its free cash flow¹⁴target of $26 billion range. The company also expects to reach the higher end of the end-of-year HBO Max/HBO global subscriber target of 70-73 million subscribers.

¹Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes FirstNet reimbursements. In 3Q21, gross capital investment included $1.0 billion in vendor financing payments.

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. Free cash flow is cash from operating activities of $9.9 billion, plus cash distributions from DIRECTV classified as investing activities of $0, minus capital expenditures of $4.7 billion.

³EBITDA is operating income before depreciation and amortization. EBITDA margin is operating income before depreciation and amortization, divided by total revenues.

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

⁵Global HBO Max and HBO subscribers consist of domestic and international HBO Max and HBO subscribers, and exclude free trials, basic and Cinemax subscribers.

⁶Domestic 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.

⁷Domestic 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.

⁸Operating Revenues, excluding impacts of the U.S. Video business, of $38.1 billion for 3Q21 is calculated as Operating Revenues of $39.9 billion minus Video operating revenues of $2.1 billion, plus WarnerMedia sales for content and advertising of $0.3 billion that are external after close of the transaction. Further information is included in our Forms 8-K dated September 9 and October 21, 2021.

⁹Adjusted 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 3Q21 of $8.4 billion is calculated as Operating Income of $7.1 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 October 21, 2021.

¹⁰Adjusted Operating Income, excluding impacts of the U.S. Video business, of $8.1 billion for 3Q21 is calculated as Adjusted Operating Income of $8.4 billion minus $0.3 billion of adjustments to reflect the impacts of the July 31, 2021 separation. Further detail of these adjustments and information is included in our Forms 8-K dated September 9 and October 21, 2021.

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 $157.9 billion (Total Debt of $179.2 billion at September 30, 2021 less Cash and Cash Equivalents of $21.3 billion) by the sum of the most recent four quarters of Pro Forma Adjusted EBITDA of $49.8 billion ($12.3 billion for December 31, 2020; $12.6 billion for March 31, 2021; $12.3 billion for June 30, 2021; and $12.6 billion for September 30, 2021).

¹²The more than 2.5 million U.S. business customer locations are included within the 9.0+ million U.S. business customer locations on or within 1,000 feet of our fiber.

¹³ The company expects adjustments to 2021 reported diluted EPS to include merger-related amortization in the range of $4.2 billion and other adjustments, the proportionate share of intangible amortization at the DIRECTV equity method investment, 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 2021 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.

¹⁴Free 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 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 entertainment and communications 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. Xandr, now part of WarnerMedia, provides marketers with innovative and relevant advertising solutions for consumers around premium video content and digital advertising through its platform. AT&T Latin America provides pay-TV services across 10 countries and territories in Latin America and the Caribbean and 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. © 2021 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
	Third Quarter						Nine-Month Period
	2021			2020			2021			2020
Net cash provided by operating activities¹	$	9,866		$	12,123		$	30,703		$	33,048
Add: Distributions from DIRECTV classified as investing
activities	—			—			—			—
Less: Capital expenditures	(4,704)			(3,851)			(12,696)			(13,283)
Free Cash Flow	5,162			8,272			18,007			19,765

Less: Dividends paid	(3,748)			(3,741)			(11,319)			(11,215)
Free Cash Flow after Dividends	$	1,414		$	4,531		$	6,688		$	8,550
Free Cash Flow Dividend Payout Ratio	72.6		%	45.2		%	62.9		%	56.7		%

¹	Includes distributions from DIRECTV of $130 in the third quarter and for the nine months ended September 30, 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
	Third Quarter				Nine-Month Period
	2021		2020		2021		2020
Capital Expenditures	$	(4,704)	$	(3,851)	$	(12,696)	$	(13,283)
Cash paid for vendor financing	(1,019)		(611)		(4,013)		(1,965)
Cash paid for Capital Investment	$	(5,723)	$	(4,462)	$	(16,709)	$	(15,248)
FirstNet reimbursement	—		(64)		—		(143)
Gross Capital Investment	$	(5,723)	$	(4,526)	$	(16,709)	$	(15,391)

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
	Third Quarter				Nine-Month Period
	2021		2020		2021		2020
Net Income	$	6,273	$	3,168	$	16,089	$	9,694
Additions:
Income Tax Expense	1,539		766		4,412		3,003
Interest Expense	1,667		1,972		5,221		6,031
Equity in Net (Income) Loss of Affiliates	(91)		(5)		(184)		11
Other (Income) Expense - Net	(2,279)		231		(7,499)		(1,589)
Depreciation and amortization	5,619		7,030		17,189		21,537
EBITDA	12,728		13,162		35,228		38,687
Merger costs	130		38		167		431
Employee separation costs and benefit-related (gain) loss	—		40		57		924
Impairments	161		73		$	4,716	2,515
Gain on spectrum transaction	—		—		—		(900)
Adjusted EBITDA ¹	$	13,019	$	13,313	$	40,168	$	41,657

¹	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
	Third Quarter						Nine-Month Period
	2021			2020			2021			2020
Communications Segment
Operating Contribution	$	7,123		$	7,064		$	21,828		$	21,953
Additions:
Depreciation and amortization	4,114			4,068			12,253			12,154
EBITDA	11,237			11,132			34,081			34,107

Total Operating Revenues	28,218			27,195			84,524			80,479

Operating Income Margin	25.2		%	26.0		%	25.8		%	27.3		%
EBITDA Margin	39.8		%	40.9		%	40.3		%	42.4		%
*Mobility*
Operating Contribution	$	5,955		$	5,691		$	17,959		$	17,284
Additions:
Depreciation and amortization	2,035			2,021			6,072			6,078
EBITDA	7,990			7,712			24,031			23,362

Total Operating Revenues	19,138			17,894			57,108			52,445
Service Revenues	14,527			13,883			42,921			41,520

Operating Income Margin	31.1		%	31.8		%	31.4		%	33.0		%
EBITDA Margin	41.7		%	43.1		%	42.1		%	44.5		%
EBITDA Service Margin	55.0		%	55.5		%	56.0		%	56.3		%
*Business Wireline*
Operating Contribution	$	985		$	1,184		$	3,093		$	3,567
Additions:
Depreciation and amortization	1,304			1,313			3,875			3,900
EBITDA	2,289			2,497			6,968			7,467

Total Operating Revenues	5,938			6,261			18,036			18,832

Operating Income Margin	16.6		%	18.9		%	17.1		%	18.9		%
EBITDA Margin	38.5		%	39.9		%	38.6		%	39.7		%
*Consumer Wireline*
Operating Contribution	$	183		$	189		$	776		$	1,102
Additions:
Depreciation and amortization	775			734			2,306			2,176
EBITDA	958			923			3,082			3,278

Total Operating Revenues	3,142			3,040			9,380			9,202

Operating Income Margin	5.8		%	6.2		%	8.3		%	12.0		%
EBITDA Margin	30.5		%	30.4		%	32.9		%	35.6		%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter						Nine-Month Period
	2021			2020			2021			2020
WarnerMedia Segment
Operating Contribution	$	1,935		$	1,755		$	5,704		$	5,681
Additions:
Equity in Net (Income) of Affiliates	73			(12)			(44)			(31)
Depreciation and amortization	163			169			491			494
EBITDA	2,171			1,912			6,151			6,144

Total Operating Revenues	8,442			7,395			25,759			21,888

Operating Income Margin	23.8		%	23.6		%	22.0		%	25.8		%
EBITDA Margin	25.7		%	25.9		%	23.9		%	28.1		%

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Third Quarter						Nine-Month Period
	2021			2020			2021			2020
Latin America Segment
Operating Contribution	$	(25)		$	(177)		$	(350)		$	(562)
Additions:
Equity in Net (Income) of Affiliates	(9)			(14)			(7)			(26)
Depreciation and amortization	157			250			683			773
EBITDA	123			59			326			185

Total Operating Revenues	1,480			1,396			4,291			4,218

Operating Income Margin	-2.3		%	-13.7		%	-8.3		%	-13.9		%
EBITDA Margin	8.3		%	4.2		%	7.6		%	4.4		%
*Vrio*
Operating Contribution	$	105		$	(34)		$	43		$	(101)
Additions:
Equity in Net (Income) of Affiliates	(9)			(14)			(7)			(26)
Depreciation and amortization	—			126			231			400
EBITDA	96			78			267			273

Total Operating Revenues	756			753			2,248			2,392

Operating Income Margin	12.7		%	-6.4		%	1.6		%	-5.3		%
EBITDA Margin	12.7		%	10.4		%	11.9		%	11.4		%
*Mexico*
Operating Contribution	$	(130)		$	(143)		$	(393)		$	(461)
Additions:
Equity in Net (Income) Loss of Affiliates	—			—			—			—
Depreciation and amortization	157			124			452			373
EBITDA	27			(19)			59			(88)

Total Operating Revenues	724			643			2,043			1,826

Operating Income Margin	-18.0		%	-22.2		%	-19.2		%	-25.2		%
EBITDA Margin	3.7		%	-3.0		%	2.9		%	-4.8		%

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
	Third Quarter				Nine-Month Period
	2021		2020		2021		2020
Operating Expenses
Merger costs	$	130	$	38	$	167	$	431
Employee separation costs and benefit-related (gain) loss¹	—		40		57		924
Assets impairments and abandonment	161		73		4,716		2,515
Gain (loss) on spectrum transaction	—		—		—		(900)
Adjustments to Operations and Support Expenses	291		151		4,940		2,970
Amortization of intangible assets	1,012		1,921		3,212		6,122
Adjustments to Operating Expenses	1,303		2,072		8,152		9,092
Other
DIRECTV intangible amortization (proportionate share)	392		—		392		—
(Gain) loss on sale of assets	(768)		—		(832)		—
Debt redemption, impairments and other	68		1,263		213		1,670
Actuarial (gain) loss	(374)		63		(3,021)		63
Employee benefit-related (gain) loss¹	—		(64)		—		(22)
Adjustments to Income Before Income Taxes	621		3,334		4,904		10,803
Tax impact of adjustments	72		648		620		1,791
Tax-related items	123		—		241		—
Impairment attributable to noncontrolling interest	—		—		81		105
Adjustments to Net Income	$	426	$	2,686	$	3,962	$	8,907

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 (losses) were $(3) and $256 in the third quarter and for the first nine months of 2021 and $123 and $125 in the third quarter and for the first nine months of 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
	Third Quarter						Nine-Month Period
	2021			2020			2021			2020
Operating Income	$	7,109		$	6,132		$	18,039		$	17,150
Adjustments to Operating Expenses	1,303			2,072			8,152			9,092
Adjusted Operating Income	8,412			8,204			26,191			26,242

EBITDA	12,728			13,162			35,228			38,687
Adjustments to Operations and Support Expenses	291			151			4,940			2,970
Adjusted EBITDA	13,019			13,313			40,168			41,657

Total Operating Revenues	39,922			42,340			127,906			126,069

Operating Income Margin	17.8		%	14.5		%	14.1		%	13.6		%
Adjusted Operating Income Margin	21.1		%	19.4		%	20.5		%	20.8		%
Adjusted EBITDA Margin	32.6		%	31.4		%	31.4		%	33.0		%

Adjusted Diluted EPS
	Third Quarter					Nine-Month Period
	2021			2020		2021			2020
Diluted Earnings Per Share (EPS)	$	0.82		$	0.39	$	2.07		$	1.19
Amortization of intangible assets	0.11			0.22		0.35			0.68
DIRECTV intangible amortization (proportionate share)	0.04			—		0.04			—
Impairments	0.02			0.01		0.54			0.35
(Gain) loss on sale of assets	(0.08)			—		(0.09)			—
Actuarial (gain) loss ¹	(0.04)			0.01		(0.32)			0.01
Debt redemption and other adjustments	0.02			0.13		0.06			0.20
Tax-related items	(0.02)			—		(0.03)			—
Adjusted EPS	$	0.87		$	0.76	$	2.62		$	2.43
Year-over-year growth - Adjusted	14.5		%			7.8		%
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,202			7,173		7,197			7,186

Includes adjustments for actuarial gains or losses associated with our pension benefit plan, 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 $0.4 billion in the third quarter of 2021. As a result, adjusted EPS reflects an expected return on plan assets of $0.9 billion (based on an average expected return on plan assets of 6.75% for our pension trust), rather than the actual return on plan assets of $1.0 billion (actual pension 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
	Dec. 31,		March. 31		June 30,		Sept. 30,		Four Quarters
	2020 ¹		2021 ¹		2021 ¹		2021
Adjusted EBITDA	$	12,889	$	13,564	$	13,585	$	13,019	$	53,057
Less: Historical Video	(710)		(1,065)		(1,364)		(418)		(3,557)
Add: WarnerMedia sale of DIRECTV advertising	565		349		372		99		1,385
Add: WarnerMedia/DIRECTV revenue share	(422)		(271)		(287)		(78)		(1,058)
Pro Forma Adjusted EBITDA	12,322		12,577		12,306		12,622		49,827
End-of-period current debt									23,755
End-of-period long-term debt									155,406
Total End-of-Period Debt									179,161
Less: Cash and Cash Equivalents									21,270
Net Debt Balance									157,891
Annualized Net Debt to Pro Forma Adjusted EBITDA Ratio									3.17

¹	As reported in AT&T's Form 8-K filed January 27, 2021, April 22, 2021, July 22, 2021, and September 9, 2021.

Net Debt to Adjusted EBITDA - 2020
Dollars in millions
	Three Months Ended
	Dec. 31,		March. 31		June 30,		Sept. 30,		Four Quarters
	2019 ¹		2020 ¹		2020 ¹		2020¹
Adjusted EBITDA	$	14,365	$	14,232	$	14,112	$	13,313	$	56,022
End-of-period current debt									5,898
End-of-period long-term debt									152,980
Total End-of-Period Debt									158,878
Less: Cash and Cash Equivalents									9,758
Net Debt Balance									149,120
Annualized Net Debt to Adjusted EBITDA Ratio									2.66

¹	As reported in AT&T's Form 8-K filed January 29, 2020, April 22, 2020, and July 23, 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
	Third Quarter
	September 30, 2021								September 30, 2020
	Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	14,527	$	—	$	(12,468)	$	2,059	$	13,883	$	—	$	(11,933)	$	1,950
Wireline service	—		5,765		—		5,765		—		6,079		—		6,079
Wireless equipment	4,611		—		(3,798)		813		4,011		—		(3,349)		662
Wireline equipment	—		173		—		173		—		182		—		182
Total Operating Revenues	19,138		5,938		(16,266)		8,810		17,894		6,261		(15,282)		8,873

Operating Expenses
Operations and support	11,148		3,649		(9,194)		5,603		10,182		3,764		(8,505)		5,441
EBITDA	7,990		2,289		(7,072)		3,207		7,712		2,497		(6,777)		3,432
Depreciation and amortization	2,035		1,304		(1,688)		1,651		2,021		1,313		(1,702)		1,632
Total Operating Expenses	13,183		4,953		(10,882)		7,254		12,203		5,077		(10,207)		7,073
Operating Income	5,955		985		(5,384)		1,556		5,691		1,184		(5,075)		1,800
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		—		—
Operating Contribution	$	5,955	$	985	$	(5,384)	$	1,556	$	5,691	$	1,184	$	(5,075)	$	1,800

¹	Non-business wireless reported in the Communication segment under the Mobility business unit.
	Results have been recast to conform to the current period's classification.

Supplemental Operational Measure
	Nine-Month Period
	September 30, 2021								September 30, 2020
	Mobility		Business Wireline		Adjustments¹		Business Solutions		Mobility		Business Wireline		Adjustments¹		Business Solutions
Operating Revenues
Wireless service	$	42,921	$	—	$	(36,868)	$	6,053	$	41,520	$	—	$	(35,736)	$	5,784
Wireline service	—		17,497		—		17,497		—		18,271		—		18,271
Wireless equipment	14,187		—		(11,803)		2,384		10,925		—		(8,968)		1,957
Wireline equipment	—		539		—		539		—		561		—		561
Total Operating Revenues	57,108		18,036		(48,671)		26,473		52,445		18,832		(44,704)		26,573

Operating Expenses
Operations and support	33,077		11,068		(27,330)		16,815		29,083		11,365		(24,001)		16,447
EBITDA	24,031		6,968		(21,341)		9,658		23,362		7,467		(20,703)		10,126
Depreciation and amortization	6,072		3,875		(5,044)		4,903		6,078		3,900		(5,116)		4,862
Total Operating Expenses	39,149		14,943		(32,374)		21,718		35,161		15,265		(29,117)		21,309
Operating Income	17,959		3,093		(16,297)		4,755		17,284		3,567		(15,587)		5,264
Equity in Net Income (Loss) of Affiliates	—		—		—		—		—		—		—		—
Operating Contribution	$	17,959	$	3,093	$	(16,297)	$	4,755	$	17,284	$	3,567	$	(15,587)	$	5,264

¹	Non-business wireless reported in the Communication segment under the Mobility business unit.
	Results have been recast to conform to the current period's classification.

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AT&T Reports Third-Quarter Results