The company continues to attract high quality customers with the most reliable 5G network¹ and the country's largest consumer fiber network

DALLAS, July 26, 2023 /PRNewswire/ -- AT&T Inc. (NYSE:T) delivered strong second-quarter results with profitable subscriber growth and year over year increases in Mobility service and broadband revenues.

Consistent strategy driving strong second-quarter results

Revenues of $29.9 billion, up 0.9% year over year
Cash from operating activities of $9.9 billion, up 28.2% year over year and up $1.2 billion in first-half 2023 compared to first-half 2022
Free cash flow* of $4.2 billion, up $1.0 billion in first-half 2023 compared to first-half 2022; confident in full-year free cash flow* of $16 billion or better
Operating income of $6.4 billion, up 29.3% year over year
On track for full-year Adjusted EBITDA* growth of more than 3%

"The direction we set three years ago is sound, and we're on the right trajectory. Compared to last year, Mobility service and broadband revenues are up, Adjusted EBITDA is up, free cash flow is up, Mobility and Consumer Wireline margins are up and customer lifetime values are up," said John Stankey, AT&T CEO. "We're focused on growing the right way, adding profitable 5G and fiber customers. We are also committing to an incremental $2 billion-plus in cost savings beyond the $6 billion we have accomplished over this period, reflecting our continued march to operating the company in a more focused and streamlined fashion. Our results give us full confidence in delivering our full-year financial guidance."

Establishing a foundation for durable, long-term growth

Delivered 326,000 postpaid phone net adds with continued strong ARPU growth and historically low levels of churn
Mobility service revenues up 4.9%; achieved company's best-ever second-quarter Mobility operating income
251,000 AT&T Fiber net adds; 14 straight quarters with more than 200,000 net adds
Consumer broadband revenues up 7.0%, driven by AT&T Fiber revenue growth of 28.0%
Surpassed 5 million FirstNet^® connections; FirstNet continues to be the leading choice for the first responder community
Named #1 in wireless customer satisfaction by the American Customer Satisfaction Index

A leading investor in America's broadband infrastructure

Expanded most reliable 5G network¹; mid-band 5G spectrum now covers more than 175 million people; remain on track to reach 200 million people with mid-band 5G by the end of the year
Grew country's largest consumer fiber network; ability to serve 20.2 million consumer and more than 3 million business customer locations with fiber; remain on track to pass 30 million-plus fiber locations by the end of 2025
Closed joint venture with BlackRock to form Gigapower to provide a state-of-the-art fiber network to an initial 8 new areas
Collaborated with AST SpaceMobile to achieve world-first direct voice call from space between unmodified everyday 4G LTE smartphones, connected via a low-earth orbit satellite; a key step in allowing us to provide even more expansive connectivity

Becoming more efficient and effective

Achieved $6 billion-plus run-rate cost savings target six months ahead of schedule
Increased target to $8 billion-plus run-rate cost savings with expectation of achieving incremental $2 billion-plus in run-rate cost savings over three years
Accelerated cost-savings across the company with AI; collaborated with Microsoft to launch custom-built generative AI tool, Ask AT&T

Note: AT&T's second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, July 26, 2023. The webcast and related materials, including financial highlights, will be available on AT&T's Investor Relations website at https://investors.att.com.

Consolidated Financial Results

Revenues for the second quarter totaled $29.9 billion versus $29.6 billion in the year-ago quarter, up 0.9%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues.

Operating expenses were $23.5 billion versus $24.7 billion in the year-ago quarter reflecting prior year non-cash impairment charges of $0.6 billion and benefits of our continued transformation efforts, partially offset by inflationary cost increases. Operating expenses decreased primarily due to lower domestic wireless equipment and associated selling costs from lower sales volumes and lower personnel costs and higher returns on benefit-related assets. These decreases were partly offset by increased depreciation and higher amortization of deferred customer acquisition costs.

Operating income was $6.4 billion versus $5.0 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.4 billion versus $5.9 billion in the year-ago quarter.

Equity in net income of affiliates was $0.4 billion primarily from the DIRECTV investment. With an adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment^*was $0.7 billion.

Income from continuing operations was $4.8 billion, essentially stable with the year-ago quarter. Earnings per diluted common share from continuing operations² was $0.61 versus $0.59 in the year-ago quarter. Adjusting for $0.02, which includes our proportionate share of intangible amortization from the DIRECTV equity method investment, net actuarial and settlement gains on benefit plans and other items, earnings per diluted common share from continuing operations^* was $0.63 compared to $0.65 in the year-ago quarter.

Cash from operating activities from continuing operations was $9.9 billion, up $2.2 billion year over year, reflecting higher cash receipts from improved operations as well as timing of working capital, including higher receivable sales and lower device payments. Capital expenditures were $4.3 billion in the quarter versus $4.9 billion in the year-ago quarter. Capital investment^*, which includes $1.6 billion of cash payments for vendor financing, totaled $5.9 billion.

Free cash flow^* was $4.2 billion for the quarter. Total debt was $143.3 billion at the end of the quarter, and net debt^* was $132.0 billion. The company expects to achieve a net debt-to-adjusted EBITDA* ratio in the 3.0x range by the end of this year and in the 2.5x range in the first half of 2025.

Communications Operational Highlights

Second-quarter revenues were $28.8 billion, up 0.5% year over year due to increases in Mobility and Consumer Wireline, which more than offset a decline in Business Wireline. Operating income was $7.2 billion, up 7.4% year over year, with operating income margin of 24.9%, compared to 23.3% in the year-ago quarter.

Mobility

Revenues were up 2.0% year over year to $20.3 billion due to higher service revenues, partially offset by lower equipment revenues. Service revenues were $15.7 billion, up 4.9% year over year, primarily driven by subscriber and postpaid ARPU growth. Equipment revenues were $4.6 billion, down 7.2% year over year, driven by lower volumes.
Operating expenses were $13.7 billion, down 1.3% year over year primarily due to lower equipment costs driven by lower device sales and lower content costs. These decreases were partly offset by increased amortization of deferred customer acquisition costs, higher network and customer support costs and higher depreciation expense.
Operating income was $6.6 billion, up 9.3% year over year. Operating income margin was 32.6%, compared to 30.4% in the year-ago quarter.
EBITDA^* was $8.7 billion, up 8.3% year over year with EBITDA margin^* of 43.0%, up from 40.5% in the year-ago quarter. This was the company's best-ever second-quarter Mobility EBITDA*. EBITDA service margin^* was 55.5%, up from 53.8% in the year-ago quarter.
Total wireless net adds were 6.2 million, including:

464,000 postpaid net adds with:

326,000 postpaid phone net adds
(70,000) postpaid tablet and other branded computing device net losses
208,000 other net adds

123,000 prepaid phone net adds

Postpaid churn was 0.95% versus 0.93% in the year-ago quarter.
Postpaid phone churn was 0.79% versus 0.75% in the year-ago quarter.
Prepaid churn was 2.50%, with Cricket substantially lower, versus 2.59% in the year-ago quarter.
Postpaid phone ARPU was $55.63, up 1.5% versus the year-ago quarter, due to prior-year pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
FirstNet connections reached more than 5.0 million across more than 26,000 agencies. FirstNet is the nationwide communications platform dedicated to public safety. The AT&T and FirstNet networks cover more than 99% of the U.S. population, and FirstNet covers more first responders than any other network in America.

Business Wireline

Revenues were $5.3 billion, down 5.6% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services.
Operating expenses were $4.9 billion, down 4.3% year over year due to ongoing operational cost efficiencies, including lower personnel, lower wholesale network access costs, one-time cost benefits and lower marketing expenses.
Operating income was $396 million, down 19.2%, with operating income margin of 7.5% compared to 8.8% in the year-ago quarter.
EBITDA^* was $1.7 billion, down 4.1% year over year with EBITDA margin^* of 32.8%, compared to 32.2% in the year-ago quarter.
AT&T Business serves the largest global companies, government agencies and small businesses. More than 750,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 3 million U.S. business customer locations. Nationwide, more than 10 million business customer locations are on or within 1,000 feet of our fiber.³

Consumer Wireline

Revenues were $3.3 billion, up 2.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 7.0% due to fiber growth of 28.0%, partly offset by a 13.7% decline in non-fiber revenues.
Operating expenses were $3.1 billion, up 1.8% year over year due to higher depreciation expense, higher network and maintenance costs and increased amortization of deferred customer acquisition costs, partly offset by lower customer support costs, including one-time cost benefits and lower content costs.
Operating income was $168 million, up 15.9% year over year with operating income margin of 5.2%, compared to 4.6% in the year-ago quarter.
EBITDA^* was $1.0 billion, up 10.2% year over year with EBITDA margin^* of 31.5%, up from 29.3% in the year-ago quarter.
Total broadband net losses, excluding DSL, were 35,000, reflecting AT&T Fiber net adds of 251,000, more than offset by losses in non-fiber services. AT&T Fiber now has the ability to serve 20.2 million customer locations and offers symmetrical, multi-gig speeds across parts of its entire footprint of more than 100 metro areas.

Latin America – Mexico Operational Highlights

Revenues were $967 million, up 19.7% year over year due to growth in both service and equipment revenues. Service revenues were $635 million, up 18.9% year over year, driven by favorable foreign exchange, higher wholesale revenues and growth in subscribers. Equipment revenues were $332 million, up 21.2% year over year due to favorable foreign exchange and higher sales.

Operating loss was ($39) million compared to ($82) million in the year-ago quarter. EBITDA^* was $146 million compared to $87 million in the year-ago quarter.

Total wireless net adds were 76,000, including 50,000 prepaid net adds, 56,000 postpaid net adds and 30,000 reseller net losses.

* Further clarification and explanation of non-GAAP measures and reconciliations to their most comparable GAAP measures can be found in the "Non-GAAP Measures and Reconciliations to GAAP Measures" section of the release and at https://investors.att.com.

FirstNet and the FirstNet logo are registered trademarks and service marks of the First Responder Network Authority. All other marks are the property of their respective owners.

¹ 5G claim based on nationwide GWS drive test data. GWS conducts paid drive tests for AT&T and uses the data in its analysis. AT&T 5G requires compatible plan and device. 5G coverage not available everywhere. Learn more at att.com/5Gforyou

² Diluted Earnings per Common Share from continuing operations is calculated using Income (Loss) from Continuing Operations, less Net Income Attributable to Noncontrolling Interest and Preferred Stock Dividends and adjustment for distributions on Mobility II preferred interests (prior to redemption) and share-based payments (when not antidilutive), divided by the weighted average common shares outstanding for the period.

³The more than 3 million U.S. business customer locations are included within the 10+ million U.S. business customer locations on or within 1,000 feet of our fiber.

About AT&T

We help more than 100 million U.S. families, friends and neighbors, plus nearly 2.5 million businesses, connect to greater possibility. From the first phone call 140+ years ago to our 5G wireless and multi-gig internet offerings today, we @ATT innovate to improve lives. For more information about AT&T Inc. (NYSE:T), please visit us at about.att.com. Investors can learn more at investors.att.com.

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.

Non-GAAP Measures and Reconciliations to GAAP Measures

Schedules and reconciliations of non-GAAP financial measures cited in this document to the most directly comparable financial measures under generally accepted accounting principles (GAAP) can be found at https://investors.att.com and in our Form 8-K dated July 26, 2023. Free cash flow, EBITDA, adjusted EBITDA, adjusted operating income, adjusted diluted EPS and net debt are non-GAAP financial measures frequently used by investors and credit rating agencies.

Free cash flow for 2Q23 of $4.2 billion is cash from operating activities from continuing operations of $9.9 billion, plus cash distributions from DIRECTV classified as investing activities of $0.2 billion, minus capital expenditures of $4.3 billion and cash paid for vendor financing of $1.6 billion.

Free cash flow for 2Q23 year-to-date of $5.2 billion is cash from operating activities from continuing operations of $16.6 billion, plus cash distributions from DIRECTV classified as investing activities of $1.0 billion, minus capital expenditures of $8.6 billion and cash paid for vendor financing of $3.8 billion.

Free cash flow for 2Q22 year-to-date of $4.2 billion is cash from operating activities from continuing operations of $15.4 billion, plus cash distributions from DIRECTV classified as investing activities of $1.6 billion, minus capital expenditures of $9.5 billion and cash paid for vendor financing of $3.3 billion.

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

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

Adjusted EBITDA is calculated by excluding from operating revenues and operating expenses certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, significant abandonments and impairment, benefit-related gains and losses, employee separation and other material gains and losses.

Adjusted EBITDA estimates depend on future levels of revenues and expenses which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between projected EBITDA and projected Adjusted EBITDA and the most comparable GAAP metrics without unreasonable effort.

Adjusted Operating Income is operating income adjusted for revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions. For 2Q23, Adjusted Operating Income of $6.4 billion is calculated as operating income of $6.4 billion minus $11 million of adjustments. For 2Q22, Adjusted Operating Income of $5.9 billion is calculated as operating income of $5.0 billion plus $941 million of adjustments. Adjustments for all periods are detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated July 26, 2023.

Adjusted Equity in Net Income from DIRECTV investment of $0.7 billion for 2Q23 is calculated as equity income from DIRECTV of $0.4 billion reported in Equity in Net Income of Affiliates and excludes $0.3 billion of AT&T's proportionate share of the non-cash depreciation and amortization of fair value accretion from DIRECTV's revaluation of assets and purchase price allocation, which we consider to be non-operational in nature.

Adjusted diluted EPS from continuing operations includes adjusting items to revenues and costs that we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including the amortization of intangible assets. While the expense associated with the amortization of certain wireless licenses and customer lists is excluded, the revenue of the acquired companies is reflected in the measure and those assets contribute to revenue generation. We 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%.

For 2Q23, Adjusted EPS from continuing operations of $0.63 is Diluted EPS from continuing operations of $0.61 adjusted for $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, minus $0.01 net actuarial and settlement gains on benefit plans.

For 2Q22, Adjusted EPS from continuing operations of $0.65 is Diluted EPS from continuing operations of $0.59 adjusted for $0.06 non-cash restructuring and impairments, $0.06 benefit-related, transaction and other costs, $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment, $0.02 dilutive impact of Accounting Standards Update No. 2020-06 and $0.01 tax-related item, minus $0.13 actuarial gain on benefit plans.

Capital investment is a non-GAAP financial measure that provides an additional view of cash paid for capital investment to provide a comprehensive view of cash used to invest in our networks, product developments and support systems. 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. Capital investment includes capital expenditures and cash paid for vendor financing ($1.6 billion in 2Q23).

Net Debt of $132.0 billion at June 30, 2023, is calculated as Total Debt of $143.3 billion less Cash and Cash Equivalents of $9.5 billion and Time Deposits (i.e. deposits at financial institutions that are greater than 90 days) of $1.8 billion.

Net 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 by the sum of the most recent four quarters of Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and deposits at financial institutions that are greater than 90 days (e.g., certificates of deposit and time deposits), from the sum of debt maturing within one year and long-term debt.

Adjusted EBITDA is calculated as defined above. Net Debt and Adjusted EBITDA estimates depend on future levels of revenues, expenses and other metrics which are not reasonably estimable at this time. Accordingly, we cannot provide a reconciliation between projected Net Debt-to-Adjusted EBITDA and the most comparable GAAP metrics and related ratios without unreasonable effort.

Discussion and Reconciliation of Non-GAAP Measures for Continuing Operations

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 and cash paid for vendor financing (classified as financing activities). Free cash flow after dividends is defined as cash from operations and cash distributions from DIRECTV, minus capital expenditures, cash paid for vendor financing 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 vendor financing, 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
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Net cash provided by operating activities from continuing operations¹	$ 9,922	$ 7,740	$ 16,600	$ 15,370
Add: Distributions from DIRECTV classified as investing activities	200	323	974	1,638
Less: Capital expenditures	(4,270)	(4,908)	(8,605)	(9,476)
Less: Cash paid for vendor financing	(1,643)	(1,771)	(3,756)	(3,337)
Free Cash Flow	4,209	1,384	5,213	4,195

Less: Dividends paid	(2,083)	(2,086)	(4,097)	(5,835)
Free Cash Flow after Dividends	$ 2,126	$ (702)	$ 1,116	$ (1,640)
Free Cash Flow Dividend Payout Ratio	49.5 %	150.7 %	78.6 %	139.1 %

¹ Includes distributions from DIRECTV of $377 and $911 in the second quarter and for the first six months of 2023, and $515 and $1,037 in the second quarter and for the first six months of 2022.

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
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Capital Expenditures	$ (4,270)	$ (4,908)	$ (8,605)	$ (9,476)
Cash paid for vendor financing	(1,643)	(1,771)	(3,756)	(3,337)
Cash paid for Capital Investment	$ (5,913)	$ (6,679)	$ (12,361)	$ (12,813)

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.

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 cash generation potential 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
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Income from Continuing Operations	$ 4,762	$ 4,751	$ 9,215	$ 9,900
Additions:
Income Tax Expense	1,403	1,509	2,717	2,949
Interest Expense	1,608	1,502	3,316	3,128
Equity in Net (Income) of Affiliates	(380)	(504)	(918)	(1,025)
Other (Income) Expense - Net	(987)	(2,302)	(1,922)	(4,459)
Depreciation and amortization	4,675	4,450	9,306	8,912
EBITDA	11,081	9,406	21,714	19,405
Transaction and other costs	—	185	—	283
Benefit-related (gain) loss	(28)	108	(72)	201
Assets impairments and abandonment and restructuring	—	631	—	631
Adjusted EBITDA¹	$ 11,053	$ 10,330	$ 21,642	$ 20,520

¹ See "Adjusting Items" section for additional discussion and reconciliation of adjusted items.

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Communications Segment
Operating Income	$ 7,177	$ 6,683	$ 13,920	$ 13,170
Add: Depreciation and amortization	4,313	4,115	8,602	8,239
EBITDA	$ 11,490	$ 10,798	$ 22,522	$ 21,409

Total Operating Revenues	$ 28,845	$ 28,695	$ 57,997	$ 57,571
Operating Income Margin	24.9 %	23.3 %	24.0 %	22.9 %
EBITDA Margin	39.8 %	37.6 %	38.8 %	37.2 %

Mobility
Operating Income	$ 6,613	$ 6,048	$ 12,884	$ 11,737
Add: Depreciation and amortization	2,123	2,017	4,221	4,076
EBITDA	$ 8,736	$ 8,065	$ 17,105	$ 15,813

Total Operating Revenues	$ 20,315	$ 19,926	$ 40,897	$ 40,001
Service Revenues	15,745	15,004	31,228	29,728
Operating Income Margin	32.6 %	30.4 %	31.5 %	29.3 %
EBITDA Margin	43.0 %	40.5 %	41.8 %	39.5 %
EBITDA Service Margin	55.5 %	53.8 %	54.8 %	53.2 %

Business Wireline
Operating Income	$ 396	$ 490	$ 774	$ 1,129
Add: Depreciation and amortization	1,333	1,313	2,663	2,612
EBITDA	$ 1,729	$ 1,803	$ 3,437	$ 3,741

Total Operating Revenues	$ 5,279	$ 5,595	$ 10,610	$ 11,235
Operating Income Margin	7.5 %	8.8 %	7.3 %	10.0 %
EBITDA Margin	32.8 %	32.2 %	32.4 %	33.3 %

Consumer Wireline
Operating Income	$ 168	$ 145	$ 262	$ 304
Add: Depreciation and amortization	857	785	1,718	1,551
EBITDA	$ 1,025	$ 930	$ 1,980	$ 1,855

Total Operating Revenues	$ 3,251	$ 3,174	$ 6,490	$ 6,335
Operating Income Margin	5.2 %	4.6 %	4.0 %	4.8 %
EBITDA Margin	31.5 %	29.3 %	30.5 %	29.3 %

Latin America Segment
Operating Income (Loss)	$ (39)	$ (82)	$ (69)	$ (184)
Add: Depreciation and amortization	185	169	360	330
EBITDA	$ 146	$ 87	$ 291	$ 146

Total Operating Revenues	$ 967	$ 808	$ 1,850	$ 1,498
Operating Income Margin	-4.0 %	-10.1 %	-3.7 %	-12.3 %
EBITDA Margin	15.1 %	10.8 %	15.7 %	9.7 %

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including the amortization of intangible assets. While the expense associated with the amortization of certain wireless licenses and customer lists is excluded, the revenue of the acquired companies is reflected in the measure and that those assets contribute to revenue generation. 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
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Operating Expenses
Transaction and other costs	$ —	$ 185	$ —	$ 283
Benefit-related (gain) loss	(28)	108	(72)	201
Assets impairments and abandonment and restructuring	—	631	—	631
Adjustments to Operations and Support Expenses	(28)	924	(72)	1,115
Amortization of intangible assets	17	17	34	44
Adjustments to Operating Expenses	(11)	941	(38)	1,159
Other
DIRECTV intangible amortization (proportionate share)	324	396	665	812
Benefit-related (gain) loss and other	(82)	314	(193)	406
Actuarial and settlement (gain) loss - net	(74)	(1,345)	(74)	(2,398)
Adjustments to Income Before Income Taxes	157	306	360	(21)
Tax impact of adjustments	35	38	81	(65)
Tax-related items	—	(79)	—	(79)
Adjustments to Net Income	$ 122	$ 347	$ 279	$ 123

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, benefit-related gains and losses, employee separation 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
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Operating Income	$ 6,406	$ 4,956	$ 12,408	$ 10,493
Adjustments to Operating Expenses	(11)	941	(38)	1,159
Adjusted Operating Income	$ 6,395	$ 5,897	$ 12,370	$ 11,652

EBITDA	$ 11,081	$ 9,406	$ 21,714	$ 19,405
Adjustments to Operations and Support Expenses	(28)	924	(72)	1,115
Adjusted EBITDA	$ 11,053	$ 10,330	$ 21,642	$ 20,520

Total Operating Revenues	$ 29,917	$ 29,643	$ 60,056	$ 59,355

Operating Income Margin	21.4 %	16.7 %	20.7 %	17.7 %
Adjusted Operating Income Margin	21.4 %	19.9 %	20.6 %	19.6 %
Adjusted EBITDA Margin	36.9 %	34.8 %	36.0 %	34.6 %

Adjusted Diluted EPS
	Second Quarter		Six-Month Period
	2023	2022	2023	2022
Diluted Earnings Per Share (EPS)	$ 0.61	$ 0.59	$ 1.19	$ 1.23
DIRECTV intangible amortization (proportionate share)	0.03	0.04	0.07	0.08
Actuarial and settlement (gain) loss - net¹	(0.01)	(0.13)	(0.01)	(0.24)
Restructuring and impairments	—	0.06	—	0.06
Benefit-related, transaction and other costs²	—	0.08	(0.02)	0.13
Tax-related items	—	0.01	—	0.01
Adjusted EPS	$ 0.63	$ 0.65	$ 1.23	$ 1.27
Year-over-year growth - Adjusted	-3.1 %		-3.1 %
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,180	7,611	7,327	7,584

¹ Includes adjustments for actuarial gains or losses associated with our pension and postretirement 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 and settlement gains of $0.1 billion in the second quarter of 2023. As a result, adjusted EPS reflects an expected return on plan

assets of $0.7 billion (based on an average expected return on plan assets of 7.50% for our pension trust), rather than the actual return on

plan assets of $0.9 billion (actual pension return of 4.1%), included in the GAAP measure of income.

² As of January 1, 2022, we adopted Accounting Standards Update (ASU) No. 2020-06, which requires that instruments which may be

settled in cash or stock to be presumed settled in stock in calculating diluted EPS. While our intent was to settle the Mobility II preferred

interests in cash, the ability to settle this instrument in AT&T shares resulted in additional dilutive impact, the magnitude of which was

influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period,

which could vary from period-to-period. For these reasons, we excluded the impact of ASU 2020-06 from our adjusted EPS calculation.

The per share impact of ASU 2020-06 was to decrease reported diluted EPS $0.00 and $0.02 for the quarters ended June 30, 2023 and

2022, and $0.01 and $0.02 for the six months ended June 30, 2023 and 2022, respectively. The Mobility II preferred interests were

repurchased on April 5, 2023.

Net Debt to 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 Adjusted EBITDA ratio is calculated by dividing the Net Debt by the sum of the most recent four quarters Adjusted EBITDA. Net Debt is calculated by subtracting cash and cash equivalents and deposits at financial institutions that are greater than 90 days (e.g., certificates of deposit and time deposits), from the sum of debt maturing within one year and long-term debt.

Net Debt to Adjusted EBITDA - 2023
Dollars in millions
	Three Months Ended
	Sept. 30,	Dec. 31,	March 31,	June 30,	Four Quarters
	2022¹	2022¹	2023¹	2023	Four Quarters
Adjusted EBITDA	$ 10,714	$ 10,231	$ 10,589	$ 11,053	$ 42,587
End-of-period current debt					15,268
End-of-period long-term debt					128,012
Total End-of-Period Debt					143,280
Less: Cash and Cash Equivalents					9,528
Less: Time Deposits					1,750
Net Debt Balance					132,002
Annualized Net Debt to Adjusted EBITDA Ratio					3.10

¹ As reported in AT&T's Form 8-K filed January 25, 2023 and April 20, 2023.

Net Debt to Adjusted EBITDA - 2022
Dollars in millions
	Three Months Ended
	Sept. 30,	Dec. 31,	March 31,	June 30,	Four Quarters
	2021¹	2021¹	2022¹	2022¹	Four Quarters
Adjusted EBITDA	$ 10,803	$ 9,480	$ 10,190	$ 10,330	$ 40,803
End-of-period current debt					6,210
End-of-period long-term debt					129,747
Total End-of-Period Debt					135,957
Less: Cash and Cash Equivalents					4,018
Net Debt Balance					131,939
Annualized Net Debt to Adjusted EBITDA Ratio					3.23

¹ As reported in AT&T's Form 8-K filed January 25, 2023.

Supplemental Operational Measures

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers. Our supplemental presentation of business solutions operations 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
	Second Quarter
	June 30, 2023				June 30, 2022
	Mobility	Business Wireline	Adj.¹	Business Solutions	Mobility	Business Wireline	Adj.¹	Business Solutions	Percent Change
Operating Revenues
Wireless service	$ 15,745	$ —	$ (13,371)	$ 2,374	$ 15,004	$ —	$ (12,829)	$ 2,175	9.1 %
Wireline service	—	5,114	—	5,114	—	5,416	—	5,416	(5.6) %
Wireless equipment	4,570	—	(3,796)	774	4,922	—	(4,048)	874	(11.4) %
Wireline equipment	—	165	—	165	—	179	—	179	(7.8) %
Total Operating Revenues	20,315	5,279	(17,167)	8,427	19,926	5,595	(16,877)	8,644	(2.5) %

Operating Expenses
Operations and support	11,579	3,550	(9,440)	5,689	11,861	3,792	(9,718)	5,935	(4.1) %
EBITDA	8,736	1,729	(7,727)	2,738	8,065	1,803	(7,159)	2,709	1.1 %
Depreciation and amortization	2,123	1,333	(1,733)	1,723	2,017	1,313	(1,664)	1,666	3.4 %
Total Operating Expenses	13,702	4,883	(11,173)	7,412	13,878	5,105	(11,382)	7,601	(2.5) %
Operating Income	$ 6,613	$ 396	$ (5,994)	$ 1,015	$ 6,048	$ 490	$ (5,495)	$ 1,043	(2.7) %

Operating Income Margin				12.0 %				12.1 %	(10) BP

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

Supplemental Operational Measure
	Six-Month Period
	June 30, 2023				June 30, 2022
	Mobility	Business Wireline	Adj.¹	Business Solutions	Mobility	Business Wireline	Adj.¹	Business Solutions	Percent Change
Operating Revenues
Wireless service	$ 31,228	$ —	$ (26,574)	$ 4,654	$ 29,728	$ —	$ (25,419)	$ 4,309	8.0 %
Wireline service	—	10,314	—	10,314	—	10,894	—	10,894	(5.3) %
Wireless equipment	9,669	—	(8,122)	1,547	10,273	—	(8,500)	1,773	(12.7) %
Wireline equipment	—	296	—	296	—	341	—	341	(13.2) %
Total Operating Revenues	40,897	10,610	(34,696)	16,811	40,001	11,235	(33,919)	17,317	(2.9) %

Operating Expenses
Operations and support	23,792	7,173	(19,636)	11,329	24,188	7,494	(19,887)	11,795	(4.0) %
EBITDA	17,105	3,437	(15,060)	5,482	15,813	3,741	(14,032)	5,522	(0.7) %
Depreciation and amortization	4,221	2,663	(3,445)	3,439	4,076	2,612	(3,362)	3,326	3.4 %
Total Operating Expenses	28,013	9,836	(23,081)	14,768	28,264	10,106	(23,249)	15,121	(2.3) %
Operating Income	$ 12,884	$ 774	$ (11,615)	$ 2,043	$ 11,737	$ 1,129	$ (10,670)	$ 2,196	(7.0) %

Operating Income Margin				12.2 %				12.7 %	(50) BP

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

View original content to download multimedia:https://www.prnewswire.com/news-releases/atts-sustainable-growth-strategy-pays-off-with-strong-2q-results-301886183.html

SOURCE AT&T

AT&T's Sustainable Growth Strategy Pays off with Strong 2Q Results