AT&T Third-Quarter Results Show Continued 5G and Fiber Subscriber Momentum

More customers choose AT&T as their converged provider for world-class connectivity

DALLAS, Oct. 23, 2024 /PRNewswire/ -- AT&T Inc. (NYSE: T) reported third-quarter results that delivered consistent growth in Mobility service and broadband revenues as it attracts high-quality, converged customers in both 5G and fiber. Following its continued performance, the Company reiterates all full-year 2024 consolidated financial guidance.

Third-Quarter Consolidated Results

• Revenues of $30.2 billion
• Diluted EPS of $(0.03); adjusted EPS* of $0.60
• Operating income of $2.1 billion; adjusted operating income* of $6.5 billion
• Net income of $0.1 billion; adjusted EBITDA* of $11.6 billion
• Cash from operating activities of $10.2 billion, down $0.1 billion year over year; consistent year to date compared to the same period in 2023
• Capital expenditures of $5.3 billion; capital investment* of $5.5 billion
• Free cash flow* of $5.1 billion, down $0.1 billion year over year; up $2.4 billion year to date compared to the same period in 2023

Third-Quarter Highlights

• 403,000 postpaid phone net adds with an expected industry-leading postpaid phone churn of 0.78%
• Mobility service revenues of $16.5 billion, up 4.0% year over year 
• 226,000 AT&T Fiber net adds; 200,000+ net adds for 19 consecutive quarters
• Consumer broadband revenues of $2.8 billion, up 6.4% year over year
• 28.3 million consumer and business locations passed with fiber

"We delivered another strong and consistent quarter, furthering our leadership in converged 5G and fiber connectivity," said John Stankey, AT&T CEO. "Despite severe weather and a work stoppage in the Southeast, this is our 19th straight quarter of adding more than 200,000 new AT&T Fiber customers. We continue to grow our largest business – Mobility – the right way with what we expect will be industry-leading postpaid phone churn for the 13th time in 15 quarters. We are investing at the top of the industry, reducing debt and growing free cash flow year to date. These solid results give us confidence in reiterating our full-year consolidated financial guidance."

2024 Outlook
For the full year, AT&T reiterates guidance of:

• Wireless service revenue growth in the 3% range.
• Broadband revenue growth of 7%+.
• Adjusted EBITDA* growth in the 3% range.
• Capital investment* in the $21-$22 billion range.
• Free cash flow* in the $17-$18 billion range.
• Adjusted EPS* in the $2.15-$2.25 range.
• The Company continues to expect to achieve net debt-to-adjusted EBITDA* in the 2.5x range in the first half of 2025.
• On track to pass 30 million-plus consumer and business locations with fiber by the end of 2025.

Note: AT&T's third-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, October 23, 2024. The webcast and related materials, including financial highlights, will be available at https://investors.att.com.

Consolidated Financial Results

• Revenues for the third quarter totaled $30.2 billion versus $30.4 billion in the year-ago quarter, down 0.5%. This was due to lower Business Wireline service revenues and declines in Mobility equipment revenues driven by lower sales volumes. These decreases were mostly offset by higher Mobility service and Consumer Wireline revenues.
• Operating expenses were $28.1 billion versus $24.6 billion in the year-ago quarter. Operating expenses increased primarily due to a $4.4 billion non-cash goodwill impairment in the current quarter associated with our Business Wireline unit based on faster-than-previously anticipated industry-wide secular decline of legacy services. Also contributing to higher operating expenses was accelerated depreciation on wireless network equipment associated with our Open RAN network modernization efforts, and our continued network upgrades. These increases were partially offset by prior year severance and restructuring costs, lower Mobility equipment costs from lower sales volumes and benefits from continued transformation.
• Operating income was $2.1 billion versus $5.8 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.5 billion, consistent with the year-ago quarter.
• Equity in net income of affiliates was $0.3 billion, primarily from the DIRECTV investment. With adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment* was $0.5 billion.
• Net income was $0.1 billion versus $3.8 billion in the year-ago quarter.
• Net income (loss) attributable to common stock was $(0.2) billion versus $3.4 billion in the year-ago quarter. Earnings per diluted common share was $(0.03) versus $0.48 in the year-ago quarter. Adjusting for $0.63 which includes a non-cash goodwill impairment, our proportionate share of intangible amortization from the DIRECTV equity method investment, and other items, adjusted earnings per diluted common share* was $0.60 compared to $0.64 in the year-ago quarter.
• Adjusted EBITDA* was $11.6 billion versus $11.2 billion in the year-ago quarter.
• Cash from operating activities was $10.2 billion, down $0.1 billion year over year, reflecting the payment of termination fees associated with network modernization programs and working capital timing, which includes higher device payments, largely offset by operational improvements.
• Capital expenditures were $5.3 billion versus $4.6 billion in the year-ago quarter.
  Capital investment* totaled $5.5 billion versus $5.6 billion in the year-ago quarter. In the quarter, cash payments for vendor financing totaled $0.2 billion versus $1.0 billion in the year-ago quarter.
• Free cash flow* was $5.1 billion versus $5.2 billion in the year-ago quarter.
• Total debt was $129.0 billion at the end of the third quarter, and net debt* was $125.8 billion.

Segment and Business Unit Results

Communications Segment
Dollars in millions	Third Quarter		Percent
Unaudited	2024	2023	Change
Operating Revenues	$                   29,074	$                    29,244	(0.6) %
Operating Income	7,156	7,273	(1.6) %
Operating Income Margin	24.6 %	24.9 %	(30) BP

Communications segment revenues were $29.1 billion, down 0.6% year over year, with operating income down 1.6% year over year.

Mobility
Dollars in millions; Subscribers in thousands	Third Quarter		Percent
Unaudited	2024	2023	Change
Operating Revenues	$                   21,052	$                    20,692	1.7 %
Service	16,539	15,908	4.0 %
Equipment	4,513	4,784	(5.7) %
Operating Expenses	14,049	13,929	0.9 %
Operating Income	7,003	6,763	3.5 %
Operating Income Margin	33.3 %	32.7 %	60 BP
EBITDA*	$                      9,493	$                      8,897	6.7 %
EBITDA Margin*	45.1 %	43.0 %	210 BP
EBITDA Service Margin*	57.4 %	55.9 %	150 BP
Total Wireless Net Adds (excl. Connected Devices)1	617	1,007
Postpaid	429	550
Postpaid Phone	403	468
Postpaid Other	26	82
Prepaid Phone	(45)	26
Postpaid Churn	0.93 %	0.95 %	(2) BP
Postpaid Phone-Only Churn	0.78 %	0.79 %	(1) BP
Prepaid Churn	2.73 %	2.78 %	(5) BP
Postpaid Phone ARPU	$                      57.07	$                      55.99	1.9 %

Mobility service revenue grew 4.0% year over year driving EBITDA service margin* expansion of 150 basis points. Postpaid phone net adds were 403,000 with postpaid phone churn of 0.78%, down 1 basis point year over year.

Mobility revenues were up 1.7% year over year, driven by service revenue growth of 4.0% from subscriber gains and postpaid phone average revenue per subscriber (ARPU) growth. As part of transformation activities and simplification efforts, the Company aligned the timing of certain administrative fees and recorded approximately $90 million of one-time revenues in the third quarter that benefited service revenues, but did not result in a price increase. This was partially offset by lower equipment revenues due to lower sales volumes. Operating expenses were up 0.9% year over year due to higher depreciation expense from Open RAN deployment and network transformation, partially offset by lower equipment expenses resulting from lower sales volumes. Operating income was $7.0 billion, up 3.5% year over year. EBITDA* was $9.5 billion, up $596 million year over year, driven by service revenue growth. This was the Company's highest-ever third-quarter Mobility EBITDA*. The Company continues to expect full-year Mobility EBITDA* growth in the higher end of the mid-single-digit range. 

Business Wireline
Dollars in millions	Third Quarter		Percent
Unaudited	2024	2023	Change
Operating Revenues	$                      4,606	$                      5,221	(11.8) %
Operating Expenses	4,649	4,871	(4.6) %
Operating Income/(Loss)	(43)	350	— %
Operating Income Margin	(0.9) %	6.7 %	(760) BP
EBITDA*	$                      1,356	$                      1,695	(20.0) %
EBITDA Margin*	29.4 %	32.5 %	(310) BP

Business Wireline revenues and profitability declined year over year driven by continued secular pressures on legacy voice and data services that were partially offset by growth in fiber and other advanced connectivity services. 

Business Wireline revenues were down 11.8% year over year, primarily due to lower demand for legacy voice and data services as well as product simplification, partially offset by growth in connectivity services. Revenue declines were also impacted by prior-year intellectual property sales of approximately $100 million and the absence of revenues from our cybersecurity business that was contributed to LevelBlue. Operating expenses were down 4.6% year over year due to lower personnel, network access and customer support expenses as well as the contribution of our cybersecurity business. Operating income was $(43) million versus $350 million in the prior-year quarter, and EBITDA* was $1.4 billion, down $339 million year over year. The Company now expects full-year Business Wireline EBITDA* to decline in the high-teens range, versus prior guidance of a mid-teens range decline.

Consumer Wireline
Dollars in millions; Subscribers in thousands	Third Quarter		Percent
Unaudited	2024	2023	Change
Operating Revenues	$                      3,416	$                      3,331	2.6 %
Broadband	2,838	2,667	6.4 %
Operating Expenses	3,220	3,171	1.5 %
Operating Income	196	160	22.5 %
Operating Income Margin	5.7 %	4.8 %	90 BP
EBITDA*	$                      1,120	$                      1,031	8.6 %
EBITDA Margin*	32.8 %	31.0 %	180 BP
Broadband Net Adds (excluding DSL)	28	15
Fiber	226	296
Non Fiber	(198)	(281)
AT&T Internet Air	135	24
Broadband ARPU	$                      68.25	$                      64.91	5.1 %
Fiber ARPU	$                      70.36	$                      68.21	3.2 %

Consumer Wireline achieved strong broadband revenue growth with improving EBITDA margins*. Consumer Wireline also delivered positive broadband net adds for the fifth consecutive quarter, driven by 226,000 AT&T Fiber net adds and 135,000 AT&T Internet Air net adds. AT&T Fiber installations were temporarily impacted by the Southeast work stoppage and Hurricane Helene.

Consumer Wireline revenues were up 2.6% year over year driven by growth in broadband revenues attributable to fiber revenues, which grew 16.7%, partially offset by declines in legacy voice and data services and other services. Operating expenses were up 1.5% year over year, primarily due to higher depreciation and increased marketing expenses, partially offset by lower customer support and network-related costs. Operating income was $196 million versus $160 million in the prior-year quarter, and EBITDA* was $1.1 billion, up $89 million year over year. The Company continues to expect full-year Consumer Wireline EBITDA* growth in the mid-to-high-single-digit range. 

Latin America Segment - Mexico
Dollars in millions; Subscribers in thousands	Third Quarter		Percent
Unaudited	2024	2023	Change
Operating Revenues	$                         1,022	$                              992	3.0 %
Service	645	672	(4.0) %
Equipment	377	320	17.8 %
Operating Expenses	$                         1,012	$                          1,021	(0.9) %
Operating Income/(Loss)	10	(29)	— %
EBITDA*	168	155	8.4 %
Total Wireless Net Adds	275	65
Postpaid	139	55
Prepaid	187	17
Reseller	(51)	(7)

Latin America segment revenues were up 3.0% year over year, primarily due to higher equipment sales and subscriber growth, largely offset by unfavorable impacts of foreign exchange rates. Operating expenses were down 0.9% due to the favorable impacts of foreign exchange rates, largely offset by higher equipment and selling costs attributable to subscriber growth. Operating income was $10 million compared to $(29) million in the year-ago quarter. EBITDA* was $168 million, up $13 million year over year.

1 Effective with our first-quarter 2024 reporting, we have removed connected devices from our total Mobility subscribers, consistent with industry standards and our key performance metrics. Connected devices include data-centric devices such as session-based tablets, monitoring devices and primarily wholesale automobile systems.

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 October 23, 2024. Adjusted diluted EPS, adjusted operating income, EBITDA, adjusted EBITDA, free cash flow, net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures frequently used by investors and credit rating agencies.

Adjusted diluted EPS is calculated by excluding from operating revenues, operating expenses, other income (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 impairments, benefit-related gains and losses, employee separation and other material gains and losses.

Non-operational items arising from asset acquisitions and dispositions include 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 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%.

For 3Q24, Adjusted EPS of $0.60 is diluted EPS of $(0.03) adjusted for $0.61 impairment and $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, minus $0.01 benefit-related, transaction and other costs.

For 3Q23, adjusted EPS of $0.64 is diluted EPS of $0.48 adjusted for $0.11 restructuring and impairments, $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment, and $0.03 benefit-related, transaction and other costs, minus $0.01 actuarial gain on benefit plans.

The Company expects adjustments to 2024 reported diluted EPS to include our proportionate share of intangible amortization at the DIRECTV equity method investment of $0.8 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 projected 2024 adjusted EPS depends on future levels of revenues and expenses, most of 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.

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 3Q24, adjusted operating income of $6.5 billion is calculated as operating income of $2.1 billion plus $4.4 billion of adjustments. For 3Q23, adjusted operating income of $6.5 billion is calculated as operating income of $5.8 billion plus $0.7 billion of adjustments. Adjustments for all periods are detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated October 23, 2024.

EBITDA is net income plus income tax, interest, and depreciation and amortization expenses minus equity in net income of affiliates and other income (expense) – net. Adjusted EBITDA is calculated by excluding from EBITDA certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, significant abandonments and impairments, benefit-related gains and losses, employee separation and other material gains and losses. Adjusted EBITDA, Mobility EBITDA, Business Wireline EBITDA and Consumer Wireline 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 adjusted EBITDA, Mobility EBITDA, Business Wireline EBITDA and Consumer Wireline EBITDA and the most comparable GAAP metrics without unreasonable effort.

For 3Q24, adjusted EBITDA of $11.6 billion is calculated as net income of $0.1 billion, plus income tax expense of $1.3 billion, plus interest expense of $1.7 billion, minus equity in net income of affiliates of $0.3 billion, minus other income (expense) – net of $0.7 billion, plus depreciation and amortization of $5.1 billion, plus adjustments of $4.4 billion. For 3Q23, adjusted EBITDA of $11.2 billion is calculated as net income of $3.8 billion, plus income tax expense of $1.2 billion, plus interest expense of $1.7 billion, minus equity in net income of affiliates of $0.4 billion, minus other income (expense) – net of $0.4 billion, plus depreciation and amortization of $4.7 billion, plus adjustments of $0.7 billion. Adjustments for all periods are detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated October 23, 2024.

At the segment or business unit level, 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.

Free cash flow for 3Q24 of $5.1 billion is cash from operating activities of $10.2 billion, plus cash distributions from DIRECTV classified as investing activities of $0.3 billion, minus capital expenditures of $5.3 billion and cash paid for vendor financing of $0.2 billion. For 3Q23, free cash flow of $5.2 billion is cash from operating activities of $10.3 billion, plus cash distributions from DIRECTV classified as investing activities of $0.5 billion, minus capital expenditures of $4.6 billion and cash paid for vendor financing of $1.0 billion.

For 3Q24 year-to-date, free cash flow of $12.8 billion is cash from operating activities of $26.9 billion, plus cash distributions from DIRECTV classified as investing activities of $0.9 billion, minus capital expenditures of $13.4 billion and cash paid for vendor financing of $1.6 billion. For 3Q23 year-to-date, free cash flow of $10.4 billion is cash from operating activities of $26.9 billion, plus cash distributions from DIRECTV classified as investing activities of $1.4 billion, minus capital expenditures of $13.3 billion and cash paid for vendor financing of $4.7 billion.

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

Capital investment provides a comprehensive view of cash used to invest in our networks, product developments and support systems. In connection with capital improvements, we have favorable payment terms of 120 days or more with certain vendors, referred to as vendor financing, which are excluded from capital expenditures and reported as financing activities. Capital investment includes capital expenditures and cash paid for vendor financing ($0.2 billion in 3Q24 and $1.0 billion in 3Q23). Due to high variability and difficulty in predicting items that impact capital expenditures and vendor financing payments, the Company is not able to provide a reconciliation between projected capital investment and the most comparable GAAP metrics without unreasonable effort.

Adjusted equity in net income from DIRECTV investment of $0.5 billion for 3Q24 is calculated as equity income from DIRECTV of $0.3 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.

Net debt of $125.8 billion at September 30, 2024, is calculated as total debt of $129.0 billion less cash and cash equivalents of $2.6 billion and time deposits (i.e. deposits at financial institutions that are greater than 90 days) of $0.7 billion. 

Net debt-to-adjusted EBITDA is calculated by dividing net debt by the sum of the most recent four quarters of adjusted EBITDA. Net debt and adjusted EBITDA are 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 

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 classified as investing activities, 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
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Net cash provided by operating activities1	$          10,235	$           10,336		$          26,875	$           26,936
Add: Distributions from DIRECTV classified as investing    activities	342	473		928	1,447
Less: Capital expenditures	(5,302)	(4,647)		(13,420)	(13,252)
Less: Cash paid for vendor financing	(180)	(980)		(1,571)	(4,736)
Free Cash Flow	5,095	5,182		12,812	10,395
Less: Dividends paid	(2,038)	(2,019)		(6,171)	(6,116)
Free Cash Flow after Dividends	$            3,057	$            3,163		$            6,641	$            4,279
Free Cash Flow Dividend Payout Ratio	40.0 %	39.0 %		48.2 %	58.8 %
1  Includes distributions from DIRECTV of $281 and $955 in the third quarter and for the first nine months of 2024, and $423 and $1,334 in the third quarter and for the first nine months of 2023.

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
	2024	2023		2024	2023
Capital Expenditures	$              (5,302)	$              (4,647)		$            (13,420)	$            (13,252)
Cash paid for vendor financing	(180)	(980)		(1,571)	(4,736)
Cash paid for Capital Investment	$              (5,482)	$              (5,627)		$            (14,991)	$            (17,988)

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
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Net Income	$                  145	$               3,826		$               7,845	$              13,041
Additions:
Income Tax Expense	1,285	1,154		3,545	3,871
Interest Expense	1,675	1,662		5,098	4,978
Equity in Net (Income) of Affiliates	(272)	(420)		(915)	(1,338)
Other (Income) Expense - Net	(717)	(440)		(1,850)	(2,362)
Depreciation and amortization	5,087	4,705		15,206	14,011
EBITDA	7,203	10,487		28,929	32,201
Transaction and other costs	34	72		101	72
Benefit-related (gain) loss	(73)	40		(122)	(32)
Asset impairments and abandonments and restructuring	4,422	604		5,061	604
Adjusted EBITDA1	$              11,586	$              11,203		$              33,969	$              32,845
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
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Communications Segment
Operating Income	$            7,156	$            7,273		$          20,906	$           21,193
Add: Depreciation and amortization	4,813	4,350		14,319	12,952
EBITDA	$          11,969	$           11,623		$          35,225	$           34,145
Total Operating Revenues	$          29,074	$           29,244		$          86,513	$           87,241
Operating Income Margin	24.6 %	24.9 %		24.2 %	24.3 %
EBITDA Margin	41.2 %	39.7 %		40.7 %	39.1 %
Mobility
Operating Income	$            7,003	$            6,763		$          20,190	$           19,647
Add: Depreciation and amortization	2,490	2,134		7,453	6,355
EBITDA	$            9,493	$            8,897		$          27,643	$           26,002
Total Operating Revenues	$          21,052	$           20,692		$          62,126	$           61,589
Service Revenues	16,539	15,908		48,810	47,136
Operating Income Margin	33.3 %	32.7 %		32.5 %	31.9 %
EBITDA Margin	45.1 %	43.0 %		44.5 %	42.2 %
EBITDA Service Margin	57.4 %	55.9 %		56.6 %	55.2 %
Business Wireline
Operating Income	$               (43)	$               350		$               123	$            1,124
Add: Depreciation and amortization	1,399	1,345		4,147	4,008
EBITDA	$            1,356	$            1,695		$            4,270	$            5,132
Total Operating Revenues	$            4,606	$            5,221		$          14,274	$           15,831
Operating Income Margin	(0.9) %	6.7 %		0.9 %	7.1 %
EBITDA Margin	29.4 %	32.5 %		29.9 %	32.4 %
Consumer Wireline
Operating Income	$               196	$               160		$               593	$               422
Add: Depreciation and amortization	924	871		2,719	2,589
EBITDA	$            1,120	$            1,031		$            3,312	$            3,011
Total Operating Revenues	$            3,416	$            3,331		$          10,113	$            9,821
Operating Income Margin	5.7 %	4.8 %		5.9 %	4.3 %
EBITDA Margin	32.8 %	31.0 %		32.7 %	30.7 %
Latin America Segment
Operating Income (Loss)	$                10	$               (29)		$                19	$               (98)
Add: Depreciation and amortization	158	184		507	544
EBITDA	$               168	$               155		$               526	$               446
Total Operating Revenues	$            1,022	$               992		$            3,188	$            2,842
Operating Income Margin	1.0 %	(2.9) %		0.6 %	(3.4) %
EBITDA Margin	16.4 %	15.6 %		16.5 %	15.7 %

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
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Operating Expenses
Transaction and other costs	$                    34	$                    72		$                  101	$                    72
Benefit-related (gain) loss	(73)	40		(122)	(32)
Asset impairments and abandonments and restructuring	4,422	604		5,061	604
Adjustments to Operations and Support Expenses	4,383	716		5,040	644
Amortization of intangible assets	13	21		43	55
Adjustments to Operating Expenses	4,396	737		5,083	699
Other
DIRECTV intangible amortization (proportionate share)	256	310		797	975
Benefit-related (gain) loss, impairments of investment and other	(92)	507		146	314
Actuarial and settlement (gain) loss - net	—	(71)		—	(145)
Adjustments to Income Before Income Taxes	4,560	1,483		6,026	1,843
Tax impact of adjustments	33	325		364	406
Adjustments to Net Income	$               4,527	$               1,158		$               5,662	$               1,437

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, other income (expense) 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 impairments, 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
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Operating Income	$            2,116	$            5,782		$          13,723	$           18,190
Adjustments to Operating Expenses	4,396	737		5,083	699
Adjusted Operating Income	$            6,512	$            6,519		$          18,806	$           18,889
EBITDA	$            7,203	$          10,487		$          28,929	$           32,201
Adjustments to Operations and Support Expenses	4,383	716		5,040	644
Adjusted EBITDA	$          11,586	$          11,203		$          33,969	$           32,845
Total Operating Revenues	$          30,213	$          30,350		$          90,038	$           90,406
Operating Income Margin	7.0 %	19.1 %		15.2 %	20.1 %
Adjusted Operating Income Margin	21.6 %	21.5 %		20.9 %	20.9 %
Adjusted EBITDA Margin	38.3 %	36.9 %		37.7 %	36.3 %
Adjusted Diluted EPS
	Third Quarter			Nine-Month Period
	2024	2023		2024	2023
Diluted Earnings Per Share (EPS)	$            (0.03)	$                 0.48		$              0.93	$                 1.67
DIRECTV intangible amortization (proportionate share)	0.03	0.03		0.09	0.10
Actuarial and settlement (gain) loss - net	—	(0.01)		—	(0.02)
Restructuring and impairments	0.61	0.11		0.72	0.11
Benefit-related, transaction and other costs	(0.01)	0.03		(0.03)	0.01
Adjusted EPS	$              0.60	$                 0.64		$              1.71	$                 1.87
Year-over-year growth - Adjusted	(6.3) %			(8.6) %
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,208	7,185		7,200	7,280

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 - 2024
Dollars in millions
	Three Months Ended
	Dec.  31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20231		20241		20241		2024
Adjusted EBITDA	$         10,555		$         11,046		$         11,337		$         11,586		$           44,524
End-of-period current debt									2,637
End-of-period long-term debt									126,375
Total End-of-Period Debt									129,012
Less: Cash and Cash Equivalents									2,586
Less: Time Deposits									650
Net Debt Balance									125,776
Annualized Net Debt to Adjusted EBITDA Ratio									2.82
1 As reported in AT&T's Form 8-K filed July 24, 2024.

 

Net Debt to Adjusted EBITDA - 2023
Dollars in millions
	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Four Quarters
	20221		20231		20231		20231
Adjusted EBITDA	$         10,231		$         10,589		$         11,053		$         11,203		$           43,076
End-of-period current debt									11,302
End-of-period long-term debt									126,701
Total End-of-Period Debt									138,003
Less: Cash and Cash Equivalents									7,540
Less: Time Deposits									1,750
Net Debt Balance									128,713
Annualized Net Debt to Adjusted EBITDA Ratio									2.99
1 As reported in AT&T's Form 8-K filed July 24, 2024.

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
	Third Quarter
	September 30, 2024					September 30, 2023
	Mobility	Business Wireline	Adj.1	Business Solutions		Mobility	Business Wireline	Adj.1	Business Solutions	Percent Change
Operating Revenues
Wireless service	$   16,539	$         —	$ (14,056)	$  2,483		$   15,908	$         —	$ (13,530)	$   2,378	4.4 %
Wireline service	—	4,417	—	4,417		—	5,087	—	5,087	(13.2) %
Wireless equipment	4,513	—	(3,735)	778		4,784	—	(4,012)	772	0.8 %
Wireline equipment	—	189	—	189		—	134	—	134	41.0 %
Total Operating Revenues	21,052	4,606	(17,791)	7,867		20,692	5,221	(17,542)	8,371	(6.0) %
Operating Expenses
Operations and support	11,559	3,250	(9,453)	5,356		11,795	3,526	(9,661)	5,660	(5.4) %
EBITDA	9,493	1,356	(8,338)	2,511		8,897	1,695	(7,881)	2,711	(7.4) %
Depreciation and amortization	2,490	1,399	(2,036)	1,853		2,134	1,345	(1,741)	1,738	6.6 %
Total Operating Expenses	14,049	4,649	(11,489)	7,209		13,929	4,871	(11,402)	7,398	(2.6) %
Operating Income	$     7,003	$       (43)	$  (6,302)	$     658		$     6,763	$       350	$  (6,140)	$     973	(32.4) %
Operating Income Margin				8.4 %					11.6 %	(320) BP
1 Non-business wireless reported in the Communications segment under the Mobility business unit.

 

Supplemental Operational Measure
	Nine-Month Period
	September 30, 2024					September 30, 2023
	Mobility	Business Wireline	Adj.1	Business Solutions		Mobility	Business Wireline	Adj.1	Business Solutions	Percent Change
Operating Revenues
Wireless service	$   48,810	$         —	$ (41,473)	$  7,337		$   47,136	$         —	$ (40,104)	$  7,032	4.3 %
Wireline service	—	13,688	—	13,688		—	15,401	—	15,401	(11.1) %
Wireless equipment	13,316	—	(11,028)	2,288		14,453	—	(12,134)	2,319	(1.3) %
Wireline equipment	—	586	—	586		—	430	—	430	36.3 %
Total Operating Revenues	62,126	14,274	(52,501)	23,899		61,589	15,831	(52,238)	25,182	(5.1) %
Operating Expenses
Operations and support	34,483	10,004	(28,180)	16,307		35,587	10,699	(29,297)	16,989	(4.0) %
EBITDA	27,643	4,270	(24,321)	7,592		26,002	5,132	(22,941)	8,193	(7.3) %
Depreciation and amortization	7,453	4,147	(6,094)	5,506		6,355	4,008	(5,186)	5,177	6.4 %
Total Operating Expenses	41,936	14,151	(34,274)	21,813		41,942	14,707	(34,483)	22,166	(1.6) %
Operating Income	$   20,190	$       123	$ (18,227)	$  2,086		$   19,647	$    1,124	$ (17,755)	$  3,016	(30.8) %
Operating Income Margin				8.7 %					12.0 %	(330) BP
1 Non-business wireless reported in the Communications segment under the Mobility business unit.

 

* 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.

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