AT&T Delivers Strong 2023 Results, Cash from Operations and Free Cash Flow Driven by 5G and Fiber Growth

* 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 Based on comparison of carrier owned & operated networks. No AT&T on-net coverage in select countries, including Canada. Details: att.com/international. Destinations covered: att.com/globalcountries. 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
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.

Non-GAAP Measures and Reconciliations to GAAP Measures

Reconciliations of non-GAAP financial measures cited in this document to the most directly comparable GAAP financial measures can be found at https://investors.att.com and in our Form 8-K dated January 24, 2024. Free cash flow, EBITDA, adjusted EBITDA, adjusted operating income, adjusted diluted EPS, net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures frequently used by investors and credit rating agencies.  All results metrics discussed below represent continuing operations.

Free cash fow for 4Q23 of $6.4 billion is cash from operating activities of $11.4 billion, plus cash distributions from DIRECTV classified as investing activities of $0.6 billion, minus capital expenditures of $4.6 billion and cash paid for vendor financing of $1.0 billion. For 2023, free cash flow of $16.8 billion is cash from operating activities of $38.3 billion, plus cash distributions from DIRECTV classified as investing activities of $2.0 billion, minus capital expenditures of $17.9 billion and cash paid for vendor financing of $5.7 billion.  For 2022, free cash flow of $14.1 billion is cash from operating activities of $35.8 billion, plus cash distributions from DIRECTV classified as investing activities of $2.6 billion, minus capital expenditures of $19.6 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.

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 4Q23, Adjusted Operating Income of $5.8 billion is calculated as operating income of $5.3 billion plus $0.5 billion of adjustments. For 4Q22, Adjusted Operating Income of $5.7 billion is calculated as operating income of ($21.1) billion plus $26.7 billion of adjustments.

For 2023, Adjusted Operating Income of $24.7 billion is calculated as operating income of $23.5 billion plus $1.2 billion of adjustments. For 2022, Adjusted Operating Income of $23.5 billion is calculated as operating income of ($4.6) billion plus $28.1 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 January 24, 2024.

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 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 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 and the most comparable GAAP metrics 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 ($1.0 billion in 4Q23, $5.7 billion in 2023). For 2024, capital investment is expected to be in the $21-$22 billion range. 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 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 impairment, 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 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%.

For 4Q23, Adjusted EPS of $0.54 is Diluted EPS of $0.30 adjusted for $0.18 actuarial loss on benefit plans, $0.06 restructuring and impairments, $0.03 proportionate share of intangible amortization at the DIRECTV equity method investment and $0.01 of benefit-related, transaction and other costs, minus $0.04 benefit from tax items.  For 4Q22, Adjusted EPS of $0.61 is Reported EPS of ($3.20) adjusted for $3.57 impairments, abandonments and restructuring, $0.19 actuarial loss on benefit plans, $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment, $0.04 benefit-related and other costs and $0.01 impact of Accounting Standards Update (ASU) No. 2020-06, minus $0.04 benefit from tax items.

For 2023, Adjusted EPS from continuing operations of $2.41 is Diluted EPS of $1.97 adjusted for $0.18 restructuring and impairments, $0.17 net actuarial and settlement loss on benefit plans, and $0.14 proportionate share of intangible amortization at the DIRECTV equity method investment, minus $0.04 benefit from tax items and $0.01 of benefit-related, transaction and other costs.  For 2022, Adjusted EPS of $2.57 is Reported EPS from continuing operations of ($1.10) adjusted for $3.59 impairments, abandonments and restructuring, $0.19 benefit-related and other costs, $0.16 proportionate share of intangible amortization at the DIRECTV equity method investment and $0.06 impact of ASU No. 2020-06, minus $0.20 actuarial gain on benefit plans and $0.13 benefit from tax items.

The company expects adjustments to 2024 reported diluted EPS to include our proportionate share of intangible amortization at the DIRECTV equity method investment in the range of $0.5-$0.7 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 and 2025 Adjusted EPS depend 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 Equity in Net Income from DIRECTV investment of $0.6 billion for 4Q23 ($2.9 billion for 2023) is calculated as equity income from DIRECTV of $0.3 billion ($1.7 billion for 2023) reported in Equity in Net Income of Affiliates and excludes $0.3 billion ($1.3 billion for 2023) of AT&T’s proportionate share of the noncash depreciation and amortization of fair value accretion from DIRECTV’s revaluation of assets and purchase price allocation.

Net Debt of $128.9 billion at December 31, 2023 is calculated as Total Debt of $137.3 billion less Cash and Cash Equivalents of $6.7 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 is calculated by dividing 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 Time Deposits, from Total 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.