REG - AT & T Inc. - 2Q17 Earnings Release <Origin Href="QuoteRef">T.N</Origin> - Part 3
23/08/2017 16:40
- Part 3: For the preceding part double click ID:nRSW8227Ob
% (177 ) (391 ) 54.7 %
Income (Loss)
Equity in Net Income 25 9 - % 45 23 95.7 %
(Loss) of Affiliates
Segment Contribution $ (32 ) $ (184 ) 82.6 % $ (132 ) $ (368 ) 64.1 %
Segment Operating (2.8 )% (10.6 )% (4.5 )% (11.2 )%
Income Margin
Supplementary
Operating Data
Subscribers and
connections in
thousands
Unaudited June 30, Percent
2017 2016 Change
Mexican Wireless
Subscribers
Postpaid 5,187 4,570 13.5 %
Prepaid 7,646 5,059 51.1 %
Branded 12,833 9,629 33.3 %
Reseller 249 326 -23.6 %
Total Mexican 13,082 9,955 31.4 %
Wireless Subscribers
Latin America
Satellite Subscribers
PanAmericana 8,103 7,175 12.9 %
SKY Brazil 5,519 5,348 3.2 %
Total Latin America 13,622 12,523 8.8 %
Satellite Subscribers
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
2017 2016 Change 2017 2016 Change
Mexican Wireless Net
Additions
Postpaid 92 165 -44.2 % 222 281 -21.0 %
Prepaid 402 614 -34.5 % 919 1,064 -13.6 %
Branded 494 779 -36.6 % 1,141 1,345 -15.2 %
Reseller (18 ) (37 ) 51.4 % (32 ) (74 ) 56.8 %
Total Mexican 476 742 -35.8 % 1,109 1,271 -12.7 %
Wireless Net
Additions
Latin America
Satellite Net
Additions
PanAmericana 13 81 -84.0 % 65 109 -40.4 %
SKY Brazil (69 ) 6 - % (30 ) (95 ) 68.4 %
Total Latin America (56 ) 87 - % 35 14 - %
Satellite Net
Additions
SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility).
Operating Results
Dollars in millions Three Months Ended Six Months Ended
Unaudited June 30, Percent June 30, Percent
2017 2016 Change 2017 2016 Change
Operating Revenues
Service $ 14,534 $ 14,911 -2.5 % $ 29,072 $ 29,709 -2.1 %
Equipment 2,984 3,013 -1.0 % 5,613 6,169 -9.0 %
Total Operating Revenues 17,518 17,924 -2.3 % 34,685 35,878 -3.3 %
Operating Expenses
Operations and support expenses 10,197 10,501 -2.9 % 20,195 21,125 -4.4 %
Depreciation and amortization 1,992 2,081 -4.3 % 3,989 4,137 -3.6 %
Total Operating Expenses 12,189 12,582 -3.1 % 24,184 25,262 -4.3 %
Operating Income $ 5,329 $ 5,342 -0.2 % $ 10,501 $ 10,616 -1.1 %
Operating Income Margin 30.4 % 29.8 % 30.3 % 29.6 %
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited June 30, Percent
2017 2016 Change
AT&T Mobility Subscribers
Postpaid 77,401 77,295 0.1 %
Prepaid 14,187 12,633 12.3 %
Branded 91,588 89,928 1.8 %
Reseller 10,254 12,920 -20.6 %
Connected Devices 34,658 28,957 19.7 %
Total AT&T Mobility Subscribers 136,500 131,805 3.6 %
Domestic Licensed POPs (000,000) 326 322 1.2 %
Three Months Ended Six Months Ended
June 30, Percent June 30, Percent
2017 2016 Change 2017 2016 Change
AT&T Mobility Net Additions
Postpaid 127 257 -50.6 % (64 ) 386 - %
Prepaid 267 365 -26.8 % 549 865 -36.5 %
Branded 394 622 -36.7 % 485 1,251 -61.2 %
Reseller (368 ) (459 ) 19.8 % (950 ) (859 ) -10.6 %
Connected Devices 2,256 1,198 88.3 % 4,828 2,750 75.6 %
Total AT&T Mobility Net Additions 2,282 1,361 67.7 % 4,363 3,142 38.9 %
M&A Activity, Partitioned Customers and Other Adjustments - (1 ) - % (2,723 ) 23 - %
Total Churn 1.28 % 1.35 % -7 BP 1.37 % 1.38 % -1 BP
Postpaid Churn 1.01 % 0.97 % 4 BP 1.07 % 1.04 % 3 BP
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
June 30, 2017
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 17,107 $ 10,313 $ 6,794 $ 2,335 $ 4,459 $ - $ 4,459
Entertainment Group 12,682 9,558 3,124 1,458 1,666 (11 ) 1,655
Consumer Mobility 7,791 4,520 3,271 871 2,400 - 2,400
International 2,026 1,772 254 311 (57 ) 25 (32 )
Segment Total 39,606 26,163 13,443 4,975 8,468 $ 14 $ 8,482
Corporate and Other 231 87 144 2 142
Acquisition-related items - 281 (281 ) 1,170 (1,451 )
Certain Significant items - (164 ) 164 - 164
AT&T Inc. $ 39,837 $ 26,367 $ 13,470 $ 6,147 $ 7,323
June 30, 2016
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 17,579 $ 10,857 $ 6,722 $ 2,521 $ 4,201 $ - $ 4,201
Entertainment Group 12,711 9,569 3,142 1,489 1,653 (2 ) 1,651
Consumer Mobility 8,186 4,680 3,506 932 2,574 - 2,574
International 1,828 1,723 105 298 (193 ) 9 (184 )
Segment Total 40,304 26,829 13,475 5,240 8,235 $ 7 $ 8,242
Corporate and Other 216 293 (77 ) 20 (97 )
Acquisition-related items - 233 (233 ) 1,316 (1,549 )
Certain Significant items - 29 (29 ) - (29 )
AT&T Inc. $ 40,520 $ 27,384 $ 13,136 $ 6,576 $ 6,560
Six Months Ended
Dollars in millions
Unaudited
June 30, 2017
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 33,955 $ 20,489 $ 13,466 $ 4,647 $ 8,819 $ - $ 8,819
Entertainment Group 25,305 19,159 6,146 2,877 3,269 (17 ) 3,252
Consumer Mobility 15,531 9,048 6,483 1,744 4,739 - 4,739
International 3,955 3,531 424 601 (177 ) 45 (132 )
Segment Total 78,746 52,227 26,519 9,869 16,650 $ 28 $ 16,678
Corporate and Other 456 308 148 33 115
Acquisition-related items - 488 (488 ) 2,372 (2,860 )
Certain Significant items - (282 ) 282 - 282
AT&T Inc. $ 79,202 $ 52,741 $ 26,461 $ 12,274 $ 14,187
June 30, 2016
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 35,188 $ 21,659 $ 13,529 $ 5,029 $ 8,500 $ - $ 8,500
Entertainment Group 25,369 19,147 6,222 2,977 3,245 1 3,246
Consumer Mobility 16,514 9,592 6,922 1,854 5,068 - 5,068
International 3,495 3,311 184 575 (391 ) 23 (368 )
Segment Total 80,566 53,709 26,857 10,435 16,422 $ 24 $ 16,446
Corporate and Other 489 670 (181 ) 37 (218 )
Acquisition-related items - 528 (528 ) 2,667 (3,195 )
Certain Significant items - (682 ) 682 - 682
AT&T Inc. $ 81,055 $ 54,225 $ 26,830 $ 13,139 $ 13,691
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.
Free Cash Flow
Free cash flow is defined as cash from operations minus Capital expenditures. Free cash flow after dividends is defined as
cash from operations minus Capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the
percentage of dividends paid 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 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 Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Net cash provided by operating activities $ 8,942 $ 10,307 $ 18,160 $ 18,207
Less: Capital expenditures (5,208 ) (5,470 ) (11,223 ) (10,139 )
Free Cash Flow 3,734 4,837 6,937 8,068
Less: Dividends paid (3,012 ) (2,952 ) (6,021 ) (5,899 )
Free Cash Flow after Dividends $ 722 $ 1,885 $ 916 $ 2,169
Free Cash Flow Dividend Payout Ratio 80.7 % 61.0 % 86.8 % 73.1 %
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 U.S. generally accepted accounting principles (GAAP).
EBITDA service margin is calculated as EBITDA divided by service revenues.
When discussing our segment results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and
amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations
(AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International
segment, EBITDA excludes depreciation and amortization from operating income.
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 segment
performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key
revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance.
Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in
2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in
evaluating the ability of our Latin America operations to generate cash to finance its own operations.
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 Consumer Mobility segment operating margin and our supplemental
AT&T Mobility 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. Management compensates for these limitations by
carefully analyzing how its competitors present 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 Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Net Income $ 4,014 $ 3,515 $ 7,588 $ 7,400
Additions:
Income Tax Expense 2,056 1,906 3,860 4,028
Interest Expense 1,395 1,258 2,688 2,465
Equity in Net (Income) Loss of Affiliates (14 ) (28 ) 159 (41 )
Other (Income) Expense - Net (128 ) (91 ) (108 ) (161 )
Depreciation and amortization 6,147 6,576 12,274 13,139
EBITDA 13,470 13,136 26,461 26,830
Total Operating Revenues 39,837 40,520 79,202 81,055
Service Revenues 36,538 37,142 72,994 74,243
EBITDA Margin 33.8 % 32.4 % 33.4 % 33.1 %
EBITDA Service Margin 36.9 % 35.4 % 36.3 % 36.1 %
Segment EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Business Solutions Segment
Segment Contribution $ 4,459 $ 4,201 $ 8,819 $ 8,500
Additions:
Depreciation and amortization 2,335 2,521 4,647 5,029
EBITDA 6,794 6,722 13,466 13,529
Total Segment Operating Revenues 17,107 17,579 33,955 35,188
Segment Operating Income Margin 26.1 % 23.9 % 26.0 % 24.2 %
EBITDA Margin 39.7 % 38.2 % 39.7 % 38.4 %
Entertainment Group Segment
Segment Contribution $ 1,655 $ 1,651 $ 3,252 $ 3,246
Additions:
Equity in Net (Income) Loss of Affiliates 11 2 17 (1 )
Depreciation and amortization 1,458 1,489 2,877 2,977
EBITDA 3,124 3,142 6,146 6,222
Total Segment Operating Revenues 12,682 12,711 25,305 25,369
Segment Operating Income Margin 13.1 % 13.0 % 12.9 % 12.8 %
EBITDA Margin 24.6 % 24.7 % 24.3 % 24.5 %
Consumer Mobility Segment
Segment Contribution $ 2,400 $ 2,574 $ 4,739 $ 5,068
Additions:
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