DALLAS, Jan. 8, 2020 /CNW/ -- John Stephens, senior executive vice president
and chief financial officer of AT&T Inc.* (NYSE:T), updated
shareholders in his presentation today at the Citi Global TMT West
Conference.
Common share retirements. Stephens said that AT&T has
retired about 140 million shares it issued for the Time Warner
acquisition, including about 80 million shares so far in 2020 under
its accelerated share repurchase (ASR) agreement. Funding for
the ASR-related share retirements will adversely affect the
company's first quarter 2020 net debt-to-adjusted EBITDA ratio, but
Stephens said the company expects this ratio will come back down
during the rest of 2020.1
2019 results. While the company's fourth-quarter and
full-year 2019 results won't be announced until January 29, 2020, Stephens said the company
continues to expect that it met all of its 2019 commitments to
shareholders. AT&T's fourth-quarter 2019 revenues will reflect
lower Warner Bros. theatrical revenues as compared to a strong
fourth-quarter 2018 film slate. Additionally, investment in
HBO Max in the fourth quarter, in the form of new content
production, foregone licensing revenues and platform costs,
pressured operating income about $500
million. Fourth-quarter revenues are also expected to
reflect U.S. wireless equipment sales revenue slightly lower than
fourth quarter of 2018. As in prior quarters, the company expects
to see foreign exchange rate pressure in some of its international
operations.
2020 guidance.2 Stephens reiterated AT&T's
2020 guidance, which includes expectations for:
- Adjusted EPS in the $3.60 to
$3.70 range, including HBO Max
investment of $1.5 billion to
$2 billion and significant share
retirements.
- Adjusted EBITDA margin stable with 2019 levels, including HBO
Max investment, service revenue growth, merger synergies and new
cost initiatives.3
- Free cash flow in the $28 billion
range with a dividend payout ratio in the low 50%
range.4
- Gross capital investment in the $20
billion range, reflecting downward bias from fiber build
completion and the company's capital efficient one-touch wireless
spectrum deployment.5
- Revenue growth of 1-2%, including wireless equipment revenue
gains from 5G device adoption.
2Adjustments to 2020 EPS include merger-related
amortization in the range of $6.5
billion, a non-cash mark-to-market benefit plan gain/loss,
merger integration and other adjustments. We expect 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 EPS, free cash flow and
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 our non-GAAP metrics and
the reported GAAP metrics without unreasonable effort.
Stephens also reiterated that the company is focused on
exceeding the annual 6% to 8% reduction in network operational
costs it has achieved in recent years. He said that the company has
begun several cost reduction initiatives as it targets an
incremental 4% in cost reductions driven primarily by lower
labor-related costs and corporate overhead. The company has already
virtualized 71% of its network functions and expects to meet its
goal of 75% by the end of 2020.
1 Net Debt to 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 Adjusted EBITDA.
2 See above.
3 EBITDA margin is operating income before depreciation
and amortization, divided by total revenues.
4 Free cash flow is cash from operating activities minus
capital expenditures. Free cash flow dividend payout ratio is
dividends divided by free cash flow.
5 Excludes expected FirstNet reimbursements in the
$1 billion range; includes potential
vendor financing.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology. It
executes in the market under four operating units. WarnerMedia is a
leading media and entertainment company that creates and
distributes premium and popular content to global audiences through
its consumer brands including: HBO, Warner Bros., TNT, TBS, truTV,
CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim,
Turner Classic Movies and others. AT&T Communications provides
more than 100 million U.S. consumers with entertainment and
communications experiences across TV, mobile and broadband
services. Plus, it serves nearly 3 million business customers with
high-speed, highly secure connectivity and smart solutions.
AT&T Latin America provides pay-TV services across 11 countries
and territories in Latin America
and the Caribbean, and is the
fastest growing wireless provider in Mexico, serving consumers and businesses.
Xandr provides marketers with innovative and relevant advertising
solutions for consumers around premium video content and
digital advertising through its AppNexus platform.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc. Additional information is available
at about.att.com. © 2020 AT&T Intellectual Property. All rights
reserved. AT&T, the Globe logo and other marks are trademarks
and service marks of AT&T Intellectual Property and/or AT&T
affiliated companies. All other marks contained herein are the
property of their respective owners.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results might differ
materially. A discussion of factors that may affect future results
is contained in AT&T's filings with the Securities and Exchange
Commission. AT&T disclaims any obligation to update and revise
statements contained in this news release based on new information
or otherwise.
This news release may contain certain non-GAAP financial
measures. Reconciliations between the non-GAAP financial measures
and the GAAP financial measures are available on the company's
website at https://investors.att.com.
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SOURCE AT&T Inc.