AT&T meets expectations with 67-cent earnings-per-share in Q2 2013
AT&T has announced their Q2 2013 earnings, stating that a record number of Android sales helped bring adjusted earnings of 67-cents per share on revenue at $32.1 billion. Randall Stephenson, AT&T chairman and CEO said in the prepared statement:
This was a solid quarter for revenue and customer additions across our key growth platform. Our 4G LTE network is the fastest and the most reliable in the nation, and deployment is ahead of schedule. That contributed to a step-up in postpaid subscriber gains, and strong mobile data revenue growth of nearly 20 percent. Growth in U-verse and strategic business services also continued to be strong — adding to our momentum.
Other highlights from the press release mention an increase of over 500,000 post-paid subscribers, and an increase of over 630,000 total subscribers for the quarter, an increase of 5.7-percent in wireless revenues to total over $17 billion, and a total of 35-percent of all customers using their LTE network which is expected to cover nearly 270 million people in 400 markets by year-end.
The second quarter also saw smartphone sales of almost $7 billion, which includes a record number of Android devices. Smartphone users now account for 88-percent of postpaid phone sales.
The full details can be found in the press release after the break, or via AT&T's live earnings call on the web.
AT&T Reports Solid Revenue Growth on Strong Wireless Gains Driven by Quality Network Performance and Continued U-verse Growth
- $0.71 diluted EPS compared to $0.66 diluted EPS in the second quarter of 2012, up
- 7.6 percent. Excluding significant items, EPS was $0.67
- Consolidated revenues of $32.1 billion, up 1.6 percent versus reported results for the year-earlier period, and up 2.6 percent adjusting for the sale of Advertising Solutions
- More than 2 million new wireless and wireline high speed broadband connections
Nation's Fastest and Most Reliable 4G LTE Network Driving Subscriber and Usage Growth
- 551,000 wireless postpaid net adds, best second-quarter postpaid net adds in four years
- 35 percent of postpaid smartphone base LTE capable
- Smartphone data usage per device up 50 percent year over year
- LTE network expected to cover nearly 270 million POPs in 400 markets by year-end
- LTE network build expected to be substantially complete by summer 2014
Strong Wireless Revenue Growth, Record Second-Quarter Smartphone Sales
- Wireless revenues up 5.7 percent, service revenues up 4.1 percent versus the year-ago quarter
- Wireless data revenues up 19.8 percent versus the year-earlier period
- Wireless operating income margin of 27.1 percent; wireless EBITDA service margin of 42.4 percent reflecting record second-quarter smartphone sales of 6.8 million, including record Android sales
- Added 1.2 million new smartphone subscribers; smartphones 88 percent of postpaid phone sales
- Total postpaid ARPU up 1.8 percent; phone-only ARPU up 3.0 percent
Wireline Transformation to IP Continues: U-verse® More Than 50 percent of Wireline Consumer Revenues; Strong Growth in Strategic Business Services Revenues
- Wireline consumer revenue growth of 2.4 percent versus the year-earlier period
- Total U-verse revenues, including business, up 30.1 percent year over year; U-verse more than half of wireline consumer revenues
- 9.4 million total U-verse subscribers (TV and high speed Internet) in service; 641,000 high speed Internet subscribers added; 233,000 U-verse TV subscribers added, topping 5 million
- Total wireline broadband data ARPU up 9 percent year over year
- Continued strength in strategic business services revenues, up more than 15 percent year over year
Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet at 4:30 p.m. ET on Tuesday, July 23, 2013, at www.att.com/investor.relations.
- Consolidated Statements of Income
- Statements of Segment Income
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Supplementary Operating and Financial Data
- Reconciliation of EBITDA
- Reconciliation of Free Cash Flow
- Net-Debt-to-EBITDA Ratio
- Adjusted Operating Revenues
- Reconciliation of Adjusted Diluted EPS
- Non-GAAP Discussions
AT&T Inc. (NYSE:T) today reported continued earnings gains for the second quarter with increasing revenue growth driven by strong mobile data growth, solid postpaid net adds and continued strong gains in wireline consumer and U-verse services.
“This was a solid quarter for revenue and customer additions across our key growth platforms,” said Randall Stephenson, AT&T chairman and CEO. “Our 4G LTE network is the fastest and the most reliable in the nation, and deployment is ahead of schedule. That contributed to a step-up in postpaid subscriber gains, and strong mobile data revenue growth of nearly 20 percent. Growth in U-verse and strategic business services also continued to be strong — adding to our momentum.”
Second-Quarter Financial Results
For the quarter ended June 30, 2013, AT&T's consolidated revenues totaled $32.1 billion, up 1.6 percent versus the year-earlier quarter and up 2.6 percent when excluding revenues from the divested Advertising Solutions business unit.
Compared with results for the second quarter of 2012, operating expenses were $26.0 billion versus $24.8 billion; operating income was $6.1 billion versus $6.8 billion; and operating income margin was 19.1 percent, compared to 21.6 percent.
Second-quarter 2013 net income attributable to AT&T totaled $3.8 billion, or $0.71 per diluted share, compared to $3.9 billion, or $0.66 per diluted share, in the year-earlier quarter, up 7.6 percent. Adjusted for a gain of 4 cents on sales of América Móvil shares, earnings per diluted share was $0.67.
Second-quarter 2013 cash from operating activities totaled $9.5 billion, and capital expenditures totaled $5.5 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $4.0 billion.
As part of its Project VIP-related LTE deployment, the company now covers more than 225 million POPs with the nation's fastest, and now most reliable, 4G LTE network, according to independent third-party data. The company's LTE network is expected to cover nearly 270 million POPs in 400 markets by year-end 2013, and its LTE deployment is expected to be substantially complete by the summer of 2014. During the quarter, both PCWorld and PC Magazine named AT&T's 4G LTE network the nation's fastest.
During the second quarter, the company completed its second 300 million share repurchase authorization and began buying back shares under its third 300 million share authorization. The company repurchased 89 million shares for $3.3 billion in the second quarter. At the end of the quarter, 272 million shares remained on the current authorization. The company expects to make future repurchases opportunistically.
WIRELESS OPERATIONAL HIGHLIGHTS
AT&T delivered solid revenue growth, strong postpaid subscriber and ARPU gains, and continued expansion of its high-value smartphone base. Highlights included:
Solid Growth in Wireless Revenues. Total wireless revenues, which include equipment sales, were up 5.7 percent year over year to $17.3 billion. Wireless service revenues increased 4.1 percent in the second quarter, to $15.4 billion. Wireless data revenues increased 19.8 percent from the year-earlier quarter to $5.4 billion. Second-quarter wireless operating expenses totaled $12.6 billion, up 11.8 percent versus the year-earlier quarter, and wireless operating income was $4.7 billion, down 7.7 percent year over year.
More than 550,000 Postpaid Subscribers Added. AT&T posted a net increase in total wireless subscribers of 632,000 in the second quarter. Subscriber additions for the quarter included postpaid net adds of 551,000, the best second-quarter postpaid net adds in four years and a more than 70 percent increase from the year-ago quarter. Postpaid net adds include 398,000 postpaid tablets added in the quarter. Connected device net adds were 484,000. Prepaid gained 11,000 subscribers even with declines in session-based tablets. Reseller had a net loss of 414,000 primarily due to losses in low-revenue accounts, but revenues increased almost 30 percent year over year.
Phone-Only Postpaid ARPU Increases 3.0 percent. Postpaid phone-only ARPU increased 3.0 percent versus the year-earlier quarter. Total postpaid subscriber ARPU, which includes high margin but lower-ARPU tablets, increased 1.8 percent versus the year-earlier quarter. This marked the 18th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU increased 17.6 percent versus the year-earlier quarter.
Smartphone Base Continues to Expand. AT&T added 1.2 million postpaid smartphone subscribers in the second quarter. At the end of the quarter, 73 percent, or 49.5 million, of AT&T's postpaid phone subscribers had smartphones, up from 64 percent, or 43.1 million, a year earlier. The company sold a second-quarter record 6.8 million smartphones, including a record number of Android sales, and smartphones accounted for 88 percent of postpaid phone sales in the quarter. AT&T's ARPU for smartphones is more than twice that of non-smartphone subscribers, and about 90 percent of postpaid subscribers are on FamilyTalk®, Mobile Share or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. More than 35 percent of AT&T's postpaid smartphone customers now use an LTE device. And about 65 percent use a 4G-capable device (LTE/HSPA+).
More Than 70 percent of Postpaid Smartphones on Usage-Based Plan. The number of subscribers on usage-based data plans (tiered data and Mobile Share plans) continues to increase. More than 70 percent, or 35.1 million, of postpaid smartphone subscribers are on usage-based data plans. This compares to 62 percent, or 26.6 million, a year ago and 45 percent two years ago. About 80 percent of customers on usage-based data plans have chosen the higher-priced plans.
More than 13 million connections, or more than 18 percent of postpaid subscribers, are on Mobile Share plans. The number of Mobile Share accounts reached 4.3 million in the second quarter with an average of about three devices per account. Take rates on the higher-data plans continue to be strong with more than 25 percent of Mobile Share accounts choosing 10 gigabytes or higher plans. More than 15 percent of Mobile Share subscribers came from unlimited plans.
Postpaid Churn Shows Sequential Improvement. Postpaid churn was 1.02 percent, up slightly from the year-ago quarter and down slightly from the first quarter of 2013. Total churn increased year over year, due mostly to increases in reseller churn, but was down slightly sequentially.
Wireless Margins Reflect Record Smartphone Sales. Second-quarter wireless margins reflect record second-quarter smartphone sales, strong upgrades and further revenue gains from the company's high-quality smartphone subscriber base. AT&T's second-quarter wireless operating income margin was 27.1 percent versus 31.0 percent in the year-earlier quarter. AT&T's wireless EBITDA service margin was 42.4 percent, compared with 45.8 percent in the second quarter of 2012. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)
WIRELINE OPERATIONAL HIGHLIGHTS
AT&T's second-quarter wireline results were led by strong U-verse TV and high speed Internet gains, solid wireline consumer revenue growth and increasing growth in strategic business services. Highlights included:
Wireline Revenues Grow Sequentially. Total second-quarter wireline revenues were $14.8 billion, down 0.9 percent versus the year-earlier quarter and up 0.8 percent sequentially. Total U-verse revenues grew 30.1 percent year over year and were up 9.0 percent versus the first quarter of 2013. Second-quarter wireline operating expenses were $13.1 billion, up 1.3 percent versus the second quarter of 2012 and up 0.9 percent sequentially. AT&T's wireline operating income totaled $1.6 billion, down 15.8 percent versus the second quarter of 2012 and flat sequentially. Second-quarter wireline operating income margin was 11.1 percent, compared to 13.0 percent in the year-earlier quarter, but flat versus the first quarter of 2013.
U-verse Now 51 percent of Consumer Revenues. Revenues from residential customers totaled $5.6 billion, an increase of 2.4 percent versus the second quarter a year ago and up 1.8 percent versus the first quarter of 2013. Continued strong growth in consumer IP data services in the second quarter more than offset lower revenues from voice and legacy products. U-verse, which includes TV, high speed Internet and voice over IP, now represents 51 percent of wireline consumer revenues, up from 41 percent in the year-earlier quarter. Consumer U-verse revenues grew 28.4 percent year over year and were up 8.2 percent versus the first quarter of 2013.
U-verse Hits 9.4 million Subscribers. Total U-verse subscribers (TV and high speed Internet) reached 9.4 million in the second quarter. U-verse TV added 233,000 subscribers to top 5.0 million in service. U-verse high speed Internet had a net gain of 641,000 subscribers to reach a total of 9.1 million. Overall, the company had a net loss of 61,000 wireline broadband subscribers, an improvement over last year's loss but still reflecting typical seasonal pressures. Total wireline broadband ARPU was up 9 percent year over year. Total U-verse high speed Internet subscribers now represent 55 percent of all wireline broadband subscribers compared with 40 percent in the year-earlier quarter.
About 59 percent of U-verse broadband subscribers have a plan delivering speeds up to 10 Mbps or higher — up from 52 percent in the year-ago quarter. In the second quarter, more than 90 percent of new U-verse TV customers also signed up for U-verse high speed Internet. About 70 percent of AT&T U-verse TV subscribers take three or four services from AT&T. ARPU for U-verse triple-play customers continues to be more than $170. U-verse TV penetration of customer locations continues to grow and was at 20.1 percent at the end of the second quarter.
Business Revenues Grow Sequentially. Total revenues from business customers were $8.9 billion, down 2.2 percent versus the year-earlier quarter and up slightly compared with the first quarter of 2013. Business service revenues declined 2.1 percent year over year. Overall, declines in legacy products were partially offset by continued double-digit growth in strategic business services. Revenues from these services, the next-generation capabilities that lead AT&T's most advanced business solutions — including VPN, Ethernet, hosting and other advanced IP services — grew more than 15 percent versus the year-earlier quarter. These services represent an $8.4 billion annualized revenue stream.