at&t analyst and investor day
TRANSCRIPT
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this presentation 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 presentation based on new information or otherwise.
This presentation may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available in the appendix of this presentation and on the company’s website at https://investors.att.com.
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary2
GROWCustomer
Relationships
Investing in strategic growth –5G, Fiber, HBO Max
Committed to sustaining dividend at current levels
Utilizing cash after dividendsto reduce debt
Our Shared 2021 Priority
DeliberateCapital Allocation
Broadband connectivity5G, Fiber
Software-based entertainmentHBO Max
Fantastic storytellingIndustry leader for 2020 Emmy wins
Our Market Focus
Continued portfolio review –restructuring non-core assets
Investing to drive growth in existing and expanding markets
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary5
AT&T Communications
WarnerMedia
Jeff McElfresh
Jason Kilar
Financial Overview John Stephens & Pascal Desroches
Question & Answer Team
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary6
73.9
317.7
1.3
5.6
Jan-
15
May
-15
Sep-
15
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
Sep-
17
Jan-
18
May
-18
Sep-
18
Jan-
19
May
-19
Sep-
19
Jan-
20
May
-20
2020
Broadband data usage steadily increases, jumps with pandemic
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary9
8
39
78
280
8
18
28
38
48
58
2015
38% CAGR
Fixed
Mobile
Downlink
Uplink
2020
35% CAGR
2015
COVID-19 COVID-19
Fixed and Mobile Broadband Usage Per Sub (GB)
Uplink and Downlink Broadband Usage Per Sub (GB)
Source: AT&T Labs Outlook
Customer connectivity usage continues to accelerate
10 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Expected Monthly Usage (Terabytes)
0.04 0.200.3
1.5
0.9
4.6
2020 2025
10:1 ~5:1Down / Uplink
Percentiles
50th
10th
90th
Today Future
Mobile 11 50 GB
Connected devices 13 32 devices
Evolving use cases
4K Content AR / VR GamingConferencing
Video streaming 3 5 hours
Source: AT&T Labs Outlook
AT&T optimally positioned to meet customers’ connectivity needs
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
GamerLow latency / high bandwidth
Small BusinessSimple / transactional
Enterprise / Public SectorDistributed and remote workers
HomeHD streaming / simultaneous viewing
TravelHighly mobile, distributed
Young Adult / StudentWireless first, gamers
141M U.S. console gamers (>1 hour week)1
~31.7M small businesses2
~20K enterprises (>500 emp.)2 ~128M households
28M between ages 19 – 253
45K average daily flights4
Fixed Wireless
Sources: 1Number of Gamers worldwide link 2U.S. Small Business Administration, Office of Advocacy link 3KFF Population by age link 4Federal Aviation Administration link
11
Fiber is foundational
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Wholesale
Macro Cell SitesIntegrated planning
+3M customer locations1
Symmetrical speeds
Multi-Gig capable
Enterprise
Small Business
Neighborhood
Small Cell Sites
1. In 2021, we are planning to increase our current fiber footprint by expanding to 3M customer locations in more than 90 metro areas
12
80
38
22
15
7
20
20
20
23
High
C-band
Mid
Low
Complemented by strong spectrum position
AT&T Spectrum Holdings (MHz)
13 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
93
72America’s Best Network1
Nation’s Largest Network2
Nationwide 5G
FirstNet
700
700DE
FN
800/850
PCS
AWS1
AWS3
WCS
C-band
173MhzMid-Band
1040High mmWave
1. GWS awarded AT&T Best Network OneScore 2020. GWS conducts drive tests for AT&T and uses the data in its OneScore analysis; 2. Based on overall coverage in U.S. licensed/roaming areas
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
COVID-19 Impact
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Wireless: Growing subscribers and EBITDA
14
33.5%
Share of Net Adds
FAST. RELIABLE. SECURE.
UNLIMITEDYOUR WAYSM
1. Represents AT&T postpaid voice share; Source: Externally reported financial statements
Churn
0.76%
AT&T share1
1Q18
Nationwide 5GLaunched HBO Max “Best Deals
for Everyone”
Unlimited Your Way
FirstNet in AT&T Retail to verified responders
1st 5G connection
New Unlimited Plans launched
4Q20
Differentiated Offer
Symmetrical Speeds
Broadband: Growing fiber subscribers and revenue
15 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
1. Penetration is based on a percentage of eligible living units in fiber footprint
8.2M
14.5M
0123456789
1011121314151617181920 ARPU
$58
Penetration1
34%
LaunchedHBO Max
DIRECTV Build requirements met
1G Fiber Pricing
1Q18 4Q20
Customer Locations
Improved marginal
economics
14M+
8M+
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Business: Simplified portfolio maintains solid margins
16
Business fiber foundation
Focus marketapproach
Secure Connectivity
Voice & Collaboration
Edge
WirelessFiber
Customer experience focus – consistency and simplicity
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Net Promoter Score
2018 2020
Postpaid Wireless
Fiber
Net Promoter® Score Lift1
Unlimited Unlimited + HBO Max
OR Fiber
~20points
Unlimited + HBO Max
+ Fiber
~15points
~10points
~10points
1. Net Promoter® is a registered trademark of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld; Data reflects affinity customers with Auto Bill Pay
17
AT&T expects continued market momentum
Network Wireless Fiber Business
18 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Deploy and optimize spectrum portfolio
Plan to expand fiber to 3M customer locations
Grow subscribers
Grow service revenue
Grow EBITDA
Grow subscribers
Grow revenue
Simplify portfolio
Maintain solid margins
2021 Consolidated financial guidance (unchanged from 4Q20 Earnings call)
45 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Key Assumptions
Revenue Growth 1% range Wireless service revenue growth of ~2%
Gradual theatrical improvement in WarnerMedia
EPS – Adjusted1 Stable with 2020Modest Mobility EBITDA growth
Increased HBO Max investment
Cost transformation reinvested in growth
Gross Capital Investment2
Capital Expenditures
$21B range
$18B range
Focus on fiber and wireless densification
Expect ~$2B in vendor financing payments and ~$1B in FirstNet reimbursements
Free Cash Flow3 $26B range Total dividend payout ratio in the high 50’s% range
Long-Term Debt Management
Utilizing cash after dividends to reduce net debt
Continued portfolio review for asset monetization
1. The company expects adjustments to 2021 reported diluted EPS to include merger-related amortization of about $4.3 billion and other adjustments, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. Based on historical results, 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 2021 EPS 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. 2. Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes expected FirstNet reimbursements3. Free cash flow total dividend payout ratio is total dividends paid divided by free cash flow. Free cash flow is cash from operating activities minus capital expenditures. Due to high variability and difficulty in predicting items that impact cash from operating activities and capital expenditures, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.
$56.3$52.1
2019 2020
$153.8 $147.3
2019 2020
AT&T financials proforma (video deconsolidation)
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary46
Revenue
$ in billions
Video Impact1
$171.8$181.2
Deconsolidation Impact(-7%)
Adjusted EBITDAVideo Impact1
EBITDA Margin
$54.5
$59.3
31.8%32.7%
Expect to close in 2H 21
Revenue trajectory improves ~100 bps
EBITDA margin improvement ~300 bps
1. Excludes commercial agreements between New DIRECTV and AT&T
~300bps higher
ex Video
AT&T near-term business expectations
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary47
BroadbandStrong fiber subscriber growth
Higher speed adoption
Continue to invest in fiber
Declines in traditional products
WarnerMediaStrong HBO Max subscriber andrevenue growth
Increased investment in HBO Max
Improved advertising demand
2H recovery in theatrical
Transformation
Latin AmericaWireless subscriber growth
Increase wholesale relationships
Expense management
Improved profitability in Mexico
2020 Pro Forma
Adj. EBITDAComposition1,2
Mobility58%
Business Wireline
19%
WarnerMedia17%
Broadband9% Latin America
1%
MobilityGrowing postpaid base, lower churn
ARPU stability
Cost savings from transformation
Business WirelineContinued migration to strategic services
Emphasize higher margin products
1. Pro Forma adj. EBITDA composition representation excludes -$2B Corporate / Other2. Excludes commercial agreements between New DIRECTV and AT&T
C-band auction purchase financing
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary48
$0.6B$1.0B
$0.3B
$2.5B
20242020 20222021 2023
$23.0B
AT&T gross spend of $27.4B
AT&T Estimated Payments1
$27.4B
Total
1. Includes accelerated payment and relocation cost estimates
Cash YE2020 $9.7B
Bank Term Loan $14.7B
Commercial paper issuance $6.1B
Total >$30B
$1.05/MHz-pop
Near-nationwide footprint of ~80 MHz
2021 Financing Sources
Free cash flow & disposition of
non-strategic assets
$177
$148
$11
~$154
$23 $6
Goal
Leverage during 2024 at ~2.50x or lower
2021: Net Debt Increases ~$6B for Spectrum Purchase
Continue to evaluate and divest non-core assets
No share retirements
Debt plan overview
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary49
$ in billions
EOY2020
NetDebt
Net Debt / Adj. EBITDA
Jun2018
~2.8x
Free Cash Flow1 less Dividends
Spectrum
~2.7x
Other Financing Activities2
EOY 2021
~3.0x
1. Free cash flow is cash from operating activities minus capital expenditures. Dividends represent expectation to sustain quarterly dividends at current levels and are subject to approval by the board of directors.2. Includes proceeds contingent upon closing the DIRECTV transaction
DTV proceeds2 -$8B
Other asset sales - $2B
Vendor financing / Other +$4B
Focus on value creation
Invest in Customer Growth
Revenue Growth
StableDividend
50 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
Broadband (5G, Fiber)
HBO Max
Cost Transformation
Efficiencies
Restructuringnon-core assets
Improved Profit Trajectory
ReducedLeverage
Upside Potential in Growth Areas
Expectations: Focused growth, sustainable dividend, debt reduction
Grow Customer Relationships
Investment in Growth
Deliberate Capital Allocation
51 AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary
120 – 150 M Global HBO + HBO Max YE 25
Grow wireless, fiber
5G, Fiber
HBO Max
Sustain dividend at current level
Reduce debt
APPENDIX: Non-GAAP reconciliations
AT&T Investor & Analyst Day / March 12, 2021 / © 2021 AT&T Intellectual Property - AT&T Proprietary53
1. Other is comprised of the Mobility, Broadband and Business Wireline business units in the Communications segments, the WarnerMedia and Latin America segments and Corporate and Other. Income taxes, interest expense and other income (expense) – net are managed only on a total company basis and are, accordingly, reflected only in the consolidated results. 2. Represents transitions between Video and the WarnerMedia segment that were considered intercompany and eliminated prior to deconsolidation of Video. 3. Excludes commercial agreements between New DIRECTV and AT&T.
$
As Reported Video Other1 AT&T Video Other1 AT&TNet Income (3,821)$ 14,975$ Additions:
Income tax (benefit) expense 965 3,493 Interest Expense 7,925 8,422 Equity in net (income) loss of affiliates (95) (6) Other (income) expense - net 1,431 1,071
Operating Income 1,729$ 4,676$ 6,405 2,064$ 25,891$ 27,955 Depreciation and amortization 2,262 26,254 28,516 2,461 25,756 28,217
EBITDA 3,991$ 30,930$ 34,921$ 4,525$ 51,647$ 56,172$
Adjustments:Impairments 18,880$ 1,458$ Employee separation costs and benefit-related loss 1,177 624 Gain on spectrum transactions (900) - Merger adjustments 468 1,033 Adjusted EBITDA 54,546$ 59,287$
Revenue 28,610$ 143,150$ 171,760$ 32,124$ 149,069$ 181,193$
Adjusted EBITDA Margin 31.8% 32.7%
Pro Forma3
AT&T Revenue as Reported 171,760$ 181,193$ Less: Video (28,610) (32,124)
Add: WarnerMedia sales to Video2 2,459 3,092
Add: Xandr advertising sales to external customers2 1,718 1,672 Pro Forma Revenues 147,327$ 153,833$
AT&T Adjusted EBITDA 54,546$ 59,287$ Less: Video (3,991) (4,525)
Add: Xandr advertising sales to external customers2 1,565 1,518 Pro Forma Adjusted EBITDA 52,120$ 56,280$
Pro Forma Adjusted EBITDA Margin 35.4% 36.6%
2020 2019
Net Debt to Adjusted EBITDA1
Dec 31, 2020 Jun 30, 2018Adjusted Annualized EBITDA 54,546$ 63,414$
Total Debt 157,245 190,167 Less: Cash and Cash Equivalents 9,740 13,523
Net Debt 147,505 176,644 Net Debt to Adjusted EBITDA Ratio 2.70 2.79
1 As reported in AT&T's Form 8-K filed January 27, 2021 and July 24, 2018.
$ in millions