Continued 5G and fiber subscriber gains

424,000 postpaid phone net adds, 11 straight quarters with more than 400,000 net adds with continued low postpaid phone churn
272,000 AT&T Fiber net adds, 13 straight quarters with more than 200,000 net adds

High-quality customer additions continue to drive revenue growth

Domestic wireless service revenues up 5.2%; best-ever first-quarter Mobility operating income
Consumer broadband revenues up 7.3% driven by AT&T Fiber revenue growth of 30.7%

Network enhancement and expansion momentum

Mid-band 5G spectrum covering more than 160 million people; reliable, nationwide 5G reaching 290 million people
Ability to serve fiber to 19.7 million consumer and more than 3 million business customer locations in more than 100 U.S. metro areas; remain on track to pass 30 million fiber locations by the end of 2025

Transformation progress supporting margin growth

On track to achieve $6 billion-plus run-rate cost savings target before the end of the year

First-Quarter Consolidated Results

Revenues of $30.1 billion
Diluted EPS from continuing operations¹ of $0.57 compared to $0.65 in the prior year
Adjusted EPS^* from continuing operations of $0.60 compared to $0.63 in the prior year
Cash from operating activities of $6.7 billion
Capital expenditures of $4.3 billion; capital investment^* of $6.4 billion
Free cash flow^* of $1.0 billion

Note: AT&T's first-quarter earnings conference call will be webcast at 8:30 a.m. ET on Thursday, April 20, 2023. The webcast and related materials, including financial highlights, will be available on AT&T's Investor Relations website at https://investors.att.com.

DALLAS, April 20, 2023 /PRNewswire/ -- AT&T Inc. (NYSE:T) reported first-quarter results that showcased consistent 5G and fiber customer additions and profitable growth driven by increasing wireless service and broadband revenues.

"Our teams take pride in connecting more people to greater possibility through 5G and fiber," said John Stankey, AT&T CEO. "We're winning thanks to a proven and sustainable playbook that centers on simple, customer-centric experiences. As a result, we're adding high-value customers, and when they choose AT&T, they stay with us. The work we're doing today is establishing a foundation for durable, long-term growth, and we remain confident in our full-year guidance."

Consolidated Financial Results

Revenues for the first quarter totaled $30.1 billion versus $29.7 billion in the year-ago quarter, up 1.4%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues.

Operating expenses were $24.1 billion, essentially stable with $24.2 billion in the year-ago quarter reflecting the benefits of our continued transformation efforts. Operating expenses decreased primarily due to lower domestic wireless equipment and associated selling costs from lower sales volumes; first-quarter 2022 3G network shutdown costs; lower personnel costs and higher returns on benefit-related assets. These decreases were partly offset by higher amortization of deferred customer acquisition costs, higher bad debt expense and increased depreciation. Additionally, business unit costs included year-over-year increases due to inflation.

Operating income was $6.0 billion versus $5.5 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.0 billion versus $5.8 billion in the year-ago quarter.

Equity in net income of affiliates of $0.5 billion primarily from the DIRECTV investment. With adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment^* was $0.9 billion.

Income from continuing operations was $4.5 billion versus $5.1 billion in the year-ago quarter. Earnings per diluted common share from continuing operations was $0.57 versus $0.65 in the year-ago quarter. Adjusting for $0.03, which includes our proportionate share of intangible amortization from the DIRECTV equity method investment and other items, earnings per diluted common share from continuing operations^* was $0.60 compared to $0.63 in the year-ago quarter.

Cash from operating activities from continuing operations was $6.7 billion, down nearly $1 billion year over year reflecting timing of working capital, including lower securitizations. Capital expenditures were $4.3 billion in the quarter versus $4.6 billion in the year-ago quarter. Capital investment^*, which includes $2.1 billion of cash payments for vendor financing, totaled $6.4 billion.

Free cash flow^* was $1.0 billion for the quarter. Total debt was $137.5 billion at the end of the quarter, and net debt^* was $134.7 billion. The company continues to expect to achieve a net debt-to-adjusted EBITDA* ratio in the 2.5x range by early 2025.

Communications Operational Highlights

(Prior year results for the Communications segment and each business unit have been recast to remove prior service credits. Additional information is provided in our Form 8-K dated March 3, 2023, and included as part of our earnings materials on the company's Investor Relations website.)

First-quarter revenues were $29.2 billion, up 1.0% year over year due to increases in Mobility and Consumer Wireline, which more than offset a decline in Business Wireline. Operating income was $6.7 billion, up 3.9% year over year, with operating income margin of 23.1%, compared to 22.5% in the year-ago quarter.

Mobility

Revenues were up 2.5% year over year to $20.6 billion due to higher service revenues, partially offset by lower equipment revenues. Service revenues were $15.5 billion, up 5.2% year over year, primarily driven by subscriber and postpaid ARPU growth. Equipment revenues were $5.1 billion, down 4.7% year over year, driven by lower volumes.
Operating expenses were $14.3 billion, down 0.5% year over year primarily due to lower equipment costs driven by lower device sales, first-quarter 2022 3G network shutdown costs and lower content costs, partly offset by increased amortization of deferred customer acquisition costs, higher network and customer support costs, higher marketing costs and higher bad debt expense.
Operating income was $6.3 billion, up 10.2% year over year. Operating income margin was 30.5%, compared to 28.3% in the year-ago quarter.
EBITDA^* was $8.4 billion, up 8.0% year over year with EBITDA margin^* of 40.7%, up from 38.6% a year ago. This was the company's best-ever first-quarter Mobility EBITDA*. EBITDA service margin^* was 54.1%, up from 52.6% in the year-ago quarter.
Total wireless net adds were 5.1 million including:

542,000 postpaid net adds with:

424,000 postpaid phone net adds
(56,000) postpaid tablet and other branded computing device net losses
174,000 other net adds

40,000 prepaid phone net adds

Postpaid churn was 0.99% versus 0.94% in the year-ago quarter.
Postpaid phone churn was 0.81% versus 0.79% in the year-ago quarter.
Prepaid churn was 2.73%, with Cricket substantially lower, versus 2.77% in the year-ago quarter.
Postpaid phone ARPU was $55.05, up nearly 2.0% versus the year-ago quarter, due to prior-year pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
FirstNet® connections reached approximately 4.7 million across more than 25,000 agencies. FirstNet is the nationwide communications platform dedicated to public safety. The AT&T and FirstNet networks cover more than 99% of the U.S. population, and FirstNet covers more first responders than any other network in America.

Business Wireline

Revenues were $5.3 billion, down 5.5% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services.
Operating expenses were $5.0 billion, down 1.0% year over year due to lower personnel and other costs associated with ongoing transformation initiatives, lower wholesale network access costs and lower marketing costs, partly offset by favorable compensation items in the prior year and increased depreciation expense.
Operating income was $378 million, down 40.8%, with operating income margin of 7.1% compared to 11.3% in the year-ago quarter.
EBITDA^* was $1.7 billion, down 11.9% year over year with EBITDA margin^* of 32.0%, compared to 34.4% in the year-ago quarter.
AT&T Business serves the largest global companies, government agencies and small businesses. More than 750,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 3 million U.S. business customer locations. Nationwide, more than 10 million business customer locations are on or within 1,000 feet of our fiber.²

Consumer Wireline

Revenues were $3.2 billion, up 2.5% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 7.3% due to fiber growth of 30.7%, partly offset by a 13.6% decline in non-fiber revenues.
Operating expenses were $3.1 billion, up 4.8% year over year due to higher depreciation expense, higher network and customer support costs and increased amortization of deferred customer acquisition costs, partly offset by lower sales, advertising and content costs.
Operating income was $94 million, down 40.9% year over year with operating income margin of 2.9%, compared to 5.0% in the year-ago quarter.
EBITDA^* was $955 million, up 3.2% year over year with EBITDA margin^* of 29.5%, up from 29.3% in the year-ago quarter.
Total broadband net losses, excluding DSL, were 23,000, reflecting AT&T Fiber net adds of 272,000, more than offset by losses in non-fiber services. AT&T Fiber now has the ability to serve 19.7 million customer locations and offers symmetrical, multi-gig speeds across parts of its entire footprint of more than 100 metro areas.

Latin America – Mexico Operational Highlights

Revenues were $883 million, up 28.0% year over year due to growth in both service and equipment revenues. Service revenues were $591 million, up 20.6% year over year, driven by favorable foreign exchange, higher wholesale revenues and growth in subscribers. Equipment revenues were $292 million, up 46.0% year over year due to higher sales and favorable foreign exchange.

Operating loss was ($30) million compared to ($102) million in the year-ago quarter. EBITDA^* was $145 million compared to $59 million in the year-ago quarter.

Total wireless net adds were 10,000, including 58,000 prepaid net losses, 49,000 postpaid net adds and 19,000 reseller net adds.

* 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 Diluted Earnings per Common Share from continuing operations is calculated using Income (Loss) from Continuing Operations, less Net Income Attributable to Noncontrolling Interest and Preferred Stock Dividends and adjustment for distributions on Mobility II preferred interests and share-based payments (in periods of net income), divided by the weighted average common shares outstanding for the period.

²The more than 3 million U.S. business customer locations are included within the 10+ million U.S. business customer locations on or within 1,000 feet of our fiber.

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. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's website at https://investors.att.com.

Non-GAAP Measures and Reconciliations to GAAP Measures

Schedules and reconciliations of non-GAAP financial measures cited in this document to the most directly comparable financial measures under generally accepted accounting principles (GAAP) can be found at https://investors.att.com and in our Form 8-K dated April 20, 2023. Free cash flow, EBITDA, adjusted operating income and net debt are non-GAAP financial measures frequently used by investors and credit rating agencies.

Adjusted diluted EPS from continuing operations includes adjusting items to revenues and costs that we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including 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 those assets contribute to revenue generation. We 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 1Q23, Adjusted EPS from continuing operations of $0.60 is Diluted EPS from continuing operations of $0.57 adjusted for $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment and $0.01 impact of Accounting Standards Update (ASU) No. 2020-06, minus $0.02 benefit-related and other costs.

For 1Q22, Adjusted EPS from continuing operations of $0.63 is Diluted EPS from continuing operations of $0.65 adjusted for $0.04 proportionate share of intangible amortization at the DIRECTV equity method investment, $0.04 of benefit-related and other costs, and $0.01 impact of ASU No. 2020-06, minus $0.11 actuarial gain on benefit plans.

Capital investment is a non-GAAP financial measure that provides an additional view of cash paid for capital investment to provide a comprehensive view of cash used to invest in our networks, product developments and support systems. In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. Capital investment includes capital expenditures and cash paid for vendor financing ($2.1 billion in 1Q23).

Free cash flow for 1Q23 of $1.0 billion is cash from operating activities from continuing operations of $6.7 billion, plus cash distributions from DIRECTV classified as investing activities of $0.8 billion, minus capital expenditures of $4.3 billion and cash paid for vendor financing of $2.1 billion.

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 1Q23, Adjusted Operating Income of $6.0 billion is calculated as operating income of $6.0 billion minus $27 million of adjustments. For 1Q22, Adjusted Operating Income of $5.8 billion is calculated as operating income of $5.5 billion plus $218 million of adjustments. Adjustments for all periods are detailed in the Discussion and Reconciliation of Non-GAAP Measures included in our Form 8-K dated April 20, 2023.

Adjusted Equity in Net Income from DIRECTV investment of $0.9 billion for 1Q23 is calculated as equity income from DIRECTV of $0.5 billion reported in Equity in Net Income of Affiliates and excludes $0.3 billion 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 $134.7 billion at March 31, 2023, is calculated as Total Debt of $137.5 billion less Cash and Cash Equivalents of $2.8 billion.

Net debt-to-adjusted 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 (calculated as total debt less cash and cash equivalents) by the sum of the most recent four quarters of Adjusted EBITDA. Adjusted EBITDA is calculated by excluding from operating revenues and operating expenses certain significant items that are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs, significant abandonments and impairment, 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 and related ratios without unreasonable effort.

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.

Discussion and Reconciliation of Non-GAAP Measures for Continuing Operations

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. These measures should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with U.S. generally accepted accounting principles (GAAP).

Free Cash Flow

Free cash flow is defined as cash from operations and cash distributions from DIRECTV classified as investing activities minus capital expenditures and cash paid for vendor financing (classified as financing activities). Free cash flow after dividends is defined as cash from operations and cash distributions from DIRECTV, minus capital expenditures, cash paid for vendor financing and dividends on common and preferred shares. Free cash flow dividend payout ratio is defined as the percentage of dividends paid on common and preferred shares 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 vendor financing, and from our continued economic interest in the U.S. video operations as part of our DIRECTV equity method investment, 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
	First Quarter
	2023	2022
Net cash provided by operating activities from continuing operations¹	$ 6,678	$ 7,630
Add: Distributions from DIRECTV classified as investing activities	774	1,315
Less: Capital expenditures	(4,335)	(4,568)
Less: Cash paid for vendor financing	(2,113)	(1,566)
Free Cash Flow	1,004	2,811

Less: Dividends paid	(2,014)	(3,749)
Free Cash Flow after Dividends	$ (1,010)	$ (938)
Free Cash Flow Dividend Payout Ratio	200.6 %	133.4 %
^{1 Includes distributions from DIRECTV of $534 in the first quarter of 2023 and $522 in the first quarter of 2022.}

Cash Paid for Capital Investment

In connection with capital improvements, we negotiate with some of our vendors to obtain favorable payment terms of 120 days or more, referred to as vendor financing, which are excluded from capital expenditures and reported in accordance with GAAP as financing activities. We present an additional view of cash paid for capital investment to provide investors with a comprehensive view of cash used to invest in our networks, product developments and support systems.

Cash Paid for Capital Investment
Dollars in millions
	First Quarter
	2023	2022
Capital Expenditures	$ (4,335)	$ (4,568)
Cash paid for vendor financing	(2,113)	(1,566)
Cash paid for Capital Investment	$ (6,448)	$ (6,134)

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 GAAP.

EBITDA service margin is calculated as EBITDA divided by service revenues.

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 cash generation potential with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key revenue and expense drivers for which management is responsible and upon which we evaluate performance.

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 Mobility business unit 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. For market comparability, management analyzes 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
	First Quarter
	2023	2022
Income from Continuing Operations	$ 4,453	$ 5,149
Additions:
Income Tax Expense	1,314	1,440
Interest Expense	1,708	1,626
Equity in Net (Income) of Affiliates	(538)	(521)
Other (Income) Expense - Net	(935)	(2,157)
Depreciation and amortization	4,631	4,462
EBITDA	10,633	9,999
Transaction and other costs	—	98
Benefit-related (gain) loss	(44)	93
Adjusted EBITDA¹	$ 10,589	$ 10,190
¹See "Adjusting Items" section for additional discussion and reconciliation of adjusted items.

Segment and Business Unit EBITDA, EBITDA Margin and EBITDA Service Margin
Dollars in millions
	First Quarter
	2023	2022
Communications Segment
Operating Income	$ 6,743	$ 6,487
Add: Depreciation and amortization	4,289	4,124
EBITDA	$ 11,032	$ 10,611

Total Operating Revenues	$ 29,152	$ 28,876
Operating Income Margin	23.1 %	22.5 %
EBITDA Margin	37.8 %	36.7 %

Mobility
Operating Income	$ 6,271	$ 5,689
Add: Depreciation and amortization	2,098	2,059
EBITDA	$ 8,369	$ 7,748

Total Operating Revenues	$ 20,582	$ 20,075
Service Revenues	15,483	14,724
Operating Income Margin	30.5 %	28.3 %
EBITDA Margin	40.7 %	38.6 %
EBITDA Service Margin	54.1 %	52.6 %

Business Wireline
Operating Income	$ 378	$ 639
Add: Depreciation and amortization	1,330	1,299
EBITDA	$ 1,708	$ 1,938

Total Operating Revenues	$ 5,331	$ 5,640
Operating Income Margin	7.1 %	11.3 %
EBITDA Margin	32.0 %	34.4 %

Consumer Wireline
Operating Income	$ 94	$ 159
Add: Depreciation and amortization	861	766
EBITDA	$ 955	$ 925

Total Operating Revenues	$ 3,239	$ 3,161
Operating Income Margin	2.9 %	5.0 %
EBITDA Margin	29.5 %	29.3 %

Latin America Segment
Operating Income (Loss)	$ (30)	$ (102)
Add: Depreciation and amortization	175	161
EBITDA	$ 145	$ 59

Total Operating Revenues	$ 883	$ 690
Operating Income Margin	-3.4 %	-14.8 %
EBITDA Margin	16.4 %	8.6 %

Adjusting Items

Adjusting items include revenues and costs we consider non-operational in nature, including items arising from asset acquisitions or dispositions, including 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. Prior periods have been recast for consistency to include gains on benefit-related and other cost investments.

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%.

Adjusting Items
Dollars in millions
	First Quarter
	2023	2022
Operating Expenses
Transaction and other costs	$ —	$ 98
Benefit-related (gain) loss	(44)	93
Adjustments to Operations and Support Expenses	(44)	191
Amortization of intangible assets	17	27
Adjustments to Operating Expenses	(27)	218
Other
DIRECTV intangible amortization (proportionate share)	341	416
Benefit-related (gain) loss and other	(111)	92
Actuarial (gain) loss	—	(1,053)
Adjustments to Income Before Income Taxes	203	(327)
Tax impact of adjustments	46	(103)
Adjustments to Net Income	$ 157	$ (224)

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS are non-GAAP financial measures calculated by excluding from operating revenues, operating 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. Management believes that these measures provide relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.

Adjusted Operating Revenues, Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA service margin and Adjusted diluted EPS should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. AT&T's calculation of Adjusted items, as presented, may differ from similarly titled measures reported by other companies.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA, and Adjusted EBITDA Margin
Dollars in millions
	First Quarter
	2023	2022
Operating Income	$ 6,002	$ 5,537
Adjustments to Operating Expenses	(27)	218
Adjusted Operating Income	$ 5,975	$ 5,755

EBITDA	$ 10,633	$ 9,999
Adjustments to Operations and Support Expenses	(44)	191
Adjusted EBITDA	$ 10,589	$ 10,190

Total Operating Revenues	$ 30,139	$ 29,712

Operating Income Margin	19.9 %	18.6 %
Adjusted Operating Income Margin	19.8 %	19.4 %
Adjusted EBITDA Margin	35.1 %	34.3 %

Adjusted Diluted EPS
	First Quarter
	2023	2022
Diluted Earnings Per Share (EPS)	$ 0.57	$ 0.65
DIRECTV intangible amortization (proportionate share)	0.04	0.04
Actuarial (gain) loss	—	(0.11)
Benefit-related, transaction and other costs¹	(0.01)	0.05
Adjusted EPS	$ 0.60	$ 0.63
Year-over-year growth - Adjusted	-4.8 %
Weighted Average Common Shares Outstanding with Dilution (000,000)	7,474	7,556
¹As of January 1, 2022, we adopted, through retrospective application, Accounting Standards Update (ASU) No. 2020-06, which requires that instruments which may be settled in cash or stock to be presumed settled in stock in calculating diluted EPS. While our intent is to settle the Mobility II preferred interests in cash, the ability to settle this instrument in AT&T shares will result in additional dilutive impact, the magnitude of which is influenced by the fair value of the Mobility II preferred interests and the average AT&T common stock price during the reporting period, which could vary from period-to-period. For these reasons, we have excluded the impact of ASU 2020-06 from our adjusted EPS calculation. The per share impact of ASU 2020-06 was to decrease reported diluted EPS $0.01 and $0.01 for the quarters ended March 31, 2023 and 2022, respectively. The Mobility II preferred interests were repurchased on April 5, 2023.

Net Debt to Adjusted EBITDA

Net Debt to EBITDA ratios are non-GAAP financial measures frequently used by investors and credit rating agencies and management believes these measures provide relevant and useful information to investors and other users of our financial data. 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. Net Debt is calculated by subtracting cash and cash equivalents and certificates of deposit and time deposits that are greater than 90 days, from the sum of debt maturing within one year and long-term debt.

Net Debt to Adjusted EBITDA - 2023
Dollars in millions
	Three Months Ended
	June 30,	Sept. 30,	Dec. 31,	March 31,	Four Quarters
	2022¹	2022¹	2022¹	2023	Four Quarters
Adjusted EBITDA	$ 10,330	$ 10,714	$ 10,231	$ 10,589	$ 41,864
End-of-period current debt					13,757
End-of-period long-term debt					123,727
Total End-of-Period Debt					137,484
Less: Cash and Cash Equivalents					2,821
Net Debt Balance					134,663
Annualized Net Debt to Adjusted EBITDA Ratio					3.22
¹As reported in AT&T's Form 8-K filed January 25, 2023.

Net Debt to Adjusted EBITDA - 2022
Dollars in millions
	Three Months Ended
	June 30,	Sept. 30,	Dec. 31,	March 31,	Four Quarters
	2021¹	2022¹	2022¹	2022¹	Four Quarters
Adjusted EBITDA	$ 11,931	$ 10,803	$ 9,480	$ 10,190	$ 42,404
End-of-period current debt					27,209
End-of-period long-term debt					148,820
Total End-of-Period Debt					176,029
Less: Cash and Cash Equivalents					17,084
Net Debt Balance					158,945
Annualized Net Debt to Adjusted EBITDA Ratio					3.75
¹As reported in AT&T's Form 8-K filed January 25, 2023.

Supplemental Operational Measures

As a supplemental presentation to our Communications segment operating results, we are providing a view of our AT&T Business Solutions results which includes both wireless and fixed operations. This combined view presents a complete profile of the entire business customer relationship and underscores the importance of mobile solutions to serving our business customers. Our supplemental presentation of business solutions operations is calculated by combining our Mobility and Business Wireline operating units, and then adjusting to remove non-business operations. The following table presents a reconciliation of our supplemental Business Solutions results.

Supplemental Operational Measure
	First Quarter
	March 31, 2023				March 31, 2022
	Mobility	Business Wireline	Adj.¹	Business Solutions	Mobility	Business Wireline	Adj.¹	Business Solutions	Percent Change
Operating Revenues
Wireless service	$ 15,483	$ —	$ (13,203)	$ 2,280	$ 14,724	$ —	$ (12,590)	$ 2,134	6.8 %
Wireline service	—	5,200	—	5,200	—	5,478	—	5,478	(5.1) %
Wireless equipment	5,099	—	(4,326)	773	5,351	—	(4,452)	899	(14.0) %
Wireline equipment	—	131	—	131	—	162	—	162	(19.1) %
Total Operating Revenues	20,582	5,331	(17,529)	8,384	20,075	5,640	(17,042)	8,673	(3.3) %

Operating Expenses
Operations and support	12,213	3,623	(10,196)	5,640	12,327	3,702	(10,169)	5,860	(3.8) %
EBITDA	8,369	1,708	(7,333)	2,744	7,748	1,938	(6,873)	2,813	(2.5) %
Depreciation and amortization	2,098	1,330	(1,712)	1,716	2,059	1,299	(1,698)	1,660	3.4 %
Total Operating Expenses	14,311	4,953	(11,908)	7,356	14,386	5,001	(11,867)	7,520	(2.2) %
Operating Income	$ 6,271	$ 378	$ (5,621)	$ 1,028	$ 5,689	$ 639	$ (5,175)	$ 1,153	(10.8) %

Operating Income Margin				12.3 %				13.3 %	(100) BP
¹Non-business wireless reported in the Communications segment under the Mobility business unit.
Results have been recast to conform to the current period's classification.

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SOURCE AT&T