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AT&T Reports Higher Earnings Despite COVID-19 Disruptions

(Image credit: AT&T)

AT&T reported higher earnings in the first quarter, despite the effects of the coronavirus, which created higher costs and cut into earnings.

Net income rose 11.8% to $4.578 billion, or 63 cents a share, from $4.096 billion, or 56 cents a share a year ago.

Revenue was down 4.6% to $42.779 billion. 

The company estimated that the pandemic cost the company $605 million in revenues, including lower ad revenue at WarnerMedia, and increased expenses by $433 million, including $54 million in production shutdown costs.

“The COVID pandemic had a 5 cents per share impact on our first quarter. Without it, the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable EBITDA and EBITDA margins,” said CEO Randall Stephenson.

“We have a strong cash position, a strong balance sheet, and our core businesses are solid and continue to generate good free cash flow — even in today’s environment. In light of the pandemic’s economic impact, we’ve already adjusted our capital allocation plans and suspended all share retirements,” Stephenson said. “As a result, we’re able to continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining our dividend commitment and paying down debt.” 

WarnerMedia operating income was down 24.3% to 1.7 billion, as revenues declined 12.2% to $7.4 billion.

Turner’s operating income was up 10.9% to 1.4 billion because of lower programming costs because of the cancellation of the NCAA Men’s Basketball Tournament and lower marketing costs. Revenue was down 8.2% to $3.2 billion. Subscription revenue was up, but ad revenues dropped because of the cancellation of March Madness, partially offset by higher news delivery.

HBO operating income was down 25.4% to $423 million as the company geared up for the launch of the HBO Max streaming service in May. Operating expenses were up 13.9%. Revenue was down 0.9% to $1.4 billion reflecting flat subscriptions revenue and a decrease in content and other revenue.

Warner Bros. operating income plunged 54.5% and revenue was down 7.9% to $3.2 billion. Theatrical revenues were down offset by higher TV revenues.

AT&T’s Entertainment Group’s operating income was down 9.7% to $1.3 billion as revenue fell 7.2% to $10.5 million. The company blamed declines in premium and over-the top TV subscribers and legacy services. 

Video revenue was down 8.4% to $7.4 billion, while IP Broadband revenues were up 1.9% to $2.1 billion. 

Premium TV subscribers--including DirecTV, U-verse and AT&T TV, were down by 897,000. AT&T Now lost 138,000 net subscribers.

Operating income at AT&T’s Xandr advanced advertising unit was up 18.2% to $299 million. Revenues rose 14.8% to $489 million, with demand strong for addressable advertising and higher CPMs across product offerings.