AT&T Misses Q1 Estimates, Citing Impact Of COVID-19

By Dade Hayes, Jill Goldsmith

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AT&T rolls out AT&T TV nationwide. Mandatory Credit: Photo by JUSTIN LANE/EPA-EFE/REX/Shutterstock (9215299d)

AT&T reported first-quarter results impaired by COVID-19, with WarnerMedia operations suffering the worst impact from the virus.

Revenue came in at $42.8 billion, which was below the consensus view of Wall Street analysts, who were looking for $44.2 billion. In the year-ago quarter, revenue was $44.8 billion. Earnings of 84 cents a share also missed estimates, but AT&T said without the virus, earnings would have been 89 cents, ahead of the consensus of 85 cents.

Wireless was a bright spot. Despite closing nearly half of its retail locations due to the virus, AT&T added 163,000 net new monthly subscribers, topping analysts’ expectations.

WarnerMedia revenue declined 12%, from $8.4 billion in the year-earlier quarter to $7.4 billion. March Madness, the NCAA men’s basketball tournament that is an annual revenue-producing highlight for TBS, was canceled this year. Another major hit to revenue was the loss of the NBA playoffs, long a mainstay of TNT. Warner Bros. has also been at a virtual standstill, unable to release theatrical movies or continue production activities. Revenue at the studio fell 8% to $3.2 billion as the current quarter paled next to last year’s period, which saw carryover box office from Aquaman.

Two individual metrics that perhaps best illustrate the challenges facing Turner and Warner Bros. are advertising and theatrical revenue. The former plummeted 24% to $957 million and the latter dropped 27% to $1.1 billion.

HBO held up best of any WarnerMedia unit, with revenue of $1.5 billion declining just 1%. The expense line showed a noticeable change, though, with operating expenses of $1.1 billion rising 14% due to HBO Max programming outlays. Operating income margins fell to 28% from 37.5% in the year-ago quarter.

The company said the path through 2020 remains uncertain, and it has withdrawn official financial guidance, but it emphasized having “ample liquidity” to continue funding operations. Even before the virus, AT&T has faced scrutiny over its high leverage as it works to digest the $81 billion acquisition of Time Warner in 2018.

“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,” CEO Randall Stephenson said in the official earnings release.

WarnerMedia on Tuesday announced HBO Max will launch on May 27. The streaming service is one of several billion-dollar efforts to hit the market as rivals look to slow the momentum of Netflix, which reported a record surge of subscribers as it benefited from the pandemic’s stay-at-home orders.

AT&T shed 897,000 premium video subscribers, including 138,000 at AT&T TV Now, the internet-delivered bundle formerly known as DirecTV Now. The company is in the midst of a transition with its pay-TV offerings and has acknowledged the secular decline of its satellite operation, DirecTV. The goal moving forward is to more closely integrate HBO Max with wireless and internet plans, a strategy the company advanced on Tuesday with the offer of several new packages including HBO Max.

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