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6,700 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | portfolio as well. In the US alone, we still see the potential to double our store count while improving the overall health of our portfolio. We'll do this through a strong store renovation program, new store builds and store closures. And we're going to make sure our stores are warm and welcoming with work continuing on store design standards and cost to build. Early customer and partner reactions to our plans show we've got the right strategy, both the reintroduction of coffee condiment bars and the expansion of free refills were identified as top drivers of purchase intent. In the coming months, our teams will be focused on refreshing our menu boards and improving cafe merchandising to reflect the coffeehouse feel and better showcase our simplified menu. We'll start an expanded test of risers and shelves at the point of handoff to help separate the cafe and mobile order experience and we'll begin to scale projects to increase and diversify seating across more of our cafes. To deliver a great customer experience, we also have to deliver a great partner experience. It's why everything we do starts and ends with our green apron partners and why I'm committed to ensuring Starbucks is the unrivaled best job in retail. In the past quarter, we more than doubled paid parental leave for eligible US store partners and we made a new commitment to promote from within 90% of retail leadership roles over the next three years, helping thousands of partners grow their careers and their incomes. As a result, through the quarter, shift completion, average hours per partner, partner retention, and hourly partner engagement improved. Looking forward, we'll continue to prioritize efforts that help our green apron partners succeed both at work through continued improvements to our staffing model and in their lives through industry-leading benefits, competitive pay, and careers that create lasting economic opportunity. Turning to international, I've had a chance to see our operations in Italy, Japan and South Korea and meet with |
6,701 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | opportunity. Turning to international, I've had a chance to see our operations in Italy, Japan and South Korea and meet with our international licensed business partners over the past few months. As I shared with them, many of our international markets set an example for the experience we aim to deliver in the US and present a great long-term opportunity, particularly as we continue to grow our store footprint and recover our business in certain challenged markets. Just last week, I also made my first market visit to China. While there, I saw firsthand the strength of our brand, our team and the premium customer experience we offer. I saw how dynamic the market is and the opportunities ahead. I also saw several near-term changes we can make to stabilize and strengthen our business while continuing to explore strategic partnerships to grow in China. We're processing these learnings and we will share more as we do. From my time there, I also believe there are several lessons we can learn from the strength of our supply chain in China to realize opportunities in our North American business. If you take one thing from today's call, let it be this; despite near-term challenges, we have significant strengths and a clear plan. The response we've seen since fundamentally shifting our strategy to get back to Starbucks gives us confidence we're on the track to turn the business around. We are where we want to be one quarter in, but much of our work is just beginning. As we continue to learn and implement our "Back to Starbucks" plan, I believe we'll make it easier to be a customer and, in turn, I believe they'll visit more often. We'll also find more ways to set our partners up for success, so they're able to deliver a great customer experience every time. In doing so, we'll reinvigorate our brand, drive stronger financial returns and return Starbucks to growth. There is important work ahead and I look forward to bringing you along. With that, I'll turn it over to Rachel. |
6,702 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Rachel Ruggeri: Thank you, Brian, and good afternoon, everyone. As Brian shared, we're pleased with our start to fiscal year 2025 with our Q1 performance meeting our expectations. Our "Back to Starbucks" strategy has already driven early progress, including gradual top-line improvement, giving us confidence that we're focused on the right priorities. Our Q1 consolidated revenue was $9.4 billion, flat to the prior year, reflecting 7% net new company-operated store growth over the past 12 months, offset by a 4% decline in comparable store sales. Our global comparable store sales decline was primarily due to a 4% decline in the US. US comparable store sales improved sequentially throughout the quarter, most evident in the morning daypart as non-Starbucks Rewards customers grew from our strategic shift to broader marketing. Our ticket growth in the US remained strong at 4% due to the benefits from the prior year pricing, attach and fewer discounts. These drivers more than offset mix shift into lower-priced beverages and removal of the extra charge for non-dairy milk customizations. Turning to store growth. We opened 377 net new stores globally in Q1, and in the US, our new company-operated stores contributed nearly 90% revenue incrementality to the trade areas. As we continue to evaluate our stores globally, we will make disciplined decisions to further strengthen and grow our portfolio, reestablishing ourselves as the community coffeehouse as we drive sustainable long-term growth. Shifting to margin. Our Q1 consolidated operating margin was 11.9%, contracting 380 basis points from the prior year, primarily driven by deleverage and the investments in support of Back to Starbucks, including store partner wages, benefits and hours and the removal of the extra charge for non-dairy milk customizations. The contraction was partially offset by annualization of pricing and out-of-store efficiencies, largely within our supply chain. Given the Q1 margin contraction, I want to provide additional insight into the investments |
6,703 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | largely within our supply chain. Given the Q1 margin contraction, I want to provide additional insight into the investments as well as the offsetting efficiencies. Let me start with investments, a critical initial step for the "Back to Starbucks" turnaround. As Brian shared, to deliver our customer experience to win the morning, we invested additional coverage hours to support the service model of a four-minute wait time and enabling our hospitality point of difference, moments of connection. These additional hours, coupled with wage and benefit rate increases, resulted in 180 basis point margin pressure in the North America segment, excluding labor productivity. As we focus on delivering the customer experience, we continue to evaluate labor needs across our store portfolio as we surgically optimize staffing levels. As you likely saw, we dialed up our marketing communication, including linear TV media, as part of our priority to reintroduce Starbucks to the world. We were pleased with the positive customer reactions and improvement in our comp trend. Overall promotional spend, which is inclusive of marketing spend and discounts, remains largely neutral relative to prior year. To improve value perception, we also removed the extra charge for non-dairy milk customizations, an impact of 60 basis points on the segment's margin in the quarter. Following this announcement, we saw strong increases in customer interactions with our brand, as Brian shared previously. Additionally, non-dairy customizations grew mid-single-digits year-over-year, off a double-digit decline in the prior year. Collectively, these targeted investments are showing signs of early progress. While there is a near-term impact on margin, we expect that through our disciplined approach to test and learn, we will make the right investments to drive long-term growth. Importantly, we also continue focusing on driving efficiencies across the company as we balance our investments while driving margin expansion over time. In Q1, our in-store efficiencies |
6,704 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | across the company as we balance our investments while driving margin expansion over time. In Q1, our in-store efficiencies increased as a result of improved partner stability as we focus on the "Back to Starbucks" strategy. Out of store, we further optimized our supply chain and recalibrated rates, resulting in meaningful sourcing efficiencies in the quarter. Collectively, in and out of store efficiencies yield savings of approximately 150 basis points in Q1. We will continue to secure additional efficiencies to help fund investments as we leverage a disciplined and data-driven approach to our turnaround. Shifting from efficiencies to G&A. For fiscal year 2025, we expect our G&A percentage to be higher than prior year as we lap lower performance-based compensation. Specific to Q2, we expect G&A as a percentage of revenue to spike as we transform the support organization, incurring near-term restructuring charges, inclusive of severance pay and related benefits. At this time, we're still working through the impact of this transformation work and we'll share more details regarding the financial impact during our Q2 earnings call. Q1 EPS was $0.69, down 22% from the prior year, primarily reflecting the impact of deleverage and heightened investments. Q1 EPS also included a $0.02 year-over-year benefit from a lower effective tax rate, primarily driven by a discrete item, which is not expected in the balance of this fiscal year. Now, looking at our full fiscal year 2025, although our guidance is suspended, I'd like to provide some insights into our quarterly earnings shape. EPS is expected to be the lowest in Q2 on an absolute basis due to seasonality, the organizational restructuring I just spoke about, and elevated investments with year-over-year pressure also intensifying in the quarter. EPS is then expected to improve in the latter half of the fiscal year 2025, both sequentially and year-over-year. Some additional aspects to consider as you think about our full year 2025 include the coffee landscape and our |
6,705 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | year-over-year. Some additional aspects to consider as you think about our full year 2025 include the coffee landscape and our Channel Development segment. In regards to the coffee landscape and the trajectory of seed price, given our overall practices and hedging strategy, our year-over-year coffee price impact was minimal in Q1. We currently estimate Q2 EPS to be pressured by approximately $0.01 net of hedge gains. As a reminder, our total cost of green coffee is typically limited to 10% to 15% of our product and distribution costs. In addition to the direct coffee pressure on EPS I just mentioned, seed price volatility also impacts our Channel Development segment and in a more meaningful way. Although we can pass this cost to our business partners, higher prices to an already pressured consumer will likely impact our segment volumes and ultimate revenue and profitability. Finally, our balance sheet remains strong and we remain committed to our BBB plus credit rating. We continue to prioritize shareholder value through dividends, providing a predictable return of capital while we turn around our business. In closing, we are encouraged by our Q1 results, which demonstrated the effectiveness of our "Back to Starbucks" strategy. Although we are in the beginning chapter and have much more work ahead of us, my thanks goes to our incredible partners across the globe who are unwavering in their commitment to bring our strategy to life. And with that, Brian and I are happy to take your questions. Thank you. Operator? |
6,706 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. [Operator Instructions] Your first question comes from David Tarantino with Baird. Please state your question.
David Tarantino: Hi, good evening. My question, Brian, is on the sales improvement you saw through the quarter. I believe Rachel mentioned that comps improved as the quarter progressed. I guess, can you maybe talk about whether that was comparison-related, or do you think you're seeing some underlying structural improvement? And if you're seeing some structural improvement, what do you think is driving that in terms of kind of the key components of your plan? Is it whether it be advertising or store operations? Maybe you can frame that up for us. Thanks. |
6,707 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. And yes, as Rachel said, the good news is we did see kind of sequential improvement throughout the quarter. And I think I mentioned this in some of my remarks, the thing that was nice to see is as we stepped away from discounting and went into more broad-based marketing efforts to demonstrate the craft of our coffee as well as the experience or the premium experience you get from Starbucks, we saw non-rewards customers respond with more traffic and more transactions, which was really nice to see how that progressed kind of quarter-to-quarter. The other thing too that was nice to see is we saw our morning daypart continue to show improvements quarter-to-quarter as well. And so, I think it's a combination of shifting the approach as far as reaching both rewards and non-rewards customers with, I think a compelling message around the craft and the quality of our coffee and our experience. And then also, I think our partners in the stores are really embracing getting back to Starbucks and enjoying making the espresso drinks and providing people that craft experience. And as you've seen even most recently, the new "Back to Starbucks" rollout that we've got in progress and I was in some stores even this morning, and the energy is really exciting to see both from our partners and our customers. Our customers are feeling the enhanced experience coming from our partners. So, definitely baby steps in both of these areas, but all moving in the right direction.
Operator: Thank you. Your next question comes from Andrew Charles with TD Cowen. Please state your question.
Andrew Charles: Great. Thanks. Brian, can you talk a little bit more about Tressie Lieberman's plan of attack to help build on the initial marketing work around reintroducing the brand? And curious, last year, it was disclosed about $600 million of advertising spend. What level can we think about for 2025, if you can comment on that as well? |
6,708 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, what we're definitely doing right now is switching the dollars out of discounting into what I would call working dollars for the brands and the brand experience. And so, what you're going to continue to see is, you might have saw we just broke a new ad over the weekend, highlighting, I think a key point of difference for Starbucks, which is centered on this connection that our baristas and our green apron partners have with our customers. And one of the ways that comes through is writing on cups. And so, what I love about this is, look, we're taking these dollars, allocating it to talk about the brand experience, and it's in such a way where it's very executable for people to actually experience it through our partners in the stores. And so, you're going to continue to see us use these dollars to turn it into working dollars to drive towards a brand commitment, but then also an experience commitment where hopefully every time you come into a Starbucks, not only do you get your coffee or your drink, but you also get this connection. And that's what we're going to continue to do. I think we're still finalizing exactly what does that spend look like ongoing, but I like the transition that we've made and I'm optimistic about the campaign that we've just started because there's a lot of additional elements still to come.
Rachel Ruggeri: The way to think about it too from a marketing as a percentage of revenue, we are increasing it. You could say close to doubling it, but we've reduced the discount. So, we've increased overall net revenue while we're putting it towards, as Brian said, the working dollars in marketing. So, it's neutral to the business overall, but you will see a shift in terms of how it shows up in the P&L and in the business.
Operator: Thank you. And your next question comes from Danilo Gargiulo with Bernstein. Please state your question. |
6,709 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. And your next question comes from Danilo Gargiulo with Bernstein. Please state your question.
Danilo Gargiulo: Hi, thanks for the question. Brian, I was wondering if you can help us quantify the impact of the operational improvements that you're starting to see at Starbucks. Maybe specifically, if you can help us understand maybe what percentage of the stores are operating in line with the four-minute handover timeline that you are expecting from the stores? And what kind of comp differential do you see between the stores that are operating at the level of efficiency that you are expecting versus the ones that need some incremental time to transform? Thank you. |
6,710 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. So, what we've done so far is we've definitely put the stores into kind of quartiles as it relates to how many transactions they're working through. And what we've -- through this work, what we've discovered is more of the challenge comes through, frankly, the mobile ordering system not having a sequencing system. And what happens is, that counter area gets really crowded, congested, and what occurs for our partners is the work switches to the task of just trying to get drinks and food solved for the rush as opposed to being able to consistently deliver the moment of connection while they still deliver the coffee drinks. And so, the good news is we have a high percentage of stores that are already comping positively, because -- and when we look at those stores, we see that the connection and the craft is being executed and we're not in as many of these bottleneck situations. And so, that's what we're focused on is how do we eliminate these bottleneck situations where the mobile ordering really overwhelms kind of the production experience to the point where we can no longer provide a great service experience. So, we've seen the difference in performance. We've seen the difference in -- and that's from a comp and financial performance. And we've also seen the difference in partner satisfaction, customer satisfaction. So, we're working through exactly how we measure these things because unfortunately, currently, we don't have a great system in place to measure the timeframe on these things, which we are putting into place. But as I mentioned earlier, the good news is, I was in one of our stores this morning where we've already started to put this algorithm in that happens kind of behind the scenes and it smooths out, I would say, those rushes of mobile orders such that our teams are able to provide great moments of connection for the in-cafe customer and the mobile order customer as well as our drive-thru customer. So -- and we're still -- we're only two weeks in on this, by the way, and it's |
6,711 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | customer as well as our drive-thru customer. So -- and we're still -- we're only two weeks in on this, by the way, and it's only in three stores, but we're seeing really good performance both in the financial performance, partner satisfaction, and customer satisfaction. |
6,712 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Your next question comes from Sara Senatore with Bank of America. Please state your question. Sara Senatore, please unmute yourself. We'll move on to the next question. Our next question comes from David Palmer with Evercore ISI. Please state your question.
David Palmer: Thanks. Wanted to ask you a question about productivity. There was a previous belief that there might be a $4 billion productivity opportunity over the four years ending 2028. Obviously, that's a big number, could be 250 basis points to 300 basis points of margin help before considering other investments, and that was going to be largely COGS-driven. Do you still see -- does Starbucks still see that sort of opportunity before considering investments that you might be making in the business?
Rachel Ruggeri: David, this is Rachel. Thanks for the question. What I'd say is we're continuing to be focused on efficiencies and we see continued opportunity both in our store as well as out of store, which is largely, as you pointed out, COGS or through our supply chain. And as I shared in my prepared remarks, we had about -- collectively about 150 basis points of margin expansion this quarter due to the efficiencies. So, we continue to believe that's an important part of how we think about our "Back to Starbucks" strategy, helping us to balance the investments we'll be making and eventually leading to margin expansion over time. But I think as far as it relates to the $4 billion, we're still working through what's going to be the right level of efficiencies for us as we go forward. And so, I wouldn't stick to the $4 billion. I would just say that we will continue efficiency work as we think about how we drive margin expansion in the future.
Operator: Thank you. And our next question comes from Brian Harbour with Morgan Stanley. Please state your question. |
6,713 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. And our next question comes from Brian Harbour with Morgan Stanley. Please state your question.
Brian Harbour: Yeah. Thank you. Good afternoon. Just on some of the announcements you made about the support organization, you've also made some management changes. What needs to change there? I guess, how much do you expect that to change? And sort of related to that, Rachel, I understand the comments on G&A in 2Q. Is this something where you might expect some favorability as we get into 3Q, 4Q and you sort of start to see those changes take hold?
Brian Niccol: First of all, I would say the purpose of the changes is to get more accountability into our key lines of business. So, you saw we have a -- we're creating the role of a Chief Store Officer, Mike's responsibility is going to be all about driving excellence in our stores. Putting a Chief Development Officer in place, again, ensuring we're building the right sites with the right design at the right cost in return, which is having a clear line of sight. And so, similar to what we're trying to do for driving that accountability through our stores, which is really where the business happens, we want to make sure that we've got the support center also focused on supporting the stores in an efficient manner and an accountable manner to where the business happens. So, structurally, that's what's going on. And we're in the process of evolving that over the next couple of months. The second half of that, I'll let Rachel chime in on that piece. |
6,714 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Rachel Ruggeri: So, Brian, in terms of your question about the G&A and the impact, as I -- as we think about the full year, we would expect, while we'll have the spike in Q2, as I shared in my prepared remarks, we would expect to see -- start to see some savings in Q4 related to that particular effort. But I think what's important to remember is that we're also lapping lower performance-based comp this year and that starts to take an even greater impact in Q3 and Q4. So, net-net G&A this year will still be higher than prior year as a percentage of revenue, largely given that lap of lower-base performance comp from last year. But yes, you would expect just from the restructuring itself, you would see some benefit in Q4. And then, of course, we will expect this will drive leverage over time.
Operator: Thank you. Your next question comes from Chris O'Cull with Stifel. Please state your question.
Chris O'Cull: Thanks. Brian, as we've thought about the business, our view has been that improving the partner experience is somewhat intertwined with improving the customer experience. Are there specific customer experience issues you believe the company can resolve that should also help improve the employee experience? And sort of related to this, when do you expect that the mobile ordering algorithm changes to be implemented? |
6,715 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, I think you're absolutely right. The idea of setting up our partners to be successful in every customer interaction results in, I think, great experiences for our customers, and they are highly intertwined. And I actually believe that's why it's so important that we have got kind of that great greeting moment and that great handoff moment. And what I'm seeing in the kind of the early days of this small pilot is just that where two things are happening. One, the partners are set up to deliver these craft drinks with a great kind of human touch or connection at the speed that makes our customers feel really great about getting their drink or their total order. So, they're kind of working in tandem because what the algorithm does is it takes the stress out of the system of having -- the partner have to figure out how to solve these mobile orders that just came in that weren't sequenced. Now what it does is it sequences those mobile orders so that it can allow the cafe order to get fulfilled in a timely fashion and with a touch of humanity. And then, the same thing happens with the mobile order, because now we're better sequenced up when people come in to give them their drink. So, we're going to continue to expand the pilot. There's some other things we want to test around this with also adding the idea of time slots, how that compares to just changing promise times. So, ideally, over the next couple of months, we're going to get a lot of learning, which then will give us clarity on the right timetable to roll out, but don't have definitive timing just yet.
Operator: Thank you. And your next question comes from Jeffrey Bernstein with Barclays. Please state your question. |
6,716 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. And your next question comes from Jeffrey Bernstein with Barclays. Please state your question.
Jeffrey Bernstein: Great. Thank you very much. Brian, I know comps always garner outsized attention and justifiably so, but just wanted to talk about unit growth for a moment. I know in the US, obviously, the unit growth could be a more consistent driver of top-line. And I think you said opportunity to double the store count in the US. I believe you were referring, I guess, to the company-operated system, which in the US is already pushing 10,000-plus. So, the doubling, I guess caught me by surprise that was above my expectation in terms of the total addressable market. I'm just wondering, as you think about that doubling, like what do you think is the rate of growth that's appropriate as you look to achieve that. Maybe how do you arrive at that doubling? And are there particular geographies or store types that have greater opportunity than others? Just curious how you think about that TAM in the US and that opportunity. Thank you. |
6,717 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, one of the things I'm really excited about is our ability to execute a smaller format that still has a great seat, okay, and delivers the partner experience or the engine behind the counter, so that we can provide these craft drinks in a timely manner with that personal touch. And so, when you combine our ability to do the drive-thru, the cafe, the mobile ordering in small, medium, large kind of executions, it just starts to open up trade areas that you get really excited about. And we're having tremendous success in places like Texas or the Southeast. And as we continue to open stores in those areas, they open with great economics. And that's what gives us a lot of confidence versus there are other markets that, frankly, we have a lot of work to do on just resetting the estate so that we have the right mix of the small, medium, large and the right mix of the access points. So, the good news is the brand has a lot of flexibility in how we execute the experience and that's what gives us the confidence that we could double the store count. And then, obviously, we get the sequencing figured out on mobile ordering. I think that just frees us up to another degree that we still haven't totally comprehended, I guess.
Operator: Thank you. And our next question comes from John Ivankoe with JPMorgan. Please state your question. |
6,718 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. And our next question comes from John Ivankoe with JPMorgan. Please state your question.
John Ivankoe: There's been at least some conversation about perhaps limiting the menu in the morning, products that were really some of the high repeat products that would be focused on speed, accuracy, consistency, and maybe opening up the afternoon to products that were more differentiated and have more customization. So, I wanted to get your thought if that was a possibility of maybe having different offerings kind of in the AM and the PM at Starbucks. And secondly, and I think related to that, food warming cabinets does seem to be one of the "easiest" ways to speed up transaction times, specifically in the drive-thru. Could you give us an update on that element of siren specifically in terms of what you might expect the rollout to be? |
6,719 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Thanks for the question. And look, that's one of the key pieces of driving our digital menu board execution is that does give us the flexibility to do the merchandising of kind of different food experiences or drink experiences in the afternoon versus the morning. And as I mentioned, I think, in my prepared remarks, we are dialing back the menu both in food and beverage to the tune of roughly 30% between now and the end of our fiscal year, which then frees us up, frankly, to make sure we've got what I would call the right food offerings in the morning. And then, also, we're looking at how do we provide the right kind of snack/food offerings as you get further into the day. And like I said, the digital menu boards allow us the flexibility then to merchandise accordingly. Regarding the hot hold equipment, what we find is, that's a great solution depending on the volume or transactions that we have in the store, regardless of whether there's a drive-thru or not. And so, you're right, obviously, if we had a hot hold, when the person just showed up to the order board, it could be much faster. But we find the trade-off in that hot hold versus just cooking it fresh to order, at those moments, it's not the right trade-off in investing in that type of equipment and also the experience that you get from it. So, right now, it's much more contingent upon the volume thresholds than it is moving speed along kind of for all day kind of experiences is the way I would describe it.
Operator: Thank you. And your next question comes from Katherine Griffin with Bank of America. Please state your question.
Katherine Griffin: Hi, thanks. Can you hear me?
Rachel Ruggeri: Yes.
Brian Niccol: Yeah. |
6,720 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Katherine Griffin: Hi, thanks. Can you hear me?
Rachel Ruggeri: Yes.
Brian Niccol: Yeah.
Katherine Griffin: Great. Okay. This is Katherine on behalf of Sara Senatore. So, earlier, I think, Rachel, you were talking about having less promotions as a positive impact on revenue. I think the goal from here is to move towards more of a traffic-driven same-store sales growth model, but we didn't see much of that this quarter. I think you mentioned that promotional transactions were 40% lower year-over-year, but can you quantify what the impact of that was on ticket? And was that because of fewer promotions? And then, I guess to the extent that you're encouraged by these results, is that what you're looking at? You're looking for more full-priced sales? |
6,721 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Rachel Ruggeri: I would start by saying we're looking for a combination. I mean, our rewards customers continue to be incredibly important, but we've seen value as we speak to all of our customers. And as we've shifted out of discounts into more broad-based marketing, that's helped us reach a broader base of customers, which this quarter, even though we're early in the turnaround, we saw good signs of progress. As Brian had shared, we had growth in the morning daypart. We had growth across our customer base, but our non-SR customers grew quarter-over-quarter. And importantly, we saw their growth as high as where we were about a year ago. So that gives us a lot of confidence that it's the right strategy. And in terms of the impact on ticket, as I had shared in my prepared remarks, our ticket in North America was about 4% -- little over 4%, and within that ticket, that was benefiting from annualized pricing, but it also benefited from fewer discounts. And that was partially then offset by the mix shift towards lower-priced items as well as the decision we had made to remove the [indiscernible] pricing. So, we see that removal of the discount or shifting of the discount, we're still discounting, but shifting the discount as a way for us to strengthen ticket but also strengthen the overall proposition as we speak to more customers more broadly.
Operator: Thank you. And your next question comes from Peter Saleh with BTIG. Please state your question.
Peter Saleh: Great. Thanks for taking the question. Brian, I wanted to ask about the siren system. It sounds like you guys are only going to implement this in the highest quartile stores. Just curious, it sounds like it's a little bit of a difference from what you were initially expecting last quarter and I know it's early, but why don't the other stores, the remaining system need it? And can they get to the four-minute coffee time without this system? I'm just curious as to the timing on rolling this siren system out to the top-performing stores. Thanks. |
6,722 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, you're right. It's a new learning that we picked up over the last couple of months, specifically as we've gotten very focused on getting the four-minute solution and bringing order to mobile ordering. And what has become clear is it's not -- in most stores, it is not driven by a lack of capacity. It's more the process combined with the algorithm to sequence the mobile orders with the cafe. So, there is a threshold where the volume gets to a place where the additional equipment is necessary, but that's only happening in like the top quartile of stores. And in the majority of our stores, just kind of putting the right process, the right deployment, combined with the algorithm, we see a big unlock in transaction throughput capability. So, that's what we're focused on. And it's a learning we've picked up over the last couple of months. And I think this is what's great about taking the test-and-learn approach is as we learn, we adopt and what we're adopting towards is making sure that we get the best experience for both the partner and our customer.
Operator: Thank you. Your next question comes from Christine Cho with Goldman Sachs. Please state your question.
Christine Cho: Thank you. So, Brian, as you come into the coffee business with fresh pair of eyes, I was hoping to get your assessment on the challenges of drawing younger customers back into the stores. Do you still view this as an important strategic focus in your turnaround plans in North America? And if so, why do you think they're more hesitant? Is it premium prices? Is it that they're drinking less coffee in general? Are they attracted to more local coffeehouses? And more importantly, how do these observations inform your menu and marketing strategy going forward? Thank you. |
6,723 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, obviously, I think we've talked about this. One of the things we want to do is broaden our reach. So, we've said we want to be winning with Gen Z all the way through to the over 50, 60 crowd. So -- and what we've discovered is, and this is actually a really nice piece of the business is, the younger customers definitely attracted to the whole tea proposition that we have, the matcha latte solution. You might have seen we most recently brought out the unsweetened matcha and then that caught a little bit of social media buzz with the Dubai matcha. And so, what we're seeing, we're seeing nice movement actually in all age groups. And it does appear that if we bring smart flavors with tea, refreshers, cold beverages, that's inclusive of even iced coffee or cold brew, we continue to see progress with the younger customers. So, I think it's just -- it's a much more balanced approach is how I would describe it as opposed to a what, we're just focused on young and cold drinks. That's not what we want to be about. We want to be about being a solution frankly for all those that want that third-place experience with a customized handcrafted drink. And the nice thing is we can do that through tea, we can do that through cold, we can do that through coffee. And so, we're seeing nice progress on all those fronts.
Operator: Thank you. Your next question comes from Lauren Silberman with Deutsche Bank. Please state your question.
Lauren Silberman: Thank you very much. I wanted to ask about the partner investments. You added additional hours to 3,000 stores. You talked about the 700 store pilot. How are you assessing the current level of staffing across the US system and magnitude of investment that might still be necessary? And then, to what extent do you see opportunities to offset these investments through other areas as we think through run rate margins or full sales leverage be enough? Thank you. |
6,724 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. So, we put in the labor into those 3,000 stores from a precision standpoint, which was really just going back and looking at the labor tables to find out where potentially we just gotten too thin in certain areas. And so, we've implemented that. The good news is we've seen a positive response on that front. In regard to the pilot that we've just about to kick off, this is all about understanding the labor model necessary to have a great customer connection for our partners, deliver the speed and handcrafted experience we want. And what we know is, if we do all those things, our partners are excited about the job at hand and our customers love the experience that they receive, and we see that playing out as they'll come more often and it further differentiates the Starbucks business and the premium value that we provide. So, this is all about delivering the brand experience, reinforcing the premium experience that you get and doing things frankly that you really can't get anywhere else. When you get a handcrafted beverage with the personal connection that we provide, it's a huge point of difference. It's meaningful for our partners and it's meaningful for our customers. And just like recently with bringing back the writing on cups and bags, the feedback I've received from our partners is they love delighting their customers. And you know what I've heard from our customers is they love getting these little messages and moments of connection from our partners. So, this is back to the core of what makes Starbucks a unique experience. That's where we're working towards understanding what type of model do we need in order to deliver that experience. And then, obviously, we'll figure out how we can grow the business accordingly with that type of investment. As Rachel mentioned, longer term, what we're looking for is to grow margins from where we are today and grow the business from where we are today. The goal of doing all this isn't just to stand still. The goal in doing all this is put the brand |
6,725 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | from where we are today. The goal of doing all this isn't just to stand still. The goal in doing all this is put the brand on its front foot, establish the premium value, the premium experience that we provide and then use that as a launching point to grow the business both from transactions that then play out into obviously the economics. |
6,726 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Rachel Ruggeri: And if I would just add to that really quickly, Lauren, what I would say is, when we think about the labor investments, which are -- we have a precision staffing model we use. So, they are targeted. While there is a near-term impact, there is a near-term unfavorable impact as we make these types of investments, they will be accretive to the business longer-term as these investments will drive traffic to Brian's point. That's why we're doing this. And so, it wouldn't be in every store. I mean, it's really about what the store needs and it's based on that precision staffing. So, I think about it as, first and foremost, the way we make this work is through traffic and ensuring that we drive the traffic over the longer term. And then, to balance all the investments we're making, while we do expect these investments will be accretive and they'll -- we'll see broader traffic improvement from these collective investments that we're making, I do think it's important to just remind that we will continue to work on efficiencies as well. We still have opportunities in the business across our business to be able to balance this and all this will lead to margin expansion in the future.
Operator: Thank you. And your next question comes from Sharon Zackfia with William Blair. Please state your question.
Sharon Zackfia: Good afternoon. I guess as I think about the different channels that you have coming into North America, whether it's walk-in or drive-thru or mobile, what part of the equation is the furthest off from that four-minute total? And as you think about labor deployment, is there a way to kind of disaggregate the production of those channels as they come in to make it kind of more aligned? |
6,727 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Look, thanks for the question. I will tell you probably right now, the biggest challenge is the fact that the mobile ordering has no sequencing. It's just first-in, first-out. And when you compare that to how drive-thru works on kind of all the access points, drive-thru is very, I would say, controlled access point, right? You've got the queue that creates a governor, you got the order board where we actually give a great greeting, and then you get to the window and we give a great handoff. That operates pretty well. We have really good metrics. We know how to get the window times we're after. Obviously, you have the unexpected order that might slow things down, but we can recover quickly. The place where we run into problems, frankly, is the fact that there is just no gating on the mobile orders. And the problem we run into is you've seen this, all these orders come flooding in, frankly, they come flooding in faster than even our customer can get there. So, all these drinks are sitting on the counter and it's at the expense of providing any other experience for a customer that's right in the store. Like the thing I was most excited about is this morning, I swung by one of our stores with this pilot and there was no congestion at the counter. And what was also really nice is the in-cafe customer, I love this term we have around here. They ask for their "for here" cup and they're like we call it a mug hug, right? They're like holding on to that ceramic mug and they're enjoying their moment in the cafe and there's not all this congestion surrounding the counter. So, it's just a much more pleasant peaceful coffee experience. Then meanwhile, when the mobile order customer comes in, the drinks are synced up in rhythm with people coming in to get their drinks and go. And so, that's what we're after. And that's why I go back to this of, look, we put a lot of things in place, I think in really short order, right, the coffee condiment bar. The other thing that was great -- this was unexpected, but |
6,728 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | I think in really short order, right, the coffee condiment bar. The other thing that was great -- this was unexpected, but literally one of our customers, she stopped me and was like, "Hey, I just wanted to say thanks for the coffee condiment bar," because she was able to do her own customization and be on her way. And then, we changed the operation of getting brewed coffee right at the POS. So, it was a really fast transaction for that customer that chose to come into our store, get a brewed cup of coffee, customize it for themselves and move on. So, what we're after is getting rid of that kind of that choke point that happens around the counter and it really happens because right now mobile ordering is just a first-in, first-out proposition, and we got to fix it. And that's what we've got a full court press on is solving the sequencing of that to deliver these moments of connection in what I would think is a reasonable time period, call it four minutes or less. So, I was really excited about what I saw, and the good news is we've got a lot of stores that are doing it. And then, when we make this better with technology behind it, I just think there's -- the brand will be right back where it needs to be, which is it's a premium experience. It's a crafted experience. It's an experience that our partners provide with some level of humanity, but you actually don't get anywhere else. And it just creates an environment where you like being there, whether you're a partner or a customer. Sorry, a long answer to that, but this is what I'm most excited about because it was really good learning over the last couple of months to understand where we got a zero-in in order to get the unlock. |
6,729 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Your next question comes from Zach Fadem with Wells Fargo. Please state your question.
Zach Fadem: Hey, good afternoon. Brian, on the four minutes or less, how does in-store compare to MOP today? I think it was a few quarters ago, there was a high mix of customers that walked away from MOP orders due to high wait times. So, curious if you could talk about where that's trending today? And then, separately, just big picture, if you were able to get all transactions under four minutes, how would you frame the comp opportunity? |
6,730 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: Yeah. Well, I would frame it as it would go up. And what I would also tell you is, the good news is we've got some really good learning that when the mobile order promise time gets beyond 15 minutes, that's when we have people kind of bailing. So, what we're testing is if you can do these time slots or if you can do these promised times in such a way where it doesn't get past, let's call it, 12 minutes to 15 minutes, then we know we're going to delight the mobile order customer, and then that frees up the capacity so that the in-store customer can have roughly a four-minute experience. And what we've seen over and over again is when that happens, now granted, this is my pilot store I'm going off of, everything starts to move in harmony, right? It's like the partners aren't rushed or overwhelmed. So, they have the ability to provide the experience, the connectivity that we want, the craft and the product that they want to provide. The customer feels like they're seeing. They're valued. They've been heard and they have a moment of connection. And that's what we want to ultimately deliver. That's frankly why Starbucks is Starbucks because in the end, you get this craft customized beverage in a reasonable amount of time in a way that actually has a touch of humanity that you frankly may not get in other points of your day. And as we improve that experience, it's really amazing to see just how the whole vibe of the coffeehouse just kind of calms down and you can kind of settle in. And the "for here" wear or the ceramic mugs and glasses and plates just add another level of like, hey, this is a spot where I can slow down, take a minute, whether I'm connecting with others or just taking a minute for myself, this is what occurs. And at the same token for the customer that needs to get in, get out, we're setting them up for success too, versus right now, the first-in, first-out mobile situation overwhelms the proposition at times. And when it happens, it's not good. And so, we got to figure out how we don't |
6,731 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | situation overwhelms the proposition at times. And when it happens, it's not good. And so, we got to figure out how we don't let those instances occur ongoing. |
6,732 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: Thank you. And the last question comes from Jon Tower with Citi. You may ask your question.
Jon Tower: Great. Thanks for taking the questions. Quick clarification and then a question. Rachel, quick on the clarification piece, on the second quarter, are you from an EPS growth standpoint, suggesting that it's going to be lower than what we saw the 23.5% contraction in the first quarter in the second quarter? That's a clarification. And then, on the question piece, I'm just curious, Brian, like from a high level, you guys are the global coffee leader with respect to sales and the footprint, and yet you hold a premium price point across many of the markets and menu items. So, can you help us think through now that obviously, you're talking about even doubling the store base in the US to something like 34,000 stores over time, how you think through the company's -- how you balance the two forces of being the most distributed potentially and yet keeping pricing and price points where they are today and what that means for pricing power over time?
Rachel Ruggeri: Jon, I'll start and I'll take the first part, which is, yes, we expect that margin and earnings will -- on an absolute basis, will be the lowest in Q2. That's based on seasonality, but it's also reflecting the organizational restructure as well as the elevated investments. What that means is earnings year-over-year pressure will intensify and that's largely driven by the organizational restructure. So, that's how we think about Q2, but then we would expect gradual improvement in the back half of the year. And specific to EPS, we would expect that you'll see improvement sequentially and year-over-year in the back half of the year. |
6,733 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Brian Niccol: And to your second question, look, I think this is where innovation has to be a part of our model. And the good news is it's also one of the things that's always been a part of the Starbucks business. And you're going to continue to see us innovate on food and beverage. It's going to be both from a standpoint of making sure that we've got the right pricing architecture across the menu and that it also serves the right occasions, whether it's a morning occasion or an afternoon occasion as well as age. We want to make sure we got the right flavors and tea/coffee so that we're relevant for the different taste profiles based on people's age. So, innovation is going to be a key piece of the puzzle to keep the brand relevant, keep the menu relevant. And then, when you do that innovation, we're going to be very cognizant of the pricing architecture that we're bringing forward to support still, hey, this is a premium experience, but we want to make sure we maintain being accessible. And so, you're going to see us leverage food and drink innovation to carry the day as it relates to pricing architecture, occasions as well as tastes. So, I think that was the last question? Yeah. Okay. Well, let's wrap up. So, first of all, thanks for all the questions. Obviously, we're -- I'm a couple of months into this, but truly energized by the -- just seeing the resiliency, the humanity of this brand and the relevance of this brand around the world, the opportunity to travel not only kind of coast-to-coast but then to Asia and Europe and Latin America, it really is so inspiring to see what our brand is able to do for our partners and our customers around the world. And along those lines, I do want to say a big thank you to all our partners around the world because they make the brand so special. And what we're committed to doing is making sure that we create the systems so that we can continue to provide that special experience for everybody. So, Q1, obviously, in 2025 results met our expectations, clearly show some |
6,734 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | to provide that special experience for everybody. So, Q1, obviously, in 2025 results met our expectations, clearly show some signs of progress, but I think it's clear we still have much work to do. The good news is, I feel like we know the work that we need to do. And we're working to build a Starbucks that I think we'll all be really proud of because we're going to have a clear mission and purpose. And we're going to once again be loved for our coffee, loved for the warmth, loved for kind of the welcoming coffeehouse, the green apron partners that we have. There's a great piece in our building when you walk around here and one of the questions is asked like what's one word that describes Starbucks? And the word that gets written up on the wall is love. And I think that should not be lost on what we're trying to do for our customers and our partners. And so, it's a critical year in front of us. We have a lot of work to do to get Back to Starbucks, but I believe we do this work. We will position the company for tremendous future growth. And I want you to also hear we're moving quickly on all these things. I'm committed to executing with excellence. And once we have clarity on those things, we'll deliver on our commitments. And so, look, in closing, I'm confident, okay, that we're going to create economic opportunity for our partners, providing experience that's worth it for our customers and generate long-term sustainable returns for our shareholders. So, this is why we love doing these jobs and I'm just really excited about what's in front of us at Starbucks. So, thank you for joining us, and have a great afternoon. |
6,735 | SBUX | 1 | 2,025 | 2025-01-28 17:00:00 | Starbucks Corporation | 34,745 | Operator: This concludes Starbucks' first quarter fiscal year 2025 conference call. You may now disconnect. |
6,736 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Operator: Good morning, and welcome to AT&T's Fourth Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions] Following the presentation, the call will be open for questions. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you, and good morning. Welcome to our fourth quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO; and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties described in AT&T's SEC filings, results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website. With that, I'll turn the call over to John Stankey. John? |
6,737 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Thanks, Brett. I appreciate you joining us. I hope you'll find there aren't going to be any surprises on today's call. We finished 2024 strong, like we said, we would at our Analyst and Investor Day in December. We achieved full year results that are in-line or better than all the consolidated financial guidance we provided at the beginning of the year. Before I cover our accomplishments, I'd like to extend my heartfelt sympathies to everyone in Southern California. Our thoughts and prayers with all those people whose lives, homes and families have been deeply impacted by the most destructive wildfires in modern U.S. history. In these moments, the importance of connection becomes increasingly apparent. And I'd like to thank our teams for their commitment to keeping customers, communities, and first responders connected in the face of this historic devastation. Now turning to our 2024 performance. Our team delivered another solid year as they again drove durable 5G and fiber subscriber growth. In Mobility, our consistent go-to-market strategy continues to resonate as more customers are choosing and staying with AT&T. Last year, we had about 1.7 million postpaid phone net additions with service revenue growth of 3.5%. We also expect to lead the industry in postpaid phone churn for the 14th time in the last 16 quarters and to lead the industry on an annual basis for the fourth straight year. This is an impressive winning run in wireless. And as you've heard me say before, where we have fiber, we won as well. We've now added 1 million or more AT&T Fiber subscribers for a remarkable seven straight years. It's clear that fiber is the best broadband alternative technology available and this was validated by Ookla just last week, when they named AT&T Fiber America's fastest Internet with the most reliable speeds. Following another strong quarter for both AT&T Fiber and AT&T Internet Air, we've now achieved six consecutive quarters of positive broadband net adds. Once again, we demonstrated our ability to |
6,738 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Air, we've now achieved six consecutive quarters of positive broadband net adds. Once again, we demonstrated our ability to grow in a healthy and sustainable manner by adding valuable subscribers, while simultaneously simplifying experiences and processes for our customers and employees. You see the results of these efforts and the margin expansion and free cash flow growth we delivered in 2024 as we outlined at our Analyst and Investors Day. We expect these trends will continue. Our investment in 5G and fiber is fueling this sustained growth. This is why we're so focused on building a durable franchise for the long-term. Our deliberate and balanced approach to capital allocation is putting us on a strong foundation to deliver attractive returns for years to come. With about $22 billion in capital investment last year, we again invested at the top of the industry as we continue to focus on building the largest, highest capacity, lowest marginal cost, converged broadband network in the country. Investing to build a truly differentiated network will provide long-term benefits to AT&T and the many customers, businesses and communities we serve. And if the new Trump administration is successful in extending expiring tax incentives this year, we feel there's ample opportunity for even more investment in U.S. communications infrastructure. Ultimately, we did what we said we would last year. As a result, we exited 2024 in a stronger competitive position. We still have a few things to accomplish. In 2025, we'll focus on executing against the priorities we laid out at our Analyst and Investor Day. This starts with our customers. We plan to grow 5G and fiber subscribers by offering an elevated customer experience with a compelling opportunity to enjoy both of these connectivity services from one provider. We remain focused on growing our business the right way, which we expect to achieve by once again gaining profitable customers and operating our business more efficiently. In December, we established a new $3 billion |
6,739 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | again gaining profitable customers and operating our business more efficiently. In December, we established a new $3 billion plus run rate cost savings target that runs through the end of 2027. In 2025, we'll make progress on this goal by further integrating AI throughout our operations. We also expect to realize cost savings as we evolve our technology stacks and work to exit our legacy copper network operations across the large majority of our wireline footprint by the end of 2029. Last month, we received FCC approval to begin the process to stop selling, transition and discontinue legacy voice services and a small number of wire centers, utilizing our AT&T phone advanced service as a replacement. This was an important first step to establish a template that supports a deliberate and planned transition to a more capable and modern communications infrastructure. Within the next few weeks, we will make detailed filings with the FCC to stop selling legacy products in about 1,300 wire centers, which is about a quarter of the wire centers across our footprint. We look forward to working with the car (ph) FCC to accelerate and advance policies and actions that stimulate investment in modernization of the U.S. communications infrastructure. On the investment front, we anticipate capital investment in the $22 billion range again this year, as we invest in modernizing our wireless network, expanding where we're able to offer fiber. We also expect to achieve our target of net debt to adjusted EBITDA in the 2.5 times range in the first half of this year. This keeps us on pace to commence common stock repurchases using our initial Board approved tranche of approximately $10 billion during the second half of 2025. This is part of a broader $40 billion plus shareholder return plan that we expect to deliver over the next three years, which includes more than $20 billion in total dividend payments and an overall capacity for about $20 billion in share repurchases. Under this plan, we also have an additional $10 billion in |
6,740 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | and an overall capacity for about $20 billion in share repurchases. Under this plan, we also have an additional $10 billion in incremental financial flexibility to pursue strategic opportunities, improve our balance sheet or deliver further capital returns to shareholders. Now before I wrap, I'd like to finish where I started, with the customer and briefly share how the AT&T guarantee builds on the vision we shared with you in December. Over the past several years, we've pivoted the AT&T brand by using our deep knowledge and insights to orient our services around putting our customers and what they want first. This has led to improvements in how customers feel about AT&T as evidenced by our broadband customer satisfaction leadership, our improving wireless Net Promoter Scores and our overall continued low churn. After over a year of research and preparation, we are taking the important step to establish a platform to differentiate our brand in the marketplace with the AT&T guarantee. AT&T is the first and only telecommunications company to offer a guarantee for both its wireless and fiber network. AT&T guarantee is a bold promise to our customers that we'll deliver connectivity that they can depend on, deals they want and the prompt, friendly service they deserve or we'll make things right if we fall short. With the AT&T guarantee, customers have peace of mind that the company stands behind our products and services in a way that no one else in our industry is doing. Our guarantee is a truly converged full company effort. It spans across both wireless and fiber, covering both consumers and small businesses. And with enterprise customers, we remain committed to providing high quality service and our contractual agreements as we always have. We were able to offer this unique promise to our customers because we own and operate scaled 5G and fiber networks, where we control the network architecture, operations and end-to-end customer experience. This allows us to provide a proactive and compelling customer guarantee |
6,741 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | operations and end-to-end customer experience. This allows us to provide a proactive and compelling customer guarantee that's tough to beat and an internal operating posture that focuses all of AT&T's employees on getting it right for our customers. We feel confident that our customers will repay us with loyalty, and we can attract new customers as well. So in summary, we have a clear strategy in place to advance the plan we shared at our Analyst and Investor Day. We have the right people, capabilities and differentiated assets to achieve our goals in 2025 and beyond. With that, I'll turn it over to Pascal. Pascal? |
6,742 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our fourth quarter financial summary on Slide 8. Overall, we're really pleased with how our team closed out the year as we continue to grow subscribers profitably. Fourth quarter revenues were up nearly 1% largely driven by wireless service and equipment revenues, as well as broadband revenues. This was partly offset by a decline in business wireline. Adjusted EBITDA for the quarter was up 2.2% as growth, primarily in Mobility and Consumer Wireline were partially offset by declines in business wireline. Adjusted EPS was $0.54 in the quarter, in line with the prior year despite $0.04 of below the line net headwinds that we outlined at the beginning of the year. Fourth quarter free cash flow was $4.8 billion, which included about $1.1 billion in pretax DIRECTV distributions. Fourth quarter cash from operating activities came at $11.9 billion, up about $500 million year-over-year. Beginning with the fourth quarter, all cash distributions from DIRECTV are now reported within cash from operating activities. However, as a reminder, starting with our first quarter of 2025 results, we will exclude all cash received from DIRECTV from reported free cash flow. Fourth quarter capital expenditures were $6.8 billion with capital investment of $7.1 billion. We delivered a strong financial performance during the quarter, while absorbing strong impacts that were slightly higher than the estimate we provided on our third quarter call. Now let's take a look at the results we delivered against our 2024 financial guidance on Slide 9. For the full year, we achieved all our consolidated financial guidance. We expected Mobility service revenue growth in the 3% range and achieve growth in the 3.5% range primarily by growing profitable customer relationships. In Consumer Wireline, we met our target of 7% plus growth in broadband revenues driven by fiber revenue growth of nearly 18%. Consolidated [Technical Difficulty] grew 3.1% for the full year |
6,743 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | revenues driven by fiber revenue growth of nearly 18%. Consolidated [Technical Difficulty] grew 3.1% for the full year compared to our expectation of growth in the 3% range. Adjusted EPS for the full year came in at $2.26, which is slightly better than the high end of the $2.20 to $2.25 range we provided at our Analyst and Investor Day. As we shared previously, in 2025, we plan to report adjusted EPS excluding DIRECTV. When excluding approximately $0.31 related to equity in net income of DIRECTV, full year adjusted EPS in 2024 was $1.95. Capital investment for the full year was approximately $22 billion, consistent with our guidance at the high end of the $21 billion to $22 billion range. On free cash flow, we delivered slightly better than the midpoint of our guidance in the $17 billion to $18 billion range, with full year free cash flow coming in at $17.6 billion. In 2025, we also plan to report free cash flow excluding DIRECTV. For comparison, 2024 free cash flow was $15.3 billion, excluding approximately $2.3 billion of after tax cash distributions from DIRECTV. Now let's look at our Mobility operating results on Slide 10. Our Mobility business continues to deliver strong results, growing both revenues and EBITDA for the seventh consecutive year. We posted 482,000 postpaid phone net adds in the quarter as we continued to successfully add high value subscribers. Mobility revenues were up 3.3% for the quarter with service revenues also up 3.3%. Fourth quarter Mobility EBITDA was up about $500 million or by 6.1% driven by growth in service revenues. Similar to recent quarters, about 100% of the year-over-year growth in our Mobility service revenues flow through to EBITDA. This is the result of sustained low churn and our focus on driving operating efficiencies. For the full year, Mobility EBITDA grew 6.3%. This is consistent with our guidance for growth in the high end of the middle-single digit range. Mobility postpaid phone ARPU was $56.72 in the fourth quarter, up nearly 1% year-over-year. ARPU growth |
6,744 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | digit range. Mobility postpaid phone ARPU was $56.72 in the fourth quarter, up nearly 1% year-over-year. ARPU growth continues to be largely driven by our targeted pricing actions and from plan mix. Postpaid phone churn for the quarter was 0.85%, up 1 basis point versus the prior year, while the upgrade rate declined 10 basis points to 4.6%. Customers reaching the end of their device promotions return to a more normalized level on a seasonal basis in the fourth quarter, and we expect this to continue during 2025. In prepaid, our phone churn was less than 3% with Cricket phone churn substantially lower. Similar to last year, our 2025 guidance anticipates a healthy wireless market with further normalization of net adds and overall activity levels. We're confident that our Mobility business will deliver solid performance again in 2025. And we continue to expect full year growth in service revenues in the higher end of the 2% to 3% range and EBITDA in the higher end of the 3% to 4% range. Now let's move to Consumer Wireline results, which are on Slide 11. Our Consumer Wireline business again delivered strong performance with 307,000 AT&T Fiber net adds, our highest ever during the fourth quarter. This solid subscriber growth reflects durable demand for AT&T Fiber as a result of its superior experience, as well as the increased pace at which we've been expanding customer locations served by our fiber network. We also believe we benefited from some pent-up demand following a one month work stoppage in the Southeast during the third quarter. AT&T Internet Air continues to perform well in the marketplace. We added 158,000 AT&T Internet Air consumer subscribers in the quarter and totaled more than 0.5 million net adds for the full year. Our combined success with AT&T Fiber and AT&T Internet Air continues to more than offset declines in our legacy copper subscriber base, which help us achieve 123,000 total broadband net adds in the quarter. Fiber ARPU was $71.71, up $1.35 sequentially and 4.7% year-over-year. The improved |
6,745 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | total broadband net adds in the quarter. Fiber ARPU was $71.71, up $1.35 sequentially and 4.7% year-over-year. The improved trend in fiber ARPU growth in 4Q was driven by pricing actions and favorable plan mix. Fourth quarter broadband revenues grew 7.8% driven by fiber revenue growth of 17.8%. In 2025, we expect fiber revenue growth in the mid-teens, which is consistent with the multiyear guidance we provided at our Analyst and Investor Day. Consumer Wireline EBITDA grew 9.8% for the quarter and 10% for the full year, which exceeded our guidance for full year growth in the mid to high-single digit range. This was driven by growth in high margin fiber revenues and by our ongoing transition away from providing service over our legacy copper network. We expect these dynamics to continue in 2025 and to drive Consumer Wireline EBITDA growth in the high-single to low double-digit range. And while our fiber investment is delivering strong returns on a standalone basis, it's also benefiting our Mobility business as we add more converged customers. Our AT&T Fiber penetration is 40% today with four out of every 10 AT&T Fiber households also choosing AT&T as their wireless provider. Both these metrics improved by about 100 basis points versus the prior year, reflecting strong demand for our fiber and 5G services together. As we discussed at our Analyst and Investor Day, over the long-term, we expect to grow our fiber penetration and our penetration of converged services within our fiber footprint. Now let's turn to Business Wireline on Slide 12. In the quarter, Business Wireline revenues declined 10%, and EBITDA was down 22% primarily due to continued industry wide secular declines in legacy services. For the full year, Business Wireline EBITDA declined 18%. This is in line with the latest guidance we provided for declines in the high-teens range. For full year 2025, we expect Business Wireline EBITDA to decline in the mid-teens range. In the fourth quarter, our Business Solutions wireless service revenues grew 3.5%, |
6,746 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | EBITDA to decline in the mid-teens range. In the fourth quarter, our Business Solutions wireless service revenues grew 3.5%, which is faster than our overall growth in Mobility service revenues. FirstNet continues to be a consistent growth category for us with wireless connections up about 300,000 sequentially, and we ended the year with more than 6.7 million total connections. Now let's move to Slide 13 for an update on our capital allocation strategy. In 2024, we were able to strengthen our balance sheet while maintaining industry leading capital investment. For the full year, we reduced net debt by $8.8 billion. And during the fourth quarter, we reduced net debt by $5.7 billion sequentially. Fourth quarter net debt included a $2.4 billion non-cash FX benefit related to our foreign denominated debt. However, there was no net balance sheet impact as there was an offsetting FX loss related to associated hedges. Another item that contributed to the reduction of net debt in the fourth quarter was the completion of a distribution of about $1.5 billion in cash from previously restricted assets. This is reflected in cash from investing and therefore, did not impact our reported free cash flow. As a result of our adjusted EBITDA growth and strong cash generation, we ended 2024 with net debt to adjusted EBITDA below 2.7 times. Additionally, we lowered vendor and direct supplier financing, which more than offset securitization facilities for a net reduction of $400 million year-over-year. Over the past two years, we've reduced our vendor financing balance by about $4.7 billion. Our efforts to reduce vendor and direct supplier financing have helped us to lower our interest expense and to improve the quality and ratability of our cash flows. Given these efforts, we feel good about our combined vendor and direct supplier financing levels and do not expect to materially reduce them on a year-over-year basis in 2025. We continue to expect to close the sale of our 70% stake in DIRECTV to TPG in the middle of this year. Since |
6,747 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | basis in 2025. We continue to expect to close the sale of our 70% stake in DIRECTV to TPG in the middle of this year. Since signing this agreement, we have received $1.7 billion in pretax cash distributions from DIRECTV and expect to receive an additional $5.9 billion in after tax cash payments related to this transaction through 2029. This includes $5.4 billion that we continue to expect this year. The strength of our operating trends, growth in our free cash flow and improvement in our balance sheet have positioned us to increase our capital returns to shareholders. As discussed at our Analyst and Investor Day, we expect to maintain our dividend per share and to begin share buybacks in the second half of 2025 once we're in this 2.5 times range for net debt to adjusted EBITDA. Our operating momentum and capital allocation framework positions AT&T to drive shareholder value through a combination of capital appreciation and capital returns in 2025 and beyond. Now let's cover our 2025 financial guidance. Our outlook for the year is unchanged from the guidance we shared at our Analyst and Investor Day. But I'd like to highlight a few key drivers of our guidance for adjusted EPS and free cash flow in order to help you with your modeling. As mentioned earlier, beginning in the first quarter, we plan to report adjusted EPS and free cash flow excluding DIRECTV, due to the pending 2025 disposition of our equity investment. On this basis, our guidance anticipates growth in both of these metrics this year, driven primarily by our outlook for growth in consolidated adjusted EBITDA of 3% or better. Our adjusted EPS guidance for 2025 of $1.97 to $2.07 also assumes depreciation and amortization expense in 2025 to be slightly higher than 2024 from continued investment in our 5G and fiber networks, lower interest expense from lower debt balances and an effective tax rate around 23%. Our planned share repurchases starting later this year are not expected to materially benefit our adjusted EPS in 2025. Looking a little further |
6,748 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | repurchases starting later this year are not expected to materially benefit our adjusted EPS in 2025. Looking a little further ahead, we continue to expect adjusted EPS to grow at a double-digit CAGR from 2027 as outlined at our Analyst and Investor Day. This is driven by our outlook for annual adjusted EBITDA growth of 3% or better as well as accumulating benefits of reducing our share count through planned share repurchases. It also assumes lower depreciation expense beyond 2025 as we complete our wireless network modernization and take legacy assets out of service. Our guidance for $16 billion plus of free cash flow this year assumes lower cash interest from lower debt balances, the absence of network termination fee payments in 2025 and lower working capital impacts in 2025 compared to 2024. Collectively, these items as well as our anticipated adjusted EBITDA growth are expected to more than offset an increase in cash taxes. Excluding DIRECTV, we expect 2025 cash taxes to be $3.3 billion, which is up about $1.5 billion from 2024 on a comparable basis. This expectation is based on current tax law, including the continued phaseout of bonus depreciation. We also expect that our free cash flow will continue to have a more ratable profile over the course of the year. As a reminder, we typically see seasonally lower free cash flow in 1Q primarily driven by the timing of device payments and annual incentive compensation payout. Also keep in mind that DIRECTV contributed $500 million to last year's first quarter free cash flow. We're excited about our outlook for the year and beyond. We're reiterating all the long-term financial and operational guidance we shared at our Analyst and Investor Day in December. Brett, that's our presentation. We're now ready for the Q&A. |
6,749 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thank you, Pascal. Operator, we're ready to take the first question.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from John Hodulik with UBS. Please go ahead.
John Hodulik: Great. Thanks, guys. John, maybe a couple of quick regulatory questions for you. First of all, on the regulatory filing about the legacy products, are there any direct cost savings that would come with this that you could potentially see in '25 if that's successful? And I think this is probably the first step in terms of heading towards a decommissioning of that copper infrastructure. How would you expect this sort of steps to proceed if you're successful with that filing? So that's number one. And then number two, on tax reform. One, just what's your view on the chance of getting that through? And you mentioned that you could go a little faster with some of the CapEx. Would that be a '25 issue or '26? And what are some of the areas do you think that you could do more spending and accelerate the plan? Thanks. |
6,750 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: All right, John. Good morning. So the legacy filings, first of all, what you should understand is, as we laid out our new cost savings objectives for you over the next three years as we discussed in the Analyst Day, as we gave you that detail, you can see that we are expecting that we're going to make progress in taking those costs out of the business, and that's a key foundational element to those estimates. So what you would expect here in this filing is, we've kind of factored all those into the guidance we've given you and the timing of those things. I'm not going to break out on a per central office basis exactly how long it takes us to recognize that. But these are processes that take some time is what you should think about. We have to go through notice cycles with customers. We then have to ultimately transition them. We grandfather them. So these are not things like you file, and 90 days later, you're starting to see a dramatic shift or a step function shift in costs. These are what gets us to our objectives by '29 and ultimately, reshaping the footprint in the cost structure of the business. How those steps proceed? As I said in my comments, the first step is, we now have a framework. We're now going to put the first scale test of that framework in with about 1,300 wire centers. We expect that when we do that, the commission is going to say, what do I do with 1,300 wire centers? And we're going to work collaboratively with them to build a process to move through that as quickly and expeditiously as possible. My expectations are from the dialogue that's occurring right now, the new administration is interested in finding approaches to scale these more rapidly and have an appropriate way to clear them through faster because they believe if the right policies are in place, it will, in fact, stimulate investment in the right kind of going forward technologies. And we intend to embrace that and work with them and figure out how we take 1,300 successfully through the commission and then move |
6,751 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | we intend to embrace that and work with them and figure out how we take 1,300 successfully through the commission and then move through another tranche as we move through that. So that's all part of the process. And it's kind of how we expected this back two years ago when we started moving down this path and putting this framework in place and building the technologies to enable it. This is kind of what we expected would be the case. And I feel good, as I mentioned I think at the Analyst Day, I think with the administration change, we kind of moved to a little bit of a tailwind in terms of the receptivity of the approach as we go through that. On the tax reform side, look, I'm hopeful and I'm optimistic that a Washington that has one party in control can figure out how to set priorities for themselves. My indications would be that from an economic growth perspective that the Republicans believe this is a key driver of what will get the economy moving in the right direction. I would certainly say from my little part of the economy, those policies would drive accelerated and stimulated investment as they did the first time we were in place. I've used this comparison, we were peaking in about $24 billion of investment a couple of years ago. It's not an accident. Our tax bill is up about the same amount that we're down in capital investment right now. I don't expect we’d ever get back to $24 billion at this juncture, given how far along we are in our reinvestment strategies. But do I think that the first place I would go if I had a little bit of latitude might be to accelerate some of the fiber build, the answer to that is, yeah, I probably would look at tweaking that. And some of that might go into investment and completing the fiber plan earlier. Some of that may be returned to shareholders. We can't turn on a dime to answer your question, when you think about what occurs with the fiber build as I shared with you at the analyst conference, if you want to think about increments of $1 million a year. So if we're |
6,752 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | build as I shared with you at the analyst conference, if you want to think about increments of $1 million a year. So if we're building $3 million right now, and we wanted to move to $4 million, that's probably a 12 month best case, 18 month worst case scenario to ramp to that level. And when you start thinking about how you gracefully do these things, increments of $1 million are kind of the graceful way to go about doing it. We’re not whipsawing vendor communities, supply chains, doing things that are inappropriate. So I think about that within the course of the year. Can you scale yourself up to get to another $1 million, that’s a decision that we’d have to make after we saw some tangibility that the tax cuts are, in fact, going to go into place. |
6,753 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thanks for the question, John. We will go to next one.
Operator: Thank you. And our next question today comes from David Barden of Bank of America. Please go ahead.
David Barden: Hi, guys. Thanks so much for taking the questions. I guess my first one for you, John, just returning to a topic that we discussed at the Analyst Day, which was this notion of home games and away games and the benefits the fiber brings to the mobile business. I'm noticing in the fourth quarter that the gains in mobile net adds among fiber customers was equal to the total net adds for the quarter and about probably 22%, 23% of gross adds. Is that something -- is there some information value in examining how those pieces fit together? And then the second question I could -- Pascal. This Reign real estate deal and the $850 million it's contributing, I guess the question is going to be was that -- was knowing that, that's coming part of the $16 billion or is it part of the plus? And how do we think about maybe as we decommission the copper plant, especially, future real estate deals contributing to this cash flow picture? Thank you.
John Stankey: Hi, Dave. I don't know that I would over rotate on the information value if I understand your question correctly. I think typically, when you look at what our strategies are for how we actually penetrate within the base, there isn't necessarily perfectly a timing to what I would call the net add dynamics that occur in broadband, whether or not we're successful at penetrating. There is some activity we get on installation, which is helpful to us. But when you start thinking about what we want to do to drive up that penetration number, the base of unaddressed individuals is much larger than the base of new customers going in. And so we have to do well in that unaddressed base in order to get net adds in it. There's different strategies associated with it. Pascal, do you want to address the Reign dynamic and the fact that it doesn't run through cash flow? |
6,754 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Yeah. So Dave, the Reign deal is, we're accounting for it as a financing transaction. It's not going to run through cash from operations or free cash flow. It will be running through our financing section of the balance sheet. You zoom out, Dave, when I think about what are the drivers of free cash flow being 2025, it starts with our expected EBITDA growth. We also, as we highlighted at Investor Day, in 2024, there was a, call it, about $0.5 billion of headwind associated with paying out a termination fee associated with our O-RAN modernization effort. Additionally, the other tailwind you should expect is, you're going to see some benefit from interest and working capital. We have -- if you saw the way we ended the year, our interest expense was down, and I would expect that to continue into 2025. And I wouldn't expect working capital to be a major factor one way or the other. And so really, those are the dynamics driving it.
David Barden: All right. Helpful. Thank you, guys, both. Appreciate it.
Brett Feldman: And we will go to next question, please.
Operator: Absolutely. And our next question today comes from Michael Rollins at Citi. Please go ahead.
Michael Rollins: Thanks, and good morning. You used the same or similar language around the healthy wireless market and a further normalization of net add and activity levels. Curious, if you could just put some additional context around that, how that may look similar or different than last year in terms of characteristics and how AT&T is looking at the mix between volume growth and ARPU opportunity within the '25 guidance? And just one other quick item. In the trending schedule, you added a much larger number of resale subs. I think it was up 13.5% quarter-on-quarter. I'm just curious what drove that performance and does reseller become a more significant component of Mobility service revenue growth during 2025? Thanks. |
6,755 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Mike. It’s good to hear from you. So I would tell you, it's the same or similar as to what we said last year, that's why there's similar language. We expect further normalization. I don't think we're seeing a whole lot different. As I said before, how we think about the customers that we want to attack that are long-term durable, sustainable customers versus what gets counted in the bucket in aggregate, they don't all necessarily represent that number. But we've seen a bit of a moderation going on, and we expect there's going to be a little bit of a moderation going on this coming year that we worked through. As with previous years, we're going to do everything we can to do both. We're going to have some volume improvement as we gain customers, and we're also going to manage the base like we effectively manage the base. I'm not going to break out for you what represents in each of those. We never do talk about those things. I don't intend to do that going forward. But you can expect that we know how to manage the subscription business, and we know how to balance the two out. There's going to be pockets of our base out there where we can move them through continuum of either getting more value through different plans or finding pockets where maybe we're priced differently than the market, what needs to be as well as growing subscribers. And we'll do both, and we'll do it effectively. What you're seeing on the resale side is, I think we've been really clear and we indicated that we were a provider to DISH and their migration and how they've been handling their customer accounts. We're a beneficiary, I think, of some of their decisions as to what networks they're putting their customers on and how they're operating that, that was certainly not the only contributor but a significant contributor to what's occurring in that. And then, we’ve also had some success in some other MVNO reseller accounts that are now starting to generate some volume as well that are contributing to that. |
6,756 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Michael Rollins: Thanks.
Brett Feldman: Thanks, Mike. We’re going to go to next question, operator.
Operator: Absolutely. Our next question comes from Benjamin Swinburne with Morgan Stanley. Please go ahead.
Benjamin Swinburne: Thanks. Good morning. Question on fiber and one on Mobility. Pascal, I think you mentioned maybe some pent-up demand benefited the fourth quarter coming off the labor strikes at the end of Q3. Any ability to size that for us? And then I'm curious, you guys had really strong fiber ARPU growth in the fourth quarter and the year. We've seen some of our cable competitors get more aggressive with their own converged offers. Doesn't seem like that's having any impact? I'm just wondering, if you could talk a little bit about your confidence in fiber ARPU growth heading into '25. And then just on Mobility, great churn results. Any update on sort of how you're thinking about gross adds and whether that can maybe inflect positive in '25 as Jen and the team kind of put a lot of their initiatives into place? Thanks so much. |
6,757 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Ben. So look, the pent-up demand dynamic, it's not substantial. I just think that there's -- there clearly was some -- there were some customers after we were out of the market for 30 days in the Southeast that decided they were going to wait, and we were able to work through that effectively. And I think that's a certain amount of what you're expecting or what we saw in the fourth quarter of turning in that 307,000 number. I don't see anything in our overall trends that suggest anything different moving forward right now. We've given you an indication. There's a variety of things that drive kind of what you should expect in volumes in fiber in a quarter, one of which is the size of the footprint and what we have to sell into. And then, of course, there's a seasonality dynamic goes into that. So as we move into the first quarter, seasonality adjustments tend to be a little bit slower than what we see otherwise. And we still have good footprint to sell into, but that pent-up demand will disappear. So you should expect that, that's not going to carry into the first quarter. Exactly what that number is, I don't know that I can precisely put a number on it, but I don't see anything in the market that suggests to me right now that there's any fundamental trend difference in how we're penetrating the market and what we're doing overall. And the ARPU growth, what I would tell you is, as I just indicated, we continue to manage the base effectively and look for opportunities to either remove customers up in plan to buy higher speeds or work on pricing adjustments where it makes sense to do that. We did get a benefit of a price increase on some portions of our cohort that work through the fourth quarter that I think you're seeing roll through that. But there's also a dynamic of a higher percentage of the base moving into fiber versus copper legacy products that usually comes with a step-up in ARPU that we get improvements on. And we're going to continue to actively manage that, but you should understand |
6,758 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | a step-up in ARPU that we get improvements on. And we're going to continue to actively manage that, but you should understand we're actively managing that underneath an umbrella. We're still lower than cable on an ARPU basis, and that's one of the reasons we do as well as we do and why we don't feel that we need to necessarily discount a better product when we're putting two together is because we are selling currently in the market on kind of underneath cable's pricing umbrella at a more competitive price. So that still continues to be the case as we move forward. What I would expect on where we are in the mobile side is should our gross add performance get a little bit better relative to what we want to do on the share side in certain segments, yes. But do I expect that we're going to be looking at outsized numbers, given the overall pool of growth is getting smaller? No. Pascal, I don't know, if there's anything you want to add to what I shared there. |
6,759 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: No. Look, I think all well said.
Benjamin Swinburne: Great. Thanks so much.
Brett Feldman: We will got to the next question, please.
Operator: Absolutely. Our next question comes from Peter Supino at Wolfe Research. Please go ahead.
Peter Supino: Hi. Good morning, everybody. A question on upgrades and one on immigration. On upgrades, I'm not going to ask you about iPhone innovation. I'm wondering, if you could comment on just the average age of the phones in your customer fleet in the postpaid phone business. And maybe you describe directionally how that number has evolved and whether we're approaching an inflection point for upgrade simply based on aging as we get into the middle of the 5G cycle here? And then on immigration, if you could comment on the sensitivity of your postpaid phone business to potential major changes in immigration statistics over the next couple of years after the change in the administration? Thank you. |
6,760 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Peter. So I would say that I don't see anything in the data that we're looking at that would suggest there's any fundamental shift going on in customers' desires to hold handsets. I’m sure, different carriers have different points of view on this. And if you're investing heavier in promotions, you may see a shift. You may incent more customers to choose to upgrade. And the richer those promotions get, the higher that rate, and therefore, you walk away and say, well, maybe there's a shift going on. I think we are pretty disciplined in what we chose to do over the course of the quarter. And if I would tell you when we did forecast of what percentage of our customers might be coming in for an upgrade, we're not seeing anything out of pattern relative to that, given how we're performing in the market and what offers we're putting in the market. And I'm not expecting to see that change anytime in the near future. The customer will ultimately make that decision. And of course, later in this year, we'll end up with some new devices coming into the market. And once we know what those devices are and how compelling they are, customers will decide whether or not they want to shift that dynamic and move at a higher rate. But right now, I didn't see anything that occurred in the fourth quarter that I can explain from what were the offers in the market and was it something that somebody wanted to do gift giving on based on what those incentives were as opposed to what I would call a fundamental shift in customers' points of view of their fleet getting more tired, so to speak. The fact of the matter is phones perform pretty well. They're more durable. People know how to take care of them more. There's better insurance and upgrade processes in place to keep devices in customers' hands for a longer period of time. I don't think those things have fundamentally shifted in the market. On immigration, I'd probably say relative to the industry, we're a bit less sensitive to it because as you've heard me say, we |
6,761 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | On immigration, I'd probably say relative to the industry, we're a bit less sensitive to it because as you've heard me say, we maybe don't play as effectively as I'd like in that part of the market or had what I would think should be more of our fair share. I guess the good news is, if there is a downward trend on it, we'll be less impacted. It doesn't mean that I wouldn't like to be more effective in that space. But we just aren't quite as well distributed in that segment of the market as maybe some other folks are. Now in aggregate, do I think that having more people living in the United States is good for a business like ours? I think the answer is yes, because we like economic growth in this country, and part of what we all want to see is that the economy continues to grow and services continue to be invested in. And I think a key element to that is we have to have the right immigration policies. And I’m hopeful that as policymakers kind of go through the next number of months and they think about what they want to do, they get to an appropriate place that understands that the U.S. economy to continue to grow, we need smart immigration. We need to do this the right way, and that is in everybody’s interest to do that. And hopefully, the wise minds prevail, and that’s what takes place, and we’ll see what happens. |
6,762 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thanks for the question, Peter. We are going to go to the next question, please.
Operator: Absolutely. And our next question today comes from Jim Schneider at Goldman Sachs. Please go ahead.
James Schneider: Good morning. Thanks for taking my question. I was wondering, if you could maybe expand, John, on your earlier comments around the broadband market and the competitive trends within it. I mean clearly, some of your competitors in the cable space are getting a little bit more aggressive on pricing. It sounds like you don't see the need to follow that. But I'm just sort of curious whether you expect there to be sort of more opportunities for jump balls or a little bit more kind of competition within the sort of existing non-home movers in the market going into 2025? And then separately, on the Business Wireline outlook, no, that's a relatively muted outlook, not different from what you talked about in 2024. But I'm wondering, if you see any opportunities on the horizon here that could jump start sort of top line opportunities, whether that's from a fiber connectivity for AI or otherwise? I think you sort of moderate those EBITDA declines sooner rather than later. Thank you. |
6,763 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi. Good morning, Jim. I don't see a shift right now in our tactics in the broadband market. I mean, as I've said before, where we have fiber, we win. We win because it's a better product. And the other tailwind, if you want to call it that, that I think we have that I've mentioned and talked about in the Analyst Day is, it's a heck of a lot easier to sell into a market where we're 40%, 50% build as opposed -- built as opposed to a market where we're just starting to build. And we're getting more and more markets where our distribution of fiber and where we are in the build starts to give us scale in the metropolitan area. So we get more effective in that case in the latter stages of our penetration where we can begin to more efficiently buy mass media awareness, word of mouth starts to show up with customers who do their own promoting on our behalf because they have the product, they talk to their friends. So yeah, I would expect that our competitors are having to do things to adjust because we continue to win. But we're fundamentally winning on the product being better. We're not necessarily winning because people are shopping for a lower price right now. And I actually think the lower price shoppers are probably migrating more towards fixed wireless. And they maybe have less scale demands as we've talked about. Our product is the one for the scaled household that requires great performance and consistent performance. And that's what we're doing very well in. And I think we know how to play in that space, and we'll continue to do that. And ultimately, as general consumption continues to increase year-over-year, we think fiber will be waiting there to pick up more and more customers as they need that high performance. So we feel really good about that. We gave you an outlook at the Analyst Day is kind of what we expect in recovery in business. And when we did that, it was, as we shared with you, driven by an orientation away from our legacy products. The good news is, we had a lot of share, and we |
6,764 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | as we shared with you, driven by an orientation away from our legacy products. The good news is, we had a lot of share, and we did really well in that space. The bad news is, some of those products are in a secular repositioning right now. And they're repositioning to fiber and high bandwidth connectivity based products and services, which we'll also do well in. But dollar for dollar is a little bit of a trade down when you make those transitions. And as we forecasted for you what we thought the recovery in that segment would be, it included what our expectations were and being effective in deploying our fiber and ultimately picking up on some of that transition. So do I expect that we can go in and probably be a little more effective in middle mile infrastructure as AI becomes more critical in places? Yeah. We expect we will be. Is that something that we expected when we gave you our forecast moving forward? Yes. Is it stuff we're working on right now that we'll have some success? Yes. Did I see in the fourth quarter probably some of our best fiber growth in business across the board in all segments and what we've historically had? Yes. Is that expected? Yes. Should it continue? Yes. We still have to outrun the legacy base, which -- that's just a mathematical equation over time that we have to work our way through. So I don't think it's going to change anything that we shared with you in terms of the direction and performance of the business. |
6,765 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: All right. Thanks for the…
Pascal Desroches: One other point is on AIA. We -- as it relates to business, we continue to believe it is a great opportunity for us. If you look, we introduced a product middle part of last year. And so we think we have plenty of room to run as it relates to AIA for business.
Brett Feldman: And that's AT&T Internet Air for business, that's our internal acronym.
Pascal Desroches: Yes.
Brett Feldman: All right. We will take the next question.
Operator: Thank you. And our next question today comes from Sebastiano Petti with JPMorgan. Please go ahead.
Sebastiano Petti: Hi. Thank you for taking the question. I guess maybe, John, kind of sticking with business, but from the wireless side, obviously, you broke out the wireless service revenue growth maybe outperformed consolidated ability growth on the business side. Can you maybe pack -- unpack a little bit of what you're seeing in that market, John, obviously, against the context of the broader industry and normalization there? At the Analyst Day, you did outline that AT&T does have a share opportunity, given your mix of customers across the board in the Fortune 1000 and how you see that evolving? But you also -- it seems like there's tailwinds in that business as well, whether it be from corporate liable, maybe demand growing. So it'd be helpful if you could perhaps unpack that and how you're thinking about that evolving over a multiyear basis within AT&T? Thank you. |
6,766 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So Sebastiano, good morning, I would tell you the biggest driver, I think, of our success in business over time is, how well we do in improving our distribution, our effectiveness in the mid and low-end of the market. And that's, I think, the biggest driver and that -- we all like the fact that if there's investment in the country and the economy grows, businesses grow, and they consume more in communication services. That's a good thing, and it's an important thing for our industry, and we tend to be highly correlated to that. But in terms of us doing better as a company and where I think the operating leverage is, it’s in us getting better in our distribution structure in that segment of the market. And as I shared with you, that's our intent when we went through the Analyst Day. Those don't change in 30 days. These are things that require some work and partnerships. And they require you to work with those partners in ways that you give them the right kind of tools to be more effective in prospecting and converting. And we're midstream on doing that. And our expectations on ramp, back to what I shared to Jim's question or part of what's into our forecast that we've given you an improvement in the segment and what we're going to ultimately be able to do. So that's how I think about for AT&T, what we need to do to be more effective in business and where there's opportunity. And it really gets down to how effectively we distribute. And I don't know that there's -- if you want to call that tailwind, I just think that's hard to pick and shovel work that we kind of have to do as our business, and that's the kind of thing that we do.
Brett Feldman: Hi. Thanks for the question, Sebastiano. Operator, we are going to take our last question.
Operator: Absolutely. And our final question today will come from Tim Horan at Oppenheimer. Please go ahead. |
6,767 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Operator: Absolutely. And our final question today will come from Tim Horan at Oppenheimer. Please go ahead.
Timothy Horan: Thanks, guys. You've been pretty early in migrating your operations and networks to the cloud and open source. I'm sure you've seen DeepSeek has created a much lower cost, large language model out there. Can you maybe just give us your thoughts on using cloud and AI to both improve relationships with customers, improve your product and lowering your overall expenses? And then maybe just the same thing on your infrastructure, just any updated thoughts how you can use your infrastructure to support AI? Thank you. |
6,768 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, Tim. We've actually, I think this is a place we've already done a lot of work and picked up a lot of benefits in terms of how you operate internally. We've -- if you kind of look at our cost of service dynamics, what we've been able to do in our call centers and how we operate within our customer base, a lot of that has been driven by AI tool application. And it's not that we're necessarily exclusively replacing individuals with the technology, but we're making them a lot more effective and efficient in how they handle customer needs and then complementing that with customer supported AI. And when you look at things like our call volumes despite the fact that we're growing, our customer base dropping 30% year-over-year, that's driven by the application of that technology and what we're able to do with it. We've used it a lot internally in our operations. We're seeing demonstrative improvements in our code effectiveness. And I shared this on a previous call, we're spending less right now to develop new code internally and getting more. And it's through the application of AI and the technology and what we're able to do with generative AI. I fully expect, as I mentioned earlier in kind of my comments on CNBC, we're very early in this technology cycle right now. And this is a seminal technology cycle. It's going to be every bit as big as the founding of the Internet when it's all said and done. And because we're very early in it, we should expect there's going to be days we wake up like this one when somebody comes in and says they figured out a way to get as much benefit out of the model by consuming less power or using less processing capability or they fine-tune the models to work in a particular domain area more effectively or they can run locally as opposed to in the cloud, which is going to open up and facilitate new applications and business models. I would expect for a nascent technology like this that we're going to have those moments because necessity is the mother of invention. |
6,769 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | expect for a nascent technology like this that we're going to have those moments because necessity is the mother of invention. And there's a lot of money, an awful lot of money and a lot of creative minds working on this and people are going to come up with better ways to apply it. And we're all going to have to stay on our game to make sure we use it effectively, so none of us are in a disadvantaged position relative to our competitors on cost structure effectiveness. I think there are places where I would like to see our business get better at doing this, which is using the data that we have to start doing things that are unique to us, which handling particular customers and segments of the base and those that we don't have as customers and understanding how we price and attack those things and using the unique data sets that we have around our infrastructure, how that lines up to particular customer segments, in particular, industries to get more effective in the market. If I were to say I had a goal for 2025, I would like to this time next year be talking about good momentum we've received in business as a result of executing on some of those things moving forward. And finally, I'd just say we continue to find innovative ways to use it in our business today. And maybe I'm not being as effective at talking about all the great things we've done to effectively use that, but we're tuning our RF capabilities dynamically in our wireless network today based on traffic flows and customer movement using machine learning capabilities and AI. And those things always help us on the margin, and we're going to continue to do them moving forward. Appreciate the question, Tim. Let me go ahead and just like to close this out for all of you. And I would just say one thing. We outlined for you what we intended to do in 2024 in January of the year. And when you kind of look at what we delivered, we did exactly what we said we were going to do, if not a little bit more. And I think what we've hopefully demonstrated to you over |
6,770 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | exactly what we said we were going to do, if not a little bit more. And I think what we've hopefully demonstrated to you over the course of '24 and the previous years, our execution is getting very consistent. And that's not a surprise as we refocused the business, and we put our energy towards being a great communications company. We're on that learning curve, and we're getting more consistent and better at what we do and we still have opportunities to improve upon the progress we've made. This is going to be an important year for us as we hit the midpoint of this year, and we have an opportunity to recalibrate on our capital allocation. And that's been the deliberate plan to do that. We look forward to that moment, and we think we're in a great position to continue to invest in this business and drive the same level of consistency and improvement that you've seen over the last couple of years. So thank you very much for your interest in us. And I hope everybody has a good rest of the year. |
6,771 | T | 4 | 2,024 | 2025-01-27 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Operator, you can go ahead and end the call. |
6,772 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Operator: Thank you for standing by. Welcome to AT&T's Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Following the presentation, the call will be open for questions. [Operator Instructions] And as a reminder, this conference is being recorded. I would like to turn the conference over to our host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you, and good morning. Welcome to our third quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO; and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties described in AT&T's SEC filings, results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website. With that, I'll turn the call over to John Stankey. John? |
6,773 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Thank you, Brett. I appreciate everyone joining this morning. I hope you're all doing well today. The third quarter showed again that our team continues to produce solid results as we efficiently grow high value wireless and broadband subscribers. Since Pascal will go through the quarter in detail, I'll share more on how our investment led strategy is helping us deliver on our full year consolidated financial guidance, creating runway for future growth, and then I'll provide a few updates on some recent developments. Our strategy remains the same to lead the industry in converged connectivity through 5G and fiber. In Mobility, the value of the coverage and reliability of the service we provide and our best deals for every one approach that puts our customers first are producing solid, sustainable results. We're growing 5G subscribers in a durable way and delivered 403,000 postpaid phone net adds in the third quarter. We also grew efficiently with lower year-over-year postpaid phone churn and upgrade rates. Three quarters of the way through the year, our Mobility business has grown EBITDA by more than 6%, which is in the high end of the guidance we provided for the full year. This puts us in a solid position heading into the fourth quarter where we expect seasonally higher phone purchasing activity, upgrades and promotional cycles. Overall, we feel great about our continued momentum in Mobility. We're adding customers, increasing profitability and expect to deliver the best postpaid phone churn in the industry for the 13th time in 15 quarters. Now let's switch gears to Consumer Wireline where we generated positive total broadband subscriber net adds for the fifth consecutive quarter despite impacts from a one month work stoppage in the Southeast and from Hurricane Helene. And I think it's important to take a moment, recognize our frontline teams who continue to show up in a heroic fashion while confronting multiple devastating hurricanes. We were pleased to welcome our committed employees in the |
6,774 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | a heroic fashion while confronting multiple devastating hurricanes. We were pleased to welcome our committed employees in the Southeast back to work on September 16th, with newly ratified agreements, a five year contract in the Southeast and a similar four year agreement in the West, we appropriately recognize our employees for the exceptional service and performance they provide our customers on a daily basis with annual wage increases averaging 3.6%. Our employees will maintain their position as some of the best paid professionals in the industry, while we cooperatively work with our labor partners to reposition the company around 5G and fiber is the only all union wireless and broadband provider in the U.S. We serve millions of individuals and businesses in the Southeast region of the country and our frontline employees on the ground have responded quickly and worked tirelessly to keep our communities, customers and first responders connected when it matters most. For context, our FirstNet organization provides a meaningfully differentiated product to public safety during events like these. Our organization dedicated to supporting our growing public safety base on FirstNet responded to more than 200 requests during the Hurricane Helene recovery. This was one of our largest emergency response efforts ever. These efforts are nothing short of remarkable. It's exactly why more than 29,000 public safety agencies and organizations, including the New York City Police Department, the Fire Department of New York City and the North Carolina Department of Public Safety choose FirstNet. The only dedicated communications platform for public safety. We applaud the FCC's recent decision to make available 50 megahertz of spectrum to the FirstNet authority to facilitate nationwide deployment of 5G services for first responders, and we look forward to working together on plans that take these capabilities to the next level. Moving back to broadband. Despite a 30 day work stoppage in the Southeast portion of our footprint, |
6,775 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | to the next level. Moving back to broadband. Despite a 30 day work stoppage in the Southeast portion of our footprint, we've now had more than 200,000 AT&T Fiber net adds for 19 consecutive quarters, which shows the strong underlying customer demand for fiber. In the quarter, Consumer Wireline delivered more than 8% EBITDA growth, driven by nearly 17% growth in fiber revenues. These consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks. Overall, the underlying momentum with 5G and fiber positions us to close the year strong. While our 5G and fiber businesses are performing well on their own, it's increasingly clear that customers prefer to purchase mobility and broadband together as a converged service. Only AT&T can offer this at scale with benefits from owners' economics. This is driving a reinforcing cycle where the success of our fiber business drives growth in mobility and vice versa. As we shared last quarter, about four out of every 10 AT&T fiber households also choose AT&T is their wireless provider. Additionally, our share of postpaid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average. This highlights the true benefit of owning and operating both 5G and fiber networks at scale, which is the ability to drive higher share in both mobility and broadband through converged service penetration. Over time, we expect this should drive higher returns on our invested capital in both our mobility and broadband businesses than either could achieve as a standalone operation. While our convergence strategy began with a focus on our own fiber footprint, we're also pursuing attractive opportunities to expand AT&T fiber outside of it. We're already America's largest fiber provider with the fastest and most reliable speeds. The superiority of AT&T fiber elevates the overall AT&T brand, we want more customers to experience the best wired Internet experience |
6,776 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | of AT&T fiber elevates the overall AT&T brand, we want more customers to experience the best wired Internet experience available today, that's why we've announced plans to bring AT&T Fiber high speed Internet to even more people in new geographies through Gigapower, our joint venture with BlackRock, as well as through recent agreements with commercial open access fiber providers. These fiber driven growth initiatives present attractive capital efficient ways for us to provide both AT&T fiber and 5G wireless services to more customers. In addition to being the largest capital investor in the U.S. connectivity infrastructure since 2019 we continue to reduce our net debt and increase operating leverage due to a combination of higher EBITDA and strong free cash flow generation. Our financial flexibility continues to improve, and we remain on pace to meet our target of net debt to adjusted EBITDA in the 2.5 times range in the first half of next year. In the quarter, we also announced that we reached an agreement to sell our remaining 70% stake in DIRECTV to TPG in a non-contingent transaction, subject only to customary closing conditions, and separate from the regulatory process associated with the DIRECTV DISH transaction. This sale and transaction structure allows us to continue our focus on being a leader in 5G and fiber connectivity throughout America, while further strengthening the balance sheet. It also presents new optionality as we consider opportunities to leverage our significant distribution to aggregate products and services that simplify and improve our customers' lives. We will close the transaction following necessary regulatory approvals and optimal financing and tax considerations. We're confident that the company's transformation over the past four years has positioned us well for continued organic growth, while also increasing our financial flexibility and capacity to support sustained investment and enhance shareholder returns. We're excited to share the details of what this all means for the |
6,777 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | support sustained investment and enhance shareholder returns. We're excited to share the details of what this all means for the future of AT&T, when we speak with you again at our upcoming Analyst and Investor Day on December 3rd, so mark your calendars for an exciting visit to Big D. With that, I'll turn it over to Pascal to cover the quarter in greater detail. Pascal? |
6,778 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our third quarter financial summary on Slide 8. Third quarter consolidated results were in line with our expectations. Revenues were down slightly as a decline in Business Wireline service revenues and low margin mobility equipment revenues were mostly offset by growth in higher margin wireless service revenues and fiber revenues. Year-over-year consolidated revenue trends were also impacted by more than $100 million of FX headwinds and an approximately $100 million impact from transferring our cybersecurity business into a joint venture earlier this year. Adjusted EBITDA was up 3.4% for the quarter as growth in Mobility, Consumer Wireline and Mexico, which collectively drove more than 80% of our total revenues in the quarter were partially offset by a continued decline in Business Wireline. Year-to-date, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year. We expect to achieve this growth even with about $115 million of estimated financial impact related to the effects of Hurricane Helene and Milton and the work stoppage. Consumer Wireline and Business Wireline are expected to bear most of this impact. Adjusted EPS was $0.60 compared to $0.64 in the year-ago quarter. Consistent with prior quarters this year, the third quarter included about $0.09 of aggregate EPS headwinds from the four items we discussed earlier in the year. Adjusted EPS excludes $0.61 impact related to a $4.4 billion non-cash goodwill impairment charge for our Business Wireline unit driven by an industry-wide secular decline of legacy services. For the full year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25. Year-to-date, free cash flow is $12.8 billion. This is up $2.4 billion compared to the same time last year and consistent with our goal of driving higher free cash flow that is more ratable on a quarterly basis. In the third quarter, we generated free cash flow of $5.1 |
6,779 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | higher free cash flow that is more ratable on a quarterly basis. In the third quarter, we generated free cash flow of $5.1 billion, which included the previously disclosed one-time payment of $480 million related to our wireless network transformation and the continued paydown of vendor financing obligations. Capital investment for the quarter was $5.5 billion, down about $150 million compared to the prior year, primarily due to lower vendor financing payments. Capital expenditures were $5.3 billion, up approximately $650 million compared to the prior year. We expect higher capital investment in the fourth quarter as we ramp our wireless network modernization. We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short-term financing, including further paydown of vendor financing in the fourth quarter. These additional vendor financing payments put us on page for a full year capital investment at the high end of our guidance range of $21 billion to $22 billion. Our free cash flow is tracking to the midpoint of our guidance range of $17 billion to $18 billion. Now let's look at our mobility operating results on Slide 9. For the quarter, we delivered 403,000 postpaid phone net adds down from 468,000 a year ago. This is consistent with our wireless market normalization expectation. We also posted another quarter of year-over-year churn improvement with postpaid phone churn of 0.8% versus 0.79% in the third quarter of 2023. Mobility service revenue grew 4% driven by strong execution in our balanced go-to-market strategy. In the quarter, we also aligned the timing of certain administrative fees and recorded approximately $90 million of one-time revenues that benefited service revenue. Postpaid phone ARPU was $57.7, up 1.9% year-over-year largely driven by higher ARPU on legacy plans. As expected, service revenue growth was partially offset by lower equipment revenues with a postpaid upgrade rate of 3.5%, which was down from 3.9% |
6,780 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | revenue growth was partially offset by lower equipment revenues with a postpaid upgrade rate of 3.5%, which was down from 3.9% last year. In prepaid, our Cricket brand continues to display remarkable consistency with positive phone net adds for 40 consecutive quarters or a decade straight. For the year, we continue to expect Mobility service revenue growth in the 3% range. Mobility EBITDA of $9.5 billion grew 6.7% or by about $600 million year-over-year. On a year-to-date basis, Mobility EBITDA grew 6.3%, reflecting nearly 100% of service revenue growth flowing through to EBITDA. The strong performance puts us on pace to achieve our target of mobility EBITDA growth in the higher end of the mid-single digit range for the full year. Our Mobility outlook also continues to anticipate higher fourth quarter promotional activity levels consistent with seasonal trends. Now let's move to Consumer Wireline results on Slide 10. The sustainable strength of fiber is driving Consumer Wireline growth and yielding strong returns. In the quarter, we added 28,000 total broadband subscribers, which includes 226,000 AT&T fiber net adds. Our fiber subscriber gains also reflect an estimated 50,000 fewer net adds from the work stoppage and storms in the Southeast. It is clear that where we do have AT&T Fiber, we win. We now passed more than 28 million consumer and business locations with fiber and remain on track to pass 30 million plus fiber locations by the end of 2025. As we've stated before, the better-than-expected returns we're seeing on our fiber investment, potentially expand our opportunity to go beyond our initial build target by roughly 10 million to 15 million additional locations. We look forward to providing you with a more detailed update on our plans for expanding the reach of AT&T Fiber during our Analyst and Investor Day on December 3. Outside of fiber, we remain encouraged by the early performance of AT&T Internet Air and our success proactively migrating legacy copper-based Internet customers to this service. We |
6,781 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | of AT&T Internet Air and our success proactively migrating legacy copper-based Internet customers to this service. We now have nearly 500,000 total AT&T Internet Air consumer subscribers, including 135,000 added during the quarter. Third quarter broadband revenues grew 6.4% due to strong fiber revenue growth of nearly 17%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber ARPU of $70.36 was up 3.2% year-over-year with intake ARPU approximately $75. We continue to see solid uptake in higher speed fiber tiers and a healthy underlying pricing trends. The third quarter also was the first full quarter in which ARPU was impacted by the rollout of Autopay changes. We view Autopay as a long-term benefit for customers as well as operationally for our broadband business. Consumer Wireline EBITDA grew 8.6%, as growth in broadband revenues and ongoing cost transformation continued to improve profitability. Through the third quarter, Consumer Wireline EBITDA grew 10%, and we continue to expect growth in the mid to high-single digit range for the full year, including impacts from the recent work stoppage and storms. Now let's cover Business Wireline on Slide 11. Business Wireline EBITDA was down 20% due to continued industry wide secular declines in legacy voice services. The reported decline in EBITDA also reflects a tough comparison versus the third quarter of last year, which benefited from approximately $100 million of IP sales that did not recur in 3Q this year. Overall, Business Wireline is performing slightly below the outlook we provided in the first quarter due to lower revenue expectations, including a shift of IP sales into 2025, as well as the impact of Southeast work stoppage and impacts of Hurricanes Helene and Milton. We now expect Business Wireline EBITDA declines in the high-teens range for the full year versus our prior outlook for a mid-teen decline. While near-term declines in legacy voice revenues are likely to weigh on Business Wireline EBITDA trends for the remainder of |
6,782 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | While near-term declines in legacy voice revenues are likely to weigh on Business Wireline EBITDA trends for the remainder of the year, our 5G and wireless products continue to present attractive growth opportunities in business solutions. This includes sustained growth at FirstNet, which now has approximately 6.4 million total connections. Similarly, we're excited about the potential of emerging growth products like AT&T Internet AirFit (ph) business. Now let's move to Slide 12 for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and deliberate. We're successfully balancing efficient growth with long-term investment as we deliver converged network services to more customers, pay down debt and return value to shareholders. We also remain focused on deleveraging, we reduced net debt by about $1.1 billion in the quarter despite a $1.3 billion FX headwind related to foreign debt. Also recall we fully hedge our foreign denominated debt. So we have an offsetting FX gain recorded in other non-current liabilities on our balance sheet related to the hedges. Year-over-year, we've reduced net debt by approximately $2.9 billion and have lower vendor and supplier financing by $2.4 billion. At the end of September, net debt to adjusted EBITDA was at 2.8 times, and we're making steady progress on achieving our target in the 2.5 times range in the first half of 2025. Looking forward, our debt maturities are very manageable and we're in a great position with more than 95% of our long-term debt fixed with a weighted average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $1.7 billion versus the second quarter. The third quarter net impact from securitization facilities was a $400 million source of cash. So the net of these items was a $1.3 billion use of cash. In the fourth quarter, we expect sequential increase in direct supplier financing balances due to typical seasonality. However, we expect to continue |
6,783 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | we expect sequential increase in direct supplier financing balances due to typical seasonality. However, we expect to continue reducing our aggregate net balance of direct supply and vendor financing on a year-over-year basis for the remainder of the year, which should lower our interest expense and continue to improve the quality and ratability of our cash flows over time. DIRECTV distributions in the quarter were about $600 million on a pretax basis. Based on the terms of our agreement to divest our 70% stake in DIRECTV, we expect $1.1 billion of pre-tax cash payments in 4Q. Cash taxes were about $600 million in the third quarter, and we expect to pay about $1.6 billion in cash taxes in the fourth quarter. To close, I'm very pleased with our team's performance so far this year. And as John noted, we're on pace to deliver on all of our full year 2024 consolidated financial guidance. Brett, that's our presentation. We're now ready for the Q&A. |
6,784 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thank you, Pascal. Operator, we are ready to take the first question.
Operator: Thank you. And that will come from the line of Simon Flannery with Morgan Stanley.
Simon Flannery: Good morning. Thank you very much. John, you mentioned in the fourth quarter, we expect seasonally higher phone purchasing activity upgrades and promo cycles. Can you just put some context around that you've continued to see low upgrade activity. There's concerns about a bigger iPhone cycle. What are you expecting in the fourth quarter and longer term as Apple introduces AI, etc. And then just one on the Business Wireline. Any kind of light at the end of the tunnel there? How much more of the sort of pressures do you think we get before the rate of change starts to stabilize and improve? Thanks.
John Stankey: Hi, Simon. Good morning.
Simon Flannery: Good morning. |
6,785 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So I don't know that I can give you an answer that's more satisfying than last quarter on projecting what Apple phone sales might be. You've seen the numbers, they're down slightly over last year's levels on an introduction. We're still waiting, obviously, for the software release and whether or not that software release drives interest in the consumer base to accelerate that remains to be seen, I don't know. I've given you my point of view that says, I think some of these things are going to be a little bit more graceful ramp-up in consumer interest as opposed to a big bang. Software oftentimes tends to be that. If you went back and thought about any software innovation that occurs on a handset over the past decades or so, you tend to see that dynamic occur. They become material and meaningful over time. But oftentimes, certain features didn't exactly go to this massive ramp when they're first released because software is an iterative technology sometimes has to be iterated on to improve it and make it meaningful and address the particular need. So I don't know that I would expect when the software release comes out, that all of a sudden, we see this massive uptick, but the consumer will ultimately decide that the consumer will be the one that decides what to do. And I think to my remarks, we're in a position in what we've done through the first-three quarters of this year that we've got a lot of flexibility. We can adjust to whatever takes place. I think I mentioned last quarter when we were on the call, expected that fourth quarter might be active combination of holiday season device capabilities. And so we've tried to make sure that we're in a position to address that, no matter how it occurs, and I feel like based on what you've seen in the industry over the course of the last couple of weeks, things have been very realistic and very pragmatic about how folks have approached the market. And I don't expect things to be dramatically different as we move through the fourth quarter. Relative to |
6,786 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | the market. And I don't expect things to be dramatically different as we move through the fourth quarter. Relative to Business Wireline, look, there's a lot -- there are green shoots. As you know, we're trying to reposition the business to a connectivity based business. And when I look at what we're doing in our connectivity based product and service portfolio as we reposition the focus of the organization, we move from spending most of our time in the Fortune 1000 to a broader exposure to the business market. I do see those volumes starting to take off, and I see our distribution starting to ramp. They're just not doing at the rate and pace of some of the decline in the legacy revenue base and some of those are products are fairly mature products that have very attractive margin constructs around it, and there's a little bit of a shift going on. And it's not a whole lot different than what we were kind of going through on the consumer side a few years back. We will catch it exactly the date that we will catch it. We'll spend some time on that in December, giving you a little bit of an outlook of how we see that playing through. But as you've been seeing, we've been doing a nice job as a business, finding other places to grow to kind of offset that as we move through it. I drive home at night thinking about a lot of things. We have a tough challenge in front of us on or things that I wonder whether we're headed in the right direction. One thing I do not wonder about is whether we should be putting our time and effort in repositioning the business. I feel very, very comfortable that this is a place that AT&T should be, this is an important market to us, all of our data, all of our research, everything we're doing suggests that we can create long-term value, just like we're doing in Consumer, as a converged provider and we will be successful in that transition. And I don't want to lose the fact that because we report Business Wireline separately, it doesn't really reflect how we're doing in the business market |
6,787 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | the fact that because we report Business Wireline separately, it doesn't really reflect how we're doing in the business market overall. When you add in what we're experiencing in the wireless space and the solid growth that we're putting up on the board, a lot of that's coming from business. And it's just -- it's a technology shift in some cases, a business that have traditionally purchase wireline services that are now migrating certain products and services to wireless. And I think our product portfolio is now starting to evolve where on a combined basis, we can be even more effective. And I'm pretty confident, we’re going to make that pivot, and we’re going to be in a good place after we get everything lined up on that. |
6,788 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Simon Flannery: Great. Thanks, John.
Brett Feldman: We'll take our next question, please.
Operator: And we’ll go to the line of John Hodulik with UBS.
John Hodulik: Great. Thanks and good morning, guys. I don't want to jump in too much on the December event, but can we talk a little bit about the out-of-region opportunity with fiber. I guess, first, how did you guys or what was the criteria for selecting the partners that you have? And are there more partners likely to be added? Second, how big could that opportunity be? I guess, including Gigapower. And third, are you guys seeing the churn benefits, I guess, you sort of laid out the customers that have bundled service, but are you guys seeing churn benefits in the wireless business for customers that -- have that take both services? Thanks. |
6,789 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, John. So happy to talk about some of those. And of course, to your point, we'll spend even more time and give you a little bit more texture when you come and visit us here in December. I hope you do come. So look, the partner dynamic is -- it's a good question, and it's really important in our point of view. And I think I alluded to this at the Communacopia conference. We tried to put a portfolio of capabilities together that make us the attractive partner. And it's not just that we can go in and move product for somebody. We're doing all the things where -- because we have a Gigapower offer and because we're actually, in some cases, operating what could ultimately be an open access network in some parts of the country. We've been very mindful of how you should construct the product offer or how you need to work with partners, etc., and we walked in with a model that's a model that we're executing in our own partner footprint where we can walk in and offer them even though we're not funding the build in this case, the same construct of what we're executing in Gigapower, same product offer, the same ability to bring our distribution strength that comes in play. The same ability to do things like offer OSS and BSS back offices that can facilitate people and how they operate things even going as far as what we can do to give them opportunities to ride on our scale and our capabilities with third-party suppliers and providers as they go about the work that they're doing, and we're very open, for example, of offering the technologies we put together for in-home technologies, how that product capability evolves over time. And to build a world-class product, that kind of scale is essential. So when we walk in and we approach a partner, and when we approach a partner, and we're not necessarily interested in selling fixed wireless access over the top of them, that looks like a really good place for somebody to maybe invest in a relationship over time, that's mutually productive moving forward. And is |
6,790 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | a really good place for somebody to maybe invest in a relationship over time, that's mutually productive moving forward. And is there more out there that can be done? Sure. And I think one of the things that maybe we all need to understand structurally of what's occurring in this industry over time is, these partnerships and some of the open access arrangements will, in fact, change the percentage of the population that certain brands and converged capabilities can serve over time. And I think that will be a meaningful -- not these most significant part, but it will be a meaningful part of the total addressable market that companies like AT&T can ultimately attack moving forward. So I do think it can get bigger. I think you're seeing just the front end of it right now. As I've said before, I don't believe this is a two or three year dynamic. I think this is what will the industry structure emerge to over the next decade dynamic. And that's the play that I'm kind of focusing the business on, and I'm trying to think about as we allocate capital to ensure that over the next decade, AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade. So where we are in performance, I gave a fair amount of insight to the front end of what we're seeing with some of our partnership sales when I was out at Communacopia. I think what we can safely say is everything at the front end, customer acquisition, ARPUs, our rate of penetration, all those things, as I shared, are looking very, very similar to what's happening in region. That's how I would kind of sum it up. I think I also shared with you when we went and we established those partnerships, we didn't expect that. We de-rated our business cases. We expected we'd be somewhat slower to penetration given that the brand hadn't necessarily been in those markets. We expected that maybe we would have ARPU dynamics that we have to price differently in order to penetrate blah, blah, blah, that's not happening. |
6,791 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | we would have ARPU dynamics that we have to price differently in order to penetrate blah, blah, blah, that's not happening. It's looking more like the in-region business case and that only makes it more compelling. Now what we don't know yet John is, we haven't been in that business for two years or 18 months. So I can't conclusively tell you that we're going to see the same dynamic play into our wireless share perspective and our churn dynamic. But if I'm seeing the early stuff looking like what it does in region, I guess I'd step back and say, why should the back end look a lot different over time, assuming we offer the same quality product and the same execution, what we’re achieving on our more established footprint and all the operational dynamics would be that we are, in fact, executing in that way. |
6,792 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Hodulik: Yeah. That make sense. Thanks for the color.
Brett Feldman: We will take the next question please.
Operator: That will come from the line of Peter Supino with Wolf Research.
Peter Supino: Hi. Good morning. Thank you. A question on consumer broadband and one on capital allocation. In Consumer broadband, your Internet Air net add growth stabilized despite your announcement that you've launched about 204 partial regions last quarter. And so, I wonder if you could comment on the relationship between that open for sale change and the growth path of Internet Air, just bigger picture? And then on capital allocation, on the M&A front, I wonder if you have a point of view on HFC assets on cable assets, where they could possibly be complementary to your fiber strategy depending on the region and the assets you have in place? Thanks. |
6,793 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Peter. I'm very comfortable with where we're at on Internet Air. I don't think you should be, as I've said many, many, many times, you shouldn't expect that AT&T is going to look like some of our competitors in the industry on volume and where we're going. We're using it, as I've said before, very strategically. I'll sell to any business customer that is well suited to the product, that's an attractive market to us. It's an attractive market because of what we can bring in growth in other products and services, including handsets in the account, we can justify the usage characteristics around it. You should expect as we continue to scale some of our distribution in the mid-business market that you'll see those numbers grow as a result of that, and then use it very strategically in consumer. We're using it as a footprint hold capability as we know we've got some copper customers, we can improve service levels, waiting for fiber. In some cases, we're using it to migrate people off of copper so that we can ultimately turn down costly service areas and not have to support the legacy infrastructure that's in place and occasionally in markets where we have surplus spectrum that we know will be in place for many, many years. And it's really kind of a follow dynamic, and we can get the right kind of returns on it. But that rate and pace is never going to rival what you're seeing with anybody else, and you should just assume that's the case. I would tell you, relative to our internal projections of the product, we're very much in line with what our expectations would have been. And I don't think you're going to see what I would call a demonstrative shift in the quarters moving forward. There was a time in my career where I thought I was – I at Air, at that time where I believe the pivot to HFC was the right capital allocation decision. And I think cable has demonstrated that it has been a pretty resilient and capable infrastructure that they've managed to get very attractive returns on. But every |
6,794 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | it has been a pretty resilient and capable infrastructure that they've managed to get very attractive returns on. But every decision has its time in place. And my belief is, even if you kind of look at the dynamics of what's necessary to service DOCSIS 4, we're on this steady march that eventually fiber is moving its way to a customer. We've been on that March since the early 1980s when fiber introduced itself, and it's just been on a slow March to getting closer to the customer. And I think we're now starting to get into the final innings of that game. And so in what I would consider to be a more mature technology cycle of HFC jumping into something that ultimately ends with fiber having to show up at the customer's home doesn't seem like a timed -- well-timed decision at this juncture. More importantly, I look at our business model and our organic opportunities that are in front of us, and I look at how we're executing around this and I look at the future returns that are available, and I'm more interested in allocating capital to use the business model we have that I think is incredibly powerful and has a fantastic runway, a fantastic annuity stream, a durable annuity stream for investors. And so that's where my energy is at, which is simplifying operations, having continuity, working with partners that can expand our footprint. I think that's the play that has longevity. And I don't subscribe to this point of view that over the long haul, that the next wave of growth in this space is somehow sub-optimal return characteristics. I just don’t believe that. I don’t see that. I don’t see that in any of the operations of our business. And I don’t see it in the way the market is structured. |
6,795 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Peter Supino: Thanks, John.
Brett Feldman: Thanks, Peter. We will take the next question, please.
Operator: And that will come from the line of David Barden of Bank of America.
David Barden: Hey, guys. Good morning. Thanks for taking the questions. So John, I do remember when you had Air, so you look great. So John, I wanted to ask this question, which is maybe the inverse of the Gigapower question, which is, as you think about how you're building fiber out in your territory and as you make these new decisions about what's coming next, is the fiber build in your territory walled garden that's only for AT&T's benefit and however much share you're able to get is the share you get or is there a thought that maybe AT&T wants to be an open access provider and the parts of the market that it doesn't access directly, you can at least participate in on a wholesale basis the way you historically were talking about maybe the wireless business and the cable relationship? And then the second question, if I could, Pascal, I think you were reiterating the guidance, the -- I think I missed the line that said that 2025 earnings growth would be positive. Obviously, there's lots of moving parts, but could you just step us through kind of the thought process on taking that out. Thank you.
John Stankey: Hi, Dave. That must be when you getting old, if you remember when I had Air, but…
David Barden: I’m.
John Stankey: The -- but you look good for being old days.
David Barden: Right back at you, John. |
6,796 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Yeah. Look, as I said, I think the structure of this industry is going to evolve differently over the next decade. And the way I think about it is, there's going to be far more differentiation that comes in overtime on what a converged offering looks like, and that differentiation will be both on product and service. And I think, if you're -- I don't want to use the term walled garden, but if you think about owned and operated assets, our motivation would be to get the best customers that we can sell the most product to and provide the most vertical revenue capability on new products and services where our brand is the owned and operated servicing brand to that customer. And I think that's the play that we want to be putting our time and energy on for the next year or two. And I think we're going to be very successful in that regard, and we're going to find very attractive customers that are interested in a very simple value proposition of working with one company, and we're going to make sure that we get the most share that we possibly can in the market in that way, shape or form that will probably be the most profitable loyal and best customers we have. But I've been in this industry long enough to know that it is a high fixed cost industry, and there's been an element of wholesale that has played in overtime in virtually every piece of infrastructure that's been built. And will come a time where you step back and say there's another point or two of growth or capacity that can be allocated in a way that's different than the way it is today, and it could be done on a wholesale structure and it may be accretive to the overall returns of the business, I think it's entirely possible that, that day could arrive. And I think it's really important that we think about an industry structure in that regard because as people start talking about the ability to federate product and service across an industry and what footprint looks like over the course of the next decade. If you're not thinking about the |
6,797 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | service across an industry and what footprint looks like over the course of the next decade. If you're not thinking about the likelihood that, that could become an element of how the industry is structured. You're missing the fact that the dynamic of how cable, for example, has federated on nationwide constructs of cooperation that you could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities and your brand position in a way over time that can make a very strong difference in terms of profitability and return. So I won't rule it out. I absolutely believe that over time, there may be an accretive and economic construct around it. I don't know that time is right now, but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways. And Pascal, if you want to talk about the earnings dynamic for '25. |
6,798 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Sure. Thanks. Hey, Dave. Thank you. I wouldn't read too much into it except for the fact that, look, as you know, we announced our DIRECTV transaction. And we're not quite sure when in 2025, that's going to close. So depending upon when it closes, we may not grow EPS on a reported basis, but rest assured, on an organic basis, there is nothing to see here that we continue to expect our EBITDA and operating income to grow next year. So I feel really good about the overall performance and so it's really all about DIRECTV and the timing close.
David Barden: All right. Thank you, both.
Brett Feldman: We will take the next question, please.
Operator: That will come from the line of Michael Rollins of Citi.
Michael Rollins: Thanks and good morning. Curious, if you could provide an update on the wireless competitive landscape broadly across the consumer and business verticals. And if you can unpack in a little bit more detail what's driving the growth in postpaid phone ARPU on a year-over-year basis, and how you view the sustainability of postpaid phone ARPU growth over the next couple of years? |
6,799 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Michael. Look, I think the industry is great. I'm very comfortable with where things sit. It's competitive. We're having to work really hard, but I don't look at it and say, I can't figure it out. I can't rationalize what people are doing. I mean I look at all the moves that competitors are making and what's going on. And the -- I think I can understand them. I think I understand what their trying to achieve. I understand what we have in terms of our long-term ability to compete against it in an effective fashion. I don't mean to sound like a broken record. There's some growth that's going on in the industry that I'm not as interested in participating in as others might be. And I've tried to be disciplined about that. I feel good about kind of the balance of our growth to the quality of our growth. And I think over the long haul, that's the best way to ensure that we're returning for our shareholders, and I feel good about where we stand in that regard. And I don't expect that is going to change dramatically, and I see consumers using more of our product every month. I see it working their ways into their lives in even more important fashions. And I think that bodes well over the long haul for what's occurring. Business, as I mentioned earlier is a place that I think we could do better as our distribution gets fine-tuned a bit. That’s -- there's a lot of activity going on in the business market. I believe that we're not -- we're doing well, but we're not as good as we can be. I think there's still some segments in the business market that we can be more present and more effective, especially, given what we're able to do on a combined basis, the introduction of Internet Air in addition to selling voice products as well as our fiber footprint. And I don't know that that's any different in how the market is performing. It's just an opportunity of where I think we can get incrementally better as we move through the year. As I think about ARPU, it's always a combination of things. I actually would |
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