AT&T INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Cash Used in Investing Activities For the first three months of 2025, cash used in investing activities totaled $4,958 and consisted primarily of $4,277 (including interest during construction) for capital expenditures. During the first three months of 2025, investing activities also included $95 of FirstNet sustainability payments net of reinvestment, and approximately $560 for our investment in a new strategic partner related to wireline network transformation accounted for under the equity method of accounting. We enter into multi-year software licensing arrangements, which are typically paid over the license terms of two to five years and referred to as vendor financing. Additionally, for capital improvements, we have negotiated favorable vendor payment terms of 120 days or more with some of our vendors, which are also referred to as vendor financing. Vendor financing is excluded from capital expenditures and reported as financing activities. For the first three months of 2025, vendor financing payments were $203, compared to $841 for the first three months of 2024. Capital expenditures for the first three months of 2025 were $4,277, and when including $203 cash paid for vendor financing, capital investment was $4,480 ($119 lower than the prior-year comparable period). The vast majority of our capital expenditures are spent on our networks, including product development and related support systems. During the first three months of 2025, we placed $378 of productive assets (primarily software) in service under vendor financing arrangements (compared to $99 in the prior-year comparable period). The amount of capital expenditures is influenced by demand for services and products, capacity needs and network enhancements. Cash Provided by or Used in Financing Activities For the first three months of 2025, cash used in financing activities totaled $553 and was primarily comprised of debt repayments, dividend payments, preferred stock repurchase and vendor financing payments, offset by issuances of long-term debt and preferred interests. A tabular summary of our debt activities for the three months ended March 31, 2025 is as follows: Three months ended March 31, 2025 Issuance of Notes and Debentures: EUR notes 2,956 Debt Issuances $ 2,956 Repayments EUR notes 1,321 Other 205 Repayments of long-term debt $ 1,526 The weighted average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2% as of March 31, 2025 and as of December 31, 2024. We had $124,790 of total notes and debentures outstanding at March 31, 2025. This also included Euro, British pound sterling, Canadian dollar, Swiss franc and Australian dollar denominated debt that totaled approximately $33,474. At March 31, 2025, we had $8,902 of long-term debt maturing within one year. We had no outstanding commercial paper or other short-term borrowings on March 31, 2025. For the first three months of 2025, we paid $203 of cash under our vendor financing program, compared to $841 in the prior-year comparable period. Total vendor financing payables included in our March 31, 2025 consolidated balance sheet were $1,694, with $1,078 due within one year (in “Accounts payable and accrued liabilities”) and the remainder predominantly due within five years (in “Other noncurrent liabilities”). At March 31, 2025, we had approximately $10,000 remaining from our common stock repurchase authorization approved by the Board of Directors in December 2024. We paid dividends on common and preferred shares of $2,091 during the first three months of 2025, compared with $2,034 for the first three months of 2024. 33 AT&T INC. MARCH 31, 2025 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts Dividends on common stock declared by our Board of Directors totaled $0.2775 per share in the first three months of 2025 and 2024. Our dividend policy considers the expectations and requirements of stockholders, capital funding requirements of AT&T and long-term growth opportunities. Financing activities in the first three months of 2025 also included the issuance of $2,250 of nonconvertible cumulative preferred interests in Telco LLC, with the funds used to redeem all outstanding Series B preferred stock for $2,075 (see Note 11). We also received approximately $850 in upfront cash proceeds from a structured sale-leaseback of real estate. Credit Facilities The following summary of our various credit and loan agreements does not purport to be complete and is qualified in its entirety by reference to each agreement filed as exhibits to our Annual Report on Form 10-K. We use credit facilities as a tool in managing our liquidity status. We currently have one $12,000 revolving credit agreement that terminates on November 18, 2029 (Revolving Credit Agreement). No amount was outstanding under the Revolving Credit Agreement as of March 31, 2025. We also utilize other external financing sources, which include various credit arrangements supported by government agencies to support network equipment purchases as well as a commercial paper program. Our Revolving Credit Agreement contains covenants that are customary for an issuer with investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75-to-1. As of March 31, 2025, we were in compliance with the covenants for our credit facilities. Collateral Arrangements Most of our counterparty collateral arrangements require cash collateral posting by AT&T only when derivative market values exceed certain thresholds. Under these arrangements, which cover the majority of our approximate $36,532 derivative portfolio, counterparties are still required to post collateral. During the first three months of 2025, we posted $8 of cash collateral, on a net basis. Cash postings under these arrangements vary with changes in credit ratings and netting agreements. (See Note 7) Other Our total capital consists of debt (long-term debt and debt maturing within one year), redeemable noncontrolling interest and stockholders’ equity. Our capital structure does not include debt issued by our equity method investments. At March 31, 2025, our debt ratio was 50.9%, compared to 52.4% at March 31, 2024 and 50.7% at December 31, 2024. The debt ratio is affected by the same factors that affect total capital, and reflects our recent debt issuances, repayments and reclassifications related to redemption of noncontrolling interests. 34 AT&T INC. MARCH 31, 2025 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations- Continued Dollars in millions except per share amounts DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURES We also evaluate segment and business unit performance based on EBITDA, which is defined as operating income excluding depreciation and amortization, and/or EBITDA margin, which is defined as EBITDA divided by total revenue. EBITDA is used as part of our management reporting, and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. There are material limitations to using these non-GAAP financial measures. EBITDA and EBITDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. First Quarter Percent 2025 2024 Change Communications Segment Operating income $ 6,991 $ 6,745 3.6 % Add: Depreciation and amortization expense 4,973 4,730 5.1 EBITDA $ 11,964 $ 11,475 4.3 % Operating income margin 23.7 % 23.4 % EBITDA margin 40.5 % 39.8 % Mobility Operating income $ 6,740 $ 6,468 4.2 % Add: Depreciation and amortization expense 2,526 2,487 1.6 EBITDA $ 9,266 $ 8,955 3.5 % Operating income margin 31.2 % 31.4 % EBITDA margin 43.0 % 43.5 % Business Wireline Operating income (loss) $ (98) $ 64 — % Add: Depreciation and amortization expense 1,498 1,362 10.0 EBITDA $ 1,400 $ 1,426 (1.8) % Operating income margin (2.2) % 1.3 % EBITDA margin 31.3 % 29.0 % Consumer Wireline Operating income $ 349 $ 213 63.8 % Add: Depreciation and amortization expense 949 881 7.7 EBITDA $ 1,298 $ 1,094 18.6 % Operating income margin 9.9 % 6.4 % EBITDA margin 36.9 % 32.7 % Latin America Segment Operating income $ 43 $ 3 — % Add: Depreciation and amortization expense 150 177 (15.3) EBITDA $ 193 $ 180 7.2 % Operating income margin 4.4 % 0.3 % EBITDA margin 19.9 % 16.9 % 35 AT&T INC. MARCH 31, 2025