AT&T Inc.

Thank you for standing by. Welcome to AT&T's first quarter 2023 earnings call. At this time, all participants are in listen-only mode. If you should require assistance during the call, please press star, then zero, and an operator will assist you offline. Following the presentation, call will be open for questions. If you would like to ask a question, please press one and then zero, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0. As a reminder, this conference is being recorded. I would like to turn the conference call over to our host, Amir Rozbudowski, Senior Vice President, Finance and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our first quarter call. I'm Amir Rozbudowski, Head of Investor Relations for AT&T. Joining me on the call today are John Stanky, our CEO, and Pascal DeRoche, 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, including our earnings materials, are available on the Investor Relations website. With that, I'll turn the call over to John Sankey. John?

Thanks, Amir, and good morning, everyone. I appreciate you joining us. Earlier today, we shared our first quarter results, which again illustrate how we're meeting our commitment to grow high-quality, durable 5G and fiber customer relationships. Thanks to a consistent discipline and return-focused go-to-market approach, our team is balancing customer growth with profitable long-term value creation as we connect people to greater possibility. And I'm particularly proud of the quality of our subscriber additions. Despite high promotional activity seen in parts of our industry, we continue to achieve consistently low churn levels while increasing the take rate of our high-value 5G and fiber plans. We believe our results demonstrate that the customer-centric strategy we launched almost three years ago continues to deliver the right mix of quality subscriber and profit growth that will prove sustainable over the longer term. So let me highlight some of our progress. Let's start with mobility. In January, I shared that we anticipated industry demand trends would continue to normalize to pre-pandemic levels. However, we still expected to grow both post-paid phone subscribers and wireless profits thanks to investments in our customer experience, distribution channels, and network. That's exactly what our teams delivered. We had 424,000 postpaid phone net ads in the first quarter and continued to grow wireless service revenues, EBITDA, and postpaid phone ARPU, all while maintaining historically low churn. Checking the box for each of these success metrics paints a clear picture of what sustainable, profitable, wireless growth looks like. We've now had more than 11 straight quarters of 400,000 postpaid phone net ads or better. We've totaled 2.6 million postpaid phone net ads over the past four quarters. We're pursuing longer-term growth by remaining committed to fostering durable relationships that solve customer pain points and bring great value to our customers. We're executing well on our discipline go-to-market strategy that centers around putting the customer first and takes advantage of our improved distribution. We also continue to hone our ability to deliver targeted solutions that provide real value to customers in our historically under-penetrated segments like first responders, as well as small and medium businesses. This approach establishes a long-term growth trajectory that thoughtfully balances customer additions with profitable returns. Now let's turn to our fiber business. Quarter after quarter, our teams prove that wherever we build fiber, we win. And the first quarter was no exception with 272,000 AT&T Fiber Net ads. This marks 13 straight quarters with more than 200,000 net ads. These net ads were a significant achievement with the number of household moves, a key growth metric for fiber sales, decreasing nationwide. As we noted at the end of last year, our fiber subscribers now outnumber non-fiber and DSL subscribers. We now have about 7.5 million AT&T fiber subscribers, fiber adoption and margin expansion driving consumer wireline revenue and EBITDA growth. We believe that AT&T offers the best wired internet service available anywhere and that this elevated AT&T fiber experience is providing a strong tailwind. So overall, across both 5G and fiber, I'm very happy with the high quality subscriber ads we achieved in the quarter. These long-term customer relationships provide a great and profitable revenue stream now and into the future. Even in the midst of increased macroeconomic uncertainty, we're executing more sharply and efficiently after repositioning our operations around our connectivity strengths. We remain on track to achieve our $6 billion plus cost savings run rate target by the end of the year, if not sooner. As we mentioned before, the benefits from these efforts are expected to increasingly fall to the bottom line. While we've largely delivered what we set out to accomplish three years ago, our journey has only raised our confidence that we can continue to evolve and improve. In fact, we believe we can further accelerate cost takeouts as we progress through the year. Part of this entails transforming our network as we ultimately replace our copper services footprint with best-in-class fiber connectivity and, where it makes sense for customers, replacement products built on our wireless network. Think about a cost structure that's no longer anchored to legacy network technologies and software stacks. For example, in addition to all of fiber's enhanced resiliency, and its superior transport characteristics, we're already seeing that fiber uses less energy, costs less to maintain, and requires fewer service dispatches. And as we reduce our copper services footprint and related legacy infrastructure, we expect to consistently improve our margins, grow EBITDA, and ultimately improve our capital efficiency. Another contributing element relies on unlocking new capabilities that make it easier to collaborate and get work done by leaning into our digital transformation. We're seeing this already come to life through early trials in our collaboration with Nvidia, where we're testing the use of artificial intelligence to improve fleet dispatches so our field technicians can better serve customers. Separately, We're using AI to match customers with the right customer care support path, resulting in more effective issue resolution. We think this is only the tip of the spear of what's possible. Now let's turn to our final priority, which centers on how we're allocating capital. We continue to invest in our 5G and fiber networks at record levels, in order to deliver long-term sustainable earnings growth. Our goal is to build a network that not only meets today's demands, but will serve the needs of our customers for decades to come. This is at the core of what we do and who we are as a company. It's also why we continue to be one of America's largest capital investors. We're investing in our connectivity infrastructure and using our team's proven expertise to not only maintain our network advantages, but to advance them. And we're doing this while moving forward on our commitment to provide more Americans with access to reliable high-speed broadband. We plan to actively pursue BEAD funding to support the transition of our wireline footprint and expect to be a significant participant in public-private partnerships. And while we're clearly committed to investing in our networks, We also remain focused on the strengthening of our balance sheet and reducing our net debt. We expect to increase cash generation over time, which will allow us to continue delivering an attractive dividend with improving credit quality. And by executing on this simplified capital allocation framework, we expect to improve our financial flexibility in the long run. This will provide us with the opportunity to take additional actions, such as investing to accelerate our business growth or generating incremental values and returns for our shareholders. Now, before I wrap up, I'd like to quickly touch on some developments we're seeing in the macroeconomic environment. We started the year with the expectation that we'd be operating against a less predictable macro backdrop. This belief has proven true thus far, and what we're seeing is in line with the expectations we built into our guidance in January, including a moderation of growth for wireless services. We expected to transition back to more historical costs of debt. That is certainly underway with the added dose of tighter credit availability to some segments of the economy. I'm clearly not breaking any ground with these observations, but this is why we have been focused on reducing our leverage and optimizing our use of capital over the last few years. As the economy adjusts to a likely period of tighter capital availability and higher interest rates, I take comfort in the state of our business for two reasons. The first is the heavy lifting we did to strengthen our balance sheet over the last several years. We've reduced our debt, taken advantage of the prior low interest rate environment on our remaining debt, and managed our debt towers for the next several years. As a result, more than 95% of our debt is now fixed in an average rate of 4.1%. The second is the repositioning of our business to focus on exclusively communication services, particularly 5G and fiber. As the last few years have demonstrated, the solutions we provide are more critical than ever before, and we only expect the demand for purpose-built, best-in-class Internet access to grow. The resiliency of the services we provide, coupled with our improved financial flexibility, provide us with the right toolset to navigate the economic environment. We remain on track to deliver the 2023 financial and operating commitments we made to our shareholders at the start of the year. However, should the need arise, we feel comfortable using the tools we have at our disposal to align our actions with a more challenging economic backdrop, whether that's accelerating cost transformation actions, being more deliberate with our capital spend, or increasing our liquidity. To conclude my remarks, I'd simply reemphasize that I'm proud of how our team started the year. Last quarter, I said that our approach and strategy for 2023 was to do it again. In the first quarter of the year, our teams have done just that. With that, I'll turn it over to Pascal. Pascal?