AT&T Inc.

Order 2024 Earnings Call. At this time, all participants are in a 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, the 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 one and then zero. And as a reminder, this conference call is being recorded. I would like to turn the conference call over to your host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead.

Thank you and good morning, everyone. Welcome to our first quarter call. I'm Brett Feldman, 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, as well as our earnings materials, are available on the Investor Relations website. With that, I'll turn the call over to John Stanky. John?

Thanks, Brett. I appreciate you all joining us this morning. We started the year with a solid first quarter as we continue to make steady progress on our investment led strategy of being the best connectivity provider through 5G and fiber. We're growing the right way by adding valuable long-term wireless and broadband subscribers. Since Pascal will cover first quarter results in detail, I'd like to spend some time highlighting how our strategic priorities are enabling us to deliver positive results and build a long runway for sustainable growth. When you look under the hood, it's clear that our largest and most powerful EBITDA growth engine, Mobility, is running well. Our strength and value proposition help us deliver 349,000 postpaid phone net ads in the first quarter. We now have about 71.6 million high value post-paid phone subscribers, which is up 1.5 million from a year ago, and these aren't empty calorie additions. Our results reflect the quality of our customer growth with higher ARPU, higher adjusted operating income, improved margins, and lower post-paid churn. We're also growing efficiently. thanks to our consistent and simple go-to-market strategy. Our postpaid phone churn of .72 percent was our lowest first quarter churn ever on record. And once again, we expect to report the lowest postpaid phone churn among the major service providers this quarter. This highlights the value customers place on the wireless service we provide and the continued strength of our best deals for everyone strategy. Now let's move to fiber, which is our fastest growing engine. The story here is familiar and one we like. Where we have fiber, we win. And we're bringing fiber to more Americans than anyone else. Since the first quarter of last year, we've passed about 2.4 million locations with fiber and now passed more than 27 million consumer and business locations. Over the last year, We grew our AT&T fiber consumer subscriber base by about 1.1 million to nearly 8.6 million customers. This includes 252,000 AT&T FiberNet additions in the first quarter. As a result of our established fiber success and early AT&T Internet Air subscriber growth, we've grown our consumer broadband subscriber base for three consecutive quarters and we expect this trend to continue. We're even more excited about the converging power of 5G and fiber together. Where we have AT&T Fiber, our strong national 5G wireless brand, provides us the opportunity to be customers' single converged provider, seamlessly connecting them both in the home and on the go. we're able to deliver convergence at a level that none of our peers can match as we're the only provider that benefits from owner's economics and scale with both 5G and fiber. This all matters because convergence presents clear benefits. When a customer has both our wireless and fiber products, we see a meaningful improvement in churn and net promoter scores. This ultimately translates to much higher lifetime values for converged customers. We're also making great progress on ensuring more Americans have access to high-speed Internet. Just this month, we expanded our commitment to $5 billion over this decade to help bridge the digital divide in our country. We've already contributed to connecting approximately 5 million Americans, and our goal is to help connect 25 million people in total by 2030. We believe that connecting changes everything, and that we must collectively address the communications capabilities of our country's needs for the next century, not the last one. To make this happen, we need sound policy that's done right, and our teams are working hard to make that happen. Future of connectivity is critical to advancing our society. That's why we're focused on growing and evolving our networks. As a result of these efforts, the areas where we're investing most heavily through 5G and fiber are performing very well. For perspective, in 2023, mobility and consumer wireline together represented more than 80% of revenue and about 85% of EBITDA in our communications segment. This means we're growing the large majority of our business and driving improved operating leverage across it. We expect this to continue. However, we still have legacy elements of our business that we're in the midst of transitioning, particularly in business wireline. In the quarter, business wireline EBITDA was down 16.5% as the industry-wide secular decline of legacy voice continues. While the wholesale market is stabilized, The reality is that businesses are transitioning to mobile and cloud-based services at an accelerated rate as post-pandemic workplace restructuring takes hold. We see the benefits from this connectivity transition in business solutions, where wireless service revenues grew 4.6% in the first quarter, outpacing our overall mobility services revenue growth. While we continue to actively work our legacy transition strategies to end-of-life products, reduce our operating footprint, and eliminate fixed costs, we're advancing several cost savings and productivity initiatives to align with this reality, such as vendor and management workforce rationalization. We also strongly believe that the future-focused area of business solutions aligns well with our core connectivity competencies, and we continue to build out a connectivity portfolio with real long-term growth opportunity. Take FirstNet. This prioritized service for first responders shows what we're able to accomplish when we focus on growing our business in areas where we have traditionally under-indexed. Additionally, our continued 5G and fiber expansion will enable new growth when paired with broader distribution. We have relationships with nearly 2.5 million business customers today and an opportunity to win with more small to medium-sized businesses. One way we intend to meet small and medium businesses' connectivity needs is with our new fixed wireless service, AT&T Internet Air for Business. We believe this is a durable national play with business because it's able to serve as a reliable 5G-powered primary internet connection where fiber is not available, in remote locations, when temporary access is needed, or with small and medium businesses that don't require always-on video streaming. While it's still early, we've been very pleased with the solid demand we're seeing from businesses. Given our success growing core connectivity We're focused on furthering the AT&T value proposition in ways that matter to our business customers, and security is at the top of their list. That's why we introduced AT&T Dynamic Defense, which provides built-in security controls on top of world-class access. The takeaway is that we're well-positioned to capitalize on emerging connectivity opportunities with businesses thanks to the strong relationships we have with almost all of the Fortune 1000 and our leading position in fiber and the fact we operate the largest wireless network in the U.S. Our business wireline operations transformation will not be a linear process, and we're going through the heaviest lift right now. However, our strong momentum across our growth areas of mobility and broadband is allowing us to outpace legacy declines and drive positive consolidated results. And we remain on track to deliver on all the consolidated financial guidance we shared in January. Now, let's spend a moment on our second priority of being effective and efficient in everything we do. Last year, we set a new target for an incremental $2 billion plus in run rate cost savings by mid-2026. This came on top of the $6 billion plus run rate cost savings target we achieved last year. The continued adoption of AI is not only helping us make progress on this goal, but also benefiting our employee and customer experiences. This focus on efficiency is translated into improved operating leverage despite continued elevated inflation. You can see this in our cash operating expenses, which were down year over year in the first quarter, contributing to adjusted EBITDA margin expansion of 170 basis points. This brings me to our final priority, which is our deliberate and balanced approach to capital allocations. As we indicated what happened, our capital investment levels have come down year over year as we move past the peak of our 5G rollout. Still, we remain a top investor in America's connectivity and continue to expand fiber at a steady pace. Even with this continued investment, we delivered first quarter free cash flow of $3.1 billion compared to $1 billion a year ago. This aligns with the expectations we shared for more ratable quarterly free cash flow, which we've accomplished by efficiently growing EBITDA, improving cash conversion, and reducing our short-term financing balances. Our strong free cash flow has also enabled us to pay down debt. We finished the first quarter with net debt to adjusted EBITDA of 2.9 times, and continue to expect to reach our target in the 2.5 times range in the first half of 2025. So it's clear we're operating well against our business priorities, and as a result, we're growing share with 5G and fiber. In mobility, we've been increasing our share of wireless service revenue growth, even without the benefit of fixed wireless, which is reported in consumer wirelines. We also expect that this will be the 11th time in the last 13 quarters where we deliver the industry's lowest postpaid phone churn. In consumer wireline, we're outpacing cable as we add broadband customers. This is driven by AT&T Fiber, which has consistently captured over one-third of broadband net ads across major providers for the past three years. So in summary, Across the services and technologies most important to the future, 5G and fiber, we're performing well and growing our share in a healthy industry environment. This gives me confidence in our strategy and tells me our team is making solid progress on our priorities. With that, I'll turn it over to Pascal. Pascal?