AT&T Beats on Q4 Earnings, WarnerMedia Income Down 38% as Discovery Merger Expected to Close in Q2
AT&T topped Wall Street estimates for the fourth quarter of 2021, with WarnerMedia revenue gains driving top-line results — helped by strong growth of HBO Max — although the division’s operating income dropped 38% on higher costs.
The company also announced that it expects the WarnerMedia spinoff and merger with Discovery to close in the second quarter. AT&T said it plans to host a virtual analyst event in the first half of March, providing financial guidance for what the telco’s communications business will look like post-WarnerMedia.
The telco earlier this month pre-announced Q4 results for HBO/HBO Max subscribers, beating its own forecast: The services at year-end tallied 73.8 million combined global subs, up 4.3 million sequentially, over the high end of AT&T’s guidance of 70 million-73 million.
HBO and HBO Max ended 2021 with 46.8 million U.S. subscribers, a net gain of 1.6 million in Q4 (after a 1.9 million net loss in the prior quarter stemming from the end of Amazon’s HBO distribution deal).
WarnerMedia total revenue grew 15.4% to $9.9 billion, driven by content licensing revenues and strong direct-to-consumer subscription growth, AT&T said. Direct-to-consumer subscription revenue increased by 11.5% year-over-year, to $1.9 billion, while direct costs supporting the DTC business climbed about 44%, to $2.3 billion in Q4 of 2021 versus $1.6 billion in the year-ago quarter.
Overall, WarnerMedia operating expenses in Q4 rose 38%, to $8.3 billion, because of higher film and programming costs and higher marketing spending. The higher expenses included $380 million in DirecTV advertising revenue sharing costs, following AT&T’s spinoff last summer of DirecTV. The segment’s operating income of $1.6 billion was down 37.8% year over year.
The Q4 earnings stand to be one of AT&T’s last to include WarnerMedia, following the $43 billion merger with Discovery in Q2 pending regulatory approvals including by the DOJ.
Overall, AT&T’s fourth quarter 2021 revenue was $41.0 billion, down 10.4% versus the year-earlier period. The company posted net income of $5.04 billion, or adjusted earnings of 78 cents per share. Wall Street analysts on average expected AT&T to report revenue of $40.43 billion and EPS of 76 cents for the year-end quarter, per Refinitiv data.
AT&T’s year-over-year revenue drop in the quarter was mainly due to the July 31 spinoff of the telco’s U.S. video business including DirecTV, in a deal with private equity firm TPG Capital. The higher WarnerMedia revenue reflected “the partial recovery from the prior-year impacts of the pandemic,” while AT&T also touted higher wireless and consumer wireline revenue.
A bright spot for Warner Bros. in Q4 was “Dune,” which pulled in $398 million at the global box office despite the pandemic-challenged theater biz and the fact that the epic sci-fi movie was available Oct. 21 day-and-date on HBO Max’s premium tier for 30 days.
For full-year 2021, AT&T said it gained 3.2 million postpaid phone net adds — more than in the prior 10 years combined. It ended the year with 67.3 million postpaid wireless subscribers.
(Pictured above: Zendaya and Timothée Chalamet in Denis Villeneuve’s “Dune”)
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