Strong wireless customer growth and loyalty highlight Verizon’s 4Q results

4Q 2018 highlights

Consolidated:

  • 47 cents in earnings per share (EPS), compared with $4.56 in 4Q 2017; adjusted EPS (non-GAAP), excluding special items, of $1.12, compared with 86 cents in 4Q 2017.

Wireless:

  • 1.2 million retail postpaid net additions, including 653,000 phone net additions and 873,000 postpaid smartphone net additions.
  • Retail postpaid churn of 1.08 percent, and retail postpaid phone churn of 0.82 percent.
  • Service revenue growth of 1.9 percent year over year, excluding the impact of the revenue recognition standard adopted on Jan. 1, 2018.
  • Total revenue growth of 2.1 percent year over year, excluding the impact of the revenue recognition standard, to $24.3 billion.

Wireline:

  • 54,000 Fios Internet net additions; Fios total revenue growth of 2.9 percent year over year.  

2018 highlights

Consolidated:

  • Full year EPS of $3.76, compared with $7.36 in 2017; adjusted EPS (non-GAAP), excluding special items, of $4.71, compared with 2017 adjusted EPS of $3.74. 
  • Full-year 2018 operating cash flow of $34.3 billion, an increase of $10 billion year over year.
  • Unsecured debt is lower by $5.2 billion and total net debt is lower by $4.7 billion from year-end 2017.

NEW YORK, Jan. 29, 2019 (GLOBE NEWSWIRE) — Verizon Communications Inc. (NYSE, Nasdaq: VZ) closed 2018 with fourth-quarter results highlighted by strong growth and retention at Verizon Wireless, increased cash flow and momentum leading into the 5G era.

“Verizon finished 2018 by delivering solid financial and operational performance, as evidenced by our strong wireless service revenue and earnings growth,” said CEO Hans Vestberg. “2018 was a remarkable year full of 5G firsts, including being first in the world to commercially deploy 5G with our 5G Home product. As we head into 2019 and the 5G era, we’re beginning a period of transformational change. We are laser focused on delivering customers a best-in-class and game-changing experience on our networks.”

For fourth-quarter 2018, Verizon reported EPS of 47 cents, compared with $4.56 in fourth-quarter 2017. On an adjusted basis (non-GAAP), fourth-quarter 2018 EPS, excluding special items, was $1.12, compared with adjusted EPS of 86 cents in fourth-quarter 2017. Verizon’s fourth-quarter 2018 EPS included a 9 cent impact due to the effects of accounting changes for revenue recognition.

Fourth-quarter 2018 adjusted EPS included a net pre-tax loss from special items of about $4.9 billion, which consisted of a previously announced goodwill impairment for Verizon Media of $4.6 billion, acquisition and integration charges of $189 million, and severance and annual mark-to-market for pension and OPEB (other post-employment benefits) charges of $165 million. Adjusted EPS also included a deferred tax benefit of $2.1 billion related to an internal reorganization.  

For full-year 2018, Verizon reported $3.76 in EPS, compared with $7.36 in full-year 2017. On an adjusted basis (non-GAAP), 2018 EPS was $4.71, compared with 2017 EPS of $3.74.  

Consolidated results

Total consolidated operating revenues in fourth-quarter 2018 were $34.3 billion, up 1.0 percent from fourth-quarter 2017. Full-year 2018 consolidated operating revenues were $130.9 billion, up 3.8 percent year over year. Excluding the impact of the revenue recognition standard, fourth-quarter 2018 consolidated operating revenues were $34.1 billion, an increase of 0.5 percent year over year.

Cash flow from operations totaled $34.3 billion in 2018, an increase of $10 billion year over year. This increase was driven by strong operating results, tax reform benefits, reduced impacts from the wireless device payment plan model, and lower discretionary pension and benefit contributions.

Full-year 2018 capital expenditures totaled $16.7 billion. In 2018, Verizon made $9.8 billion in cash dividend payments to shareholders. The company’s unsecured debt decreased by $5.2 billion and its total net debt decreased by $4.7 billion during 2018.

Verizon is on track to deliver against its goal to achieve $10 billion in cumulative cash savings by 2021. This initiative includes zero-based budgeting and has yielded approximately $2.3 billion of cumulative cash savings by year-end 2018, of which a majority has been derived from capital efficiencies. 

For fourth-quarter 2018, Verizon Media revenues were $2.1 billion, down 5.8 percent year over year. Revenue trends were up sequentially from third-quarter 2018 due to seasonal advertising spending.

In the telematics business, total Verizon Connect revenues, excluding the impact of the revenue recognition standard, were $242 million in fourth-quarter 2018. IoT (Internet of Things) fourth-quarter revenues, including Verizon Connect, increased approximately 9.5 percent year over year, excluding the impact of the revenue recognition standard.

Net income was $2.1 billion in fourth-quarter 2018. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled approximately $6.9 billion. Consolidated operating income margin was 1.9 percent. Consolidated EBITDA margin (non-GAAP) was 20.2 percent in fourth-quarter 2018, compared with 25.4 percent in fourth-quarter 2017. Adjusted EBITDA margin (non-GAAP) in fourth-quarter 2018 was 33.8 percent. Excluding the impact of the revenue recognition standard, adjusted EBITDA margin (non-GAAP) was 32.2 percent.

Wireless results

  • Verizon reported 1.2 million retail postpaid net additions in fourth-quarter 2018, consisting of 653,000 phone net additions, 11,000 tablet additions and 556,000 other connected devices, primarily wearables. Postpaid smartphone net additions were 873,000, compared with 647,000 in fourth-quarter 2017, a 34.9 percent increase.
  • Verizon reported full-year 2018 postpaid net additions of 2.5 million, consisting of phone net additions of 1.1 million, tablet losses of 181,000 and 1.6 million other connected device additions. Postpaid smartphone net additions for full-year 2018 were 2 million, up 13 percent year over year.
  • Total revenues were $24.4 billion, an increase of 2.7 percent year over year. For full-year 2018, operating revenues totaled $91.7 billion, an increase of 4.8 percent year over year. Excluding the impact of the revenue recognition standard, total revenues grew 2.1 percent year over year in fourth-quarter 2018 and 4.4 percent for the full year, compared with 2017, to $24.3 billion and $91.3 billion, respectively.
  • Service revenues increased 0.1 percent in fourth-quarter 2018, driven by ongoing customer growth, step-ups to unlimited plans and the benefits of customers customizing their experience through mix-and-match plans. Full-year service revenues decreased 0.2 percent year over year. Excluding the impact of the revenue recognition standard, service revenues increased 1.9 percent in fourth-quarter 2018 and 1.7 percent for the full year, on a year over year basis.
  • Total retail postpaid churn was 1.08 percent in fourth-quarter 2018, and retail postpaid phone churn was 0.82 percent.
  • Segment EBITDA (non-GAAP) totaled $10.4 billion in fourth-quarter 2018, an increase of 9.7 percent year over year. Excluding the impact of the revenue recognition standard, segment EBITDA totaled $9.8 billion in fourth-quarter 2018. Segment EBITDA margin on total revenues (non-GAAP) was 42.5 percent. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 40.5 percent. For the full year, segment EBITDA margin was 46.4 percent in 2018, compared with 44.1 percent in 2017.

Wireline results

  • Total wireline revenues decreased 3.2 percent year over year in fourth-quarter 2018 and 3.0 percent for the full year, compared with 2017, to $7.4 billion and $29.8 billion, respectively.
  • Total Fios revenues grew 2.5 percent year over year, excluding the impact of the revenue recognition standard. In fourth-quarter 2018, Verizon added a net of 54,000 Fios Internet connections and lost a net of 46,000 Fios Video connections, continuing to reflect the shift from traditional linear video to over-the-top offerings. At year-end 2018, Verizon had 6.1 million Fios Internet connections and 4.5 million Fios Video connections.
  • Wireline operating loss was $273 million in fourth-quarter 2018, and segment operating loss margin was 3.7 percent. Full-year 2018 segment operating loss was $273 million, and segment operating loss margin was 0.9 percent.
  • Segment EBITDA (non-GAAP) was $1.3 billion in fourth-quarter 2018. Excluding the impact of the revenue recognition standard, segment EBITDA was $1.2 billion. Segment EBITDA margin (non-GAAP) was 17.6 percent in fourth-quarter 2018, compared with 20.9 percent in fourth-quarter 2017. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 16.9 percent. For the full year, segment EBITDA margin was 19.9 percent in 2018, compared with 21.1 percent in 2017.

Outlook and guidance

  For 2019, Verizon expects the following:

  • Low single-digit percentage growth in full-year consolidated revenues on a GAAP reported basis.
  • Adjusted EPS excluding the impact of the new lease accounting standard to be similar to 2018 adjusted EPS. The new lease accounting standard is expected to have an approximately 1 to 2 cent per quarter headwind impact on EPS for full-year 2019.
  • The effective tax rate for full-year 2019 to be in the range of 24 to 26 percent.
  • Cash taxes to be $2 billion to $3 billion higher than in 2018 due to benefits that were realized in 2018 that are not expected to repeat in 2019.
  • Capital spending for 2019 to be in the range of $17 billion to $18 billion, including the expanded commercial launch of 5G.    

NOTE: See the accompanying schedules and www.verizon.com/about/investors for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.

Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York City, generated revenues of $130.9 billion in 2018. The company operates America’s most reliable wireless network and the nation’s premier all-fiber network, and delivers integrated solutions to businesses worldwide. With brands like Yahoo, TechCrunch and HuffPost, the company’s media group helps consumers stay informed and entertained, communicate and transact, while creating new ways for advertisers and partners to connect. Verizon’s corporate responsibility prioritizes the environmental, social and governance issues most relevant to its business and impact to society.

VERIZON’S ONLINE MEDIA CENTER: News releases, stories, media contacts and other resources are available at www.verizon.com/about/news/. News releases are also available through an RSS feed. To subscribe, visit www.verizon.com/about/rss-feeds/.

Forward-looking statements
In this communication we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “expects,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following important factors, along with those discussed in our filings with the Securities and Exchange Commission (the “SEC”), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; material changes in technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance; our high level of indebtedness; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; the inability to implement our business strategies; and the inability to realize the expected benefits of strategic transactions.

Media contacts:
Bob Varettoni
908.559.6388
[email protected]

Eric Wilkens
201.572.9317
[email protected]

                 
Verizon Communications Inc.                
Condensed Consolidated Statements of Income  
       
                   
            (dollars in millions, except per share amounts)    
                   
    3 Mos. Ended   3 Mos. Ended         12 Mos. Ended   12 Mos. Ended        
Unaudited 12/31/18   12/31/17   % Change     12/31/18   12/31/17   % Change    
                   
Operating Revenues                
Service revenues and other $ 27,460   $ 27,480   (0.1 )   $ 108,605   $ 107,145   1.4    
Wireless equipment revenues   6,821     6,475   5.3       22,258     18,889   17.8    
Total Operating Revenues   34,281     33,955   1.0       130,863     126,034   3.8    
                   
Operating Expenses                
Cost of services   8,163     8,219   (0.7 )     32,185     30,916   4.1    
Wireless cost of equipment   7,128     7,339   (2.9 )     23,323     22,147   5.3    
Selling, general and administrative expense   9,410     8,480   11.0       31,083     28,592   8.7    
Depreciation and amortization expense   4,352     4,456   (2.3 )     17,403     16,954   2.6    
Oath goodwill impairment   4,591           4,591        
Total Operating Expenses   33,644     28,494   18.1       108,585     98,609   10.1    
                   
Operating Income   637     5,461   (88.3 )     22,278     27,425   (18.8 )  
Equity in earnings (losses) of unconsolidated businesses   64     (6 )     (186 )   (77 )  
Other income (expense), net   1,865     (1,302 )     2,364     (2,021 )  
Interest expense   (1,199 )   (1,219 ) (1.6 )     (4,833 )   (4,733 ) 2.1    
Income Before (Provision) Benefit For Income Taxes   1,367     2,934   (53.4 )     19,623     20,594   (4.7 )  
(Provision) benefit for income taxes   698     15,849   (95.6 )     (3,584 )   9,956    
Net Income $ 2,065   $ 18,783   (89.0 )   $ 16,039   $ 30,550   (47.5 )  
                   
Net income attributable to noncontrolling interests $ 126   $ 114   10.5     $ 511   $ 449   13.8    
Net income attributable to Verizon   1,939     18,669   (89.6 )     15,528     30,101   (48.4 )  
Net Income $ 2,065   $ 18,783   (89.0 )   $ 16,039   $ 30,550   (47.5 )  
                   
Basic Earnings Per Common Share                
Net income attributable to Verizon $ 0.47   $ 4.57   (89.7 )   $ 3.76   $ 7.37   (49.0 )  
                 
Weighted average number of common shares (in millions)    4,137      4,087          4,128      4,084      
                 
Diluted Earnings Per Common Share (1)                
Net income attributable to Verizon $ 0.47   $ 4.56   (89.7 )   $ 3.76   $ 7.36   (48.9 )  
                 
Weighted average number of common                
  shares-assuming dilution (in millions)    4,141      4,090          4,132      4,089      
                   
                   
Footnotes:                
(1) Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.    
                   
* Not meaningful                
                   

Verizon Communications Inc.      
Condensed Consolidated Balance Sheets      
               
               
            (dollars in millions)    
               
Unaudited 12/31/18     12/31/17     $ Change    
               
Assets            
Current assets            
Cash and cash equivalents $ 2,745     $ 2,079     $ 666    
Accounts receivable, net   25,102       23,493       1,609    
Inventories   1,336       1,034       302    
Prepaid expenses and other   5,453       3,307       2,146    
Total current assets   34,636       29,913       4,723    
Property, plant and equipment   252,835       246,498       6,337    
Less accumulated depreciation   163,549       157,930       5,619    
Property, plant and equipment, net   89,286       88,568       718    
Investments in unconsolidated businesses   671       1,039       (368 )  
Wireless licenses   94,130       88,417       5,713    
Goodwill   24,614       29,172       (4,558 )  
Other intangible assets, net   9,775       10,247       (472 )  
Other assets   11,717       9,787       1,930    
Total assets $ 264,829     $ 257,143     $ 7,686    
               
Liabilities and Equity            
Current liabilities            
Debt maturing within one year $ 7,190     $ 3,453     $ 3,737    
Accounts payable and accrued liabilities   22,501       21,232       1,269    
Other current liabilities   8,239       8,352       (113 )  
Total current liabilities   37,930       33,037       4,893    
Long-term debt   105,873       113,642       (7,769 )  
Employee benefit obligations   18,599       22,112       (3,513 )  
Deferred income taxes   33,795       31,232       2,563    
Other liabilities   13,922       12,433       1,489    
Total long-term liabilities   172,189       179,419       (7,230 )  
               
Equity            
Common stock   429       424       5    
Additional paid in capital   13,437       11,101       2,336    
Retained earnings   43,542       35,635       7,907    
Accumulated other comprehensive income   2,370       2,659       (289 )  
Common stock in treasury, at cost   (6,986 )     (7,139 )     153    
Deferred compensation – employee
stock ownership plans and other
  353       416       (63 )  
Noncontrolling interests   1,565       1,591       (26 )  
Total equity   54,710       44,687       10,023    
Total liabilities and equity $ 264,829     $ 257,143     $ 7,686    
               
               
Verizon – Selected Financial and Operating Statistics      
               
Unaudited 12/31/18     12/31/17        
               
Total debt (in millions) $ 113,063     $ 117,095        
Net debt (in millions) $ 110,318     $ 115,016        
Net debt / Consolidated Adjusted EBITDA(1) 2.3   2.6      
Common shares outstanding end of period (in millions)   4,132       4,079        
Total employees (‘000)   144.5       155.4        
Quarterly cash dividends declared per common share $ 0.6025     $ 0.5900        
               
Footnotes:            
(1)  Consolidated adjusted EBITDA excludes the effects of non-operational items, special items and operating results of divested businesses.                          
               

 

Verizon Communications Inc.            
Condensed Consolidated Statements of Cash Flows      
               
               
        (dollars in millions)    
               
    12 Mos. Ended     12 Mos. Ended        
Unaudited 12/31/18     12/31/17     $ Change    
               
Cash Flows from Operating Activities            
Net Income $   16,039     $   30,550     $   (14,511 )  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization expense    17,403        16,954        449    
Employee retirement benefits    (2,657 )      440        (3,097 )  
Deferred income taxes    389        (14,463 )      14,852    
Provision for uncollectible accounts    980        1,167        (187 )  
Equity in losses of unconsolidated businesses, net of dividends received    231        117        114    
Net gain on sale of divested businesses    —        (1,774 )      1,774    
Oath goodwill impairment    4,591        —        4,591    
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses    (1,177 )      (5,938 )      4,761    
Discretionary employee benefits contributions    (1,679 )      (3,411 )      1,732    
Other, net    219        676        (457 )  
Net cash provided by operating activities    34,339        24,318        10,021    
               
Cash Flows from Investing Activities            
Capital expenditures (including capitalized software)    (16,658 )      (17,247 )      589    
Acquisitions of businesses, net of cash acquired    (230 )      (5,880 )      5,650    
Acquisitions of wireless licenses    (1,429 )      (583 )      (846 )  
Proceeds from dispositions of businesses    —        3,614        (3,614 )  
Other, net    383        1,640        (1,257 )  
Net cash used in investing activities    (17,934 )      (18,456 )      522    
               
Cash Flows from Financing Activities            
Proceeds from long-term borrowings    5,967        27,707        (21,740 )  
Proceeds from asset-backed long-term borrowings    4,810        4,290        520    
Repayments of long-term borrowings and capital lease obligations    (10,923 )      (23,837 )      12,914    
Repayments of asset-backed long-term borrowings    (3,635 )      (400 )      (3,235 )  
Dividends paid    (9,772 )      (9,472 )      (300 )  
Other, net    (1,824 )      (4,439 )      2,615    
Net cash used in financing activities    (15,377 )      (6,151 )      (9,226 )  
               
Increase (decrease) in cash, cash equivalents and restricted cash    1,028        (289 )      1,317    
Cash, cash equivalents and restricted cash, beginning of period    2,888        3,177        (289 )  
Cash, cash equivalents and restricted cash, end of period $   3,916     $   2,888     $   1,028    
               

 

Verizon Communications Inc.                
Wireless – Selected Financial Results            
                   
                   
                   
              (dollars in millions)    
                   
    3 Mos. Ended   3 Mos. Ended       12 Mos. Ended   12 Mos. Ended      
Unaudited 12/31/18   12/31/17   % Change     12/31/18   12/31/17   % Change    
                   
Operating Revenues                
Service $ 15,898   $ 15,880   0.1     $ 63,020   $ 63,121   (0.2 )  
Equipment   6,821     6,475   5.3       22,258     18,889   17.8    
Other   1,693     1,416   19.6       6,456     5,501   17.4    
Total Operating Revenues   24,412     23,771   2.7       91,734     87,511   4.8    
                   
Operating Expenses                
Cost of services   2,351     2,210   6.4       9,251     8,886   4.1    
Cost of equipment   7,128     7,339   (2.9 )     23,323     22,147   5.3    
Selling, general and administrative expense   4,552     4,760   (4.4 )     16,604     17,876   (7.1 )  
Depreciation and amortization expense   2,395     2,344   2.2       9,736     9,395   3.6    
Total Operating Expenses   16,426     16,653   (1.4 )     58,914     58,304   1.0    
                   
Operating Income $ 7,986   $ 7,118   12.2     $ 32,820   $ 29,207   12.4    
Operating Income Margin   32.7 %   29.9 %       35.8 %   33.4 %    
                   
Segment EBITDA $ 10,381   $ 9,462   9.7     $ 42,556   $ 38,602   10.2    
Segment EBITDA Margin   42.5 %   39.8 %       46.4 %   44.1 %    
                   
                   
Footnotes:                
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.    
                 
Intersegment transactions have not been eliminated.              
                   

 

Verizon Communications Inc.                
Wireless – Selected Operating Statistics            
                 
                   
Unaudited         12/31/18   12/31/17   % Change    
                   
Connections (‘000)                
Retail postpaid           113,353     110,854   2.3    
Retail prepaid           4,646     5,403   (14.0 )  
Total retail           117,999     116,257   1.5    
                   
                   
    3 Mos. Ended   3 Mos. Ended         12 Mos. Ended   12 Mos. Ended        
Unaudited 12/31/18   12/31/17   % Change     12/31/18   12/31/17   % Change    
                   
Net Add Detail (‘000) (1)                
Retail postpaid   1,220     1,174   3.9       2,526     2,084   21.2    
Retail prepaid   (90 )   (184 ) 51.1       (757 )   (43 )  
Total retail   1,130     990   14.1       1,769     2,041   (13.3 )  
                   
                   
Account Statistics                
Retail postpaid accounts (‘000) (2)           35,427     35,404   0.1    
Retail postpaid connections per account (2)           3.20     3.13   2.2    
Retail postpaid ARPA (3) (5) $ 135.11   $ 135.78   (0.5 )   $ 134.49   $ 135.99   (1.1 )  
Retail postpaid I-ARPA (4) (5) $ 170.51   $ 167.19   2.0     $ 168.61   $ 166.28   1.4    
                   
Churn Detail                
Retail postpaid   1.08 %   1.00 %       1.03 %   1.01 %    
Retail   1.24 %   1.24 %       1.23 %   1.25 %    
                   
Retail Postpaid Connection Statistics (2)                
Total smartphone postpaid phone base           92.2 %   90.1 %    
Total Internet postpaid base           19.7 %   19 %    
                 
Other Operating Statistics                
Capital expenditures (in millions) $ 2,342   $ 3,383   (30.8 )   $ 8,486   $ 10,310   (17.7 )  
                   
                   
Footnotes:                
(1) Connection net additions exclude acquisitions and adjustments.  
                   
(2) Statistics presented as of end of period.                
                   
(3) Retail postpaid ARPA – average service revenue per account from retail postpaid accounts.  
                   
(4) Retail postpaid I-ARPA – average service revenue per account from retail postpaid account plus recurring device installment billings.  
                   
(5) ARPA and I-ARPA for periods beginning after January 1, 2018 reflect the adoption of Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ARPA and I-ARPA for periods ending prior to January 1, 2018 were calculated based on the guidance per ASC Topic 605, “Revenue Recognition”.  Accordingly, amounts are not calculated on a comparative basis.  
                   
  The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.  
                   
  Intersegment transactions have not been eliminated.              
                   
* Not meaningful                
                   

 

Verizon Communications Inc.                
Wireline – Selected Financial Results            
                   
                   
                   
              (dollars in millions)    
                                       
    3 Mos. Ended   3 Mos. Ended         12 Mos. Ended   12 Mos. Ended        
Unaudited 12/31/18   12/31/17   % Change     12/31/18   12/31/17   % Change    
                   
Operating Revenues                
Consumer Markets $ 3,169   $ 3,188   (0.6 )   $ 12,589   $ 12,777   (1.5 )  
Enterprise Solutions   2,217     2,285   (3.0 )     8,840     9,167   (3.6 )  
Partner Solutions   1,098     1,209   (9.2 )     4,692     4,917   (4.6 )  
Business Markets   836     885   (5.5 )     3,397     3,585   (5.2 )  
Other   53     50   6.0       242     234   3.4    
Total Operating Revenues   7,373     7,617   (3.2 )     29,760     30,680   (3.0 )  
                   
Operating Expenses                
Cost of services   4,478     4,465   0.3       17,701     17,922   (1.2 )  
Selling, general and administrative expense   1,597     1,558   2.5       6,151     6,274   (2.0 )  
Depreciation and amortization expense   1,571     1,532   2.5       6,181     6,104   1.3    
Total Operating Expenses   7,646     7,555   1.2       30,033     30,300   (0.9 )  
                   
Operating Income (Loss) $ (273 ) $ 62     $ (273 ) $ 380    
Operating Income (Loss) Margin   (3.7 )%   0.8 %       (0.9 )%   1.2 %    
                   
Segment EBITDA $ 1,298   $ 1,594   (18.6 )   $ 5,908   $ 6,484   (8.9 )  
Segment EBITDA Margin   17.6 %   20.9 %       19.9 %   21.1 %    
                   
                   
Footnotes:                
  The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.  
                   
  Intersegment transactions have not been eliminated.              
                   
* Not meaningful                
                   

 

Verizon Communications Inc.                
Wireline – Selected Operating Statistics            
                   
                   
                   
                   
Unaudited         12/31/18   12/31/17   % Change    
                   
Connections (‘000)                
Fios video connections             4,451       4,619    (3.6 )  
Fios Internet connections             6,067       5,850    3.7    
Fios digital voice residence connections            3,803      3,905    (2.6 )  
Fios digital connections            14,321      14,374    (0.4 )  
High-speed Internet (HSI) connections             894       1,109    (19.4 )  
Total broadband connections             6,961       6,959    —    
Total voice connections             11,732       12,821    (8.5 )  
                   
                   
                   
    3 Mos. Ended   3 Mos. Ended         12 Mos. Ended   12 Mos. Ended        
Unaudited 12/31/18   12/31/17   % Change     12/31/18   12/31/17   % Change    
                   
Net Add Detail (‘000)                
Fios video connections    (46 )    (29 )  (58.6 )      (168 )    (75 )  
Fios Internet connections    54       47     14.9        217       197     10.2    
Fios digital voice residence connections    (30 )    (15 )      (102 )    10     
Fios digital connections    (22 )    3         (53 )    132     
High-speed Internet (HSI) connections    (51 )    (66 )  22.7        (215 )    (276 )  22.1    
Total broadband connections    3       (19 )      2       (79 )  
Total voice connections    (277 )    (279 )  0.7        (1,089 )    (1,118 )  2.6    
                   
Revenue Statistics                
Fios revenues (in millions) $   3,046   $   2,959    2.9     $   11,939   $   11,691    2.1    
                   
Other Operating Statistics                
Capital expenditures (in millions) $   1,855   $   1,981    (6.4 )   $   6,255   $   5,339    17.2    
Wireline employees (‘000)            54.3      57.1      
                   
                   
Footnotes:                
  The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.  
                   
  Intersegment transactions have not been eliminated.              
                   
* Not meaningful                
                   

 

Verizon Communications Inc.                        
Supplemental Information – Impact of Topic 606
                         
We adopted Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)” on January 1, 2018, using the modified retrospective application. This method does not impact the prior periods, which continue to reflect the accounting treatment prior to the adoption of Topic 606. As a result, for items that were affected by our adoption of Topic 606, financial results of periods prior to January 1, 2018 are not comparable to the current period financial results.  To provide comparability to our results, we provide the following supplemental schedule which contains certain financial information on a pre adoption of Topic 606 basis.
                         
                         
                         
Consolidated                        
                    (dollars in millions)
    3 Mos. Ended 12/31/18   3 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Service revenues and other   $ 27,460     $ 27,780     $ (320 )   $ 27,480   $ 300     1.1  
Wireless equipment revenues     6,821       6,340       481       6,475     (135 )   (2.1 )
Total Operating Revenues     34,281       34,120       161       33,955     165     0.5  
                         
Operating Expenses                        
Cost of services     8,163       8,180       (17 )     8,219     (39 )   (0.5 )
Wireless cost of equipment     7,128       7,102       26       7,339     (237 )   (3.2 )
Selling, general and administrative expense     9,410       9,861       (451 )     8,480     1,381     16.3  
Depreciation and amortization expense     4,352       4,352             4,456     (104 )   (2.3 )
Oath goodwill impairment     4,591       4,591                 4,591    
Total Operating Expenses     33,644       34,086       (442 )     28,494     5,592     19.6  
Operating Income   $ 637     $ 34     $ 603     $ 5,461   $ (5,427 )   (99.4 )
                         
                    (dollars in millions)
    12 Mos. Ended 12/31/18   12 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Service revenues and other   $ 108,605     $ 109,964     $ (1,359 )   $ 107,145   $ 2,819     2.6  
Wireless equipment revenues     22,258       20,474       1,784       18,889     1,585     8.4  
Total Operating Revenues     130,863       130,438       425       126,034     4,404     3.5  
                         
Operating Expenses                        
Cost of services     32,185       32,240       (55 )     30,916     1,324     4.3  
Wireless cost of equipment     23,323       23,189       134       22,147     1,042     4.7  
Selling, general and administrative expense     31,083       32,588       (1,505 )     28,592     3,996     14.0  
Depreciation and amortization expense     17,403       17,403             16,954     449     2.6  
Oath goodwill impairment     4,591       4,591                 4,591    
Total Operating Expenses     108,585       110,011       (1,426 )     98,609     11,402     11.6  
Operating Income   $ 22,278     $ 20,427     $ 1,851     $ 27,425   $ (6,998 )   (25.5 )
                         
                         
                         
Wireless(1)(2)                        
                    (dollars in millions)
    3 Mos. Ended 12/31/18   3 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Service   $ 15,898     $ 16,183     $ (285 )   $ 15,880   $ 303     1.9  
Equipment     6,821       6,340       481       6,475     (135 )   (2.1 )
Other     1,693       1,746       (53 )     1,416     330     23.3  
Total Operating Revenues     24,412       24,269       143       23,771     498     2.1  
                         
Operating Expenses                        
Cost of services     2,351       2,351             2,210     141     6.4  
Cost of equipment     7,128       7,102       26       7,339     (237 )   (3.2 )
Selling, general and administrative expense     4,552       4,985       (433 )     4,760     225     4.7  
Depreciation and amortization expense     2,395       2,395             2,344     51     2.2  
Total Operating Expenses     16,426       16,833       (407 )     16,653     180     1.1  
Operating Income   $ 7,986     $ 7,436     $ 550     $ 7,118   $ 318     4.5  
                         
                    (dollars in millions)
    12 Mos. Ended 12/31/18   12 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Service   $ 63,020     $ 64,222     $ (1,202 )   $ 63,121   $ 1,101     1.7  
Equipment     22,258       20,474       1,784       18,889     1,585     8.4  
Other     6,456       6,624       (168 )     5,501     1,123     20.4  
Total Operating Revenues     91,734       91,320       414       87,511     3,809     4.4  
                         
Operating Expenses                        
Cost of services     9,251       9,251             8,886     365     4.1  
Cost of equipment     23,323       23,189       134       22,147     1,042     4.7  
Selling, general and administrative expense     16,604       18,006       (1,402 )     17,876     130     0.7  
Depreciation and amortization expense     9,736       9,736             9,395     341     3.6  
Total Operating Expenses     58,914       60,182       (1,268 )     58,304     1,878     3.2  
Operating Income   $ 32,820     $ 31,138     $ 1,682     $ 29,207   $ 1,931     6.6  
                         
                         
                         
Wireline(1)(2)                        
                    (dollars in millions)
    3 Mos. Ended 12/31/18   3 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Consumer Markets   $ 3,169     $ 3,156     $ 13     $ 3,188   $ (32 )   (1.0 )
Enterprise Solutions     2,217       2,217             2,285     (68 )   (3.0 )
Partner Solutions     1,098       1,098             1,209     (111 )   (9.2 )
Business Markets     836       835       1       885     (50 )   (5.6 )
Other     53       47       6       50     (3 )   (6.0 )
Total Operating Revenues     7,373       7,353       20       7,617     (264 )   (3.5 )
                         
Operating Expenses                        
Cost of services     4,478       4,494       (16 )     4,465     29     0.6  
Selling, general and administrative expense     1,597       1,616       (19 )     1,558     58     3.7  
Depreciation and amortization expense     1,571       1,571             1,532     39     2.5  
Total Operating Expenses     7,646       7,681       (35 )     7,555     126     1.7  
Operating Income (Loss)   $ (273 )   $ (328 )   $ 55     $ 62   $ (390 )  
                         
                    (dollars in millions)
    12 Mos. Ended 12/31/18   12 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Consumer Markets   $ 12,589     $ 12,588     $ 1     $ 12,777   $ (189 )   (1.5 )
Enterprise Solutions     8,840       8,840             9,167     (327 )   (3.6 )
Partner Solutions     4,692       4,692             4,917     (225 )   (4.6 )
Business Markets     3,397       3,395       2       3,585     (190 )   (5.3 )
Other     242       207       35       234     (27 )   (11.5 )
Total Operating Revenues     29,760       29,722       38       30,680     (958 )   (3.1 )
                         
Operating Expenses                        
Cost of services     17,701       17,750       (49 )     17,922     (172 )   (1.0 )
Selling, general and administrative expense     6,151       6,257       (106 )     6,274     (17 )   (0.3 )
Depreciation and amortization expense     6,181       6,181             6,104     77     1.3  
Total Operating Expenses     30,033       30,188       (155 )     30,300     (112 )   (0.4 )
Operating Income (Loss)   $ (273 )   $ (466 )   $ 193     $ 380   $ (846 )  
                         
                         
                         
Fios Revenues                        
                    (dollars in millions)
    3 Mos. Ended 12/31/18   3 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Fios Revenues   $ 3,046     $ 3,033     $ 13     $ 2,959   $ 74     2.5  
                         
                         
                    (dollars in millions)
    12 Mos. Ended 12/31/18   12 Mos. Ended 12/31/17   Year Over Year
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported   $ Change   % Change
                         
Fios Revenues   $ 11,939     $ 11,934     $ 5     $ 11,691   $ 243     2.1  
                         
                         
Footnotes:                        
                         
(1)  The financial results above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
                         
(2)  Intersegment transactions have not been eliminated.
                         
*  Not meaningful                        
                         

 

Verizon Communications Inc.                    
Non-GAAP Reconciliations – Consolidated Verizon              
                     
                     
Consolidated EBITDA, Consolidated EBITDA Margin, Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Excluding Operating Results from Divested Businesses        
            (dollars in millions)    
    3 Mos.   3 Mos.   3 Mos.   3 Mos. 3 Mos.   3 Mos.   3 Mos.   3 Mos.    
    Ended   Ended   Ended   Ended Ended   Ended   Ended   Ended    
Unaudited   12/31/18   9/30/18   6/30/18   3/31/18 12/31/17   9/30/17   6/30/17   3/31/17    
                     
Consolidated Net Income   $ 2,065   $ 5,062   $ 4,246   $ 4,666 $ 18,783   $ 3,736   $ 4,478   $ 3,553    
Add/(subtract):                    
Provision (benefit) for income taxes     (698 )   1,613     1,281     1,388   (15,849 )   1,775     2,489     1,629    
Interest expense     1,199     1,211     1,222     1,201   1,219     1,164     1,218     1,132    
Depreciation and amortization expense     4,352     4,377     4,350     4,324   4,456     4,272     4,167     4,059    
Consolidated EBITDA   $ 6,918   $ 12,263   $ 11,099   $ 11,579 $ 8,609   $ 10,947   $ 12,352   $ 10,373    
                     
Add/subtract:                    
Other (income) expense, net*   $ (1,865 ) $ (214 ) $ (360 ) $ 75 $ 1,302   $ 291   $ (199 ) $ 627    
Equity in losses (earnings) of unconsolidated businesses†     (64 )   3     228     19   6     22     28     21    
Oath goodwill impairment     4,591                              
Severance charges     1,818         339       302         195        
Product realignment charges‡             450       463                
Gain on spectrum license transactions                   (144 )           (126 )  
Net gain on sale of divested businesses                           (1,774 )      
Acquisition and integration related charges‡     187     130     109     105   154     166     559        
      4,667     (81 )   766     199   2,083     479     (1,191 )   522    
Consolidated Adjusted EBITDA   $ 11,585   $ 12,182   $ 11,865   $ 11,778 $ 10,692   $ 11,426   $ 11,161   $ 10,895    
Operating results from divested businesses‡                       (17 )   (50 )   (104 )  
Consolidated Adjusted EBITDA Excluding Operating Results from Divested Businesses $ 11,585   $ 12,182   $ 11,865   $ 11,778 $ 10,692   $ 11,409   $ 11,111   $ 10,791    
Consolidated Operating Revenues – Quarter to Date   $ 34,281         $ 33,955          
Operating Income Margin – Quarter to Date     1.9 %         16.1 %        
Consolidated EBITDA Margin – Quarter to Date     20.2 %         25.4 %        
Consolidated Adjusted EBITDA Margin – Quarter to Date     33.8 %         31.5 %        
                     
*  Includes Pension and benefits mark-to-market adjustments and Early debt redemption costs, where applicable.      
                     
†  Includes Product realignment charges, where applicable.      
                     
‡  Excludes depreciation and amortization expense.      
                     

 

Verizon Communications Inc.                  
Non-GAAP Reconciliations – Consolidated Verizon          
                   
                   
Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio            
              (dollars in millions)  
Unaudited             12/31/18   12/31/17    
                   
Net Debt                  
Debt maturing within one year             $ 7,190   $ 3,453    
Long-term debt               105,873     113,642    
Total Debt               113,063     117,095    
Less Cash and cash equivalents               2,745     2,079    
Net Debt             $ 110,318   $ 115,016    
Net Debt to Consolidated Adjusted EBITDA Ratio             2.3x   2.6x    
                   
                   
                   
Adjusted Earnings per Common Share (Adjusted EPS)(1)              
                   
Unaudited   3 Mos. Ended 12/31/18
    3 Mos. Ended 12/31/17
   
  Pre-tax Tax After-Tax   Pre-tax Tax After-Tax    
EPS       $ 0.47         $ 4.56    
Severance, pension and benefits charges $ 165 $ (57 ) $ 108     0.03   $ 1,196   $ (464 ) $ 732     0.18    
Acquisition and integration related charges   189   (47 )   142     0.03     154     (59 )   95     0.02    
Oath goodwill impairment   4,591   (64 )   4,527     1.09                    
Wireless legal entity restructuring     (2,065 )   (2,065 )   (0.50 )                  
Early debt redemption costs                 681     (272 )   409     0.10    
Product realignment charges                 671     (210 )   461     0.11    
Gain on spectrum license transactions                 (144 )   53     (91 )   (0.02 )  
Impact of adoption of tax reform                     (16,761 )   (16,761 )   (4.10 )  
  $ 4,945 $ (2,233 ) $ 2,712     0.65   $ 2,558   $ (17,713 ) $ (15,155 )   (3.71 )  
Adjusted EPS       $ 1.12         $ 0.86    
                   
                   
Unaudited   12 Mos. Ended 12/31/18
    12 Mos. Ended 12/31/17
   
  Pre-tax Tax After-Tax   Pre-tax Tax After-Tax    
EPS       $ 3.76         $ 7.36    
Severance, pension and benefits charges $ 50 $ (27 ) $ 23     0.01   $ 1,391   $ (541 ) $ 850     0.21    
Early debt redemption costs   725   (189 )   536     0.13     1,983     (788 )   1,195     0.29    
Product realignment charges   658   (149 )   509     0.12     671     (210 )   461     0.11    
Acquisition and integration related charges   553   (134 )   419     0.10     884     (334 )   550     0.13    
Oath goodwill impairment   4,591   (64 )   4,527     1.10                    
Wireless legal entity restructuring     (2,065 )   (2,065 )   (0.50 )                  
Gain on spectrum license transactions                 (270 )   102     (168 )   (0.04 )  
Net gain on sale of divested businesses                 (1,774 )   843     (931 )   (0.23 )  
Impact of adoption of tax reform                     (16,761 )   (16,761 )   (4.10 )  
  $ 6,577 $ (2,628 ) $ 3,949     0.96   $ 2,885   $ (17,689 ) $ (14,804 )   (3.62 )  
Adjusted EPS       $ 4.71         $ 3.74    
                   
                   
(1)  Adjusted EPS may not add due to rounding.                  
                   

 

Verizon Communications Inc.          
Non-GAAP Reconciliations – Segments        
           
           
Segment EBITDA and Segment EBITDA Margin        
           
Wireless   (dollars in millions)  
           
Unaudited   3 Mos. Ended 12/31/18     3 Mos. Ended 12/31/17    
           
Operating Income   $ 7,986     $ 7,118    
Add Depreciation and amortization expense     2,395       2,344    
Segment EBITDA   $ 10,381     $ 9,462    
Year over year change     9.7 %      
           
Total operating revenues   $ 24,412     $ 23,771    
Operating Income Margin     32.7 %     29.9 %  
Segment EBITDA Margin     42.5 %     39.8 %  
           
           
    (dollars in millions)  
           
Unaudited   12 Mos. Ended 12/31/18     12 Mos. Ended 12/31/17    
           
Operating Income   $ 32,820     $ 29,207    
Add Depreciation and amortization expense     9,736       9,395    
Segment EBITDA   $ 42,556     $ 38,602    
           
Total operating revenues   $ 91,734     $ 87,511    
Operating Income Margin     35.8 %     33.4 %  
Segment EBITDA Margin     46.4 %     44.1 %  
           
           
Wireline   (dollars in millions)    
           
Unaudited   3 Mos. Ended 12/31/18     3 Mos. Ended 12/31/17    
           
Operating Income (Loss)   $ (273 )   $ 62    
Add Depreciation and amortization expense     1,571       1,532    
Segment EBITDA   $ 1,298     $ 1,594    
           
Total operating revenues   $ 7,373     $ 7,617    
Operating Income (Loss) Margin     (3.7 )%     0.8 %  
Segment EBITDA Margin     17.6 %     20.9 %  
           
           
  (dollars in millions)    
           
Unaudited   12 Mos. Ended 12/31/18     12 Mos. Ended 12/31/17    
           
Operating Income (Loss)   $ (273 )   $ 380    
Add Depreciation and amortization expense     6,181       6,104    
Segment EBITDA   $ 5,908     $ 6,484    
           
Total operating revenues   $ 29,760     $ 30,680    
Operating Income (Loss) Margin     (0.9 )%     1.2 %  
Segment EBITDA Margin     19.9 %     21.1 %  
           

 

Verizon Communications Inc.            
EBITDA Excluding Impact of Topic 606(1)      
             
             
Consolidated        
  (dollars in millions)        
      3 Months        
      Ended        
Unaudited     12/31/18        
             
             
Consolidated Net Income     $ 2,065        
Add/subtract:            
Benefit for income taxes       (698 )      
Interest expense       1,199        
Depreciation and amortization expense       4,352        
Consolidated EBITDA     $ 6,918        
             
Add/subtract:            
Other income, net*     $ (1,865 )      
Equity in earnings of unconsolidated businesses†       (64 )      
Oath goodwill impairment       4,591        
Severance, pension and benefits charges       1,818        
Acquisition and integration related charges‡       187        
        4,667        
             
Consolidated Adjusted EBITDA     $ 11,585        
Less Impact of Topic 606       603        
Consolidated Adjusted EBITDA Excluding Impact of Topic 606     $ 10,982        
Total operating revenues     $ 34,120        
Consolidated Adjusted EBITDA Margin Excluding Impact of Topic 606       32.2 %      
             
*  Includes Pension and benefits mark-to-market adjustments and Early debt redemption costs, where applicable.      
             
†  Includes Product realignment charges, where applicable.  
             
‡  Excludes depreciation and amortization expense.  
             
             
Wireless        
  (dollars in millions)      
      3 Months      
      Ended      
Unaudited     12/31/18      
             
Operating Income     $ 7,436        
Add Depreciation and amortization expense       2,395        
Segment EBITDA     $ 9,831        
Total operating revenues     $ 24,269        
Segment EBITDA Margin       40.5 %      
             
             
Wireline        
             
  (dollars in millions)      
      3 Months      
      Ended      
Unaudited     12/31/18      
             
Operating Loss     $ (328 )      
Add Depreciation and amortization expense       1,571        
Segment EBITDA     $ 1,243        
Total operating revenues     $ 7,353        
Segment EBITDA Margin       16.9 %      
             
             
(1)  Amounts for the three months ended December 31, 2018 exclude the impact of Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which we adopted on January 1, 2018.