Market Overview

Verizon begins 2018 with strong momentum

Share:

1Q 2018 highlights

Consolidated:

  • $1.11 in earnings per share (EPS), compared with 84 cents in 1Q 2017; adjusted EPS (non-GAAP), excluding special items, of $1.17, compared with 95 cents in 1Q 2017.
  • Total consolidated revenue growth of 6.6 percent, or 3.2 percent on an adjusted basis (non-GAAP).

Wireless:

  • 260,000 retail postpaid net additions, including 220,000 postpaid smartphone net adds.
  • Strong customer loyalty with 0.80 percent retail postpaid phone churn, the fourth consecutive period of customer retention at 0.80 percent or better.
  • Total revenue growth of 4.7 percent, excluding the impact of the revenue recognition standard adopted on January 1, 2018.

Wireline:

  • 66,000 Fios Internet net adds.
  • Total Fios revenue growth of 1.9 percent, excluding the impact of the revenue recognition standard.

NEW YORK, April 24, 2018 (GLOBE NEWSWIRE) -- Verizon Communications Inc. (NYSE:VZ) (NASDAQ:VZ) today reported first-quarter 2018 results highlighted by consolidated revenue growth and strong Verizon Wireless customer loyalty.

"We began 2018 with strong momentum, and we expect it to continue throughout the year," said Chairman and CEO Lowell McAdam. "We are positioning Verizon for long-term growth while executing our strategy today and leading the way for the next cycle of growth for the industry."

For first-quarter 2018, Verizon reported EPS of $1.11, compared with 84 cents in first-quarter 2017. On an adjusted basis (non-GAAP), first-quarter 2018 EPS was $1.17, compared with 95 cents in first-quarter 2017. Verizon's first-quarter 2018 EPS included approximately 21 cents due to tax reform and accounting changes for revenue recognition.

First-quarter 2018 earnings also included a pre-tax charge of about $249 million related to early debt extinguishment and approximately $107 million of acquisition and integration costs related primarily to Oath. The net impact of these items, after tax, was approximately 6 cents per share.

Consolidated results

Total consolidated operating revenues in first-quarter 2018 were $31.8 billion, up 6.6 percent from first-quarter 2017. On a comparable basis excluding the impact of Oath and divested businesses and the impact of the revenue recognition standard (non-GAAP), consolidated revenues were $29.9 billion, which grew approximately 3.2 percent. The primary driver was solid performance in the wireless business with improved service revenue results.  

Net income was $4.7 billion in first-quarter 2018. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled approximately $11.7 billion. Consolidated operating income margin was 23.1 percent. Consolidated EBITDA margin (non-GAAP) was 36.7 percent in first-quarter 2018, compared with 37.0 percent in first-quarter 2017. Adjusted EBITDA margin (non-GAAP) in first-quarter 2018 was 37.1 percent. Excluding the impact of the revenue recognition standard, adjusted EBITDA margin (non-GAAP) was 35.8 percent, which was down 70 basis points year over year due to higher wireless equipment revenue and the inclusion of Yahoo in the year's results. Adjusted EBITDA, excluding the impact of the revenue recognition standard, improved by $0.5 billion year over year due to steady improvement in operating efficiencies and increased penetration across the company's high-quality customer base.

Cash flow from operations totaled $6.6 billion during first-quarter 2018, up $5.3 billion year over year. Total capital expenditures in the first quarter were $4.6 billion.

As part of its commitment to strengthening the balance sheet and providing financial flexibility to grow the business, Verizon made a discretionary contribution of $1.0 billion to improve the funded status of its pension plans. As a result, Verizon does not project to have any mandatory pension contributions until approximately 2026.

Last year Verizon announced a goal to achieve $10 billion in cumulative cash savings from the business over the next four years. The company's business excellence initiative, which includes implementing zero-based budgeting, yielded positive results in the first quarter, realizing approximately $200 million of savings so far. The program is on track to deliver against Verizon's goals over the four-year period.

In Verizon's media business, Oath, gross revenues, excluding the impact of the revenue recognition standard, decreased sequentially, as expected, about 13 percent from fourth-quarter 2017, to $1.9 billion, due to seasonally lower display advertising performance. The integration of the Oath assets is accelerating Verizon's mobile-first media strategy and positioning it for global reach and future growth from premium content distribution and programmatic advertising capabilities across key verticals.

In the telematics business, as part of the ongoing integration of the Fleetmatics and Telogis acquisitions, Verizon has created the new Verizon Connect organization. Total Verizon Connect revenues, excluding the impact of the revenue recognition standard, were $234 million in first-quarter 2018. IoT (Internet of Things) revenues, including Verizon Connect, increased approximately 13 percent year over year.

Wireless results

  • Total revenues, excluding the impact of the revenue recognition standard, were $21.9 billion in first-quarter 2018, an increase of 4.7 percent compared with first-quarter 2017.

  • Service revenues for the quarter on a reported basis were down 2.4 percent. Excluding the impact from the revenue recognition standard, service revenues were flat. Service revenues improved year over year throughout the quarter, with results turning positive in the month of March when excluding the impact from the revenue recognition standard.

  • Verizon now has 81 percent of its postpaid phone base on unsubsidized plans, compared with 72 percent for the same period last year.

  • Verizon reported a net increase of 260,000 retail postpaid connections in first-quarter 2018, consisting of net phone losses of 24,000 and tablet losses of 75,000, offset by 359,000 other connected devices gains, primarily wearables. Postpaid smartphone net additions for the quarter were 220,000.

  • Total retail postpaid churn was 1.04 percent in first-quarter 2018, a year-over-year improvement. Retail postpaid phone churn of 0.80 percent was the fourth consecutive quarter of retail postpaid phone churn of 0.80 percent or better.

  • Segment operating income in first-quarter 2018 was $8.0 billion, and segment operating income margin on total revenues was 36.8 percent. Segment EBITDA (non-GAAP) totaled $10.5 billion in first-quarter 2018. Segment EBITDA margin on total revenues (non-GAAP) was 47.8 percent, compared with 45.1 percent in first-quarter 2017. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 46.3 percent, an improvement of 120 basis points year over year.

Wireline results

  • Total wireline revenues, excluding the impact of the revenue recognition standard, decreased 1.8 percent year over year in first-quarter 2018. Total Fios revenues, excluding the impact of the revenue recognition standard, grew 1.9 percent year over year, driven by growing demand for high-quality broadband service.

  • In first-quarter 2018, Verizon added a net of 66,000 Fios Internet connections and lost 22,000 Fios Video connections, indicative of the continued cord-cutting trend regarding traditional linear video bundles.

  • Wireline operating income was $69 million in first-quarter 2018, and segment operating income margin was 0.9 percent. Segment EBITDA (non-GAAP) was $1.6 billion in first-quarter 2018. Segment EBITDA margin (non-GAAP) was 21.2 percent in first-quarter 2018, compared with 21.9 percent in first-quarter 2017. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 20.4 percent.

Outlook and guidance

Verizon expects the following:

  • Full-year consolidated revenue growth at low single-digit percentage rates on a GAAP reported basis. Verizon expects service revenue growth on a GAAP reported basis to turn positive by the end of 2018.

  • Low single-digit percentage growth in adjusted EPS in 2018 before the impact of tax reform and the revenue recognition standard.

  • Capital spending for 2018 will be in the range of $17.0 billion to $17.8 billion, including the commercial launch of 5G.

  • The expected savings from tax reform will generate a net $3.5 billion to $4 billion uplift to cash flow from operations in 2018. This is expected to yield a 55 to 65 cent increase in 2018 EPS, net of impacts from employee and Verizon Foundation initiatives. The resulting 2018 effective tax rate is projected to be in the range of 24 to 26 percent. 

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:VZ) (NASDAQ:VZ), headquartered in New York City, generated $126 billion in 2017 revenues. The company operates America's most reliable wireless network and the nation's premier all-fiber network, and delivers integrated solutions to businesses worldwide. Its Oath subsidiary reaches about one billion people around the world with a dynamic house of media and technology brands.  

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.

 

 
Verizon Communications Inc.
Condensed Consolidated Statements of Income
   
         
    (dollars in millions, except per share amounts)
         
    3 Mos. Ended   3 Mos. Ended      
Unaudited 3/31/18   3/31/17   % Change  
         
Operating Revenues      
Service revenues and other $   26,732   $   26,050    2.6  
Wireless equipment revenues    5,040      3,764    33.9  
Total Operating Revenues    31,772      29,814    6.6  
         
Operating Expenses      
Cost of services    7,946      7,239    9.8  
Wireless cost of equipment    5,309      4,808    10.4  
Selling, general and administrative expense    6,844      6,746    1.5  
Depreciation and amortization expense    4,324      4,059    6.5  
Total Operating Expenses    24,423      22,852    6.9  
         
Operating Income    7,349      6,962    5.6  
Equity in losses of unconsolidated businesses    (19 )    (21 )  9.5  
Other expense, net    (75 )    (627 )  88.0  
Interest expense    (1,201 )    (1,132 )  (6.1 )
Income Before Provision For Income Taxes    6,054      5,182    16.8  
Provision for income taxes    (1,388 )    (1,629 )  (14.8 )
Net Income $   4,666   $   3,553    31.3  
         
Net income attributable to noncontrolling interests $   121   $   103    17.5  
Net income attributable to Verizon    4,545      3,450    31.7  
Net Income $   4,666   $   3,553    31.3  
         
Basic Earnings Per Common Share      
Net income attributable to Verizon $   1.11   $   0.85    30.6  
       
Weighted average number of common shares (in millions)    4,104      4,082    
       
Diluted Earnings Per Common Share (1)      
Net income attributable to Verizon $   1.11   $   0.84    32.1  
       
Weighted average number of common      
  shares-assuming dilution (in millions)    4,107      4,087    
         
         
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.  
         
  Certain amounts have been reclassified to conform to the current period presentation.  
         

 

     
Verizon Communications Inc.    
Condensed Consolidated Balance Sheets    
           
           
          (dollars in millions)  
           
Unaudited 3/31/18     12/31/17     $ Change  
           
Assets          
Current assets          
Cash and cash equivalents $   1,923     $   2,079     $   (156 )
Accounts receivable, net    22,595        23,493        (898 )
Inventories    1,285        1,034        251  
Prepaid expenses and other    5,222        3,307        1,915  
Total current assets    31,025        29,913        1,112  
Property, plant and equipment    246,877        246,498        379  
Less accumulated depreciation    158,955        157,930        1,025  
Property, plant and equipment, net    87,922        88,568        (646 )
Investments in unconsolidated businesses    994        1,039        (45 )
Wireless licenses    93,677        88,417        5,260  
Goodwill    29,121        29,172        (51 )
Other intangible assets, net    10,014        10,247        (233 )
Other assets    11,763        9,787        1,976  
Total assets $   264,516     $   257,143     $   7,373  
           
Liabilities and Equity          
Current liabilities          
Debt maturing within one year $   6,323     $   3,453     $   2,870  
Accounts payable and accrued liabilities    17,052        21,232        (4,180 )
Other current liabilities    8,240        8,352        (112 )
Total current liabilities    31,615        33,037        (1,422 )
Long-term debt    112,734        113,642        (908 )
Employee benefit obligations    20,689        22,112        (1,423 )
Deferred income taxes    34,414        31,232        3,182  
Other liabilities    12,719        12,433        286  
Total long-term liabilities    180,556        179,419        1,137  
           
Equity          
Common stock    429        424        5  
Additional paid in capital    13,437        11,101        2,336  
Retained earnings    39,974        35,635        4,339  
Accumulated other comprehensive income    3,705        2,659        1,046  
Common stock in treasury, at cost    (6,992 )      (7,139 )      147  
Deferred compensation – employee stock ownership plans and other    228        416        (188 )
Noncontrolling interests    1,564        1,591        (27 )
Total equity    52,345        44,687        7,658  
Total liabilities and equity $   264,516     $   257,143     $   7,373  
           
           
Verizon - Selected Financial and Operating Statistics    
           
Unaudited 3/31/18     12/31/17      
           
Total debt (in millions) $   119,057     $   117,095      
Net debt (in millions) $   117,134     $   115,016      
Net debt / Consolidated adjusted EBITDA(1)   2.6x       2.6x      
Common shares outstanding end of period (in millions)    4,132        4,079      
Total employees (‘000)    154.7        155.4      
Quarterly cash dividends declared per common share $   0.59     $   0.59      
           
Footnotes:          
(1)

Consolidated adjusted EBITDA excludes the effects of special items and operating results of divested businesses, as the Company's chief operating decision maker excludes these items in assessing business unit performance.
           

 

           
Verizon Communications Inc.          
Condensed Consolidated Statements of Cash Flows    
             
             
        (dollars in millions)
             
    3 Mos. Ended     3 Mos. Ended      
Unaudited 3/31/18     3/31/17     $ Change  
             
Cash Flows from Operating Activities          
Net Income $   4,666     $   3,553     $   1,113  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization expense    4,324        4,059        265  
Employee retirement benefits    (151 )      (111 )      (40 )
Deferred income taxes    702        2,025        (1,323 )
Provision for uncollectible accounts    239        330        (91 )
Equity in losses of unconsolidated businesses, net of dividends received    30        28        2  
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses    (2,033 )      (4,998 )      2,965  
Discretionary contributions to qualified pension plans    (1,000 )      (3,411 )      2,411  
Other, net    (129 )      (99 )      (30 )
Net cash provided by operating activities    6,648        1,376        5,272  
             
Cash Flows from Investing Activities          
Capital expenditures (including capitalized software)    (4,552 )      (3,067 )      (1,485 )
Acquisitions of businesses, net of cash acquired    (32 )      (1,746 )      1,714  
Acquisitions of wireless licenses    (970 )      (196 )      (774 )
Other, net    269        459        (190 )
Net cash used in investing activities    (5,285 )      (4,550 )      (735 )
             
Cash Flows from Financing Activities          
Proceeds from long-term borrowings    1,956        13,054        (11,098 )
Proceeds from asset-backed long-term borrowings    1,178        1,283        (105 )
Repayments of long-term borrowings and capital lease obligations    (2,984 )      (5,592 )      2,608  
Increase (decrease) in short-term obligations, excluding current maturities    1,222        (52 )      1,274  
Dividends paid    (2,407 )      (2,354 )      (53 )
Other, net    (281 )      (1,674 )      1,393  
Net cash provided by (used in) financing activities    (1,316 )      4,665        (5,981 )
             
Increase in cash, cash equivalents and restricted cash    47        1,491        (1,444 )
Cash, cash equivalents and restricted cash, beginning of period    2,888        3,177        (289 )
Cash, cash equivalents and restricted cash, end of period $   2,935     $   4,668     $   (1,733 )
             
Footnotes:          
Certain amounts have been reclassified to conform to the current period presentation.
             

 

       
Verizon Communications Inc.      
Wireless - Selected Financial Results      
         
         
      (dollars in millions)
         
    3 Mos. Ended   3 Mos. Ended      
Unaudited 3/31/18   3/31/17   % Change  
         
Operating Revenues      
Service $   15,402   $   15,778    (2.4 )
Equipment    5,040      3,764    33.9  
Other    1,458      1,336    9.1  
Total Operating Revenues    21,900      20,878    4.9  
         
Operating Expenses      
Cost of services    2,215      2,187    1.3  
Cost of equipment    5,309      4,808    10.4  
Selling, general and administrative expense    3,899      4,469    (12.8 )
Depreciation and amortization expense    2,428      2,338    3.8  
Total Operating Expenses    13,851      13,802    0.4  
         
Operating Income $   8,049   $   7,076    13.8  
Operating Income Margin   36.8 %   33.9 %  
         
Segment EBITDA $   10,477   $   9,414    11.3  
Segment EBITDA Margin   47.8 %   45.1 %  
         
         
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.      
         
  Certain amounts have been reclassified to conform to the current period presentation.
         

 

       
Verizon Communications Inc.      
Wireless - Selected Operating Statistics  
         
         
Unaudited 3/31/18   3/31/17   % Change  
         
Connections (‘000)      
Retail postpaid     111,114       108,483    2.4  
Retail prepaid     5,068       5,430    (6.7 )
Total retail     116,182       113,913    2.0  
         
         
    3 Mos. Ended   3 Mos. Ended    
Unaudited 3/31/18   3/31/17   % Change  
         
Net Add Detail (‘000) (1)      
Retail postpaid     260       (307 ) *  
Retail prepaid     (335 )     (17 ) *  
Total retail     (75 )     (324 )  76.9  
         
         
Account Statistics      
Retail postpaid accounts (‘000) (2)     35,333       35,270    0.2  
Retail postpaid connections per account (2)     3.14       3.08    1.9  
Retail postpaid ARPA (3) (5) $   131.71   $   136.98    (3.8 )
Retail postpaid I-ARPA (4) (5) $   164.72   $   166.01    (0.8 )
         
Churn Detail      
Retail postpaid   1.04 %   1.15 %  
Retail   1.28 %   1.39 %  
         
Retail Postpaid Connection Statistics      
Total smartphone postpaid phone base (2)   90.7 %   88.1 %  
Total Internet postpaid base (2)   19.2 %   18.3 %  
       
Other Operating Statistics      
Capital expenditures (in millions) $   2,367   $   1,831    29.3  
         
         
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    
Unaudited 3/31/18   3/31/17   % Change  
       
Operating Revenues      
Consumer Markets $   3,150   $   3,201    (1.6 )
Enterprise Solutions    2,240      2,311    (3.1 )
Partner Solutions    1,228      1,229    (0.1 )
Business Markets    871      879    (0.9 )
Other    68      62    9.7  
Total Operating Revenues    7,557      7,682    (1.6 )
       
Operating Expenses      
Cost of services    4,475      4,419    1.3  
Selling, general and administrative expense    1,479      1,582    (6.5 )
Depreciation and amortization expense    1,534      1,475    4.0  
Total Operating Expenses    7,488      7,476    0.2  
       
Operating Income $   69   $   206    (66.5 )
Operating Income Margin   0.9 %   2.7 %  
       
Segment EBITDA $   1,603   $   1,681    (4.6 )
Segment EBITDA Margin   21.2 %   21.9 %  
       
       
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.      
Wireline - Selected Operating Statistics  
         
         
Unaudited 3/31/18   3/31/17   % Change  
         
Connections (‘000)      
Fios video connections     4,597       4,681    (1.8 )
Fios Internet connections     5,916       5,688    4.0  
Fios digital voice residence connections     3,891       3,887    0.1  
Fios digital connections     14,404       14,256    1.0  
High-speed Internet (HSI) connections     1,050       1,323    (20.6 )
Total broadband connections     6,966       7,011    (0.6 )
Total voice connections     12,555       13,634    (7.9 )
         
         
    3 Mos. Ended   3 Mos. Ended    
Unaudited 3/31/18   3/31/17   % Change  
         
Net Add Detail (‘000)      
Fios video connections     (22 )     (13 )  (69.2 )
Fios Internet connections     66       35    88.6  
Fios digital voice residence connections     (14 )     (8 )  (75.0 )
Fios digital connections     30       14   *  
High-speed Internet (HSI) connections     (59 )     (62 )  4.8  
Total broadband connections     7       (27 ) *  
Total voice connections     (266 )     (305 )  12.8  
         
Revenue Statistics      
Fios revenues (in millions) $   2,951   $   2,891    2.1  
         
Other Operating Statistics      
Capital expenditures (in millions) $   1,673   $   960    74.3  
Wireline employees (‘000)     57.2       59.4    
         
         
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 - Impacts from the adoption 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(3)                        
    3/31/2018   3/31/2017   YoY
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported    $ Change   % Change
                         
Operating Revenues                        
Service revenues and other   $   26,732   $   27,133   $   (401 )   $   26,050   $   1,083      4.2  
Wireless equipment revenues      5,040      4,594      446        3,764      830      22.1  
Total Operating Revenues      31,772      31,727      45        29,814      1,913      6.4  
                         
Operating Expenses                        
Cost of services      7,946      7,956      (10 )      7,239      717      9.9  
Wireless cost of equipment      5,309      5,287      22        4,808      479      10.0  
Selling, general and administrative expense      6,844      7,234      (390 )      6,746      488      7.2  
Depreciation and amortization expense      4,324      4,324      —        4,059      265      6.5  
Total Operating Expenses      24,423      24,801      (378 )      22,852      1,949      8.5  
                         
Operating Income   $   7,349   $   6,926   $   423     $   6,962   $   (36 )    (0.5 )
 
 
Wireless(1)(2)(3)  
    3/31/2018   3/31/2017   YoY
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported   $ Change   % Change
                         
Operating Revenues                        
Service   $   15,402   $   15,782   $   (380 )   $   15,778   $   4     0.0  
Equipment      5,040      4,594      446        3,764      830       22.1  
Other      1,458      1,489      (31 )      1,336      153       11.5  
Total Operating Revenues      21,900      21,865      35        20,878      987       4.7  
                         
Operating Expenses                        
Cost of services      2,215      2,215      —        2,187      28       1.3  
Cost of equipment      5,309      5,287      22        4,808      479       10.0  
Selling, general and administrative expense      3,899      4,248      (349 )      4,469      (221 )     (4.9 )
Depreciation and amortization expense      2,428      2,428      —        2,338      90       3.8  
Total Operating Expenses      13,851      14,178      (327 )      13,802      376       2.7  
                         
Operating Income   $   8,049   $   7,687   $   362     $   7,076   $   611       8.6  
 
 
Wireline(1)(2)  
    3/31/2018   3/31/2017   YoY
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported   $ Change   % Change
                         
Operating Revenues                        
Consumer Markets   $   3,150   $   3,146   $   4     $   3,201   $   (55 )    (1.7 )
Enterprise Solutions      2,240      2,240      —        2,311      (71 )    (3.1 )
Partner Solutions      1,228      1,228      —        1,229      (1 )    (0.1 )
Business Markets      871      870      1        879      (9 )    (1.0 )
Other      68      56      12        62      (6 )    (9.7 )
Total Operating Revenues      7,557      7,540      17        7,682      (142 )    (1.8 )
                         
Operating Expenses                        
Cost of services      4,475      4,485      (10 )      4,419      66      1.5  
Selling, general and administrative expense      1,479      1,516      (37 )      1,582      (66 )    (4.2 )
Depreciation and amortization expense      1,534      1,534      —        1,475      59      4.0  
Total Operating Expenses      7,488      7,535      (47 )      7,476      59      0.8  
                         
Operating Income   $   69   $   5   $   64     $   206   $   (201 )    (97.6 )
 
 
Fios Revenues  
    3/31/2018   3/31/2017   YoY
Unaudited   As reported   Balances without adoption of Topic 606   Adjustments   As reported   $ Change   % Change
                         
Fios Revenues   $   2,951   $   2,945   $   6     $   2,891   $   54      1.9  
   
 
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.
                         
(3)  Certain amounts have been reclassified to conform to the current period presentation.
 

 

       
Verizon Communications Inc.      
Non-GAAP Reconciliations - Consolidated Verizon      
       
       
Consolidated Operating Revenues Excluding Oath, Divested Businesses and the Revenue Recognition Standard  
    (dollars in millions)
    3 Mos. Ended   3 Mos. Ended
Unaudited   3/31/18   3/31/17
       
Consolidated Operating Revenues   $   31,772   $   29,814
Less impacts of adoption of Topic 606      45      —
Less operating revenues from divested businesses      —      194
Less Oath revenues      1,875      703
Consolidated Operating Revenues Excluding Oath, Divested Businesses and the Revenue Recognition Standard $   29,852   $   28,917
Year over year change     3.2 %  
       

 

           
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.  
  Ended   Ended   Ended   Ended   Ended  
Unaudited 3/31/18   12/31/17   9/30/17   6/30/17   3/31/17  
           
Consolidated Net Income $   4,666   $   18,783   $   3,736   $   4,478   $   3,553  
  Add/(subtract):          
Provision for income taxes    1,388      (15,849 )    1,775      2,489      1,629  
Interest expense    1,201      1,219      1,164      1,218      1,132  
Other (income) expense, net    75      1,302      291      (199 )    627  
Equity in losses of unconsolidated businesses    19      6      22      28      21  
Operating Income    7,349      5,461      6,988      8,014      6,962  
Add Depreciation and amortization expense    4,324      4,456      4,272      4,167      4,059  
Consolidated EBITDA    11,673      9,917      11,260      12,181      11,021  
           
  Add/subtract special items (before tax):          
Severance(2)    —      302      —      195      —  
Product realignment    —      463      —      —      —  
Gain on spectrum license transactions    —      (144 )    —      —      (126 )
Net gain on sale of divested businesses    —      —      —      (1,774 )    —  
Acquisition and integration related costs(1)(2)    105      154      166      559      —  
     105      775      166      (1,020 )    (126 )
Consolidated Adjusted EBITDA     11,778       10,692       11,426       11,161       10,895  
Operating Results from divested businesses(1)    —      —      (17 )    (50 )    (104 )
Consolidated Adjusted EBITDA Excluding Operating Results From Divested Businesses $   11,778   $   10,692   $   11,409   $   11,111   $   10,791  
Consolidated Operating Revenues - Quarter to Date $   31,772         $   29,814  
Consolidated Operating Income Margin - Quarter to Date   23.1 %        
Consolidated EBITDA Margin - Quarter to Date   36.7 %         37.0 %
Consolidated Adjusted EBITDA Margin - Quarter to Date   37.1 %         36.5 %
           
(1)  Excludes depreciation and amortization expense.       
           
(2)  Certain amounts have been reclassified to conform to the current period presentation.
           

 

                 
Verizon Communications Inc.                
Non-GAAP Reconciliations - Consolidated Verizon        
                 
                 
Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio          
              (dollars in millions)  
Unaudited             3/31/18   12/31/17  
                 
Net Debt                
Debt maturing within one year             $   6,323   $   3,453  
Long-term debt                112,734      113,642  
Total Debt                119,057      117,095  
Less Cash and cash equivalents                1,923      2,079  
Net Debt             $   117,134   $   115,016  
Net Debt to Consolidated Adjusted EBITDA Ratio             2.6x   2.6x  
                 
                 
Adjusted Earnings per Common Share (Adjusted EPS)(1)        
        3 Mos. Ended       3 Mos. Ended  
Unaudited       3/31/18       3/31/17  
  Pre-tax Tax After-Tax   Pre-tax Tax After-Tax  
EPS       $   1.11       $   0.84  
Early debt redemption costs     249     (65 )     184     0.04    848      (336 )    512       0.13  
Acquisition and integration related costs     107     (25 )     82     0.02    —      —      —      —  
Gain on spectrum license transactions    —    —      —    —    (126 )    49      (77 )     (0.02 )
  $   356 $   (90 ) $   266     0.06 $   722   $   (287 ) $   435       0.11  
Adjusted EPS       $   1.17       $   0.95  
                 
(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)  
  3 Mos. Ended     3 Mos. Ended  
Unaudited 3/31/18     3/31/17  
       
Operating Income $   8,049     $   7,076  
Add Depreciation and amortization expense    2,428        2,338  
Segment EBITDA $   10,477     $   9,414  
       
Total operating revenues $   21,900     $   20,878  
Operating Income Margin   36.8 %     33.9 %
Segment EBITDA Margin   47.8 %     45.1 %
       
       
Wireline (dollars in millions)  
  3 Mos. Ended     3 Mos. Ended  
Unaudited 3/31/18     3/31/17  
       
Operating Income $   69     $   206  
Add Depreciation and amortization expense    1,534        1,475  
Segment EBITDA $   1,603     $   1,681  
       
Total operating revenues $   7,557     $   7,682  
Operating Income Margin   0.9 %     2.7 %
Segment EBITDA Margin   21.2 %     21.9 %
       

 

     
Verizon Communications Inc.    
EBITDA excluding impacts from the adoption of Topic 606
     
     
Consolidated - Excluding Impacts From the Adoption of Topic 606  
  (dollars in millions)  
  3 Months   3 Months  
  Ended   Ended  
Unaudited 3/31/18   3/31/17  
     
     
Consolidated Net Income $   4,666   $   3,553  
  Add/(subtract):    
Provision for income taxes    1,388      1,629  
Interest expense    1,201      1,132  
Other (income) expense, net    75      627  
Equity in losses of unconsolidated businesses    19      21  
Operating Income    7,349      6,962  
Add Depreciation and amortization expense    4,324      4,059  
Consolidated EBITDA     11,673       11,021  
     
  Add/subtract special items (before tax):    
Gain on spectrum license transactions    —      (126 )
Acquisition and integration related costs    105      —  
     105      (126 )
     
Consolidated Adjusted EBITDA     11,778       10,895  
Less Impacts from the Adoption of Topic 606 to Operating Income    423      —  
Consolidated Adjusted EBITDA excluding the impacts from the adoption of Topic 606 $   11,355   $   10,895  
Total operating revenues(1) $   31,727   $   29,814  
Consolidated Adjusted EBITDA Margin(1)   35.8 %   36.5 %
Year over year increase to consolidated adjusted EBITDA $   460    
Year over year change in consolidated adjusted EBITDA margin  (70) bps     
     
     
Wireless - Excluding Impacts From the Adoption of Topic 606    
  (dollars in millions)  
  3 Months   3 Months  
  Ended   Ended  
Unaudited 3/31/18   3/31/17  
     
     
Operating Income(1) $   7,687   $   7,076  
Add Depreciation and amortization expense    2,428      2,338  
Segment EBITDA(1) $   10,115   $   9,414  
Total operating revenues(1) $   21,865   $   20,878  
Segment EBITDA Margin(1)   46.3 %   45.1 %
Year over year change in segment EBITDA margin  120 bps     
     
     
Wireline - Excluding Impacts From the Adoption of Topic 606    
     
  (dollars in millions)    
  3 Months    
  Ended    
Unaudited 3/31/18    
     
     
Operating Income(1) $   5    
Add Depreciation and amortization expense    1,534    
Segment EBITDA(1) $   1,539    
Total operating revenues(1) $   7,540    
Segment EBITDA Margin(1)   20.4 %  
     
     
     
(1)  Amounts for the three months ended March 31, 2018 exclude impacts of Accounting Standard Update 2014-09, "Revenue from Contracts with Customers (Topic 606)", which we adopted on January 1, 2018.
     

Media contacts:
Bob Varettoni
908.559.6388
robert.a.varettoni@verizon.com

Eric Wilkens
908.559.3063
eric.wilkens@verizon.com

Primary Logo

View Comments and Join the Discussion!