Market Overview

Verizon ends first-half 2018 with strong operating results

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2Q 2018 highlights

Consolidated:

  • $1.00 in earnings per share (EPS), compared with $1.07 in 2Q 2017; adjusted EPS (non-GAAP), excluding special items, of $1.20, compared with 96 cents in 2Q 2017.
  • Total consolidated revenue growth of 5.4 percent year over year, or 2.6 percent on an adjusted basis (non-GAAP).

Wireless:

  • 531,000 retail postpaid net additions, including 398,000 postpaid smartphone net adds.
  • Strong customer loyalty with 0.75 percent retail postpaid phone churn, the fifth consecutive period of retail postpaid phone churn at 0.80 percent or better.
  • Total revenue growth of 4.7 percent year over year, excluding the impact of the revenue recognition standard adopted on Jan. 1, 2018.

Wireline:

  • 43,000 Fios Internet net adds; total Fios revenue growth of 2.3 percent year over year, excluding the impact of the revenue recognition standard.

NEW YORK, July 24, 2018 (GLOBE NEWSWIRE) -- Strong revenue momentum and operating results at Verizon Wireless highlighted second-quarter 2018 performance at Verizon Communications Inc. (NYSE:VZ) (NASDAQ:VZ), which today reported EPS of $1.00 for the quarter.

"Verizon is extremely well-positioned for the future," said Chairman and CEO Lowell McAdam. "Our financial and operating results for the first half of 2018 were strong, as evidenced by service revenue, earnings and operating cash flow growth delivered in a highly competitive marketplace."

For second-quarter 2018, Verizon reported EPS of $1.00, compared with $1.07 in second-quarter 2017. On an adjusted basis (non-GAAP), second-quarter 2018 EPS was $1.20, compared with 96 cents in second-quarter 2017. Verizon's second-quarter 2018 EPS included approximately 21 cents due to the net effects of tax reform and accounting changes for revenue recognition.

Adjusted second-quarter 2018 earnings included a pre-tax charge for product realignment of $658 million, mainly related to the discontinuation of Verizon's go90 platform and associated content, severance charges of $339 million, and acquisition and integration-related charges of $120 million, primarily pertaining to Oath. The net impact of these items, after tax, was approximately $0.9 billion, or 20 cents per share.

Consolidated results

Total consolidated operating revenues in second-quarter 2018 were $32.2 billion, up 5.4 percent from second-quarter 2017. On a comparable basis excluding the impacts of Oath, divested businesses and the revenue recognition standard (non-GAAP), consolidated revenues were $30.2 billion, up approximately 2.6 percent.

Net income was $4.2 billion in second-quarter 2018. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled approximately $11 billion. For second-quarter 2018, consolidated operating income margin was 20.5 percent. Consolidated EBITDA margin (non-GAAP) was 34.1 percent in second-quarter 2018, compared with 39.9 percent in second-quarter 2017. Adjusted EBITDA margin (non-GAAP) in second-quarter 2018 was 36.8 percent. Excluding the impact of the revenue recognition standard, adjusted EBITDA margin (non-GAAP) was 35.6 percent.

Cash flow from operations totaled $9.8 billion during second-quarter 2018, up $1.9 billion year over year. Total capital expenditures in the second quarter were $3.3 billion, bringing first-half capital spending to $7.8 billion. Verizon's total debt balance declined by $4.4 billion sequentially in second-quarter 2018, as the company began to realize benefits from tax reform.

Last year Verizon announced a goal to achieve $10 billion in cumulative cash savings over the next four years. This initiative, which includes zero-based budgeting, has yielded approximately $500 million of cumulative cash savings on a year-to-date basis and is on track to deliver against the company's goals.

In Verizon's media business, Oath revenues, excluding the impact of the revenue recognition standard, were $1.9 billion in second-quarter 2018, which were relatively flat on a sequential basis. In the telematics business, total Verizon Connect revenues, excluding the impact of the revenue recognition standard, were $241 million in second-quarter 2018. IoT (Internet of Things) revenues, including Verizon Connect, increased approximately 13 percent year over year, excluding the impact of the revenue recognition standard.

Wireless results

  • Total revenues were $22.4 billion, an increase of 5.5 percent year over year. Excluding the impact of the revenue recognition standard, total revenues were $22.3 billion in second-quarter 2018, an increase of 4.7 percent compared with second-quarter 2017.

  • Service revenues for the quarter on a reported basis grew 0.8 percent year over year. Excluding the impact of the revenue recognition standard, service revenues grew 2.5 percent year over year, driven by customer step-ups to higher access plans and increases in the average connections per account. Sequentially, service revenues increased 1.5 percent, excluding the impact of the revenue recognition standard.

  • In second-quarter 2018, approximately 82 percent of Verizon's postpaid phone base were on unsubsidized plans, compared with 81 percent in first-quarter 2018 and 75 percent in the same period last year.

  • Verizon reported a net increase of 531,000 retail postpaid net additions in second-quarter 2018, consisting of net phone additions of 199,000, tablet losses of 37,000 and 369,000 other connected devices additions, primarily wearables. Postpaid smartphone net additions for the quarter were 398,000.

  • Total retail postpaid churn was 0.97 percent in second-quarter 2018, slightly up year-over-year. Retail postpaid phone churn of 0.75 percent in second-quarter 2018 was the fifth consecutive quarter of retail postpaid phone churn of 0.80 percent or better.

  • Segment operating income in second-quarter 2018 was $8.3 billion, and segment operating income margin on total revenues was 36.9 percent.
  • Segment EBITDA (non-GAAP) totaled $10.7 billion. Excluding the impact of the revenue recognition standard, segment EBITDA totaled $10.3 billion in second-quarter 2018. Segment EBITDA margin on total revenues (non-GAAP) was 47.8 percent, compared with 45.8 percent in second-quarter 2017. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 46.2 percent, an improvement of 40 basis points year over year.

Wireline results

  • Total wireline revenues were $7.5 billion. Excluding the impact of the revenue recognition standard, total wirelines revenues decreased 3.4 percent year over year in second-quarter 2018.

  • Total Fios revenues were $3.0 billion, an increase of 2.0 percent year over year. Excluding the impact of the revenue recognition standard, total Fios revenues grew 2.3 percent year over year, driven by Verizon's broadband offerings.

  • In second-quarter 2018, Verizon added a net of 43,000 Fios Internet connections, indicative of strong demand as customers value broadband connections more than ever. Verizon lost 37,000 Fios Video connections in second-quarter 2018 amid pressures from cord-cutting of video bundles.

  • Wireline operating loss was $19 million in second-quarter 2018, and segment operating loss margin was 0.3 percent. Segment EBITDA (non-GAAP) was $1.5 billion in second-quarter 2018. Excluding the impact of the revenue recognition standard, segment EBITDA was $1.5 billion. Segment EBITDA margin (non-GAAP) was 20.2 percent in second-quarter 2018, compared with 20.7 percent in second-quarter 2017. Excluding the impact of the revenue recognition standard, segment EBITDA margin was 19.6 percent. 

Outlook and guidance

Verizon expects the following:

  • Full-year consolidated revenue growth at low-to-mid single-digit percentage rates on a GAAP reported basis. This update to full-year guidance is due to better-than-expected equipment revenue trends.

  • The impact of revenue recognition on EPS for full-year 2018 to be between 27 and 31 cents. The accretive benefit to full-year 2018 consolidated operating income is expected to moderate in 2019 and become insignificant in 2020, as the timing impacts to revenues and commission costs converge.

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

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

  • The effective tax rate for full-year 2018 to be at the low end of 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 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     6 Mos. Ended 6 Mos. Ended    
Unaudited 6/30/18 6/30/17 % Change   6/30/18 6/30/17 % Change  
                   
Operating Revenues                
Service revenues and other $   27,159   $   26,250    3.5     $   53,891   $   52,300    3.0    
Wireless equipment revenues    5,044      4,298    17.4        10,084      8,062    25.1    
Total Operating Revenues    32,203      30,548    5.4        63,975      60,362    6.0    
                   
Operating Expenses                
Cost of services    8,234      7,449    10.5        16,180      14,688    10.2    
Wireless cost of equipment    5,397      5,035    7.2        10,706      9,843    8.8    
Selling, general and administrative expense    7,605      5,883    29.3        14,449      12,629    14.4    
Depreciation and amortization expense    4,350      4,167    4.4        8,674      8,226    5.4    
Total Operating Expenses    25,586      22,534    13.5        50,009      45,386    10.2    
                   
Operating Income    6,617      8,014    (17.4 )      13,966      14,976    (6.7 )  
Equity in losses of unconsolidated businesses    (228 )    (28 ) *        (247 )    (49 ) *    
Other income (expense), net    360      199    80.9        285      (428 ) *    
Interest expense    (1,222 )    (1,218 )  0.3        (2,423 )    (2,350 )  3.1    
Income Before Provision For Income Taxes    5,527      6,967    (20.7 )      11,581      12,149    (4.7 )  
Provision for income taxes    (1,281 )    (2,489 )  (48.5 )      (2,669 )    (4,118 )  (35.2 )  
Net Income $   4,246   $   4,478    (5.2 )   $   8,912   $   8,031    11.0    
                   
Net income attributable to noncontrolling interests $   126   $   116    8.6     $   247   $   219    12.8    
Net income attributable to Verizon    4,120      4,362    (5.5 )      8,665      7,812    10.9    
Net Income $   4,246   $   4,478    (5.2 )   $   8,912   $   8,031    11.0    
                   
Basic Earnings Per Common Share                
Net income attributable to Verizon $   1.00   $   1.07    (6.5 )   $   2.10   $   1.91    9.9    
                 
Weighted average number of common shares (in millions)    4,135      4,082          4,120      4,082      
                 
Diluted Earnings Per Common Share (1)                
Net income attributable to Verizon $   1.00   $   1.07    (6.5 )   $   2.10   $   1.91    9.9    
                 
Weighted average number of common                
  shares-assuming dilution (in millions)    4,139      4,087          4,123      4,088      
                   
                   
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 6/30/18   12/31/17   $ Change  
               
Assets            
Current assets            
Cash and cash equivalents $   1,750     $   2,079     $   (329 )  
Accounts receivable, net    23,099        23,493        (394 )  
Inventories    1,102        1,034        68    
Prepaid expenses and other    4,925        3,307        1,618    
Total current assets    30,876        29,913        963    
Property, plant and equipment    249,294        246,498        2,796    
Less accumulated depreciation    161,513        157,930        3,583    
Property, plant and equipment, net    87,781        88,568        (787 )  
Investments in unconsolidated businesses    787        1,039        (252 )  
Wireless licenses    93,855        88,417        5,438    
Goodwill    29,200        29,172        28    
Other intangible assets, net    9,861        10,247        (386 )  
Other assets    10,943        9,787        1,156    
Total assets $   263,303     $   257,143     $   6,160    
               
Liabilities and Equity            
Current liabilities            
Debt maturing within one year $   5,466     $   3,453     $   2,013    
Accounts payable and accrued liabilities    18,560        21,232        (2,672 )  
Other current liabilities    8,303        8,352        (49 )  
Total current liabilities    32,329        33,037        (708 )  
Long-term debt    109,174        113,642        (4,468 )  
Employee benefit obligations    19,955        22,112        (2,157 )  
Deferred income taxes    35,069        31,232        3,837    
Other liabilities    13,201        12,433        768    
Total long-term liabilities    177,399        179,419        (2,020 )  
               
Equity            
Common stock    429        424        5    
Additional paid in capital    13,438        11,101        2,337    
Retained earnings    41,657        35,635        6,022    
Accumulated other comprehensive income    3,205        2,659        546    
Common stock in treasury, at cost    (6,990 )      (7,139 )      149    
Deferred compensation – employee
stock ownership plans and other
   285        416        (131 )  
Noncontrolling interests    1,551        1,591        (40 )  
Total equity    53,575        44,687        8,888    
Total liabilities and equity $   263,303     $   257,143     $   6,160    
               
               
Verizon - Selected Financial and Operating Statistics      
               
Unaudited 6/30/18   12/31/17      
               
Total debt (in millions) $   114,640     $   117,095        
Net debt (in millions) $   112,890     $   115,016        
Net debt / Consolidated adjusted EBITDA(1) 2.5x     2.6x        
Common shares outstanding end of period (in millions)    4,132        4,079        
Total employees (‘000)    153.1        155.4        
Quarterly cash dividends declared per common share $   0.5900     $   0.5900        
               
Footnotes:            
(1)  Consolidated adjusted EBITDA excludes the effects of special items and operating results of divested businesses.  
               


             
Verizon Communications Inc.            
Condensed Consolidated Statements of Cash Flows      
               
               
        (dollars in millions)  
               
    6 Mos. Ended   6 Mos. Ended      
Unaudited 6/30/18   6/30/17   $ Change  
               
Cash Flows from Operating Activities            
Net Income $   8,912     $   8,031     $   881    
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization expense    8,674        8,226        448    
Employee retirement benefits    (300 )      (223 )      (77 )  
Deferred income taxes    1,354        1,880        (526 )  
Provision for uncollectible accounts    462        632        (170 )  
Equity in losses of unconsolidated businesses, net of dividends received    268        67        201    
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses    (1,538 )      (3,721 )      2,183    
Discretionary employee benefits contributions    (1,679 )      (3,411 )      1,732    
Net gain on sale of divested businesses    —        (1,774 )      1,774    
Other, net    280        (401 )      681    
Net cash provided by operating activities    16,433        9,306        7,127    
               
Cash Flows from Investing Activities            
Capital expenditures (including capitalized software)    (7,838 )      (7,011 )      (827 )  
Acquisitions of businesses, net of cash acquired    (38 )      (6,231 )      6,193    
Acquisitions of wireless licenses    (1,155 )      (315 )      (840 )  
Proceeds from dispositions of businesses    —        3,512        (3,512 )  
Other, net    303        786        (483 )  
Net cash used in investing activities    (8,728 )      (9,259 )      531    
               
Cash Flows from Financing Activities            
Proceeds from long-term borrowings    4,584        16,009        (11,425 )  
Proceeds from asset-backed long-term borrowings    1,716        2,878        (1,162 )  
Repayments of long-term borrowings and capital lease obligations    (6,568 )      (10,294 )      3,726    
Repayments of asset-backed long-term borrowings    (2,000 )      —        (2,000 )  
Decrease in short-term obligations, excluding current maturities    (210 )      (152 )      (58 )  
Dividends paid    (4,845 )      (4,710 )      (135 )  
Other, net    (542 )      (1,831 )      1,289    
Net cash provided by (used in) financing activities    (7,865 )      1,900        (9,765 )  
               
Increase (decrease) in cash, cash equivalents and restricted cash    (160 )      1,947        (2,107 )  
Cash, cash equivalents and restricted cash, beginning of period    2,888        3,177        (289 )  
Cash, cash equivalents and restricted cash, end of period $   2,728     $   5,124     $   (2,396 )  
               


                 
Verizon Communications Inc.                
Wireless - Selected Financial Results            
                   
                   
                   
              (dollars in millions)  
                   
    3 Mos. Ended 3 Mos. Ended     6 Mos. Ended 6 Mos. Ended    
Unaudited 6/30/18 6/30/17 % Change   6/30/18 6/30/17 % Change  
                   
Operating Revenues                
Service $   15,754   $   15,622    0.8     $   31,156   $   31,400    (0.8 )  
Equipment    5,044      4,298    17.4        10,084      8,062    25.1    
Other    1,651      1,362    21.2        3,109      2,698    15.2    
Total Operating Revenues    22,449      21,282    5.5        44,349      42,160    5.2    
                   
Operating Expenses                
Cost of services    2,335      2,219    5.2        4,550      4,406    3.3    
Cost of equipment    5,397      5,035    7.2        10,706      9,843    8.8    
Selling, general and administrative expense    3,984      4,271    (6.7 )      7,883      8,740    (9.8 )  
Depreciation and amortization expense    2,459      2,347    4.8        4,887      4,685    4.3    
Total Operating Expenses    14,175      13,872    2.2        28,026      27,674    1.3    
                   
Operating Income $   8,274   $   7,410    11.7     $   16,323   $   14,486    12.7    
Operating Income Margin   36.9 %   34.8 %       36.8 %   34.4 %    
                   
Segment EBITDA $   10,733   $   9,757    10.0     $   21,210   $   19,171    10.6    
Segment EBITDA Margin   47.8 %   45.8 %       47.8 %   45.5 %    
                   
                   
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         6/30/18 6/30/17 % Change  
                   
Connections (‘000)                
Retail postpaid             111,622       109,088    2.3    
Retail prepaid             4,832       5,448    (11.3 )  
Total retail             116,454       114,536    1.7    
                   
                   
    3 Mos. Ended 3 Mos. Ended     6 Mos. Ended 6 Mos. Ended    
Unaudited 6/30/18 6/30/17 % Change   6/30/18 6/30/17 % Change  
                   
Net Add Detail (‘000) (1)                
Retail postpaid     531       614    (13.5 )       791       307   *    
Retail prepaid     (236 )     19   *         (571 )     2   *    
Total retail     295       633    (53.4 )       220       309    (28.8 )  
                   
                   
Account Statistics                
Retail postpaid accounts (‘000) (2)             35,309       35,334    (0.1 )  
Retail postpaid connections per account (2)             3.16       3.09    2.3    
Retail postpaid ARPA (3) (5) $   134.56   $   134.89    (0.2 )   $   133.13   $   135.93    (2.1 )  
Retail postpaid I-ARPA (4) (5) $   168.30   $   164.94    2.0     $   166.51   $   165.47    0.6    
                   
Churn Detail                
Retail postpaid   0.97 %   0.94 %       1.01 %   1.04 %    
Retail   1.18 %   1.18 %       1.23 %   1.28 %    
                   
Retail Postpaid Connection Statistics (2)                
Total smartphone postpaid phone base           91.2 %   88.8 %    
Total Internet postpaid base           19.4 %   18.4 %    
                 
Other Operating Statistics                
Capital expenditures (in millions) $   1,650   $   2,444    (32.5 )   $   4,017   $   4,275    (6.0 )  
                   
                   
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     6 Mos. Ended 6 Mos. Ended    
Unaudited 6/30/18 6/30/17 % Change   6/30/18 6/30/17 % Change  
                   
Operating Revenues                
Consumer Markets $   3,132   $   3,184    (1.6 )   $   6,282   $   6,385    (1.6 )  
Enterprise Solutions    2,211      2,309    (4.2 )      4,451      4,620    (3.7 )  
Partner Solutions    1,200      1,235    (2.8 )      2,428      2,464    (1.5 )  
Business Markets    850      918    (7.4 )      1,721      1,797    (4.2 )  
Other    66      73    (9.6 )      134      135    (0.7 )  
Total Operating Revenues    7,459      7,719    (3.4 )      15,016      15,401    (2.5 )  
                   
Operating Expenses                
Cost of services    4,377      4,542    (3.6 )      8,852      8,961    (1.2 )  
Selling, general and administrative expense    1,577      1,582    (0.3 )      3,056      3,164    (3.4 )  
Depreciation and amortization expense    1,524      1,548    (1.6 )      3,058      3,023    1.2    
Total Operating Expenses    7,478      7,672    (2.5 )      14,966      15,148    (1.2 )  
                   
Operating Income (Loss) $   (19 ) $   47   *     $   50   $   253    (80.2 )  
Operating Income (Loss) Margin   (0.3 )%   0.6 %       0.3 %   1.6 %    
                   
Segment EBITDA $   1,505   $   1,595    (5.6 )   $   3,108   $   3,276    (5.1 )  
Segment EBITDA Margin   20.2 %   20.7 %       20.7 %   21.3 %    
                   
                   
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         6/30/18 6/30/17 % Change  
                   
Connections (‘000)                
Fios video connections             4,560       4,666    (2.3 )  
Fios Internet connections             5,959       5,737    3.9    
Fios digital voice residence connections             3,863       3,909    (1.2 )  
Fios digital connections             14,382       14,312    0.5    
High-speed Internet (HSI) connections             997       1,251    (20.3 )  
Total broadband connections             6,956       6,988    (0.5 )  
Total voice connections             12,270       13,352    (8.1 )  
                   
                   
                   
    3 Mos. Ended 3 Mos. Ended     6 Mos. Ended 6 Mos. Ended    
Unaudited 6/30/18 6/30/17 % Change   6/30/18 6/30/17 % Change  
                   
Net Add Detail (‘000)                
Fios video connections     (37 )     (15 ) *         (59 )     (28 ) *    
Fios Internet connections     43       49    (12.2 )       109       84    29.8    
Fios digital voice residence connections     (28 )     22   *         (42 )     14   *    
Fios digital connections     (22 )     56   *         8       70    (88.6 )  
High-speed Internet (HSI) connections     (53 )     (72 )  26.4         (112 )     (134 )  16.4    
Total broadband connections     (10 )     (23 )  56.5         (3 )     (50 )  94.0    
Total voice connections     (285 )     (282 )  (1.1 )       (551 )     (587 )  6.1    
                   
Revenue Statistics                
Fios revenues (in millions) $   2,956   $   2,899    2.0     $   5,907   $   5,790    2.0    
                   
Other Operating Statistics                
Capital expenditures (in millions) $   1,176   $   1,190    (1.2 )   $   2,849   $   2,150    32.5    
Wireline employees (‘000)            56.9      58.6      
                   
                   
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                        
    3 Mos. Ended 6/30/18   3 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Service revenues and other   $   27,159     $   27,469     $   (310 )   $   26,250   $   1,219      4.6  
Wireless equipment revenues      5,044        4,590        454        4,298      292      6.8  
Total Operating Revenues      32,203        32,059        144        30,548      1,511      4.9  
                         
Operating Expenses                        
Cost of services      8,234        8,251        (17 )      7,449      802      10.8  
Wireless cost of equipment      5,397        5,351        46        5,035      316      6.3  
Selling, general and administrative expense      7,605        7,948        (343 )      5,883      2,065      35.1  
Depreciation and amortization expense      4,350        4,350        —        4,167      183      4.4  
Total Operating Expenses      25,586        25,900        (314 )      22,534      3,366      14.9  
                         
Operating Income   $   6,617     $   6,159     $   458     $   8,014   $   (1,855 )    (23.1 )
                         
    6 Mos. Ended 6/30/18   6 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Service revenues and other   $   53,891     $   54,602     $   (711 )   $   52,300   $   2,302      4.4  
Wireless equipment revenues      10,084        9,184        900        8,062      1,122      13.9  
Total Operating Revenues      63,975        63,786        189        60,362      3,424      5.7  
                         
Operating Expenses                        
Cost of services      16,180        16,207        (27 )      14,688      1,519      10.3  
Wireless cost of equipment      10,706        10,638        68        9,843      795      8.1  
Selling, general and administrative expense      14,449        15,182        (733 )      12,629      2,553      20.2  
Depreciation and amortization expense      8,674        8,674        —        8,226      448      5.4  
Total Operating Expenses      50,009        50,701        (692 )      45,386      5,315      11.7  
                         
Operating Income   $   13,966     $   13,085     $   881     $   14,976   $   (1,891 )    (12.6 )
                         
                         
                         
Wireless(1)(2)                        
    3 Mos. Ended 6/30/18   3 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Service   $   15,754     $   16,012     $   (258 )   $   15,622   $   390      2.5  
Equipment      5,044        4,590        454        4,298      292      6.8  
Other      1,651        1,689        (38 )      1,362      327      24.0  
Total Operating Revenues      22,449        22,291        158        21,282      1,009      4.7  
                         
Operating Expenses                        
Cost of services      2,335        2,335        —        2,219      116      5.2  
Cost of equipment      5,397        5,351        46        5,035      316      6.3  
Selling, general and administrative expense      3,984        4,310        (326 )      4,271      39      0.9  
Depreciation and amortization expense      2,459        2,459        —        2,347      112      4.8  
Total Operating Expenses      14,175        14,455        (280 )      13,872      583      4.2  
                         
Operating Income   $   8,274     $   7,836     $   438     $   7,410   $   426      5.7  
                         
    6 Mos. Ended 6/30/18   6 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Service   $   31,156     $   31,794     $   (638 )   $   31,400   $   394      1.3  
Equipment      10,084        9,184        900        8,062      1,122      13.9  
Other      3,109        3,178        (69 )      2,698      480      17.8  
Total Operating Revenues      44,349        44,156        193        42,160      1,996      4.7  
                         
Operating Expenses                        
Cost of services      4,550        4,550        —        4,406      144      3.3  
Cost of equipment      10,706        10,638        68        9,843      795      8.1  
Selling, general and administrative expense      7,883        8,558        (675 )      8,740      (182 )    (2.1 )
Depreciation and amortization expense      4,887        4,887        —        4,685      202      4.3  
Total Operating Expenses      28,026        28,633        (607 )      27,674      959      3.5  
                         
Operating Income   $   16,323     $   15,523     $   800     $   14,486   $   1,037      7.2  
                         
                         
                         
Wireline(1)(2)                        
    3 Mos. Ended 6/30/18   3 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Consumer Markets   $   3,132     $   3,140     $   (8 )   $   3,184   $   (44 )    (1.4 )
Enterprise Solutions      2,211        2,211        —        2,309      (98 )    (4.2 )
Partner Solutions      1,200        1,200        —        1,235      (35 )    (2.8 )
Business Markets      850        850        —        918      (68 )    (7.4 )
Other      66        52        14        73      (21 )    (28.8 )
Total Operating Revenues      7,459        7,453        6        7,719      (266 )    (3.4 )
                         
Operating Expenses                        
Cost of services      4,377        4,390        (13 )      4,542      (152 )    (3.3 )
Selling, general and administrative expense      1,577        1,600        (23 )      1,582      18      1.1  
Depreciation and amortization expense      1,524        1,524        —        1,548      (24 )    (1.6 )
Total Operating Expenses      7,478        7,514        (36 )      7,672      (158 )    (2.1 )
                         
Operating Income (Loss)   $   (19 )   $   (61 )   $   42     $   47   $   (108 )   *  
                         
    6 Mos. Ended 6/30/18   6 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Operating Revenues                        
Consumer Markets   $   6,282     $   6,286     $   (4 )   $   6,385   $   (99 )    (1.6 )
Enterprise Solutions      4,451        4,451        —        4,620      (169 )    (3.7 )
Partner Solutions      2,428        2,428        —        2,464      (36 )    (1.5 )
Business Markets      1,721        1,720        1        1,797      (77 )    (4.3 )
Other      134        108        26        135      (27 )    (20.0 )
Total Operating Revenues      15,016        14,993        23        15,401      (408 )    (2.6 )
                         
Operating Expenses                        
Cost of services      8,852        8,875        (23 )      8,961      (86 )    (1.0 )
Selling, general and administrative expense      3,056        3,116        (60 )      3,164      (48 )    (1.5 )
Depreciation and amortization expense      3,058        3,058        —        3,023      35      1.2  
Total Operating Expenses      14,966        15,049        (83 )      15,148      (99 )    (0.7 )
                         
Operating Income (Loss)   $   50     $   (56 )   $   106     $   253   $   (309 )   *  
                         
                         
                         
Fios Revenues                        
    3 Mos. Ended 6/30/18   3 Mos. Ended 6/30/17   YoY
Unaudited   As
reported
  Balances without
adoption of

Topic 606
  Adjustments   As
reported
   $ Change   % Change
                         
Fios Revenues   $   2,956     $   2,967     $   (11 )   $   2,899   $   68      2.3  
                         
                         
                         
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 Operating Revenues Excluding Oath, Divested Businesses and the Revenue Recognition Standard    
          (dollars in millions)  
          3 Mos. Ended 3 Mos. Ended  
Unaudited         6/30/18 6/30/17  
               
Consolidated Operating Revenues         $   32,203   $   30,548  
Less Oath operating revenues            1,874      994  
Less Operating revenues from divested businesses            —      120  
Less Impact of Topic 606            144      —  
Consolidated Operating Revenues Excluding Oath, Divested Businesses and the Revenue Recognition
Standard
$   30,185   $   29,434  
Year over year change           2.6  %    
               

 

                 
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.  
    Ended Ended Ended Ended Ended Ended  
Unaudited   6/30/18 3/31/18 12/31/17 9/30/17 6/30/17 3/31/17  
                 
Consolidated Net Income   $   4,246   $   4,666 $   18,783   $   3,736   $   4,478   $   3,553    
  Add/(subtract):                
Provision (benefit) for income taxes      1,281      1,388    (15,849 )    1,775      2,489      1,629    
Interest expense      1,222      1,201    1,219      1,164      1,218      1,132    
Other (income) expense, net      (360 )    75    1,302      291      (199 )    627    
Equity in losses of unconsolidated businesses      228      19    6      22      28      21    
Operating Income      6,617      7,349    5,461      6,988      8,014      6,962    
Add Depreciation and amortization expense      4,350      4,324    4,456      4,272      4,167      4,059    
Consolidated EBITDA   $   10,967   $   11,673 $   9,917   $   11,260   $   12,181   $   11,021    
                 
  Add/subtract special items (before tax):                
Severance charges      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(1)      109      105    154      166      559      —    
       898      105    775      166      (1,020 )    (126 )  
Consolidated Adjusted EBITDA   $   11,865   $   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 $   11,865   $   11,778 $   10,692   $   11,409   $   11,111   $   10,791    
Consolidated Operating Revenues - Quarter to Date   $   32,203         $   30,548      
Consolidated Operating Income Margin - Quarter to Date     20.5  %            
Consolidated EBITDA Margin - Quarter to Date     34.1  %         39.9  %    
Consolidated Adjusted EBITDA Margin - Quarter to Date     36.8  %         36.5  %    
                 
(1)  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             6/30/18 12/31/17  
                   
Net Debt                  
Debt maturing within one year             $   5,466   $   3,453    
Long-term debt                109,174      113,642    
Total Debt                114,640      117,095    
Less Cash and cash equivalents                1,750      2,079    
Net Debt             $   112,890   $   115,016    
Net Debt to Consolidated Adjusted EBITDA Ratio             2.5x 2.6x  
                   
                   
                   
Adjusted Earnings per Common Share (Adjusted EPS)(1)              
        3 Mos. Ended       3 Mos. Ended  
Unaudited       6/30/18       6/30/17  
  Pre-tax Tax After-Tax   Pre-tax Tax After-Tax    
EPS       $   1.00       $   1.07    
Net gain on sale of divested businesses $   — $   —   $   —    — $   (1,774 ) $   843   $   (931 )    (0.23 )  
Severance charges    339    (89 )    250    0.06    195      (77 )    118      0.03    
Product realignment charges    658    (149 )    509    0.12    —       —       —       —     
Acquisition and integration related charges    120    (28 )    92    0.02    564      (209 )    355      0.09    
  $   1,117 $   (266 ) $   851    0.20 $   (1,015 ) $   557   $   (458 )    (0.11 )  
Adjusted EPS       $   1.20       $   0.96    
                   
(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       6/30/18     6/30/17    
               
Operating Income       $   8,274     $   7,410    
Add Depreciation and amortization expense          2,459        2,347    
Segment EBITDA       $   10,733     $   9,757    
               
Total operating revenues       $   22,449     $   21,282    
Operating Income Margin         36.9  %     34.8  %  
Segment EBITDA Margin         47.8  %     45.8  %  
               
               
Wireline       (dollars in millions)    
        3 Mos. Ended     3 Mos. Ended    
Unaudited       6/30/18     6/30/17    
               
Operating Income (Loss)       $   (19 )   $   47    
Add Depreciation and amortization expense          1,524        1,548    
Segment EBITDA       $   1,505     $   1,595    
               
Total operating revenues       $   7,459     $   7,719    
Operating Income (Loss) Margin         (0.3 )%     0.6 %  
Segment EBITDA Margin         20.2  %     20.7  %  
               

 

           
Verizon Communications Inc.          
EBITDA Excluding Impact of Topic 606(1)  
           
           
Consolidated      
  (dollars in millions)      
      3 Months      
      Ended      
Unaudited     6/30/18      
           
           
Consolidated Net Income     $   4,246      
  Add/(subtract):          
Provision (benefit) for income taxes        1,281      
Interest expense        1,222      
Other (income) expense, net        (360 )    
Equity in losses of unconsolidated businesses        228      
Operating Income        6,617      
Add Depreciation and amortization expense        4,350      
Consolidated EBITDA     $   10,967      
           
  Add/subtract special items (before tax):          
Severance charges        339      
Product realignment charges        450      
Acquisition and integration related charges        109      
         898      
           
Consolidated Adjusted EBITDA     $   11,865      
Less Impact of Topic 606 to Operating Income        458      
Consolidated Adjusted EBITDA Excluding Impact of Topic 606     $   11,407      
Total operating revenues     $   32,059      
Consolidated Adjusted EBITDA Margin       35.6  %    
           
           
Wireless      
      (dollars in millions)    
      3 Months   3 Months    
      Ended   Ended    
Unaudited     6/30/18   6/30/17    
           
           
Operating Income     $   7,836   $   7,410    
Add Depreciation and amortization expense        2,459      2,347    
Segment EBITDA     $   10,295   $   9,757    
Total operating revenues     $   22,291   $   21,282    
Segment EBITDA Margin       46.2  %   45.8  %  
Year over year change in segment EBITDA margin      40 bps      
           
           
Wireline      
           
  (dollars in millions)      
      3 Months      
      Ended      
Unaudited     6/30/18      
           
           
Operating Loss     $   (61 )    
Add Depreciation and amortization expense        1,524      
Segment EBITDA     $   1,463      
Total operating revenues     $   7,453      
Segment EBITDA Margin       19.6 %    
           
           
           
(1)  Amounts for the three months ended June 30, 2018 exclude the impact 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

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