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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________
FORM 8-K
______________________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 25, 2023
(Date of earliest event reported)
______________________________________________________________________________
Verizon Communications Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________
| | | | | | | | | | | |
| | | |
| Delaware | 1-8606 | 23-2259884 |
(State or other jurisdiction
of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| | | |
| 1095 Avenue of the Americas | | 10036 |
| New York, | New York | | |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (212) 395-1000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
| Common Stock, par value $0.10 | | VZ | | New York Stock Exchange |
| Common Stock, par value $0.10 | | VZ | | The Nasdaq Global Select Market |
| 1.625% Notes due 2024 | | VZ 24B | | New York Stock Exchange |
| 4.073% Notes due 2024 | | VZ 24C | | New York Stock Exchange |
| 0.875% Notes due 2025 | | VZ 25 | | New York Stock Exchange |
| 3.25% Notes due 2026 | | VZ 26 | | New York Stock Exchange |
| 1.375% Notes due 2026 | | VZ 26B | | New York Stock Exchange |
| 0.875% Notes due 2027 | | VZ 27E | | New York Stock Exchange |
| 1.375% Notes due 2028 | | VZ 28 | | New York Stock Exchange |
| 1.125% Notes due 2028 | | VZ 28A | | New York Stock Exchange |
| 2.350% Fixed Rate Notes due 2028 | | VZ 28C | | New York Stock Exchange |
| 1.875% Notes due 2029 | | VZ 29B | | New York Stock Exchange |
| 0.375% Notes due 2029 | | VZ 29D | | New York Stock Exchange |
| 1.250% Notes due 2030 | | VZ 30 | | New York Stock Exchange |
| 1.875% Notes due 2030 | | VZ 30A | | New York Stock Exchange |
| 4.250% Notes due 2030 | | VZ 30D | | New York Stock Exchange |
| 2.625% Notes due 2031 | | VZ 31 | | New York Stock Exchange |
| 2.500% Notes due 2031 | | VZ 31A | | New York Stock Exchange |
| 3.000% Fixed Rate Notes due 2031 | | VZ 31D | | New York Stock Exchange |
| 0.875% Notes due 2032 | | VZ 32 | | New York Stock Exchange |
| 0.750% Notes due 2032 | | VZ 32A | | New York Stock Exchange |
| 1.300% Notes due 2033 | | VZ 33B | | New York Stock Exchange |
| 4.75% Notes due 2034 | | VZ 34 | | New York Stock Exchange |
| 4.750% Notes due 2034 | | VZ 34C | | New York Stock Exchange |
| 3.125% Notes due 2035 | | VZ 35 | | New York Stock Exchange |
| 1.125% Notes due 2035 | | VZ 35A | | New York Stock Exchange |
| 3.375% Notes due 2036 | | VZ 36A | | New York Stock Exchange |
| 2.875% Notes due 2038 | | VZ 38B | | New York Stock Exchange |
| 1.875% Notes due 2038 | | VZ 38C | | New York Stock Exchange |
| 1.500% Notes due 2039 | | VZ 39C | | New York Stock Exchange |
| 3.50% Fixed Rate Notes due 2039 | | VZ 39D | | New York Stock Exchange |
| 1.850% Notes due 2040 | | VZ 40 | | New York Stock Exchange |
| 3.850% Fixed Rate Notes due 2041 | | VZ 41C | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
Attached as Exhibit 99.1 hereto are a press release and financial tables, dated July 25, 2023, issued by Verizon Communications Inc. (Verizon). Attached as Exhibit 99.2 hereto is commentary, dated July 25, 2023, discussing Verizon's financial and operating results for the second quarter of 2023.
Non-GAAP Measures
Verizon’s press release, financial tables and commentary attached to the report include financial information prepared in conformity with generally accepted accounting principles in the United States (GAAP) as well as non-GAAP financial information. It is management's intent to provide non-GAAP financial information to enhance the understanding of Verizon's GAAP financial information and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
EBITDA and EBITDA Margin Related Non-GAAP Measures
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), Segment EBITDA and Segment EBITDA Margin are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information as they are widely accepted financial measures used in evaluating the profitability of a company and its operating performance in relation to its competitors.
Consolidated EBITDA is calculated by adding back interest, taxes and depreciation and amortization expense to net income.
Segment EBITDA is calculated by adding back segment depreciation and amortization expense to segment operating income. Segment EBITDA Margin is calculated by dividing Segment EBITDA by total segment operating revenues.
Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Forecast
Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Forecast are non-GAAP financial measures that we believe provide relevant and useful information to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe that Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Forecast are used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes and depreciation and amortization policies. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis.
Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items: equity in losses and earnings of unconsolidated businesses and other income and expense, net, and the following special items: severance charges, asset rationalization and net gain from disposition of business. Severance charges recorded during 2023 and 2022 relate to involuntary separations under our existing plans. Severance charges recorded during 2021 relate to voluntary separations under our existing plans. Asset rationalization relates to certain real estate and non-strategic assets that we have made a decision to cease use of as part of our transformation initiatives in 2023. Net gain from disposition of business relates to the sale of Verizon Media in 2021.
We have not provided a reconciliation for our Consolidated Adjusted EBITDA Forecast because we cannot, without unreasonable effort, predict the special items that could arise during 2023.
Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio
Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating Verizon’s ability to service its unsecured debt from continuing operations.
Net Unsecured Debt is calculated by subtracting secured debt and cash and cash equivalents from the sum of debt maturing within one year and long-term debt. Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio is calculated by dividing Net Unsecured Debt by Consolidated Adjusted EBITDA. For purposes of Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio, Consolidated Adjusted EBITDA is calculated for the last twelve months.
Adjusted Earnings per Common Share (Adjusted EPS) and Adjusted EPS Forecast
Adjusted EPS and Adjusted EPS Forecast are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of special items which could vary from period to period. We believe excluding special items provides more comparable assessment of our financial results from period to period.
Adjusted EPS is calculated by excluding from the calculation of reported EPS the effect of the following special items: amortization of acquisition-related intangible assets, severance, pension and benefits charges and asset rationalization.
We exclude the amortization of acquisition-related intangible assets because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions we consummate. While we have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition’s purchase price allocated to intangible assets and related amortization term are unique to each acquisition and can vary significantly from acquisition to acquisition. Exclusion of this amortization expense facilitates more consistent comparisons of operating results over time between our newly acquired and long-held businesses, and with both acquisitive and non-acquisitive peer companies. We believe that it is important for investors to understand that our non-GAAP financial measure adjusts for the intangible asset amortization but does not adjust the revenue that is generated in part from the use of such intangible assets.
We have not provided a reconciliation for our Adjusted EPS Forecast because we cannot, without unreasonable effort, predict the special items that could arise during 2023.
Adjusted Effective Income Tax Rate Attributable to Verizon Forecast (Adjusted ETR Forecast)
Adjusted ETR Forecast is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in assessing our effective income tax rate without the effect of special items which could vary from period to period. Adjusted ETR Forecast is calculated by dividing the provision for income taxes by net income attributable to Verizon before tax after adjusting for the effect of special items.
We have not provided a reconciliation for our Adjusted ETR Forecast because we cannot, without unreasonable effort, predict the special items that could arise during 2023.
Free Cash Flow
Free cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on finance lease obligations or cash payments for acquisitions of businesses or wireless licenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
Free cash flow is calculated by subtracting capital expenditures (including capitalized software) from net cash provided by operating activities.
Consolidated Operating Expenses Excluding Depreciation and Amortization and Special Items
Consolidated operating expenses excluding depreciation and amortization and special items is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating our operating expenses and underlying operating trends in a manner that is consistent with management's evaluation of operating performance. We believe that consolidated operating expenses excluding depreciation and amortization and special items is used by investors to more accurately compare a company’s operating expenses to those of its competitors by eliminating impacts caused by differences in depreciation and amortization policies. In addition, the exclusion of the effects of special items allows for better comparability of our financial results from period to period.
Consolidated operating expenses excluding depreciation and amortization and special items is calculated by excluding from consolidated operating expenses the effects of depreciation and amortization expense and the following special items: severance charges and asset rationalization.
See the accompanying schedules for reconciliations of non-GAAP financial measures to GAAP.
Item 9.01. Financial Statements and Exhibits
| | | | | | | | |
| (d) Exhibits. | | |
| |
Exhibit
Number | | Description |
| |
| | Press release and financial tables, dated July 25, 2023, issued by Verizon Communications Inc. |
| | Commentary discussing financial and operating results of Verizon Communications Inc. for the second quarter of 2023. |
| | |
| | |
| 104 | | Cover Page Interactive Data File (formatted as inline XBRL). |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Verizon Communications Inc. |
| | | | | | (Registrant) |
| | | | |
| Date: | | July 25, 2023 | | | | /s/ Mary-Lee Stillwell |
| | | | | | Mary-Lee Stillwell |
| | | | | | Senior Vice President and Controller |
Exhibit 99.1
News Release
| | | | | |
FOR IMMEDIATE RELEASE | Media contacts: |
| July 25, 2023 | Donna Lyden |
| 908-872-0278 |
| donna.lyden@verizon.com |
| |
| Eric Wilkens |
| 201-572-9317 |
| eric.wilkens@verizon.com |
Strong wireless service revenue growth and
cash flow highlight Verizon's 2Q results
Notable year over year improvement in Verizon Consumer postpaid phone gross additions
Eighth consecutive quarter that Verizon Business reported more than 125,000 postpaid phone net additions
2Q 2023 highlights
Consolidated:
•$1.10 in EPS, compared with $1.24 in second-quarter 2022; adjusted EPS1, excluding special items, of $1.21, compared with $1.31 in second-quarter 2022.
•Total operating revenue of $32.6 billion, a decrease of 3.5 percent from second-quarter 2022.
•First-half 2023 cash flow from operations of $18.0 billion, an increase from $17.7 billion in first-half 2022.
•Net income of $4.8 billion, a decrease of 10.3 percent from second-quarter 2022, and consolidated adjusted EBITDA1 of $12.0 billion, up 0.8 percent year over year.
Total Broadband:
•Total broadband net additions of 418,000, reflecting a strong demand for fixed wireless and Fios products. This result included 384,000 fixed wireless net additions, an increase from 256,000 fixed wireless net additions in second-quarter 2022. This is the third consecutive quarter that Verizon reported more than 400,000 broadband net additions. Verizon now has nearly 2.3 million subscribers on its fixed wireless service.
•54,000 Fios Internet net additions, an increase from 36,000 Fios Internet net additions in second-quarter 2022.
Total Wireless:
•Total wireless service revenue3 of $19.1 billion, a 3.8 percent increase year over year.
•Postpaid phone net additions of 8,000, and retail postpaid net additions of 612,000. Total wireless postpaid phone gross additions increased 2.0 percent year over year, primarily driven by a 6.9 percent year over year growth in Consumer postpaid phone gross additions.
•Total retail postpaid churn of 1.07 percent, and retail postpaid phone churn of 0.83 percent.
NEW YORK - Verizon Communications Inc. (NYSE, Nasdaq: VZ) reported second-quarter results today highlighted by wireless service revenue growth, increased cash flow from operations and strong momentum heading into the second half of the year.
"In the second quarter, we showed progress in our key priorities of growing wireless service revenue, delivering healthy consolidated adjusted EBITDA, and increasing free cash flow," said Chairman and CEO Hans Vestberg. "We look forward to extending our network leadership in the second half of the year by continuing our rapid C-Band deployment as we are laser focused on providing value to our customers. The steps that we have taken to improve our operational performance are working, and we are confident that we will achieve our financial targets for the full year."
For second-quarter 2023, Verizon reported EPS of $1.10, compared with $1.24 in second-quarter 2022. On an adjusted basis1, excluding special items, EPS was $1.21 in second-quarter 2023, compared with adjusted EPS1 of $1.31 in second-quarter 2022.
Second-quarter 2023 earnings reflected a pre-tax loss from special items of approximately $598 million. This included a pre-tax severance charge of $237 million, the impacts of amortization of intangible assets related to TracFone and other acquisitions of $206 million, and a pre-tax asset rationalization charge of $155 million related to certain real estate and non-strategic assets that the company has decided to cease use of as part of its transformation initiatives.
Consolidated results
•Total consolidated operating revenue in second-quarter 2023 of $32.6 billion, a decrease of 3.5 percent from second-quarter 2022. This decrease was primarily due to reduced wireless equipment revenue and lower postpaid phone upgrade activity.
•Total wireless service revenue3 in second-quarter 2023 increased 3.8 percent year over year. This increase was driven primarily by pricing actions implemented in recent quarters, the larger allocation of administrative and telco recovery fees from other revenue into wireless service revenue, and a growing contribution from fixed wireless offerings.
•Net income of $4.8 billion, a decrease of 10.3 percent compared to second-quarter 2022, and consolidated adjusted EBITDA1 of $12.0 billion, an increase of 0.8 percent year over year.
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•First-half 2023 cash flow from operations totaled $18.0 billion, an increase from $17.7 billion in first-half 2022. This increase continues to be related to lower receivables and lower inventory levels tied to fewer upgrades, which were offset by higher cash income taxes and interest expense.
•Capital expenditures in first-half 2023 were $10.1 billion.
•The company ended first-half 2023 with free cash flow1 of $8.0 billion, an increase from $7.2 billion in first-half 2022.
•Verizon's unsecured debt as of the end of second-quarter 2023 decreased by $662 million sequentially to $131.4 billion. The company's net unsecured debt1 balance improved sequentially by $3.2 billion to $126.6 billion. At the end of second-quarter 2023, Verizon's ratio of unsecured debt to net income (LTM) was approximately 6.1 times, and its net unsecured debt to adjusted EBITDA ratio1 was approximately 2.6 times.
Verizon Consumer results
•Total Verizon Consumer revenue was $24.6 billion, a decrease of 4.1 percent year over year. Growth in service and other revenue was offset by wireless equipment revenue declines.
•Wireless service revenue increased 3.5 percent year over year. This increase was driven by growth in retail postpaid Average Revenue Per Account (ARPA), partially offset by a decline in retail postpaid phone connections and prepaid connections.
•Consumer wireless retail postpaid churn was 0.95 percent in second-quarter 2023, and wireless retail postpaid phone churn was 0.76 percent.
•In second-quarter 2023, Consumer reported 136,000 wireless retail postpaid phone net losses. Consumer postpaid phone gross additions increased 6.9 percent year over year, and continued the momentum that began in second-half 2022.
•Consumer reported 304,000 wireless retail prepaid net losses in second-quarter 2023.
•Consumer reported 251,000 fixed wireless net additions and 51,000 Fios Internet net additions in second-quarter 2023. Consumer Fios revenue was $2.9 billion in second-quarter 2023, a decrease of 0.3 percent year over year.
•In second-quarter 2023, Consumer operating income was $7.3 billion, an increase of 2.5 percent year over year, and segment operating income margin was 29.8 percent, an increase from 27.9 percent in second-quarter 2022. Segment EBITDA1 in second-quarter 2023 was $10.6 billion, an increase of 2.1 percent year over year. This improvement can be attributed to service revenue growth and lower upgrade volumes. Segment EBITDA margin1 was 43.1 percent, an increase from 40.5 percent in second-quarter 2022.
Verizon Business results
•Total Verizon Business revenue was $7.5 billion in second-quarter 2023, a decrease of 1.9 percent year over year. Growth in wireless service revenue was more than offset by lower wireline revenue and lower wireless equipment revenue.
•Business wireless service revenue was $3.4 billion, an increase of 5.3 percent year over year. This growth was driven by continued strong net additions and pricing actions implemented in recent quarters.
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•Business reported 308,000 wireless retail postpaid net additions in second-quarter 2023, including 144,000 postpaid phone net additions. This was the eighth consecutive quarter that Business reported more than 125,000 postpaid phone net additions.
•Business wireless retail postpaid churn was 1.48 percent in second-quarter 2023, and wireless retail postpaid phone churn was 1.10 percent.
•Business reported 133,000 fixed wireless net additions in second-quarter 2023.
•In second-quarter 2023, Verizon Business operating income was $533 million, a decrease of 21.0 percent year over year, and segment operating income margin was 7.1 percent, a decrease from 8.9 percent in second-quarter 2022. Segment EBITDA1 was $1.6 billion in second-quarter 2023, a decrease of 6.5 percent year over year, driven by continued declines in high margin wireline revenues. Segment EBITDA margin1 was 21.9 percent in second-quarter 2023, a decrease from 22.9 percent in second-quarter 2022.
Outlook and guidance
The company does not provide a reconciliation for any of the following adjusted (non-GAAP) forecasts because it cannot, without unreasonable effort, predict the special items that could arise, and the company is unable to address the probable significance of the unavailable information.
For 2023, Verizon continues to expect the following:
•Total wireless service revenue growth2 3 of 2.5 percent to 4.5 percent.
•Adjusted EBITDA1 of $47.0 billion to $48.5 billion.
•Adjusted EPS1 of $4.55 to $4.85.
•Adjusted effective income tax rate1 in the range of 22.5 percent to 24.0 percent.
•Capital spending in the range of $18.25 billion to $19.25 billion.
1 Non-GAAP financial measure. See the accompanying schedules and www.verizon.com/about/investors for reconciliations of non-GAAP financial measures cited in this document to most directly comparable financial measures under generally accepted accounting principles (GAAP).
2 Includes a benefit of approximately 190 basis points from the reallocation from other revenue to wireless service revenue. This results from a larger allocation of administrative and telco recovery charges which partly recover network operating costs.
3 Total wireless service revenue represents the sum of Consumer and Business segments.
Verizon Communications Inc. (NYSE, Nasdaq: VZ) was formed on June 30, 2000 and is one of the world’s leading providers of technology and communications services. Headquartered in New York City and with a presence around the world, Verizon generated revenues of $136.8 billion in 2022. The company offers data, video and voice services and solutions on its award-winning networks and platforms, delivering on customers’ demand for mobility, reliable network connectivity, security and control.
####
VERIZON’S ONLINE MEDIA CENTER: News releases, stories, media contacts and other resources are available at verizon.com/news. News releases are also available through an RSS feed. To subscribe, visit www.verizon.com/about/rss-feeds/.
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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,” “forecasts,” “hopes,” “plans” 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: the effects of competition in the markets in which we operate, including any inability to successfully respond to competitive factors such as prices, promotional incentives and evolving consumer preferences; failure to take advantage of, or respond to competitors' use of, developments in technology and address changes in consumer demand; performance issues or delays in the deployment of our 5G network resulting in significant costs or a reduction in the anticipated benefits of the enhancement to our networks; the inability to implement our business strategy; adverse conditions in the U.S. and international economies, including inflation in the markets in which we operate; cyber attacks impacting our networks or systems and any resulting financial or reputational impact; damage to our infrastructure or disruption of our operations from natural disasters, extreme weather conditions, acts of war, terrorist attacks or other hostile acts and any resulting financial or reputational impact; the impact of public health crises on our operations, our employees and the ways in which our customers use our networks and other products and services; disruption of our key suppliers’ or vendors' provisioning of products or services, including as a result of geopolitical factors, public health crises or the potential impacts of global climate change; material adverse changes in labor matters and any resulting financial or operational impact; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks or businesses; allegations regarding the release of hazardous materials or pollutants into the environment from our, or our predecessors’, network assets and any related regulatory developments, litigation, liability, compliance costs, penalties, operational impacts or reputational damage; our high level of indebtedness; significant litigation and any resulting material expenses incurred in defending against lawsuits or paying awards or settlements; 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; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; and 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.
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Verizon Communications Inc.
Condensed Consolidated Statements of Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions, except per share amounts) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Operating Revenues | | | | | | | | | | | | |
| Service revenues and other | | $ | 27,319 | | | $ | 27,115 | | | 0.8 | | $ | 54,471 | | | $ | 54,333 | | | 0.3 |
| Wireless equipment revenues | | 5,277 | | | 6,674 | | | (20.9) | | 11,037 | | | 13,010 | | | (15.2) |
| Total Operating Revenues | | 32,596 | | | 33,789 | | | (3.5) | | 65,508 | | | 67,343 | | | (2.7) |
| | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | |
| Cost of services | | 6,986 | | | 6,932 | | | 0.8 | | 14,064 | | | 14,159 | | | (0.7) |
| Cost of wireless equipment | | 5,778 | | | 7,488 | | | (22.8) | | 12,204 | | | 14,611 | | | (16.5) |
| Selling, general and administrative expense | | 8,253 | | | 7,496 | | | 10.1 | | 15,759 | | | 14,668 | | | 7.4 |
| Depreciation and amortization expense | | 4,359 | | | 4,321 | | | 0.9 | | 8,677 | | | 8,557 | | | 1.4 |
| | | | | | | | | | | | |
| Total Operating Expenses | | 25,376 | | | 26,237 | | | (3.3) | | 50,704 | | | 51,995 | | | (2.5) |
| | | | | | | | | | | | |
| Operating Income | | 7,220 | | | 7,552 | | | (4.4) | | 14,804 | | | 15,348 | | | (3.5) |
| Equity in earnings (losses) of unconsolidated businesses | | (33) | | | 41 | | | * | | (24) | | | 38 | | | * |
| Other income (expense), net | | 210 | | | 49 | | | * | | 324 | | | (875) | | | * |
| Interest expense | | (1,285) | | | (785) | | | 63.7 | | (2,492) | | | (1,571) | | | 58.6 |
| Income Before Provision For Income Taxes | | 6,112 | | | 6,857 | | | (10.9) | | 12,612 | | | 12,940 | | | (2.5) |
| Provision for income taxes | | (1,346) | | | (1,542) | | | (12.7) | | (2,828) | | | (2,914) | | | (3.0) |
| Net Income | | $ | 4,766 | | | $ | 5,315 | | | (10.3) | | $ | 9,784 | | | $ | 10,026 | | | (2.4) |
| | | | | | | | | | | | |
| Net income attributable to noncontrolling interests | | $ | 118 | | | $ | 116 | | | 1.7 | | $ | 227 | | | $ | 247 | | | (8.1) |
| Net income attributable to Verizon | | 4,648 | | | 5,199 | | | (10.6) | | 9,557 | | | 9,779 | | | (2.3) |
| Net Income | | $ | 4,766 | | | $ | 5,315 | | | (10.3) | | $ | 9,784 | | | $ | 10,026 | | | (2.4) |
| | | | | | | | | | | | |
| Basic Earnings Per Common Share | | | | | | | | | | | | |
| Net income attributable to Verizon | | $ | 1.10 | | | $ | 1.24 | | | (11.3) | | $ | 2.27 | | | $ | 2.33 | | | (2.6) |
| Weighted-average shares outstanding (in millions) | | 4,208 | | | 4,201 | | | | | 4,207 | | | 4,201 | | | |
| | | | | | | | | | | | |
Diluted Earnings Per Common Share (1) | | | | | | | | | | | | |
| Net income attributable to Verizon | | $ | 1.10 | | | $ | 1.24 | | | (11.3) | | $ | 2.27 | | | $ | 2.33 | | | (2.6) |
| Weighted-average shares outstanding (in millions) | | 4,213 | | | 4,202 | | | | | 4,212 | | | 4,202 | | | |
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 | | 6/30/23 | | 12/31/22 | | $ Change |
| | | | | | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 4,803 | | | $ | 2,605 | | | $ | 2,198 | |
| Accounts receivable | | 24,108 | | | 25,332 | | | (1,224) | |
| Less Allowance for credit losses | | 922 | | | 826 | | | 96 | |
| | | | | | |
| Accounts receivable, net | | 23,186 | | | 24,506 | | | (1,320) | |
| Inventories | | 1,896 | | | 2,388 | | | (492) | |
| | | | | | |
| Prepaid expenses and other | | 7,503 | | | 8,358 | | | (855) | |
| Total current assets | | 37,388 | | | 37,857 | | | (469) | |
| | | | | | |
| Property, plant and equipment | | 313,424 | | | 307,689 | | | 5,735 | |
| Less Accumulated depreciation | | 206,154 | | | 200,255 | | | 5,899 | |
| Property, plant and equipment, net | | 107,270 | | | 107,434 | | | (164) | |
| Investments in unconsolidated businesses | | 1,015 | | | 1,071 | | | (56) | |
| Wireless licenses | | 151,337 | | | 149,796 | | | 1,541 | |
| | | | | | |
| Goodwill | | 28,647 | | | 28,671 | | | (24) | |
| Other intangible assets, net | | 11,097 | | | 11,461 | | | (364) | |
| Operating lease right-of-use assets | | 25,345 | | | 26,130 | | | (785) | |
| Other assets | | 17,856 | | | 17,260 | | | 596 | |
| Total assets | | $ | 379,955 | | | $ | 379,680 | | | $ | 275 | |
| | | | | | |
| Liabilities and Equity | | | | | | |
| Current liabilities | | | | | | |
| Debt maturing within one year | | $ | 14,827 | | | $ | 9,963 | | | $ | 4,864 | |
| Accounts payable and accrued liabilities | | 20,067 | | | 23,977 | | | (3,910) | |
| | | | | | |
| Current operating lease liabilities | | 4,211 | | | 4,134 | | | 77 | |
| Other current liabilities | | 12,299 | | | 12,097 | | | 202 | |
| Total current liabilities | | 51,404 | | | 50,171 | | | 1,233 | |
| | | | | | |
| Long-term debt | | 137,871 | | | 140,676 | | | (2,805) | |
| Employee benefit obligations | | 12,357 | | | 12,974 | | | (617) | |
| Deferred income taxes | | 44,055 | | | 43,441 | | | 614 | |
| Non-current operating lease liabilities | | 20,745 | | | 21,558 | | | (813) | |
| Other liabilities | | 17,021 | | | 18,397 | | | (1,376) | |
| Total long-term liabilities | | 232,049 | | | 237,046 | | | (4,997) | |
| | | | | | |
| Equity | | | | | | |
| Common stock | | 429 | | | 429 | | | — | |
| Additional paid in capital | | 13,523 | | | 13,420 | | | 103 | |
| Retained earnings | | 86,448 | | | 82,380 | | | 4,068 | |
| Accumulated other comprehensive loss | | (1,921) | | | (1,865) | | | (56) | |
| Common stock in treasury, at cost | | (3,830) | | | (4,013) | | | 183 | |
| Deferred compensation – employee stock ownership plans and other | | 544 | | | 793 | | | (249) | |
| Noncontrolling interests | | 1,309 | | | 1,319 | | | (10) | |
| Total equity | | 96,502 | | | 92,463 | | | 4,039 | |
| Total liabilities and equity | | $ | 379,955 | | | $ | 379,680 | | | $ | 275 | |
Verizon Communications Inc.
Consolidated - Selected Financial and Operating Statistics
| | | | | | | | | | | | | | | | | | |
| (dollars in millions, except per share amounts) | | | | |
| Unaudited | | 6/30/23 | | 12/31/22 | | | | |
| | | | | | | | |
| Total debt | | $ | 152,698 | | | $ | 150,639 | | | | | |
| | | | | | | | |
| Unsecured debt | | $ | 131,356 | | | $ | 130,631 | | | | | |
Net unsecured debt(1) | | $ | 126,553 | | | $ | 128,026 | | | | | |
| | | | | | | | |
| Unsecured debt / Consolidated Net Income (LTM) | | 6.1 | x | | 6.0 | x | | | | |
Net unsecured debt / Consolidated Adjusted EBITDA(1)(2) | | 2.6x | | 2.7 | x | | | | |
| Common shares outstanding end of period (in millions) | | 4,204 | | | 4,200 | | | | | |
| Total employees (‘000) | | 114.2 | | | 117.1 | | | | | |
| Quarterly cash dividends declared per common share | | $ | 0.6525 | | | $ | 0.6525 | | | | | |
Footnotes:
(1)Non-GAAP financial measure.
(2)Consolidated Adjusted EBITDA excludes the effects of non-operational items and special items.
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
| | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | $ Change |
| | | | | | |
| Cash Flows from Operating Activities | | | | | | |
| Net Income | | $ | 9,784 | | | $ | 10,026 | | | $ | (242) | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization expense | | 8,677 | | | 8,557 | | | 120 | |
| Employee retirement benefits | | 108 | | | (121) | | | 229 | |
| Deferred income taxes | | 633 | | | 1,514 | | | (881) | |
| Provision for expected credit losses | | 1,061 | | | 665 | | | 396 | |
| Equity in losses (earnings) of unconsolidated businesses, net of dividends received | | 49 | | | (18) | | | 67 | |
| | | | | | |
| | | | | | |
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses | | (620) | | | (1,959) | | | 1,339 | |
| | | | | | |
| Other, net | | (1,672) | | | (999) | | | (673) | |
| Net cash provided by operating activities | | 18,020 | | | 17,665 | | | 355 | |
| | | | | | |
| Cash Flows from Investing Activities | | | | | | |
| Capital expenditures (including capitalized software) | | (10,070) | | | (10,491) | | | 421 | |
| Cash received related to acquisitions of businesses, net | | — | | | 247 | | | (247) | |
| Acquisitions of wireless licenses | | (1,085) | | | (2,275) | | | 1,190 | |
| Collateral receipts (payments) related to derivative contracts, net | | 824 | | | (2,075) | | | 2,899 | |
| | | | | | |
| Other, net | | 131 | | | (62) | | | 193 | |
| Net cash used in investing activities | | (10,200) | | | (14,656) | | | 4,456 | |
| | | | | | |
| Cash Flows from Financing Activities | | | | | | |
| Proceeds from long-term borrowings | | 1,503 | | | 3,617 | | | (2,114) | |
| Proceeds from asset-backed long-term borrowings | | 3,705 | | | 5,053 | | | (1,348) | |
| Net proceeds from (repayments of) short-term commercial paper | | (167) | | | 2,560 | | | (2,727) | |
| Repayments of long-term borrowings and finance lease obligations | | (2,600) | | | (7,405) | | | 4,805 | |
| Repayments of asset-backed long-term borrowings | | (2,383) | | | (2,695) | | | 312 | |
| Dividends paid | | (5,487) | | | (5,378) | | | (109) | |
| Other, net | | (157) | | | 411 | | | (568) | |
| Net cash used in financing activities | | (5,586) | | | (3,837) | | | (1,749) | |
| | | | | | |
| Increase (decrease) in cash, cash equivalents and restricted cash | | 2,234 | | | (828) | | | 3,062 | |
| Cash, cash equivalents and restricted cash, beginning of period | | 4,111 | | | 4,161 | | | (50) | |
| Cash, cash equivalents and restricted cash, end of period | | $ | 6,345 | | | $ | 3,333 | | | $ | 3,012 | |
Footnotes:
Certain amounts have been reclassified to conform to the current period presentation.
Verizon Communications Inc.
Consumer - Selected Financial Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Operating Revenues | | | | | | | | | | | | |
| Service | | $ | 18,641 | | | $ | 18,149 | | | 2.7 | | $ | 37,097 | | | $ | 36,275 | | | 2.3 |
| Wireless equipment | | 4,430 | | | 5,708 | | | (22.4) | | 9,308 | | | 11,082 | | | (16.0) |
| Other | | 1,487 | | | 1,747 | | | (14.9) | | 3,010 | | | 3,539 | | | (14.9) |
| Total Operating Revenues | | 24,558 | | | 25,604 | | | (4.1) | | 49,415 | | | 50,896 | | | (2.9) |
| | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | |
| Cost of services | | 4,367 | | | 4,284 | | | 1.9 | | 8,799 | | | 8,730 | | | 0.8 |
| Cost of wireless equipment | | 4,626 | | | 6,221 | | | (25.6) | | 9,817 | | | 12,034 | | | (18.4) |
| Selling, general and administrative expense | | 4,988 | | | 4,738 | | | 5.3 | | 9,909 | | | 9,290 | | | 6.7 |
| Depreciation and amortization expense | | 3,247 | | | 3,211 | | | 1.1 | | 6,461 | | | 6,373 | | | 1.4 |
| Total Operating Expenses | | 17,228 | | | 18,454 | | | (6.6) | | 34,986 | | | 36,427 | | | (4.0) |
| | | | | | | | | | | | |
| Operating Income | | $ | 7,330 | | | $ | 7,150 | | | 2.5 | | $ | 14,429 | | | $ | 14,469 | | | (0.3) |
| Operating Income Margin | | 29.8 | % | | 27.9 | % | | | | 29.2 | % | | 28.4 | % | | |
| | | | | | | | | | | | |
Segment EBITDA(1) | | $ | 10,577 | | | $ | 10,361 | | | 2.1 | | $ | 20,890 | | | $ | 20,842 | | | 0.2 |
Segment EBITDA Margin(1) | | 43.1 | % | | 40.5 | % | | | | 42.3 | % | | 41.0 | % | | |
Footnotes:
(1) Non-GAAP financial measure.
The segment financial results and metrics above exclude the effects of special items (other than the effects of acquisition-related intangible asset amortization), which the Company’s chief operating decision maker does not consider in assessing segment performance.
Certain intersegment transactions with corporate entities have not been eliminated.
Verizon Communications Inc.
Consumer - Selected Operating Statistics
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Unaudited | | | | | | | | 6/30/23 | | 6/30/22 | | % Change |
| | | | | | | | | | | | |
| Connections (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | | | | | | | 92,474 | | | 91,475 | | | 1.1 |
| Wireless retail prepaid | | | | | | | | 21,646 | | | 23,138 | | | (6.4) |
| Total wireless retail | | | | | | | | 114,120 | | | 114,613 | | | (0.4) |
| | | | | | | | | | | | |
| Wireless retail postpaid phones | | | | | | | | 74,465 | | | 75,197 | | | (1.0) |
| | | | | | | | | | | | |
| Fios video | | | | | | | | 3,091 | | | 3,409 | | | (9.3) |
| Fios internet | | | | | | | | 6,854 | | | 6,626 | | | 3.4 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Fixed wireless access (FWA) broadband | | | | | | | | 1,390 | | | 384 | | | * |
| Wireline broadband | | | | | | | | 7,098 | | | 6,938 | | | 2.3 |
| Total broadband | | | | | | | | 8,488 | | | 7,322 | | | 15.9 |
| | | | | | | | | | | | |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Gross Additions (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | 2,928 | | | 2,622 | | | 11.7 | | 6,138 | | | 5,103 | | | 20.3 |
| | | | | | | | | | | | |
Net Additions Detail (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | 304 | | | 84 | | | * | | 625 | | | (42) | | | * |
| Wireless retail prepaid | | (304) | | | (229) | | | (32.8) | | (655) | | | (309) | | | * |
| Total wireless retail | | — | | | (145) | | | * | | (30) | | | (351) | | | 91.5 |
| | | | | | | | | | | | |
| Wireless retail postpaid phones | | (136) | | | (215) | | | 36.7 | | (399) | | | (507) | | | 21.3 |
| | | | | | | | | | | | |
| Fios video | | (69) | | | (86) | | | 19.8 | | (143) | | | (164) | | | 12.8 |
| Fios internet | | 51 | | | 30 | | | 70.0 | | 114 | | | 85 | | | 34.1 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| FWA broadband | | 251 | | | 168 | | | 49.4 | | 507 | | | 280 | | | 81.1 |
| Wireline broadband | | 36 | | | 13 | | | * | | 82 | | | 50 | | | 64.0 |
| | | | | | | | | | | | |
| Total broadband | | 287 | | | 181 | | | 58.6 | | 589 | | | 330 | | | 78.5 |
| | | | | | | | | | | | |
| Churn Rate: | | | | | | | | | | | | |
| Wireless retail postpaid | | 0.95 | % | | 0.93 | % | | | | 1.00 | % | | 0.94 | % | | |
| Wireless retail postpaid phones | | 0.76 | % | | 0.75 | % | | | | 0.80 | % | | 0.76 | % | | |
| Wireless retail prepaid | | 4.24 | % | | 3.90 | % | | | | 4.28 | % | | 3.79 | % | | |
| Wireless retail | | 1.58 | % | | 1.53 | % | | | | 1.63 | % | | 1.52 | % | | |
| | | | | | | | | | | | |
| Revenue Statistics (in millions): | | | | | | | | | | | | |
| Wireless service revenue | | $ | 15,762 | | | $ | 15,236 | | | 3.5 | | $ | 31,361 | | | $ | 30,453 | | | 3.0 |
| Fios revenues | | $ | 2,886 | | | $ | 2,895 | | | (0.3) | | $ | 5,775 | | | $ | 5,806 | | | (0.5) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Verizon Communications Inc.
Consumer - Selected Operating Statistics (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Other Wireless Statistics: | | | | | | | | | | | | |
Wireless retail postpaid ARPA (1) | | $ | 131.83 | | | $ | 124.16 | | | 6.2 | | $ | 130.95 | | | $ | 124.06 | | | 5.6 |
Wireless retail postpaid upgrade rate | | 3.5 | % | | 5.6 | % | | | | | | | | |
Wireless retail postpaid accounts (‘000) (2) | | | | | | | | 32,976 | | | 33,386 | | | (1.2) |
Wireless retail postpaid connections per account (2) | | | | | | | | 2.80 | | | 2.74 | | | 2.2 |
Wireless retail prepaid ARPU (3) | | $ | 31.42 | | | $ | 31.26 | | | 0.5 | | $ | 31.06 | | | $ | 31.07 | | | — |
| | | | | | | | | | | | |
Footnotes:
(1) Wireless retail postpaid ARPA - average service revenue per account from retail postpaid accounts.
(2) Statistics presented as of end of period.
(3) Wireless retail prepaid ARPU - average service revenue per unit from retail prepaid connections.
Where applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.
Certain intersegment transactions with corporate entities have not been eliminated.
* Not meaningful
Verizon Communications Inc.
Business - Selected Financial Results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Operating Revenues | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Enterprise and Public Sector | | $ | 3,784 | | | $ | 3,867 | | | (2.1) | | $ | 7,571 | | | $ | 7,845 | | | (3.5) |
| | | | | | | | | | | | |
Business Markets and Other(1) | | 3,109 | | | 3,130 | | | (0.7) | | 6,213 | | | 6,206 | | | 0.1 |
| Wholesale | | 590 | | | 629 | | | (6.2) | | 1,193 | | | 1,284 | | | (7.1) |
| Total Operating Revenues | | 7,483 | | | 7,626 | | | (1.9) | | 14,977 | | | 15,335 | | | (2.3) |
| | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | |
| Cost of services | | 2,543 | | | 2,559 | | | (0.6) | | 5,125 | | | 5,165 | | | (0.8) |
| Cost of wireless equipment | | 1,152 | | | 1,268 | | | (9.1) | | 2,386 | | | 2,578 | | | (7.4) |
| Selling, general and administrative expense | | 2,152 | | | 2,050 | | | 5.0 | | 4,185 | | | 4,109 | | | 1.8 |
| Depreciation and amortization expense | | 1,103 | | | 1,074 | | | 2.7 | | 2,197 | | | 2,135 | | | 2.9 |
| Total Operating Expenses | | 6,950 | | | 6,951 | | | — | | 13,893 | | | 13,987 | | | (0.7) |
| | | | | | | | | | | | |
| Operating Income | | $ | 533 | | | $ | 675 | | | (21.0) | | $ | 1,084 | | | $ | 1,348 | | | (19.6) |
| Operating Income Margin | | 7.1 | % | | 8.9 | % | | | | 7.2 | % | | 8.8 | % | | |
| | | | | | | | | | | | |
Segment EBITDA(2) | | $ | 1,636 | | | $ | 1,749 | | | (6.5) | | $ | 3,281 | | | $ | 3,483 | | | (5.8) |
Segment EBITDA Margin(2) | | 21.9 | % | | 22.9 | % | | | | 21.9 | % | | 22.7 | % | | |
Footnotes:
(1) Referred to as "Business Markets and SaaS" in the first quarter of 2023.
(2) Non-GAAP financial measure.
Our Business segment’s wireless and wireline products and services are organized by the primary customer groups targeted by these offerings. During the first quarter of 2023, Verizon reorganized the customer groups within its Business segment. Previously, this segment was comprised of four customer groups: Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale. Following the reorganization, there are now three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale. Enterprise and Public Sector combines the customers previously included in Global Enterprise and Public Sector and Other (excluding BlueJeans and Connect customers) as well as the commercial wireline customers previously included in Small and Medium Business. Business Markets and Other combines the customers previously included in Small and Medium Business (excluding commercial wireline customers), the BlueJeans customers previously included in Global Enterprise and Public Sector and Other, and the Connect customers previously included in Public Sector and Other. The Wholesale customer group remained unchanged. Prior period operating revenue results within the Business segment have been recast for these reorganized customer groups. There was no change to the composition of our reportable segments and total segment results, nor the determination of segment profit.
The segment financial results and metrics above exclude the effects of special items (other than the effects of acquisition-related intangible asset amortization), which the Company’s chief operating decision maker does not consider in assessing segment performance.
Certain intersegment transactions with corporate entities have not been eliminated.
Verizon Communications Inc.
Business - Selected Operating Statistics
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Unaudited | | | | | | | | 6/30/23 | | 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Connections (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | | | | | | | 29,105 | | | 28,208 | | | 3.2 |
| Wireless retail postpaid phones | | | | | | | | 17,856 | | | 17,586 | | | 1.5 |
| | | | | | | | | | | | |
| Fios video | | | | | | | | 64 | | | 70 | | | (8.6) |
| Fios internet | | | | | | | | 380 | | | 367 | | | 3.5 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| FWA broadband | | | | | | | | 870 | | | 316 | | | * |
| Wireline broadband | | | | | | | | 464 | | | 474 | | | (2.1) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Total broadband | | | | | | | | 1,334 | | | 790 | | | 68.9 |
| | | | | | | | | | | | |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Gross Additions (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | 1,590 | | | 1,582 | | | 0.5 | | 3,197 | | | 3,084 | | | 3.7 |
| | | | | | | | | | | | |
| Net Additions Detail (‘000): | | | | | | | | | | | | |
| Wireless retail postpaid | | 308 | | | 430 | | | (28.4) | | 620 | | | 825 | | | (24.8) |
| Wireless retail postpaid phones | | 144 | | | 227 | | | (36.6) | | 280 | | | 483 | | | (42.0) |
| | | | | | | | | | | | |
| Fios video | | (1) | | | (1) | | | — | | (3) | | | (1) | | | * |
| Fios internet | | 3 | | | 6 | | | (50.0) | | 7 | | | 11 | | | (36.4) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| FWA broadband | | 133 | | | 88 | | | 51.1 | | 270 | | | 170 | | | 58.8 |
| Wireline broadband | | (2) | | | (1) | | | * | | (4) | | | (3) | | | (33.3) |
| | | | | | | | | | | | |
| Total broadband | | 131 | | | 87 | | | 50.6 | | 266 | | | 167 | | | 59.3 |
| | | | | | | | | | | | |
| Churn Rate: | | | | | | | | | | | | |
| Wireless retail postpaid | | 1.48 | % | | 1.37 | % | | | | 1.49 | % | | 1.35 | % | | |
| Wireless retail postpaid phones | | 1.10 | % | | 1.07 | % | | | | 1.13 | % | | 1.07 | % | | |
| | | | | | | | | | | | |
| Revenue Statistics (in millions): | | | | | | | | | | | | |
| Wireless service revenue | | $ | 3,351 | | | $ | 3,182 | | | 5.3 | | $ | 6,641 | | | $ | 6,307 | | | 5.3 |
| Fios revenues | | $ | 308 | | | $ | 298 | | | 3.4 | | $ | 615 | | | $ | 593 | | | 3.7 |
| | | | | | | | | | | | |
| Other Operating Statistics: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Wireless retail postpaid upgrade rate | | 2.7 | % | | 3.1 | % | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Footnotes:
Where applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.
Certain intersegment transactions with corporate entities have not been eliminated.
*Not meaningful
Verizon Communications Inc.
Supplemental Information - Total Wireless Operating and Financial Statistics
The following supplemental schedule contains certain financial and operating metrics which reflect an aggregation of our Consumer and Business segments’ wireless results.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| Unaudited | | 6/30/23 | | 6/30/22 | | % Change |
| | | | | | | | | | | | |
| Connections (‘000) | | | | | | | | | | | | |
| Retail postpaid | | | | | | | | 121,579 | | | 119,683 | | | 1.6 |
Retail prepaid | | | | | | | | 21,646 | | | 23,138 | | | (6.4) |
| Total retail | | | | | | | | 143,225 | | | 142,821 | | | 0.3 |
| | | | | | | | | | | | |
| Retail postpaid phones | | | | | | | | 92,321 | | | 92,783 | | | (0.5) |
| | | | | | | | | | | | |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | %
Change | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | | %
Change |
| | | | | | | | | | | | |
| Net Additions Detail (‘000) | | | | | | | | | | | | |
| Retail postpaid phones | | 8 | | | 12 | | | (33.3) | | (119) | | | (24) | | | * |
| Retail postpaid | | 612 | | | 514 | | | 19.1 | | 1,245 | | | 783 | | | 59.0 |
| Retail prepaid | | (304) | | | (229) | | | (32.8) | | (655) | | | (309) | | | * |
| Total retail | | 308 | | | 285 | | | 8.1 | | 590 | | | 474 | | | 24.5 |
| | | | | | | | | | | | |
| Account Statistics | | | | | | | | | | | | |
Retail postpaid accounts (‘000) (1) | | | | | | | | 34,855 | | | 35,132 | | | (0.8) |
Retail postpaid connections per account (1) | | | | | | | | 3.49 | | | 3.41 | | | 2.3 |
Retail postpaid ARPA (2) | | $ | 154.51 | | | $ | 145.50 | | | 6.2 | | $ | 153.39 | | | $ | 145.18 | | | 5.7 |
Retail prepaid ARPU (3) | | $ | 31.42 | | | $ | 31.26 | | | 0.5 | | $ | 31.06 | | | $ | 31.07 | | | — |
| | | | | | | | | | | | |
| Churn Detail | | | | | | | | | | | | |
| Retail postpaid phone | | 0.83 | % | | 0.81 | % | | | | 0.87 | % | | 0.82 | % | | |
| Retail postpaid | | 1.07 | % | | 1.03 | % | | | | 1.11 | % | | 1.03 | % | | |
| Retail prepaid | | 4.24 | % | | 3.90 | % | | | | 4.28 | % | | 3.79 | % | | |
| Retail | | 1.56 | % | | 1.50 | % | | | | 1.60 | % | | 1.49 | % | | |
| | | | | | | | | | | | |
| Retail Postpaid Connection Statistics | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Upgrade rate | | 3.3 | % | | 5.0 | % | | | | | | | | |
| | | | | | | | | | | | |
Revenue Statistics (in millions) (4) | | | | | | | | | | | | |
| Wireless service | | $ | 19,113 | | | $ | 18,418 | | | 3.8 | | $ | 38,002 | | | $ | 36,760 | | | 3.4 |
| Wireless equipment | | 5,277 | | | 6,674 | | | (20.9) | | 11,037 | | | 13,010 | | | (15.2) |
| Wireless other | | 1,486 | | | 1,800 | | | (17.4) | | 3,001 | | | 3,618 | | | (17.1) |
| Total Wireless | | $ | 25,876 | | | $ | 26,892 | | | (3.8) | | $ | 52,040 | | | $ | 53,388 | | | (2.5) |
Footnotes:
(1) Statistics presented as of end of period.
(2) Wireless retail postpaid ARPA - average service revenue per account from retail postpaid accounts.
(3) Wireless retail prepaid ARPU - average service revenue per unit from retail prepaid connections.
(4) Intersegment transactions between Consumer or Business segment with corporate entities have not been eliminated.
Where applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures.
*Not meaningful
Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon
Consolidated EBITDA and Consolidated Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | | | | | | | | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 3/31/23 | | | | | | 3 Mos. Ended 12/31/22 | | 3 Mos. Ended 9/30/22 | | 3 Mos. Ended 6/30/22 | | 3 Mos. Ended 3/31/22 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Net Income | | | | | | | | | | $ | 4,766 | | | $ | 5,018 | | | | | | | $ | 6,698 | | | $ | 5,024 | | | $ | 5,315 | | | $ | 4,711 | |
| Add: | | | | | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | | | | | | 1,346 | | | 1,482 | | | | | | | 2,113 | | | 1,496 | | | 1,542 | | | 1,372 | |
| Interest expense | | | | | | | | | | 1,285 | | | 1,207 | | | | | | | 1,105 | | | 937 | | | 785 | | | 786 | |
Depreciation and amortization expense (1) | | | | | | | | | | 4,359 | | | 4,318 | | | | | | | 4,218 | | | 4,324 | | | 4,321 | | | 4,236 | |
| Consolidated EBITDA | | | | | | | | | | $ | 11,756 | | | $ | 12,025 | | | | | | | $ | 14,134 | | | $ | 11,781 | | | $ | 11,963 | | | $ | 11,105 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Add/(subtract): | | | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net (2) | | | | | | | | | | $ | (210) | | | $ | (114) | | | | | | | $ | (2,687) | | | $ | 439 | | | $ | (49) | | | $ | 924 | |
| Equity in losses (earnings) of unconsolidated businesses | | | | | | | | | | 33 | | | (9) | | | | | | | (4) | | | (2) | | | (41) | | | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Severance charges | | | | | | | | | | 237 | | | — | | | | | | | 304 | | | — | | | — | | | — | |
| Asset rationalization | | | | | | | | | | 155 | | | — | | | | | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | 215 | | | (123) | | | | | | | (2,387) | | | 437 | | | (90) | | | 927 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Adjusted EBITDA | | | | | | | | | | $ | 11,971 | | | $ | 11,902 | | | | | | | $ | 11,747 | | | $ | 12,218 | | | $ | 11,873 | | | $ | 12,032 | |
| Consolidated Adjusted EBITDA - Year over year change % | | | | | | | | | | 0.8 | % | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Footnotes:
(1) Includes Amortization of acquisition-related intangible assets.
(2) Includes Pension and benefits remeasurement adjustments and Early debt redemption costs, where applicable.
Consolidated EBITDA and Consolidated Adjusted EBITDA (LTM)
| | | | | | | | | | | | | | | | | | | | |
| Unaudited | | 12 Mos. Ended 6/30/23 | | 12 Mos. Ended 3/31/23 | | 12 Mos. Ended 12/31/22 |
| | | | | | |
| Consolidated Net Income | | $ | 21,506 | | | $ | 22,055 | | | $ | 21,748 | |
| Add: | | | | | | |
| Provision for income taxes | | 6,437 | | | 6,633 | | | 6,523 | |
| Interest expense | | 4,534 | | | 4,034 | | | 3,613 | |
Depreciation and amortization expense (1) | | 17,219 | | | 17,181 | | | 17,099 | |
| Consolidated EBITDA | | $ | 49,696 | | | $ | 49,903 | | | $ | 48,983 | |
| | | | | | |
| Add/(subtract): | | | | | | |
Other (income) expense, net (2) | | $ | (2,572) | | | $ | (2,411) | | | $ | (1,373) | |
| Equity in losses (earnings) of unconsolidated businesses | | 18 | | | (56) | | | (44) | |
| | | | | | |
| Severance charges | | 541 | | | 304 | | | 304 | |
| Asset rationalization | | 155 | | | — | | | — | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | (1,858) | | | (2,163) | | | (1,113) | |
| | | | | | |
| Consolidated Adjusted EBITDA | | $ | 47,838 | | | $ | 47,740 | | | $ | 47,870 | |
Footnotes:
(1) Includes Amortization of acquisition-related intangible assets.
(2) Includes Pension and benefits remeasurement adjustments and Early debt redemption costs, where applicable.
Verizon Communications Inc.
Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 6/30/23 | | 3/31/23 | | | | 12/31/22 | | |
| | | | | | | | | | |
| Debt maturing within one year | | $ | 14,827 | | | $ | 12,081 | | | | | $ | 9,963 | | | |
| Long-term debt | | 137,871 | | | 140,772 | | | | | 140,676 | | | |
| Total Debt | | 152,698 | | | 152,853 | | | | | 150,639 | | | |
| Less Secured debt | | 21,342 | | | 20,835 | | | | | 20,008 | | | |
| Unsecured Debt | | 131,356 | | | 132,018 | | | | | 130,631 | | | |
| Less Cash and cash equivalents | | 4,803 | | | 2,234 | | | | | 2,605 | | | |
Net Unsecured Debt | | $ | 126,553 | | | $ | 129,784 | | | | | $ | 128,026 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Consolidated Net Income (LTM) | | $ | 21,506 | | | | | | | $ | 21,748 | | | |
| Unsecured Debt to Consolidated Net Income Ratio | | 6.1 | x | | | | | | 6.0 | x | | |
| Consolidated Adjusted EBITDA (LTM) | | $ | 47,838 | | | | | | | $ | 47,870 | | | |
| Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio | | 2.6x | | | | | | 2.7 | x | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net Unsecured Debt - Quarter over quarter change | | $ | (3,231) | | | | | | | | | |
| | | | | | | | | | |
Adjusted Earnings per Common Share (Adjusted EPS)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions, except per share amounts) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 |
| | Pre-tax | Tax | After-Tax | | | Pre-tax | Tax | After-Tax | |
| EPS | | | | | $ | 1.10 | | | | | | $ | 1.24 | |
| Amortization of acquisition-related intangible assets | | $ | 206 | | $ | (53) | | $ | 153 | | 0.04 | | | $ | 237 | | $ | (62) | | $ | 175 | | 0.04 | |
| Severance, pension and benefits charges | | 237 | | (59) | | 178 | | 0.04 | | | 198 | | (51) | | 147 | | 0.03 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Asset rationalization | | 155 | | (33) | | 122 | | 0.03 | | | — | | — | | — | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| | $ | 598 | | $ | (145) | | $ | 453 | | $ | 0.11 | | | $ | 435 | | $ | (113) | | $ | 322 | | $ | 0.08 | |
| Adjusted EPS | | | | | $ | 1.21 | | | | | | $ | 1.31 | |
| | | | | | | | | | |
Footnotes:
Adjusted EPS may not add due to rounding.
| | | | | | | | | | | | | | | |
| | | | | |
| Free Cash Flow | | | | | |
| (dollars in millions) | |
| Unaudited | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | |
| | | | | |
| Net Cash Provided by Operating Activities | | $ | 18,020 | | | $ | 17,665 | | |
| Capital expenditures (including capitalized software) | | (10,070) | | | (10,491) | | |
| Free Cash Flow | | $ | 7,950 | | | $ | 7,174 | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Verizon Communications Inc.
Non-GAAP Reconciliations - Segments
Segment EBITDA and Segment EBITDA Margin
Consumer
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 |
| | | | | | | | |
| Operating Income | | $ | 7,330 | | | $ | 7,150 | | | $ | 14,429 | | | $ | 14,469 | |
| Add Depreciation and amortization expense | | 3,247 | | | 3,211 | | | 6,461 | | | 6,373 | |
| Segment EBITDA | | $ | 10,577 | | | $ | 10,361 | | | $ | 20,890 | | | $ | 20,842 | |
| Year over year change % | | 2.1 | % | | | | 0.2 | % | | |
| | | | | | | | |
| Total operating revenues | | $ | 24,558 | | | $ | 25,604 | | | $ | 49,415 | | | $ | 50,896 | |
| Operating Income Margin | | 29.8 | % | | 27.9 | % | | 29.2 | % | | 28.4 | % |
| Segment EBITDA Margin | | 43.1 | % | | 40.5 | % | | 42.3 | % | | 41.0 | % |
| | | | | | | | |
| | | | | | | | |
Business
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 |
| | | | | | | | |
| Operating Income | | $ | 533 | | | $ | 675 | | | $ | 1,084 | | | $ | 1,348 | |
| Add Depreciation and amortization expense | | 1,103 | | | 1,074 | | | 2,197 | | | 2,135 | |
| Segment EBITDA | | $ | 1,636 | | | $ | 1,749 | | | $ | 3,281 | | | $ | 3,483 | |
| Year over year change % | | (6.5) | % | | | | (5.8) | % | | |
| | | | | | | | |
| Total operating revenues | | $ | 7,483 | | | $ | 7,626 | | | $ | 14,977 | | | $ | 15,335 | |
| Operating Income Margin | | 7.1 | % | | 8.9 | % | | 7.2 | % | | 8.8 | % |
| Segment EBITDA Margin | | 21.9 | % | | 22.9 | % | | 21.9 | % | | 22.7 | % |
| | | | | | | | |
| | | | | | | | |
This supplemental information regarding the financial and operating results of Verizon Communications Inc. (Verizon) for the second quarter ended June 30, 2023 contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is included at the end of this document and is also contained in Verizon's filings with the US Securities and Exchange Commission.
Consolidated Financial Results
* Non-GAAP financial measure.
** Total Wireless service revenue represents the sum of Consumer and Business segments.
Consolidated total operating revenue for the second quarter was $32.6 billion, down 3.5% year over year.
•Service and other revenue was $27.3 billion, up 0.8% year over year, as the growth of Wireless service revenue was partially offset by wireline declines and lower Other revenue due to the reallocation of certain fees.
◦Total Wireless service revenue2 was $19.1 billion, up 3.8% year over year, driven primarily by pricing actions implemented in recent quarters, the larger allocation of our administrative and telco recovery fees from Other revenue into Wireless service revenue,
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VlpHU09DSUQyMDE5UTE=
and growing contribution from our fixed wireless access (FWA) offerings.
◦Total Fios revenue was $3.2 billion, relatively flat year over year as the benefits of Fios internet customer growth were more than offset by declines in voice and video connections.
•Wireless equipment revenue was $5.3 billion, down 20.9% year over year, predominantly due to lower upgrade rates.
Consolidated net income for the second quarter was $4.8 billion, down 10.3% year over year.
Consolidated adjusted EBITDA1 for the second quarter was $12.0 billion, up 0.8% year over year, driven by Wireless service revenue growth and lower upgrade rates.
Consolidated operating expenses for the second quarter were $25.4 billion, down 3.3% year over year. Consolidated operating expenses, excluding depreciation and amortization and special items,1 were $20.6 billion, down 5.9% year over year.
Interest expense for the second quarter was $1.3 billion compared to $1.2 billion the first quarter 2023 due to higher interest rates on our outstanding debt balance.
Earnings per share (EPS) was $1.10, down 11.3% year over year.
•Reported second quarter earnings reflect a pre-tax loss from special items of approximately $598 million. This includes a pre-tax severance charge of $237 million, the impacts of amortization of intangible assets related to TracFone Wireless, Inc. and other acquisitions of $206 million, and a pre-tax asset rationalization charge of $155 million related to certain real estate and non-strategic assets that we have made a decision to cease use of as part of our transformation initiatives.
Adjusted EPS1 was $1.21, down 7.6% year over year.
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VlpHU09DSUQyMDE5UTE=
Cash Flow Summary
* Non-GAAP financial measure.
Cash flow from operating activities for the six months ended June 30, 2023 was $18.0 billion compared to $17.7 billion in the prior year period driven by working capital improvements as a result of lower receivables and lower inventory levels tied to fewer upgrades, which were offset by higher cash income taxes and interest expense.
•Capital spending for the six months ended June 30, 2023 was $10.1 billion, including the remaining $1.75 billion of the C-Band related spending in our guidance.
•Our guidance for 2023 capital expenditures of $18.25 billion to $19.25 billion remains unchanged.
Free cash flow1 for the six months ended June 30, 2023 was $8.0 billion.
Total unsecured debt as of the end of the second quarter was $131.4 billion, a $0.7 billion improvement compared to the prior quarter and $1.1 billion lower year over year. Unsecured debt to net income (LTM) ratio was 6.1x as of the end of the second quarter, an increase of 0.1x compared to the prior quarter and a 0.1x improvement year over year.
Net unsecured debt1 as of the end of the second quarter was $126.6 billion, a $3.2 billion improvement compared to the prior quarter and $4.1 billion lower year over year. Net unsecured debt to adjusted EBITDA ratio1 was 2.6x as of the end of the second quarter, a 0.1x improvement both sequentially and year over year.
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Mobility Highlights
Consolidated
Total retail postpaid net additions for the second quarter were 612 thousand, up from 514 thousand in the prior year period, driven by continued FWA momentum, wearables adoption, and strong Business phone performance.
Total postpaid phone net additions for the second quarter were 8 thousand, down from 12 thousand in the prior year period.
•Postpaid phone gross additions were 2.3 million, up 2.0% year over year.
•Postpaid phone churn was 0.83%, up 2 basis points year over year.
Consumer Group
Postpaid net additions for the second quarter were 304 thousand, up from 84 thousand in the prior year period, as growth in FWA and wearables was partially offset by phone and tablet losses.
•Postpaid phone net losses were 136 thousand compared to 215 thousand net losses in the prior year period.
◦Postpaid phone gross additions were 1.6 million, up 6.9% year over year, continuing the momentum that began building in the second half of last year.
◦Postpaid phone churn was 0.76%, up 1 basis point year over year.
•Prepaid net losses were 304 thousand compared to 229 thousand net losses in the prior year period.
◦Prepaid churn was 4.24%, up 34 basis points year over year.
Business Group
Postpaid phone net additions for the second quarter were 144 thousand, down from 227 thousand in the prior year period.
•Postpaid phone churn was 1.10%, up 3 basis points year over year.
Broadband Highlights
Total broadband net additions were 418 thousand for the second quarter, up from 268 thousand in the prior year period, driven by strong demand and good retention rates for both Fios and FWA products.
•FWA net additions were 384 thousand, up from 256 thousand in the prior year period.
◦Consumer FWA net additions were 251 thousand, up 83 thousand year over year.
◦Business FWA net additions were 133 thousand, up 45 thousand year over year.
•Fios internet net additions were 54 thousand, up from 36 thousand in the prior year period.
Consumer Financial Results
Total Consumer revenue for the second quarter was $24.6 billion, down 4.1% year over year, as gains in Service and other revenue were offset by Wireless equipment revenue declines.
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•Consumer Service and other revenue was $20.1 billion, up 1.2% year over year.
•Consumer Wireless service revenue was $15.8 billion, up 3.5% year over year, driven by Consumer wireless postpaid average revenue per account (ARPA) growth, which was partially offset by decline in retail postpaid phone connections and prepaid connections.
•Consumer Fios revenue was $2.9 billion, down 0.3% year over year, as the benefits of Fios internet customer growth were more than offset by declines in voice and video connections.
•Consumer Wireless equipment revenue was $4.4 billion, down 22.4% year over year, driven primarily by a 38% year over year decline in upgrades.
Consumer wireless postpaid ARPA was $131.83 for the second quarter, up 6.2% year over year, driven by pricing actions implemented in recent quarters, and the larger allocation of our administrative and telco recovery fees from Other revenue into Wireless service revenue, as well as an increase in our FWA subscriber base and device protection revenue, partially offset by the amortization impact on service revenue from promotional costs.
Consumer operating income was $7.3 billion, up 2.5% year over year, resulting in operating income margin of 29.8%.
Consumer segment EBITDA1 was $10.6 billion, up 2.1% year over year. This improvement can be attributed to service revenue growth and lower upgrade volumes. Consumer segment EBITDA margin1 for the second quarter was 43.1%.
Business Financial Results
* Referred to in the first quarter 2023 as "Business Markets and SaaS".
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Total Business revenue was $7.5 billion, down 1.9% year over year, as growth in Wireless service revenue was more than offset by lower Wireline revenue and lower Wireless equipment revenue.
•Business Wireless service revenue was $3.4 billion, up 5.3% year over year, driven by continued strong net additions and pricing actions implemented in recent quarters.
•Business wireline results reflect continued secular declines in the prevailing wireline market and our rationalization of certain legacy wireline products, consistent with prior periods.
Business operating income was $533 million, down 21.0% year over year, resulting in operating income margin of 7.1%.
Business segment EBITDA1 was $1.6 billion, down 6.5% year over year, driven by continued declines in high margin Wireline revenues. Business segment EBITDA margin1 for the second quarter was 21.9%.
Notes
1 Non-GAAP financial measure. See the accompanying schedules and www.verizon.com/about/investors for reconciliations of non-GAAP financial measures cited in this document to most directly comparable financial measures under generally accepted accounting principles (GAAP).
2 Total Wireless service revenue represents the sum of Consumer and Business segments.
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,” “forecasts,” “hopes,” “plans” 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: the effects of competition in the markets in which we operate, including any inability to successfully respond to competitive factors such as prices, promotional incentives and evolving consumer preferences;
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failure to take advantage of, or respond to competitors' use of, developments in technology and address changes in consumer demand; performance issues or delays in the deployment of our 5G network resulting in significant costs or a reduction in the anticipated benefits of the enhancement to our networks; the inability to implement our business strategy; adverse conditions in the U.S. and international economies, including inflation in the markets in which we operate; cyber attacks impacting our networks or systems and any resulting financial or reputational impact; damage to our infrastructure or disruption of our operations from natural disasters, extreme weather conditions, acts of war, terrorist attacks or other hostile acts and any resulting financial or reputational impact; the impact of public health crises on our operations, our employees and the ways in which our customers use our networks and other products and services; disruption of our key suppliers’ or vendors' provisioning of products or services, including as a result of geopolitical factors, public health crises or the potential impacts of global climate change; material adverse changes in labor matters and any resulting financial or operational impact; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks or businesses; allegations regarding the release of hazardous materials or pollutants into the environment from our, or our predecessors’, network assets and any related regulatory developments, litigation, liability, compliance costs, penalties, operational impacts or reputational damage; our high level of indebtedness; significant litigation and any resulting material expenses incurred in defending against lawsuits or paying awards or settlements; 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; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; and 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.
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Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon
Consolidated EBITDA and Consolidated Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | |
| Unaudited | | | | | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 3/31/23 | | 3 Mos. Ended 12/31/22 | | 3 Mos. Ended 9/30/22 | | 3 Mos. Ended 6/30/22 | | 3 Mos. Ended 3/31/22 | | 3 Mos. Ended 12/31/21 | | 3 Mos. Ended 9/30/21 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Net Income | | | | | | $ | 4,766 | | | $ | 5,018 | | | $ | 6,698 | | | $ | 5,024 | | | $ | 5,315 | | | $ | 4,711 | | | $ | 4,737 | | | $ | 6,554 | | | |
| Add: | | | | | | | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | | | | 1,346 | | | 1,482 | | | 2,113 | | | 1,496 | | | 1,542 | | | 1,372 | | | 1,407 | | | 1,820 | | | |
| Interest expense | | | | | | 1,285 | | | 1,207 | | | 1,105 | | | 937 | | | 785 | | | 786 | | | 739 | | | 801 | | | |
Depreciation and amortization expense (1) | | | | | | 4,359 | | | 4,318 | | | 4,218 | | | 4,324 | | | 4,321 | | | 4,236 | | | 4,051 | | | 3,961 | | | |
| Consolidated EBITDA | | | | | | $ | 11,756 | | | $ | 12,025 | | | $ | 14,134 | | | $ | 11,781 | | | $ | 11,963 | | | $ | 11,105 | | | $ | 10,934 | | | $ | 13,136 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Add/(subtract): | | | | | | | | | | | | | | | | | | | | | | |
Other (income) expense, net (2) | | | | | | $ | (210) | | | $ | (114) | | | $ | (2,687) | | | $ | 439 | | | $ | (49) | | | $ | 924 | | | $ | 860 | | | $ | (269) | | | |
Equity in losses (earnings) of unconsolidated businesses (3) | | | | | | 33 | | | (9) | | | (4) | | | (2) | | | (41) | | | 3 | | | (135) | | | (1) | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Severance charges | | | | | | 237 | | | — | | | 304 | | | — | | | — | | | — | | | 106 | | | 103 | | | |
| Asset rationalization | | | | | | 155 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Net gain from disposition of business | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (706) | | | |
| | | | | | 215 | | | (123) | | | (2,387) | | | 437 | | | (90) | | | 927 | | | 831 | | | (873) | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Adjusted EBITDA | | | | | | $ | 11,971 | | | $ | 11,902 | | | $ | 11,747 | | | $ | 12,218 | | | $ | 11,873 | | | $ | 12,032 | | | $ | 11,765 | | | $ | 12,263 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Adjusted EBITDA - Year over year change % | | | | | | 0.8 | % | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | |
Footnotes:
(1) Includes Amortization of acquisition-related intangible assets.
(2) Includes Pension and benefits remeasurement adjustments and Early debt redemption costs, where applicable.
(3) Includes Net gain from disposition of assets, where applicable.
Consolidated EBITDA and Consolidated Adjusted EBITDA (LTM)
| | | | | | | | | | | | | | | | | | | | | | | | |
| Unaudited | | 12 Mos. Ended 6/30/23 | | 12 Mos. Ended 3/31/23 | | | | 12 Mos. Ended 6/30/22 | | |
| | | | | | | | | | |
| Consolidated Net Income | | $ | 21,506 | | | $ | 22,055 | | | | | $ | 21,317 | | | |
| Add: | | | | | | | | | | |
| Provision for income taxes | | 6,437 | | | 6,633 | | | | | 6,141 | | | |
| Interest expense | | 4,534 | | | 4,034 | | | | | 3,111 | | | |
Depreciation and amortization expense (1) | | 17,219 | | | 17,181 | | | | | 16,569 | | | |
| Consolidated EBITDA | | $ | 49,696 | | | $ | 49,903 | | | | | $ | 47,138 | | | |
| | | | | | | | | | |
| Add/(subtract): | | | | | | | | | | |
Other (income) expense, net (2) | | $ | (2,572) | | | $ | (2,411) | | | | | $ | 1,466 | | | |
Equity in losses (earnings) of unconsolidated businesses (3) | | 18 | | | (56) | | | | | (174) | | | |
| | | | | | | | | | |
| Severance charges | | 541 | | | 304 | | | | | 209 | | | |
| Asset rationalization | | 155 | | | — | | | | | — | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net gain from disposition of business | | — | | | | | | | (706) | | | |
| | (1,858) | | | (2,163) | | | | | 795 | | | |
| | | | | | | | | | |
| Consolidated Adjusted EBITDA | | $ | 47,838 | | | $ | 47,740 | | | | | $ | 47,933 | | | |
Footnotes:
(1) Includes Amortization of acquisition-related intangible assets.
(2) Includes Pension and benefits remeasurement adjustments and Early debt redemption costs, where applicable.
(3) Includes Net gain from disposition of assets, where applicable.
Verizon Communications Inc.
Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 6/30/23 | | 3/31/23 | | 6/30/22 | | | | | | | | |
| | | | | | | | | | | | | | |
| Debt maturing within one year | | $ | 14,827 | | | $ | 12,081 | | | $ | 12,873 | | | | | | | | | |
| Long-term debt | | 137,871 | | | 140,772 | | | 136,184 | | | | | | | | | |
| Total Debt | | 152,698 | | | 152,853 | | | 149,057 | | | | | | | | | |
| Less Secured debt | | 21,342 | | | 20,835 | | | 16,572 | | | | | | | | | |
| Unsecured Debt | | 131,356 | | | 132,018 | | | 132,485 | | | | | | | | | |
| Less Cash and cash equivalents | | 4,803 | | | 2,234 | | | 1,857 | | | | | | | | | |
Net Unsecured Debt | | $ | 126,553 | | | $ | 129,784 | | | $ | 130,628 | | | | | | | | | |
| Consolidated Net Income (LTM) | | $ | 21,506 | | | $ | 22,055 | | | $ | 21,317 | | | | | | | | | |
| Unsecured Debt to Consolidated Net Income Ratio | | 6.1 | x | | 6.0 | x | | 6.2 | x | | | | | | | | |
| Consolidated Adjusted EBITDA (LTM) | | $ | 47,838 | | | $ | 47,740 | | | $ | 47,933 | | | | | | | | | |
| Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio | | 2.6 | x | | 2.7 | x | | 2.7 | x | | | | | | | | |
| Net Unsecured Debt - Quarter over quarter change | | $ | (3,231) | | | | | | | | | | | | | |
| Net Unsecured Debt - Year over year change | | $ | (4,075) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio - Quarter over quarter change | | (0.1) | x | | | | | | | | | | | | |
| Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio - Year over year change | | (0.1) | x | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Adjusted Earnings per Common Share (Adjusted EPS)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in millions, except per share amounts) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 |
| | Pre-tax | Tax | After-Tax | | | Pre-tax | Tax | After-Tax | |
| EPS | | | | | $ | 1.10 | | | | | | $ | 1.24 | |
| Amortization of acquisition-related intangible assets | | $ | 206 | | $ | (53) | | $ | 153 | | 0.04 | | | $ | 237 | | $ | (62) | | $ | 175 | | 0.04 | |
| Severance, pension and benefits charges | | 237 | | (59) | | 178 | | 0.04 | | | 198 | | (51) | | 147 | | 0.03 | |
| Asset rationalization | | 155 | | (33) | | 122 | | 0.03 | | | — | | — | | — | | — | |
| | | | | | | | | | |
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| | $ | 598 | | $ | (145) | | $ | 453 | | $ | 0.11 | | | $ | 435 | | $ | (113) | | $ | 322 | | $ | 0.08 | |
| Adjusted EPS | | | | | $ | 1.21 | | | | | | $ | 1.31 | |
| Year over year change % | | | | | (7.6) | % | | | | | |
Footnotes:
Adjusted EPS may not add due to rounding.
| | | | | | | | | | | | | | | |
| | | | | |
| Free Cash Flow | | | | | |
| (dollars in millions) | |
| Unaudited | | 6 Mos. Ended 6/30/23 | | 6 Mos. Ended 6/30/22 | |
| | | | | |
| Net Cash Provided by Operating Activities | | $ | 18,020 | | | $ | 17,665 | | |
| Capital expenditures (including capitalized software) | | (10,070) | | | (10,491) | | |
| Free Cash Flow | | $ | 7,950 | | | $ | 7,174 | | |
| | | | | |
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| | | | | |
| Consolidated Operating Expenses Excluding Depreciation and Amortization and Special Items | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | | 3 Mos. Ended 6/30/22 |
| | | | | |
| Consolidated Operating Expenses | | $ | 25,376 | | | | $ | 26,237 | |
Depreciation and amortization expense (1) | | 4,359 | | | | 4,321 | |
| Severance charges | | 237 | | | | — | |
| Asset rationalization | | 155 | | | | — | |
| Consolidated Operating Expenses Excluding Depreciation and Amortization and Special Items | | $ | 20,625 | | | | $ | 21,916 | |
| Year over year change % | | (5.9) | % | | | |
| | | | | |
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Footnotes:
(1) Includes Amortization of acquisition-related intangible assets.
Verizon Communications Inc.
Non-GAAP Reconciliations - Segments
Segment EBITDA and Segment EBITDA Margin
Consumer
| | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | | | |
| | | | | | | | |
| Operating Income | | $ | 7,330 | | | $ | 7,150 | | | | | |
| Add Depreciation and amortization expense | | 3,247 | | | 3,211 | | | | | |
| Segment EBITDA | | $ | 10,577 | | | $ | 10,361 | | | | | |
| Year over year change % | | 2.1 | % | | | | | | |
| | | | | | | | |
| Total operating revenues | | $ | 24,558 | | | $ | 25,604 | | | | | |
| Operating Income Margin | | 29.8 | % | | 27.9 | % | | | | |
| Segment EBITDA Margin | | 43.1 | % | | 40.5 | % | | | | |
| | | | | | | | |
| | | | | | | | |
Business
| | | | | | | | | | | | | | | | | | |
| (dollars in millions) |
| Unaudited | | 3 Mos. Ended 6/30/23 | | 3 Mos. Ended 6/30/22 | | | | |
| | | | | | | | |
| Operating Income | | $ | 533 | | | $ | 675 | | | | | |
| Add Depreciation and amortization expense | | 1,103 | | | 1,074 | | | | | |
| Segment EBITDA | | $ | 1,636 | | | $ | 1,749 | | | | | |
| Year over year change % | | (6.5) | % | | | | | | |
| | | | | | | | |
| Total operating revenues | | $ | 7,483 | | | $ | 7,626 | | | | | |
| Operating Income Margin | | 7.1 | % | | 8.9 | % | | | | |
| Segment EBITDA Margin | | 21.9 | % | | 22.9 | % | | | | |
| | | | | | | | |
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