29/01/2019 12:00:00

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

4Q 2018 highlights

Consolidated:

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

Wireless:

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

Wireline:

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

2018 highlights

Consolidated:

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

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

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

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

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

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

Consolidated results

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

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

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

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

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

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

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

Wireless results

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

Wireline results

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

Outlook and guidance

  For 2019, Verizon expects the following:

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

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

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

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

Forward-looking statements

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

Media contacts:

Bob Varettoni

908.559.6388

robert.a.varettoni@verizon.com

Eric Wilkens

201.572.9317

eric.wilkens@verizon.com

         

Verizon Communications Inc.

        
Condensed Consolidated Statements of Income 
    
          
      (dollars in millions, except per share amounts)  
          
  3 Mos. Ended 3 Mos. Ended    12 Mos. Ended 12 Mos. Ended    
Unaudited12/31/18 12/31/17 % Change  12/31/18 12/31/17 % Change  
          

Operating Revenues

        
Service revenues and other$27,460 $27,480 (0.1) $108,605 $107,145 1.4  
Wireless equipment revenues 6,821  6,475 5.3   22,258  18,889 17.8  

Total Operating Revenues

 34,281  33,955 1.0   130,863  126,034 3.8  
          

Operating Expenses

        
Cost of services 8,163  8,219 (0.7)  32,185  30,916 4.1  
Wireless cost of equipment 7,128  7,339 (2.9)  23,323  22,147 5.3  
Selling, general and administrative expense 9,410  8,480 11.0   31,083  28,592 8.7  
Depreciation and amortization expense 4,352  4,456 (2.3)  17,403  16,954 2.6  
Oath goodwill impairment 4,591     4,591    

Total Operating Expenses

 33,644  28,494 18.1   108,585  98,609 10.1  
          

Operating Income

 637  5,461 (88.3)  22,278  27,425 (18.8) 
Equity in earnings (losses) of unconsolidated businesses 64  (6)  (186) (77) 
Other income (expense), net 1,865  (1,302)  2,364  (2,021) 
Interest expense (1,199) (1,219)(1.6)  (4,833) (4,733)2.1  

Income Before (Provision) Benefit For Income Taxes

 1,367  2,934 (53.4)  19,623  20,594 (4.7) 
(Provision) benefit for income taxes 698  15,849 (95.6)  (3,584) 9,956  

Net Income

$2,065 $18,783 (89.0) $16,039 $30,550 (47.5) 
          
Net income attributable to noncontrolling interests$126 $114 10.5  $511 $449 13.8  
Net income attributable to Verizon 1,939  18,669 (89.6)  15,528  30,101 (48.4) 

Net Income

$2,065 $18,783 (89.0) $16,039 $30,550 (47.5) 
          

Basic Earnings Per Common Share

        
Net income attributable to Verizon$0.47 $4.57 (89.7) $3.76 $7.37 (49.0) 
         

Weighted average number of common shares (in millions)

 

 

4,137

  

 

4,087

    

 

4,128

  

 

4,084

   
         

Diluted Earnings Per Common Share

(1)

        
Net income attributable to Verizon$0.47 $4.56 (89.7) $3.76 $7.36 (48.9) 
         

Weighted average number of common

        
 

shares-assuming dilution (in millions)

 

 

4,141

  

 

4,090

    

 

4,132

  

 

4,089

   
          
          

Footnotes:

        
(1)Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.  
          
*Not meaningful        
          

Verizon Communications Inc.

   
Condensed Consolidated Balance Sheets   
        
        
      (dollars in millions)  
        
Unaudited12/31/18  12/31/17  $ Change  
        

Assets

      
Current assets      
Cash and cash equivalents$2,745  $2,079  $666  
Accounts receivable, net 25,102   23,493   1,609  
Inventories 1,336   1,034   302  
Prepaid expenses and other 5,453   3,307   2,146  
Total current assets 34,636   29,913   4,723  
Property, plant and equipment 252,835   246,498   6,337  
Less accumulated depreciation 163,549   157,930   5,619  
Property, plant and equipment, net 89,286   88,568   718  
Investments in unconsolidated businesses 671   1,039   (368) 
Wireless licenses 94,130   88,417   5,713  
Goodwill 24,614   29,172   (4,558) 
Other intangible assets, net 9,775   10,247   (472) 
Other assets 11,717   9,787   1,930  

Total assets

$264,829  $257,143  $7,686  
        

Liabilities and Equity

      
Current liabilities      
Debt maturing within one year$7,190  $3,453  $3,737  
Accounts payable and accrued liabilities 22,501   21,232   1,269  
Other current liabilities 8,239   8,352   (113) 
Total current liabilities 37,930   33,037   4,893  
Long-term debt 105,873   113,642   (7,769) 
Employee benefit obligations 18,599   22,112   (3,513) 
Deferred income taxes 33,795   31,232   2,563  
Other liabilities 13,922   12,433   1,489  
Total long-term liabilities 172,189   179,419   (7,230) 
        
Equity      
Common stock 429   424   5  
Additional paid in capital 13,437   11,101   2,336  
Retained earnings 43,542   35,635   7,907  
Accumulated other comprehensive income 2,370   2,659   (289) 
Common stock in treasury, at cost (6,986)  (7,139)  153  
Deferred compensation – employee

stock ownership plans and other

 353   416   (63) 
Noncontrolling interests 1,565   1,591   (26) 
Total equity 54,710   44,687   10,023  

Total liabilities and equity

$264,829  $257,143  $7,686  
        
        
Verizon - Selected Financial and Operating Statistics   
        
Unaudited12/31/18  12/31/17    
        
Total debt (in millions)$113,063  $117,095    
Net debt (in millions)$110,318  $115,016    
Net debt / Consolidated Adjusted EBITDA(1)2.3 2.6   
Common shares outstanding end of period (in millions) 4,132   4,079    
Total employees (‘000) 144.5   155.4    
Quarterly cash dividends declared per common share$0.6025  $0.5900    
        

Footnotes:

      
(1) Consolidated adjusted EBITDA excludes the effects of non-operational items, special items and operating results of divested businesses.             
        

 

Verizon Communications Inc.

      
Condensed Consolidated Statements of Cash Flows   
        
        
    (dollars in millions)  
        
  12 Mos. Ended  12 Mos. Ended    
Unaudited12/31/18  12/31/17  $ Change  
        

Cash Flows from Operating Activities

      
Net Income$  16,039  $  30,550  $  (14,511) 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization expense  17,403    16,954    449  
Employee retirement benefits  (2,657)   440    (3,097) 
Deferred income taxes  389    (14,463)   14,852  
Provision for uncollectible accounts  980    1,167    (187) 
Equity in losses of unconsolidated businesses, net of dividends received  231    117    114  
Net gain on sale of divested businesses  —    (1,774)   1,774  
Oath goodwill impairment  4,591    —    4,591  
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses  (1,177)   (5,938)   4,761  
Discretionary employee benefits contributions  (1,679)   (3,411)   1,732  
Other, net  219    676    (457) 
Net cash provided by operating activities  34,339    24,318    10,021  
        

Cash Flows from Investing Activities

      
Capital expenditures (including capitalized software)  (16,658)   (17,247)   589  
Acquisitions of businesses, net of cash acquired  (230)   (5,880)   5,650  
Acquisitions of wireless licenses  (1,429)   (583)   (846) 
Proceeds from dispositions of businesses  —    3,614    (3,614) 
Other, net  383    1,640    (1,257) 
Net cash used in investing activities  (17,934)   (18,456)   522  
        

Cash Flows from Financing Activities

      
Proceeds from long-term borrowings  5,967    27,707    (21,740) 
Proceeds from asset-backed long-term borrowings  4,810    4,290    520  
Repayments of long-term borrowings and capital lease obligations  (10,923)   (23,837)   12,914  
Repayments of asset-backed long-term borrowings  (3,635)   (400)   (3,235) 
Dividends paid  (9,772)   (9,472)   (300) 
Other, net  (1,824)   (4,439)   2,615  
Net cash used in financing activities  (15,377)   (6,151)   (9,226) 
        

Increase (decrease) in cash, cash equivalents and restricted cash

  1,028    (289)   1,317  

Cash, cash equivalents and restricted cash, beginning of period

  2,888    3,177    (289) 

Cash, cash equivalents and restricted cash, end of period

$  3,916  $  2,888  $  1,028  
        

 

Verizon Communications Inc.

        
Wireless - Selected Financial Results      
          
          
          
       (dollars in millions)  
          
  3 Mos. Ended 3 Mos. Ended   12 Mos. Ended 12 Mos. Ended   
Unaudited12/31/18 12/31/17 % Change  12/31/18 12/31/17 % Change  
          

Operating Revenues

        
Service$15,898 $15,880 0.1  $63,020 $63,121 (0.2) 
Equipment 6,821  6,475 5.3   22,258  18,889 17.8  
Other 1,693  1,416 19.6   6,456  5,501 17.4  

Total Operating Revenues

 24,412  23,771 2.7   91,734  87,511 4.8  
          

Operating Expenses

        
Cost of services 2,351  2,210 6.4   9,251  8,886 4.1  
Cost of equipment 7,128  7,339 (2.9)  23,323  22,147 5.3  
Selling, general and administrative expense 4,552  4,760 (4.4)  16,604  17,876 (7.1) 
Depreciation and amortization expense 2,395  2,344 2.2   9,736  9,395 3.6  

Total Operating Expenses

 16,426  16,653 (1.4)  58,914  58,304 1.0  
          

Operating Income

$7,986 $7,118 12.2  $32,820 $29,207 12.4  

Operating Income Margin

 32.7% 29.9%   35.8% 33.4%  
          

Segment EBITDA

$10,381 $9,462 9.7  $42,556 $38,602 10.2  

Segment EBITDA Margin

 42.5% 39.8%   46.4% 44.1%  
          
          

Footnotes:

        
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.  
         
Intersegment transactions have not been eliminated.       
          

 

Verizon Communications Inc.

        
Wireless - Selected Operating Statistics      
         
          
Unaudited    12/31/18 12/31/17 % Change  
          

Connections (‘000)

        
Retail postpaid     113,353  110,854 2.3  
Retail prepaid     4,646  5,403 (14.0) 
Total retail     117,999  116,257 1.5  
          
          
  3 Mos. Ended 3 Mos. Ended    12 Mos. Ended 12 Mos. Ended    
Unaudited12/31/18 12/31/17 % Change  12/31/18 12/31/17 % Change  
          

Net Add Detail (‘000)

(1)

        
Retail postpaid 1,220  1,174 3.9   2,526  2,084 21.2  
Retail prepaid (90) (184)51.1   (757) (43) 
Total retail 1,130  990 14.1   1,769  2,041 (13.3) 
          
          

Account Statistics

        
Retail postpaid accounts (‘000) (2)     35,427  35,404 0.1  
Retail postpaid connections per account (2)     3.20  3.13 2.2  
Retail postpaid ARPA (3) (5)$135.11 $135.78 (0.5) $134.49 $135.99 (1.1) 
Retail postpaid I-ARPA (4) (5)$170.51 $167.19 2.0  $168.61 $166.28 1.4  
          

Churn Detail

        
Retail postpaid 1.08% 1.00%   1.03% 1.01%  
Retail 1.24% 1.24%   1.23% 1.25%  
          

Retail Postpaid Connection Statistics

(2)

        
Total smartphone postpaid phone base     92.2% 90.1%  
Total Internet postpaid base     19.7% 19%  
         

Other Operating Statistics

        
Capital expenditures (in millions)$2,342 $3,383 (30.8) $8,486 $10,310 (17.7) 
          
          

Footnotes:

        
(1)Connection net additions exclude acquisitions and adjustments. 
          
(2)Statistics presented as of end of period.        
          
(3)Retail postpaid ARPA - average service revenue per account from retail postpaid accounts. 
          
(4)Retail postpaid I-ARPA - average service revenue per account from retail postpaid account plus recurring device installment billings. 
          
(5)ARPA and I-ARPA for periods beginning after January 1, 2018 reflect the adoption of Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)”.  ARPA and I-ARPA for periods ending prior to January 1, 2018 were calculated based on the guidance per ASC Topic 605, "Revenue Recognition".  Accordingly, amounts are not calculated on a comparative basis. 
          
 The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance. 
          
 Intersegment transactions have not been eliminated.       
          
*Not meaningful        
          

 

Verizon Communications Inc.

        
Wireline - Selected Financial Results      
          
          
          
       (dollars in millions)  
                    
  3 Mos. Ended 3 Mos. Ended    12 Mos. Ended 12 Mos. Ended    
Unaudited12/31/18 12/31/17 % Change  12/31/18 12/31/17 % Change  
          

Operating Revenues

        
Consumer Markets$3,169 $3,188 (0.6) $12,589 $12,777 (1.5) 
Enterprise Solutions 2,217  2,285 (3.0)  8,840  9,167 (3.6) 
Partner Solutions 1,098  1,209 (9.2)  4,692  4,917 (4.6) 
Business Markets 836  885 (5.5)  3,397  3,585 (5.2) 
Other 53  50 6.0   242  234 3.4  

Total Operating Revenues

 7,373  7,617 (3.2)  29,760  30,680 (3.0) 
          

Operating Expenses

        
Cost of services 4,478  4,465 0.3   17,701  17,922 (1.2) 
Selling, general and administrative expense 1,597  1,558 2.5   6,151  6,274 (2.0) 
Depreciation and amortization expense 1,571  1,532 2.5   6,181  6,104 1.3  

Total Operating Expenses

 7,646  7,555 1.2   30,033  30,300 (0.9) 
          

Operating Income (Loss)

$(273)$62  $(273)$380  

Operating Income (Loss) Margin

 (3.7)% 0.8%   (0.9)% 1.2%  
          

Segment EBITDA

$1,298 $1,594 (18.6) $5,908 $6,484 (8.9) 

Segment EBITDA Margin

 17.6% 20.9%   19.9% 21.1%  
          
          

Footnotes:

        
 The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance. 
          
 Intersegment transactions have not been eliminated.       
          
*Not meaningful        
          

 

Verizon Communications Inc.

        
Wireline - Selected Operating Statistics      
          
          
          
          
Unaudited    12/31/18 12/31/17 % Change  
          

Connections (‘000)

        
Fios video connections       4,451    4,619  (3.6) 
Fios Internet connections       6,067    5,850  3.7  
Fios digital voice residence connections      3,803   3,905  (2.6) 
Fios digital connections      14,321   14,374  (0.4) 
High-speed Internet (HSI) connections       894    1,109  (19.4) 
Total broadband connections       6,961    6,959  —  
Total voice connections       11,732    12,821  (8.5) 
          
          
          
  3 Mos. Ended 3 Mos. Ended    12 Mos. Ended 12 Mos. Ended    
Unaudited12/31/18 12/31/17 % Change  12/31/18 12/31/17 % Change  
          

Net Add Detail (‘000)

        
Fios video connections  (46)  (29) (58.6)   (168)  (75) 
Fios Internet connections  54    47   14.9    217    197   10.2  
Fios digital voice residence connections  (30)  (15)   (102)  10   
Fios digital connections  (22)  3     (53)  132   
High-speed Internet (HSI) connections  (51)  (66) 22.7    (215)  (276) 22.1  
Total broadband connections  3    (19)   2    (79) 
Total voice connections  (277)  (279) 0.7    (1,089)  (1,118) 2.6  
          

Revenue Statistics

        
Fios revenues (in millions)$  3,046 $  2,959  2.9  $  11,939 $  11,691  2.1  
          

Other Operating Statistics

        
Capital expenditures (in millions)$  1,855 $  1,981  (6.4) $  6,255 $  5,339  17.2  
Wireline employees (‘000)      54.3   57.1   
          
          

Footnotes:

        
 The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance. 
          
 Intersegment transactions have not been eliminated.       
          
*Not meaningful        
          

 

Verizon Communications Inc.

            
Supplemental Information - Impact of Topic 606
             
We adopted Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)” on January 1, 2018, using the modified retrospective application. This method does not impact the prior periods, which continue to reflect the accounting treatment prior to the adoption of Topic 606. As a result, for items that were affected by our adoption of Topic 606, financial results of periods prior to January 1, 2018 are not comparable to the current period financial results.  To provide comparability to our results, we provide the following supplemental schedule which contains certain financial information on a pre adoption of Topic 606 basis.
             
             
             

Consolidated

            
          (dollars in millions)
  

3 Mos. Ended 12/31/18

 

3 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Service revenues and other $27,460  $27,780  $(320) $27,480 $300  1.1 
Wireless equipment revenues  6,821   6,340   481   6,475  (135) (2.1)

Total Operating Revenues

  34,281   34,120   161   33,955  165  0.5 
             

Operating Expenses

            
Cost of services  8,163   8,180   (17)  8,219  (39) (0.5)
Wireless cost of equipment  7,128   7,102   26   7,339  (237) (3.2)
Selling, general and administrative expense  9,410   9,861   (451)  8,480  1,381  16.3 
Depreciation and amortization expense  4,352   4,352      4,456  (104) (2.3)
Oath goodwill impairment  4,591   4,591        4,591  

Total Operating Expenses

  33,644   34,086   (442)  28,494  5,592  19.6 

Operating Income

 $637  $34  $603  $5,461 $(5,427) (99.4)
             
          (dollars in millions)
  

12 Mos. Ended 12/31/18

 

12 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Service revenues and other $108,605  $109,964  $(1,359) $107,145 $2,819  2.6 
Wireless equipment revenues  22,258   20,474   1,784   18,889  1,585  8.4 

Total Operating Revenues

  130,863   130,438   425   126,034  4,404  3.5 
             

Operating Expenses

            
Cost of services  32,185   32,240   (55)  30,916  1,324  4.3 
Wireless cost of equipment  23,323   23,189   134   22,147  1,042  4.7 
Selling, general and administrative expense  31,083   32,588   (1,505)  28,592  3,996  14.0 
Depreciation and amortization expense  17,403   17,403      16,954  449  2.6 
Oath goodwill impairment  4,591   4,591        4,591  

Total Operating Expenses

  108,585   110,011   (1,426)  98,609  11,402  11.6 

Operating Income

 $22,278  $20,427  $1,851  $27,425 $(6,998) (25.5)
             
             
             

Wireless

(1)(2)

            
          (dollars in millions)
  

3 Mos. Ended 12/31/18

 

3 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Service $15,898  $16,183  $(285) $15,880 $303  1.9 
Equipment  6,821   6,340   481   6,475  (135) (2.1)
Other  1,693   1,746   (53)  1,416  330  23.3 

Total Operating Revenues

  24,412   24,269   143   23,771  498  2.1 
             

Operating Expenses

            
Cost of services  2,351   2,351      2,210  141  6.4 
Cost of equipment  7,128   7,102   26   7,339  (237) (3.2)
Selling, general and administrative expense  4,552   4,985   (433)  4,760  225  4.7 
Depreciation and amortization expense  2,395   2,395      2,344  51  2.2 

Total Operating Expenses

  16,426   16,833   (407)  16,653  180  1.1 

Operating Income

 $7,986  $7,436  $550  $7,118 $318  4.5 
             
          (dollars in millions)
  

12 Mos. Ended 12/31/18

 

12 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Service $63,020  $64,222  $(1,202) $63,121 $1,101  1.7 
Equipment  22,258   20,474   1,784   18,889  1,585  8.4 
Other  6,456   6,624   (168)  5,501  1,123  20.4 

Total Operating Revenues

  91,734   91,320   414   87,511  3,809  4.4 
             

Operating Expenses

            
Cost of services  9,251   9,251      8,886  365  4.1 
Cost of equipment  23,323   23,189   134   22,147  1,042  4.7 
Selling, general and administrative expense  16,604   18,006   (1,402)  17,876  130  0.7 
Depreciation and amortization expense  9,736   9,736      9,395  341  3.6 

Total Operating Expenses

  58,914   60,182   (1,268)  58,304  1,878  3.2 

Operating Income

 $32,820  $31,138  $1,682  $29,207 $1,931  6.6 
             
             
             

Wireline

(1)(2)

            
          (dollars in millions)
  

3 Mos. Ended 12/31/18

 

3 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Consumer Markets $3,169  $3,156  $13  $3,188 $(32) (1.0)
Enterprise Solutions  2,217   2,217      2,285  (68) (3.0)
Partner Solutions  1,098   1,098      1,209  (111) (9.2)
Business Markets  836   835   1   885  (50) (5.6)
Other  53   47   6   50  (3) (6.0)

Total Operating Revenues

  7,373   7,353   20   7,617  (264) (3.5)
             

Operating Expenses

            
Cost of services  4,478   4,494   (16)  4,465  29  0.6 
Selling, general and administrative expense  1,597   1,616   (19)  1,558  58  3.7 
Depreciation and amortization expense  1,571   1,571      1,532  39  2.5 

Total Operating Expenses

  7,646   7,681   (35)  7,555  126  1.7 

Operating Income (Loss)

 $(273) $(328) $55  $62 $(390) 
             
          (dollars in millions)
  

12 Mos. Ended 12/31/18

 

12 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Operating Revenues

            
Consumer Markets $12,589  $12,588  $1  $12,777 $(189) (1.5)
Enterprise Solutions  8,840   8,840      9,167  (327) (3.6)
Partner Solutions  4,692   4,692      4,917  (225) (4.6)
Business Markets  3,397   3,395   2   3,585  (190) (5.3)
Other  242   207   35   234  (27) (11.5)

Total Operating Revenues

  29,760   29,722   38   30,680  (958) (3.1)
             

Operating Expenses

            
Cost of services  17,701   17,750   (49)  17,922  (172) (1.0)
Selling, general and administrative expense  6,151   6,257   (106)  6,274  (17) (0.3)
Depreciation and amortization expense  6,181   6,181      6,104  77  1.3 

Total Operating Expenses

  30,033   30,188   (155)  30,300  (112) (0.4)

Operating Income (Loss)

 $(273) $(466) $193  $380 $(846) 
             
             
             

Fios Revenues

            
          (dollars in millions)
  

3 Mos. Ended 12/31/18

 

3 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

 

$ Change

 

% Change

             

Fios Revenues

 $3,046  $3,033  $13  $2,959 $74  2.5 
             
             
          (dollars in millions)
  

12 Mos. Ended 12/31/18

 

12 Mos. Ended 12/31/17

 

Year Over Year

Unaudited 

As reported

 

Balances without adoption of Topic 606

 

Adjustments

 

As reported

 

$ Change

 

% Change

             

Fios Revenues

 $11,939  $11,934  $5  $11,691 $243  2.1 
             
             

Footnotes:

            
             
(1)  The financial results above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
             
(2)  Intersegment transactions have not been eliminated.
             
*  Not meaningful            
             

 

Verizon Communications Inc.

          
Non-GAAP Reconciliations - Consolidated Verizon       
           
           

Consolidated EBITDA, Consolidated EBITDA Margin, Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Excluding Operating Results from Divested Businesses

    
      (dollars in millions)  
  3 Mos. 3 Mos. 3 Mos. 3 Mos.3 Mos. 3 Mos. 3 Mos. 3 Mos.  
  Ended Ended Ended EndedEnded Ended Ended Ended  
Unaudited 12/31/18 9/30/18 6/30/18 3/31/1812/31/17 9/30/17 6/30/17 3/31/17  
           

Consolidated Net Income

 $2,065 $5,062 $4,246 $4,666$18,783 $3,736 $4,478 $3,553  
Add/(subtract):          
Provision (benefit) for income taxes  (698) 1,613  1,281  1,388 (15,849) 1,775  2,489  1,629  
Interest expense  1,199  1,211  1,222  1,201 1,219  1,164  1,218  1,132  
Depreciation and amortization expense  4,352  4,377  4,350  4,324 4,456  4,272  4,167  4,059  

Consolidated EBITDA

 $6,918 $12,263 $11,099 $11,579$8,609 $10,947 $12,352 $10,373  
           
Add/subtract:          
Other (income) expense, net* $(1,865)$(214)$(360)$75$1,302 $291 $(199)$627  
Equity in losses (earnings) of unconsolidated businesses†  (64) 3  228  19 6  22  28  21  
Oath goodwill impairment  4,591               
Severance charges  1,818    339   302    195    
Product realignment charges‡      450   463        
Gain on spectrum license transactions         (144)     (126) 
Net gain on sale of divested businesses             (1,774)   
Acquisition and integration related charges‡  187  130  109  105 154  166  559    
   4,667  (81) 766  199 2,083  479  (1,191) 522  

Consolidated Adjusted EBITDA

 $11,585 $12,182 $11,865 $11,778$10,692 $11,426 $11,161 $10,895  
Operating results from divested businesses‡           (17) (50) (104) 

Consolidated Adjusted EBITDA Excluding Operating Results from Divested Businesses

$11,585 $12,182 $11,865 $11,778$10,692 $11,409 $11,111 $10,791  

Consolidated Operating Revenues - Quarter to Date

 $34,281    $33,955     

Operating Income Margin - Quarter to Date

  1.9%    16.1%    

Consolidated EBITDA Margin - Quarter to Date

  20.2%    25.4%    

Consolidated Adjusted EBITDA Margin - Quarter to Date

  33.8%    31.5%    
           
*  Includes Pension and benefits mark-to-market adjustments and Early debt redemption costs, where applicable.   
           
†  Includes Product realignment charges, where applicable.   
           
‡  Excludes depreciation and amortization expense.   
           

 

Verizon Communications Inc.

         
Non-GAAP Reconciliations - Consolidated Verizon     
          
          

Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio

      
       (dollars in millions) 
Unaudited      12/31/18 12/31/17  
          

Net Debt

         
Debt maturing within one year      $7,190 $3,453  
Long-term debt       105,873  113,642  

Total Debt

       113,063  117,095  
Less Cash and cash equivalents       2,745  2,079  

Net Debt

      $110,318 $115,016  

Net Debt to Consolidated Adjusted EBITDA Ratio

      2.3x 2.6x  
          
          
          

Adjusted Earnings per Common Share (Adjusted EPS)

(1)

       
          
Unaudited 

3 Mos. Ended 12/31/18

  

3 Mos. Ended 12/31/17

  
 

Pre-tax

Tax

After-Tax

 

Pre-tax

Tax

After-Tax

  

EPS

   $0.47    $4.56  
Severance, pension and benefits charges$165$(57)$108  0.03 $1,196 $(464)$732  0.18  
Acquisition and integration related charges 189 (47) 142  0.03  154  (59) 95  0.02  
Oath goodwill impairment 4,591 (64) 4,527  1.09          
Wireless legal entity restructuring  (2,065) (2,065) (0.50)         
Early debt redemption costs        681  (272) 409  0.10  
Product realignment charges        671  (210) 461  0.11  
Gain on spectrum license transactions        (144) 53  (91) (0.02) 
Impact of adoption of tax reform          (16,761) (16,761) (4.10) 
 $4,945$(2,233)$2,712  0.65 $2,558 $(17,713)$(15,155) (3.71) 

Adjusted EPS

   $1.12    $0.86  
          
          
Unaudited 

12 Mos. Ended 12/31/18

  

12 Mos. Ended 12/31/17

  
 

Pre-tax

Tax

After-Tax

 

Pre-tax

Tax

After-Tax

  

EPS

   $3.76    $7.36  
Severance, pension and benefits charges$50$(27)$23  0.01 $1,391 $(541)$850  0.21  
Early debt redemption costs 725 (189) 536  0.13  1,983  (788) 1,195  0.29  
Product realignment charges 658 (149) 509  0.12  671  (210) 461  0.11  
Acquisition and integration related charges 553 (134) 419  0.10  884  (334) 550  0.13  
Oath goodwill impairment 4,591 (64) 4,527  1.10          
Wireless legal entity restructuring  (2,065) (2,065) (0.50)         
Gain on spectrum license transactions        (270) 102  (168) (0.04) 
Net gain on sale of divested businesses        (1,774) 843  (931) (0.23) 
Impact of adoption of tax reform          (16,761) (16,761) (4.10) 
 $6,577$(2,628)$3,949  0.96 $2,885 $(17,689)$(14,804) (3.62) 

Adjusted EPS

   $4.71    $3.74  
          
          
(1)  Adjusted EPS may not add due to rounding.         
          

 

Verizon Communications Inc.

     
Non-GAAP Reconciliations - Segments    
      
      

Segment EBITDA and Segment EBITDA Margin

    
      

Wireless

 (dollars in millions) 
      
Unaudited 3 Mos. Ended 12/31/18  3 Mos. Ended 12/31/17  
      

Operating Income

 $7,986  $7,118  
Add Depreciation and amortization expense  2,395   2,344  

Segment EBITDA

 $10,381  $9,462  
Year over year change  9.7%   
      
Total operating revenues $24,412  $23,771  

Operating Income Margin

  32.7%  29.9% 

Segment EBITDA Margin

  42.5%  39.8% 
      
      
  (dollars in millions) 
      
Unaudited 12 Mos. Ended 12/31/18  12 Mos. Ended 12/31/17  
      

Operating Income

 $32,820  $29,207  
Add Depreciation and amortization expense  9,736   9,395  

Segment EBITDA

 $42,556  $38,602  
      
Total operating revenues $91,734  $87,511  

Operating Income Margin

  35.8%  33.4% 

Segment EBITDA Margin

  46.4%  44.1% 
      
      

Wireline

 (dollars in millions)  
      
Unaudited 3 Mos. Ended 12/31/18  3 Mos. Ended 12/31/17  
      

Operating Income (Loss)

 $(273) $62  
Add Depreciation and amortization expense  1,571   1,532  

Segment EBITDA

 $1,298  $1,594  
      
Total operating revenues $7,373  $7,617  

Operating Income (Loss) Margin

  (3.7)%  0.8% 

Segment EBITDA Margin

  17.6%  20.9% 
      
      
 (dollars in millions)  
      
Unaudited 12 Mos. Ended 12/31/18  12 Mos. Ended 12/31/17  
      

Operating Income (Loss)

 $(273) $380  
Add Depreciation and amortization expense  6,181   6,104  

Segment EBITDA

 $5,908  $6,484  
      
Total operating revenues $29,760  $30,680  

Operating Income (Loss) Margin

  (0.9)%  1.2% 

Segment EBITDA Margin

  19.9%  21.1% 
      

 

Verizon Communications Inc.

      
EBITDA Excluding Impact of Topic 606(1)   
       
       

Consolidated

    
 (dollars in millions)    
   3 Months    
   Ended    
Unaudited  12/31/18    
       
       

Consolidated Net Income

  $2,065    
Add/subtract:      
Benefit for income taxes   (698)   
Interest expense   1,199    
Depreciation and amortization expense   4,352    

Consolidated EBITDA

  $6,918    
       
Add/subtract:      
Other income, net*  $(1,865)   
Equity in earnings of unconsolidated businesses†   (64)   
Oath goodwill impairment   4,591    
Severance, pension and benefits charges   1,818    
Acquisition and integration related charges‡   187    
    4,667    
       

Consolidated Adjusted EBITDA

  $11,585    
Less Impact of Topic 606   603    

Consolidated Adjusted EBITDA Excluding Impact of Topic 606

  $10,982    

Total operating revenues

  $34,120    

Consolidated Adjusted EBITDA Margin Excluding Impact of Topic 606

   32.2%   
       
*  Includes Pension and benefits mark-to-market adjustments and Early debt redemption costs, where applicable.   
       
†  Includes Product realignment charges, where applicable. 
       
‡  Excludes depreciation and amortization expense. 
       
       

Wireless

    
 (dollars in millions)   
   3 Months   
   Ended   
Unaudited  12/31/18   
       

Operating Income

  $7,436    
Add Depreciation and amortization expense   2,395    

Segment EBITDA

  $9,831    

Total operating revenues

  $24,269    

Segment EBITDA Margin

   40.5%   
       
       

Wireline

    
       
 (dollars in millions)   
   3 Months   
   Ended   
Unaudited

 

 

12/31/18   
       

Operating Loss

  $(328)   
Add Depreciation and amortization expense   1,571    

Segment EBITDA

  $1,243    

Total operating revenues

  $7,353    

Segment EBITDA Margin

   16.9%   
       
       
(1)  Amounts for the three months ended December 31, 2018 exclude the impact of Accounting Standard Update 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which we adopted on January 1, 2018.   
       

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