Verizon Profits Beat - Guides Up
October 21, 2020
Verizon Communications reported strong third-quarter results and revised
earnings guidance upward for the year. The company's performance was
highlighted by increases in wireless service revenue and total Fios
Internet net additions.
Verizon earned $1.25 per share which
was more than the $1.22 investors sought.
“We continue to demonstrate our strength and resilience by delivering
very strong third quarter financial results,” said Verizon Chairman and
CEO Hans Vestberg. “We are energized by the transformational technology
that our 5G Ultra Wideband and 5G nationwide bring. Our purpose-driven
culture paired with our network leadership will shape the future, for
For third-quarter 2020, Verizon reported EPS of $1.05, compared with
$1.25 in third-quarter 2019. On an adjusted basis (non-GAAP),
third-quarter 2020 EPS, excluding a special item, was $1.25, compared
with adjusted EPS of $1.25 in third-quarter 2019. The company estimates
that third-quarter 2020 EPS and adjusted EPS included approximately
negative 5 cents of COVID-19-related net impacts. Third-quarter 2020 EPS
included a net pre-tax charge of about $1.1 billion related to a
mark-to-market adjustment for pension liabilities.
In third-quarter 2020, Verizon's results also included the continued
effects of a reduction in benefits from the adoption of a revenue
recognition standard, primarily due to the deferral of commission
expense. The net impact was 2 cents in third-quarter 2020 and 7 cents
year to date.
consolidated operating revenues in third-quarter 2020 were $31.5
billion, down 4.1 percent from third-quarter 2019. This decline
was due to lower customer activity and the timing of certain
cash flow from operations totaled $32.5 billion, an increase of
$5.7 billion year over year. This growth was a result of the
continued performance and strength of the business, a
non-recurring tax item in second-quarter 2020, improvements in
working capital primarily due to lower volumes, and payments
related to the Voluntary Separation Plan in full-year 2019 that
did not repeat this year.
capital expenditures were $14.2 billion. Capital expenditures
continue to support the growth in traffic on the company's 4G
LTE network, the launch and continued build-out of the company's
5G Ultra Wideband and nationwide networks, the upgrade to its
Intelligent Edge Network architecture, and the deployment of
significant fiber in more than 60 markets.
- In 2018, Verizon
announced a goal to achieve $10 billion in cumulative cash
savings by the end of 2021. This initiative has yielded $8.3
billion of cumulative cash savings since the program began and
is on track to achieve its target. The company expects to
continue its focus on operational efficiencies after the current
target is achieved to identify additional long-term
transformation initiatives and deliver the related cost
- The company
ended third-quarter 2020 with free cash flow (non-GAAP) of $18.3
billion, an increase of $3.9 billion year over year, and $9.0
billion of cash on hand.
unsecured debt balance increased year over year by $4.7 billion
to $105.5 billion in third-quarter 2020, and the company’s net
unsecured debt (non-GAAP) decreased by $1.3 billion year over
year to $96.5 billion. Verizon's net income in third-quarter
2020 was $4.5 billion, and its adjusted EBITDA (non-GAAP) was
$11.9 billion. Verizon's net unsecured debt to adjusted EBITDA
ratio (non-GAAP) was 2.1 times versus its targeted range of 1.75
to 2.0 times. The company remains focused on achieving its net
unsecured debt to EBITDA target while maintaining a strong
financial position to give it flexibility to invest in the
- Total Verizon
Consumer revenues were $21.7 billion, a decrease of 4.3 percent
year over year, primarily driven by a significant decrease in
wireless equipment revenue due to reduced customer activity.
third-quarter 2020, Verizon gradually reopened all of its
company-operated retail stores, implementing practices to
reinforce social distancing such as touch-less retail,
appointment scheduling, and curbside pickup. In third-quarter
2020, Consumer reported 136,000 wireless retail postpaid net
additions. This consisted of 142,000 phone net additions and
113,000 tablet net losses, offset by 107,000 other connected
device net additions. Postpaid smartphone net additions were
wireless service revenues were $13.4 billion in third-quarter
2020, a 0.7 percent decrease year over year.
- Total retail
postpaid churn was 0.80 percent in third-quarter 2020, and
retail postpaid phone churn was 0.63 percent.
reported 139,000 Fios Internet net additions in third-quarter
2020, an increase from 30,000 Fios Internet net additions in
third-quarter 2019. Consumer and Business reported 144,000 total
Fios Internet net additions, the most Fios Internet net
additions since fourth-quarter 2014. Consumer reported 61,000
Fios Video net losses in third-quarter 2020, reflecting the
ongoing shift from traditional linear video to over-the-top
- In third-quarter
2020, segment operating income was $7.4 billion, a decrease of
0.7 percent year over year, and segment operating income margin
was 34.2 percent, an increase from 33.0 percent in third-quarter
2019. Segment EBITDA (non-GAAP) totaled $10.3 billion in
third-quarter 2020, flat year over year. Segment EBITDA margin
(non-GAAP) was 47.4 percent in third-quarter 2020, up from 45.3
percent in third-quarter 2019, and included approximately 60
basis points of headwind from the deferral of commission
Verizon Business revenues were $7.7 billion, down 1.7 percent
year over year. The Business segment continues to be resilient
through a challenging environment as the company provides
critical solutions to customers across state and local
government agencies and education providers.
reported 417,000 wireless retail postpaid net additions in
third-quarter 2020. This consisted of 141,000 phone net
additions, 86,000 tablet net additions, and 190,000 other
connected device additions.
wireless service revenues were $3.0 billion in third-quarter
2020, a 4.9 percent increase year over year, primarily driven by
Public Sector and Small and Medium Business.
- Total retail
postpaid churn was 1.19 percent in third-quarter 2020, and
retail postpaid phone churn was 0.96 percent.
- In third-quarter
2020, segment operating income was $923 million, a decrease of
5.5 percent year over year, and segment operating income margin
was 11.9 percent, compared with 12.4 percent in third-quarter
2019. Segment EBITDA (non-GAAP) totaled $2.0 billion in
third-quarter 2020, a decrease of 1.9 percent year over year.
Segment EBITDA margin (non-GAAP) was 25.2 percent, which was
flat year over year.
- Total Verizon
Media revenues were $1.7 billion, down 7.4 percent year over
year, but an increase of 21.2 percent from second-quarter 2020.
Year over year revenue trends improved each month during
third-quarter 2020. Trends resulting from the COVID-19 pandemic
continued to impact both search and advertising in the quarter,
though Media continues to drive increased customer engagement on
its owned and operated properties.
Outlook and guidance
Based on three
quarters of resilient earnings and projected trends into
fourth-quarter 2020, Verizon is updating financial guidance for
- The company now
expects adjusted EPS growth (non-GAAP) of 0 to 2 percent, an
update from prior guidance for 2020 adjusted EPS growth (non-GAAP)
of -2 to 2 percent. This update includes the previously
discussed accounting headwinds, impacts from COVID-19, and new
device launches in fourth-quarter 2020.
- The company now
expects total wireless service revenue growth of at least 2
percent in fourth-quarter 2020 compared to last year.
Verizon expects the
following results for full-year 2020:
- Capital spending
to now be at the higher end of the guided range of $17.5 billion
to $18.5 billion.
effective income tax rate (non-GAAP) in the range of 23 percent
to 25 percent.