Verizon Keeps 5G Plans - Withdraws Revenue
April 27, 2020
Verizon reported first-quarter results highlighted by strong earnings
per share performance, increased cash flow, and a further commitment to
"Verizon began 2020 with strong operational performance," said Chairman
and CEO Hans Vestberg. "In an unprecedented time, Verizon took decisive
and balanced actions that will serve our stakeholders in the long term,
including protecting our employees, maintaining our network quality and
reliability, serving our customers, and supporting our communities. We
will emerge from this crisis stronger, knowing we provided critical
connectivity to our customers, and especially our first responders,
while maintaining our commitment to investing in our 5G and Fiber
strategies. We are particularly proud of our employees who continue to
deliver essential services to our customers and those on the front lines
so they can serve others."
For first-quarter 2020, Verizon reported EPS of $1.00, compared with
$1.22 in first-quarter 2019. On an adjusted basis (non-GAAP),
first-quarter 2020 EPS, excluding special items, was $1.26, compared
with adjusted EPS of $1.20 in first-quarter 2019. The company estimates
that first-quarter 2020 EPS and adjusted EPS included approximately
negative 4 cents of COVID-19-related net impacts, primarily driven by an
increase to its bad debt reserve.
With Verizon pulling down a
$1.26 EPS, the firm beat the Street $1.22 EPS estimate. The Telco's revenue
fell 1.6% to $31.6 billion from a year earlier which was short of the
$32.27 billion expectation.
The company guided its full-year
adjusted earnings per share outlook down to between a growth of 2% and a
negative 2%. Previously, it expected a growth of 2% to 4%.
The company withdrew its
financial guidance related to Consolidated Revenues.
First-quarter 2020 EPS included a pre-tax loss from special items of
about $1.4 billion, which consisted of a $1.2 billion loss related to
the FCC's recently completed spectrum Auction 103 and a net charge of
$182 million related to a mark-to-market adjustment for pension
In first-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 3 cents in first-quarter 2020.
- Total consolidated operating
revenues in first-quarter 2020 were $31.6 billion, down 1.6 percent
from first-quarter 2019. This decline was primarily the result of
growth in wireless service revenue in the Consumer and Business
segments, more than offset by sharp reductions in equipment revenue,
after social distancing measures were adopted in March, limiting
in-store customer engagement.
- First-quarter 2020 cash flow from
operations totaled $8.8 billion, an increase of $1.7 billion from
first-quarter 2019. This year over year growth was primarily the
result of Voluntary Separation Program payments and voluntary
pension contributions made in first-quarter 2019 that did not repeat
this year, as well as working capital improvements this quarter.
- Capital expenditures in
first-quarter 2020 were $5.3 billion. Capital expenditures continue
to support the capacity for unprecedented traffic growth across
Verizon's networks and the deployment of fiber and additional cell
sites to support the company's 5G Ultra Wideband rollout.
- In 2018, Verizon announced a goal
to achieve $10 billion in cumulative cash savings by the end of
2021. This initiative has yielded $6.3 billion of cumulative cash
savings since the program began and is on track to achieve its
- Bad debt expenses increased in
first-quarter 2020 as a result of changing expectations around
customer payments during the COVID-19 crisis. The company increased
its bad debt reserve in first-quarter by $228 million based on the
expected number of customers who will seek payment relief under the
Keep Americans Connected pledge.
- The company ended first-quarter
2020 with $7 billion of cash on hand, an increase of $4.5 billion
from year-end 2019. Carrying a higher cash balance is part of the
company's liquidity planning strategy, which included a $3.5 billion
bond offering completed in March.
- Total Verizon Consumer revenues
were $21.8 billion, a decrease of 1.7 percent year over year, driven
by strong service revenue and other revenue growth, more than offset
by a significant decrease in wireless equipment revenue due to low
- As a result of COVID-19, Verizon
closed nearly 70 percent of its company-operated retail locations
and reduced in-store service hours to promote social distancing.
This resulted in a significant drop in customer activity and device
volumes for the quarter. Consumer reported 525,000 wireless retail
postpaid net losses in first-quarter 2020. This consisted of 307,000
phone net losses and 227,000 tablet net losses, offset by 9,000
other connected device net additions. Postpaid smartphone net losses
- Consumer wireless service
revenues were $13.5 billion in first-quarter 2020, a 0.9 percent
increase year over year.
- Total retail postpaid churn was
1.01 percent in first-quarter 2020, and retail postpaid phone churn
was 0.77 percent.
- Consumer reported 59,000 Fios
Internet net additions as work-from-home, in-home schooling, and
other related measures increased the demand for high-quality
broadband offerings. Consumer reported 84,000 Fios Video net losses
in first-quarter 2020, reflecting the ongoing shift from traditional
linear video to over-the-top offerings.
- In first-quarter 2020, segment
operating income was $7.3 billion, an increase of 0.4 percent year
over year, and segment operating income margin was 33.5 percent, an
increase from 32.7 percent in first-quarter 2019. Segment EBITDA
(non-GAAP) totaled $10.1 billion in first-quarter 2020, a decrease
of 0.4 percent year over year. Segment EBITDA margin (non-GAAP) was
46.4 percent in first-quarter 2020, up from 45.8 percent in
- Total Verizon Business revenues
were $7.7 billion, down 0.5 percent year over year. Business trends
were strong throughout first-quarter 2020. Starting in March,
Business saw heightened demand for its products and services,
specifically for mobility, jetpacks, VPN services and high speed
circuit capacity, and experienced increased activity to support
front line crisis responders, new work-from-home and home schooling
arrangements, and other demands for critical connectivity services.
- Business reported 475,000
wireless retail postpaid net additions in first-quarter 2020,
compared with 264,000 in first-quarter 2019. This consisted of
239,000 phone net additions, 60,000 tablet net additions, and
176,000 other connected device additions.
- Business' customer-centric
approach led to an effective response to the needs of its business
customers at the onset of the COVID-19 crisis. In wireless, this led
to a total retail postpaid churn of 1.30 percent in first-quarter
2020, and retail postpaid phone churn of 1.02 percent.
- In first-quarter 2020, segment
operating income was $954 million, a decrease of 9.0 percent year
over year, and segment operating income margin was 12.4 percent,
compared with 13.6 percent in first-quarter 2019. Segment EBITDA
(non-GAAP) totaled $2.0 billion in first-quarter 2020, a decrease of
5.8 percent year over year. Segment EBITDA margin (non-GAAP) was
25.6 percent, down from 27.1 percent in first-quarter 2019.
- Total Verizon Media revenues were
$1.7 billion, down 4.0 percent year over year, driven almost
entirely by COVID-19 impacts. Prior to the COVID-19 crisis, year
over year revenue trends continued the steady improvement seen in
full-year 2019. Verizon Media has seen increased levels of customer
engagement on its platforms, but advertising rates have declined in
the current environment.
Based on the unprecedented magnitude
of current conditions, Verizon is updating financial guidance for
- The company now expects adjusted
EPS growth (non-GAAP) of -2 to 2 percent, an update from prior
guidance for 2020 adjusted EPS growth (non-GAAP) of 2 to 4 percent.
This updated expectation is based on a scenario that assumes
significant headwinds prevailing through second-quarter 2020.
- The company is withdrawing
financial guidance related to Consolidated Revenues.
Verizon also expects the following:
- Capital spending to be in the
range of $17.5 billion to $18.5 billion as previously announced, to
facilitate network activity and help support the economy during this
period of disruption.
- Adjusted effective income tax
rate (non-GAAP) in the range of 23 percent to 25 percent.