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Strong wireless service revenue growth highlights Verizon’s 2Q results

Verizon Communications Inc. 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.
  • 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.
  • 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.

CT Bureau

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