Strong wireless service revenue growth highlights Verizon’s 4Q and 2022 results

Verizon Communications Inc. (NYSE, Nasdaq: VZ) closed 2022 with fourth-quarter results marked by wireless service revenue growth and the highest total wireless retail postpaid net additions3 in seven years.

“We delivered on the operational expectations and financial targets that we set in the second half of 2022,” said Verizon Chairman and CEO Hans Vestberg. “We are rapidly building out our C-Band spectrum with the most aggressive network deployment in our company’s history and are well positioned to improve and accelerate our performance. Wireless mobility and nationwide broadband will be two of the most significant contributors to our growth for the next several years.

For fourth-quarter 2022, Verizon reported EPS of $1.56, compared with $1.11 in fourth-quarter 2021. On an adjusted basis1, excluding special items, EPS was $1.19 in fourth-quarter 2022, compared with adjusted EPS1 of $1.33 in fourth-quarter 20212.

Fourth-quarter 2022 earnings included a pre-tax net gain from special items of approximately $2.1 billion. This included a net pre-tax benefit of approximately $2.5 billion related to a mark-to-market adjustment for pension and OPEB (other post-employment benefits) liabilities, a $304 million charge related to severance and the impacts of amortization of intangible assets related to TracFone and other acquisitions of $115 million.

For full-year 2022, Verizon reported $5.06 in EPS, compared with $5.32 for full-year 2021. On an adjusted basis1, excluding special items, 2022 EPS was $5.18, compared with $5.50 for 20212.

Consolidated results

• Total consolidated operating revenue in fourth-quarter 2022 of $35.3 billion, up 3.5 percent from fourth-quarter 2021. Revenue growth was driven by service and other revenue and equipment revenue. Full-year 2022 consolidated operating revenue was $136.8 billion, up 2.4 percent year over year.
• Total wireless service revenue5 in fourth-quarter 2022 increased 5.9 percent year over year. This increase was driven by unlimited plan migrations, the company’s highest total wireless retail postpaid net additions in seven years, pricing actions that were implemented beginning in June 2022 and a full quarter contribution from TracFone. Full-year 2022 wireless service revenue5 increased 8.6 percent year over year. The results for both fourth-quarter 2021 and full-year 2021 included a partial contribution from the acquisition of
• TracFone, which was completed in November 2021.
• Net income of $6.7 billion, an increase of 41.4 percent compared to fourth-quarter 2021, and adjusted EBITDA1 of $11.7 billion, a decline of 0.2 percent year over year.
• Cash flow from operations totaled $37.1 billion in 2022, a decrease from $39.5 billion in 2021. This decline was primarily driven by higher device payment receivables as the company’s device payment portfolio increased by approximately $5 billion during 2022.
• Full-year 2022 capital expenditures were $23.1 billion, including C-Band spending of $6.2 billion.
• The company ended 2022 with free cash flow1 of $14.1 billion, a decrease from $19.3 billion at year-end 2021.
• Verizon’s unsecured debt as of the end of fourth-quarter 2022 decreased by $766 million sequentially to $130.6 billion. The company’s net unsecured debt1 balance decreased sequentially by $1.3 billion to $128.0 billion, and its net unsecured debt to adjusted EBITDA ratio1 at quarter-end was approximately 2.7 times.

Verizon Consumer results

• Total Verizon Consumer revenue was $26.8 billion, an increase of 4.2 percent year over year, driven by wireless service revenue. For full-year 2022, total Verizon Consumer revenue was $103.5 billion, an increase of 8.6 percent from full-year 2021.
• Wireless service revenue increased 6.1 percent year over year. For full-year 2022, total Consumer wireless service revenue was $61.5 billion, an increase of 9.6 percent from full-year 2021. This increase was driven by premium adoption, overall postpaid connection growth, pricing actions that were implemented beginning in June 2022 and the inclusion of TracFone results.
• Consumer wireless retail postpaid churn3 was 1.06 percent in fourth-quarter 2022, and wireless retail postpaid phone churn3 was 0.86 percent.
• In fourth-quarter 2022, Consumer reported 41,000 wireless retail postpaid phone net additions3. Consumer ended fourth-quarter 2022 with 59 percent of its postpaid wireless phone customers having 5G-capable devices.
• Consumer reported 175,000 wireless retail prepaid net losses3 in fourth-quarter 2022.
• Consumer reported 262,000 fixed wireless net additions and 56,000 Fios Internet net additions in fourth-quarter 2022. For full-year 2022, Consumer reported 776,000 fixed wireless net additions and 199,000 Fios Internet net additions. Consumer Fios revenue was $2.9 billion in fourth-quarter 2022, flat year over year. Full-year 2022 Consumer Fios revenue was $11.6 billion, an increase of 0.6 percent from full-year 2021.
• In fourth-quarter 2022, Consumer operating income was $7.0 billion, a decrease of 4.4 percent year over year, and segment operating income margin was 26.3 percent, a decrease from 28.6 percent in fourth-quarter 2021. Full-year 2022 Consumer operating income was $28.8 billion and segment operating income margin was 27.9 percent, a decrease from 31.4 percent in full-year 2021. Segment EBITDA1 in fourth-quarter 2022 was $10.1 billion, a decrease of 2.0 percent year over year. This decline was due to higher promotional expense related to device subsidies. Segment EBITDA margin1 was 37.9 percent, a decrease from 40.3 percent in fourth-quarter 2021. For the full year, segment EBITDA margin1 was 40.2 percent in 2022, a decrease from 43.7 percent in 2021.

Verizon Business results

• Total Verizon Business revenue was $7.9 billion in fourth-quarter 2022, an increase of 1.2 percent year over year. Growth was primarily driven by Small and Medium Business mobility, partially offset by wireline declines. For full-year 2022, total Verizon Business revenue was $31.1 billion, flat year over year, as strong wireless performance was offset by wireline declines.
• Business wireless service revenue was $3.3 billion, an increase of 4.7 percent year over year. This growth was driven predominantly by the continued momentum in adding more customers onto the platform. Full-year 2022 Business wireless service revenue was $12.8 billion, an increase of 3.9 percent compared to full-year 2021.
• Business reported 455,000 wireless retail postpaid net additions3 in fourth-quarter 2022, including 176,000 postpaid phone net additions3. This was the sixth consecutive quarter that Business reported more than 150,000 postpaid phone net additions.
• Business wireless retail postpaid churn3 was 1.38 percent in fourth-quarter 2022, and wireless retail postpaid phone churn3 was 1.06 percent.
• Business reported 117,000 fixed wireless net additions in fourth-quarter 2022.
• In fourth-quarter 2022, Verizon Business operating income was $585 million, a decrease of 26.5 percent year over year, and segment operating income margin was 7.4 percent, a decrease from 10.2 percent in fourth-quarter 2021. Full-year 2022 segment operating income was $2.6 billion and segment operating income margin was 8.5 percent, compared with 11.1 percent in full-year 2021. Segment EBITDA1 was $1.7 billion in fourth-quarter 2022, a decrease of 8.2 percent year over year, which reflected higher subsidies due to increased activations and sales-related expense, as well as declines in high margin wireline revenues. Segment EBITDA margin1 was 21.3 percent in fourth-quarter 2022, a decrease from 23.5 percent in fourth-quarter 2021. For the full year, segment EBITDA margin1 was 22.3 percent, a decrease from 24.2 percent in 2021.

Outlook and guidance
For 2023, Verizon expects the following:

• Total wireless service revenue growth4 5 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, including the final approximately $1.75 billion of the incremental $10 billion of C-Band-related capital spending.

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).

Adjusted EPS for the prior year period has been reclassified to conform to current period presentation.

At the end of the fourth quarter of 2022, Verizon fully decommissioned its 3G network, as a result of which approximately 909,000 wireless retail postpaid connections (576,000 Consumer and 333,000 Business connections), including 392,000 wireless retail postpaid phone connections (180,000 Consumer and 212,000 Business connections), and 237,000 wireless retail prepaid connections were disconnected from its network. The impact of the 3G network shutdown has been excluded for purposes of calculating wireless retail net additions and wireless churn for the respective periods.

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.

Total wireless service revenue represents the sum of Consumer and Business segments.

CT Bureau