Verizon Communications Inc. (VZ) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the Verizon First quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for questions following the presentation. . Today's conference is being recorded. If you have any objections, you may disconnect at this time. Brady Connor: Thanks, Brad. Good morning, and welcome to our first quarter earnings conference call. This is Brady Connor, and I am here with our Chairman and Chief Executive Officer, Hans Vestberg; and Matt Ellis, our Chief Financial Officer. As a reminder, our earnings release, financial and operating information and the presentation slides are available on our Investor Relations website. A replay and transcript of this call will also be made available on our website. Before we get started, I'd like to draw your attention to our Safe Harbor statement on Slide 2. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. The quarterly growth rates discussed in our presentation slides and during our formal remarks are on a year-over-year basis, unless otherwise noted as sequential. Now let's take a look at consolidated earnings for the first quarter. In the first quarter, we reported earnings of $1.27 per share on a GAAP basis. Reported first quarter earnings include a pre-tax loss from a special item of approximately $223 million related to the sale of certain wireless licenses. Excluding the effects of this special item, adjusted earnings per share was $1.31 in the first quarter. On April 8, we announced a recall process for approximately 2.5 million Jetpack units, which impacted some customers enrolled in our distance learning programs. The overall impact included within consolidated operating income was approximately $160 million during the quarter, split between $100 million in the business segment and the remaining $60 million in consumer. The impact included within reported and adjusted earnings per share was $0.03 in the first quarter. With that, I'll now turn the call over to Hans to take us through a recap of the first quarter. Hans Vestberg: Thanks, Brady, and welcome to all to this first quarter earnings call. We marked more than one year since the devastating effects of COVID-19. While we see significant progress in vaccination, customer sentiment and recover our economy, there is still a lot to go before we're back to normal. Matthew Ellis : Thank you, Hans. And good morning, everyone. As Hans mentioned in his prepared remarks, the first quarter has been a truly exciting and transformative period for our company. I am pleased to report that we're off to an excellent start for the year based on our strong operational and financial performance. We are seeing continued strength in our core business with traction across all five of our growth vectors, driving higher revenues and increased demand for our products and services. With the positive momentum exiting the first quarter and the ongoing recovery of business activity, we are highly confident that our actions in the marketplace will deliver strong results throughout the year. In the first quarter, consolidated operating revenue was $32.9 billion, up year-over-year by 4.0%. High quality sustainable wireless service revenue growth, a recovery in wireless equipment revenues, strong Fios momentum, and excellent digital advertising trends resulted in revenue growth across consumer, business and media. Total wireless service revenues were up 2.4% year-over-year, an acceleration from the 2.2% year-over-year growth that we delivered in the fourth quarter. Additional details on total wireless performance are provided in the financial and operating information and the supplemental earnings release schedules on our website. Total Fios revenues were up 2.5% year-over-year, driven by the strong broadband volumes in recent quarters. Our portfolio of mobility and broadband products and services continues to lead the industry, delivering value to our customers. And we are well positioned to maintain and expand our leadership position as we enter new markets and broaden our offerings and network capabilities. Hans Vestberg : Thank you, Matt. Let me sum this up in a couple of easy buckets. First of all, our strategy is unchanged. Our focus is clear. We're going to accelerate our multi-purpose network strategy, including the C-Band that were required. We're going to focus on amplify and accelerate the five vectors of growth. And we're going to see with that that we're going to deliver on our 2021 commitments both operationally and financially. And as I said earlier, I feel really good about our position and the team that I have that they will deliver on that. With that, I hand it over to Brady. Brady Connor : Thanks, Hans. Brad, we're ready to take questions. Operator: Thank you. We will now begin the question-and-answer session. . Your first question comes from John Hodulik of UBS. Sir, you may go ahead. John Hodulik: Great. Thanks. Good morning, guys. Hans, could we get your thoughts on the competitive landscape now and maybe whether the new pricing from Comcast or any other competitive development sort of affects your view of the return to growth in terms of postpaid phone net adds here in the second quarter. From your - the last slide there, it looks like that you expect some nice acceleration. And then secondly, there's potentially just a massive amount of federal stimulus money flowing into broadband infrastructure deployment over the next year or two. I realize we're very early in the process and the rules aren't laid out yet. But do you think Verizon is in a position to capture some of those funds as you sort of continue your heavy spending on Ultra Wideband deployment? Thanks. Hans Vestberg: Thank you, John. On the competitive situation, I mean, as you have seen yourself, it is a competitive market and it's been for quite a while. But with our model, I can see that we are actually winning in any case because with our growth trajectory that we have in all our businesses and a unique model, especially on the consumer side with the Mix & Match, the value proposition, and you saw in the quarter, we continue to do that. And – but also, as Matt mentioned, it was a little bit light in the beginning of the quarter because of stores that were closed, et cetera. And then we saw a very good sort of strength in our port ratios and our growth in the end of the quarter because we have all the stores open. So, we look forward to the second quarter and the second part of the year. And as Ronan said when we had the Investor Day, we believe we're going to have a good second part of the year. Second quarter is really close to us. And what we've seen so far, we feel good about it. So, again, we have an overall strategy in order to address the market for consumer that is really working with this step up, the migrations and all of that. So, in general, we feel good about it. The team is doing well. You saw we came out with a new promo as well. And we've always had lots of financial discipline. We do this because we know we can actually capture market at the good high-quality customers. On the infrastructure, as I said, this is in the planning stages. So, it's hard to say if this is true or not. So - but on the other hand, I think that what we are telling the administration is, of course, that accessibility, affordability and usability are the three buckets to address the digital divide. And when it comes to accessibility, we have to recognize – and I worked in 180 countries with networks, that the networks during the COVID-19 in the U.S., they were really working well. There were basically no major issues at all. They could deliver even though traffic moved around. So, I think that what we are advocating for, we want that private sector continue to invest in the network and leading that charge and then having government work more with the affordability of it. So, we have plans that meets all needs for all different customer segments in the market. So, that's what we're advocating for. That's the same as BRT is advocating for as well. We don't think that any price regulation would be – that will be counterproductive to the market. So, in general, again, it's very early on. I mean, it's a plan that has not been approved and submitted, but at least we're advocating together with BRT and with ourselves what we think should be the right. Matt, any more comments on the competitive landscape? Matthew Ellis: No, I think you touched on the key points, Hans. The only other thing I'd add is you mentioned the strong momentum coming out of margin to the quarter. You add that with the promotion that we put in place at the start of the month that we think is an innovative promotion that's addressing a customer pain point that nobody else has addressed in the past. We're seeing good traction on that in the early days of that. So, certainly feel good about the momentum heading into the quarter on the volume side. When you add that in with the financial performance we saw in the first quarter, it was set up nicely for 2Q and the rest of the year. John Hodulik: Great. Thanks, guys. Brady Connor: Yes. Thanks, John. Brad, we’re ready for the next question. Operator: Thank you. The next question comes from Simon Flannery of Morgan Stanley. Your line is open. Simon Flannery: Great. Thank you very much. Good morning. You had another strong quarter with Fios Internet. Perhaps you could just give us a little bit of insight into the sustainability of that. Obviously, 2020 was a great year in terms of broadband demand. But you seem to be sustaining that into this year. Is this share? Is this incremental marketing opportunities? And what's happening with the speed up-tiering there? And maybe related to that on 5G home, you've had a number of announcements here recently. I know we're headed to 15 million households. But what's the latest on the ground today? And what should we expect through the year? Thanks. Hans Vestberg: Thank you, Simon. Yes, we had good Fios quarter again. I mean, overall, I think the broadband is in demand and our high-quality Fios, of course, a great opportunity for us to expand on them. We – I think personally, that this will continue. The demand for broadband will continue. We are just starting a total revolution of using technology, which is scalable and sustainable in the post era of the COVID. So - and we are great position. And that also is going to help me tremendously when we come with 5G Home or millimeter wave and C-Band and all that because we know how to deal with home broadband. And that is an advantage we have to any others that is trying to do fixed wireless access and we've been on to it for a long time. And as we saw as well, now we're up to over 30 markets with 5G Home, I mean, adding some 20 very recently. So, we're on fire on this right now. We have a very big belief in our 5G Home. And then, later the year, when C-Band comes, we're going to add even more coverage on that. And all is embedded in our work with the ecosystem from the from the beginning and how we have developed our own IPRs on how to do self-install, how to do all the sort of grids when it comes to millimeter wave and having a great opportunity to see that our customer gets a fantastic service. So, all in all, this is a full package that we are bringing to the market in order to have a full scale broadband for the country. I think it's absolutely the right moment. But don't forget, on the business side as well, we now - it's called 5G Internet on the business side. We are using the same methodology. We are doing the scaling on the same platforms and we address another market with it. It goes back to a strategy that we had for all the time. We have a network service and we scale it with different customers. And that scale will help us with growth. But it also means that with the platform thinking we have, that will fall to the bottom line. And if you see in this quarter, all three units are growing and we're bringing it to all to bottom line and we still have more to do. And - but we know how to do it and we'll have the model. Simon Flannery: Great. Thanks a lot. Brady Connor: Yes, great. Thanks, Simon. Brad, we’re ready for the next question. Operator: Thank you. The next question comes from Brett Feldman of Goldman Sachs. Your line is open. Brett Feldman: Yes. Thanks for taking the question. So earlier this week, you announced that you had officially commenced the deployment of your C-Band licenses and that you would expect 100 million POPs to be covered by at least 60 megahertz as we get into March of next year. Equally important to creating that coverage is making sure your customer base is able to use that capacity, which is going to require a fairly significant handset upgrade cycle. You noted that you had just put a new promo into the market this quarter. How are you thinking about stimulating device upgrades over the course of the year? What's embedded in your guidance in terms of maybe doing more of this? And then, just as a follow-up question, you had noted you do expect that the phase one spectrum will be cleared by 3Q, 4Q, but it seems like you don't expect to be fully utilizing it until March. So, there's a bit of a gap. I'm just wondering if there's anything you can do to close out or that's just what the supply chain can deliver right now? Thanks. Hans Vestberg: First of all, I can only say that we are on to a false start on the C-Band. It's only some six weeks ago since we can start to talk to our employees, we could talk to the partners, we can talk to the satellite companies, our suppliers . We have already ordered half of the equipment. We have made agreement with the tower cos. We have talked to the satellite companies that has reaffirmed that they believe that they can clear this first tranche of the spectrum in third quarter and fourth quarter. And we actually made a press release yesterday that we're now starting deploying C-Band as well, and that's six weeks. So, the technology was on fire to make this happen. And as said when we had our investor day, we said that we worked with the date we got from the FCC because we hadn't talked to anybody. Right now, this is the best dates we have. And of course, we are pushing as much as possible to see that we get this up for our customers as soon as possible in order to get a great experience. And then flowing that over to the to the phone question. I think that we have seen a great uptake on 5G phones and unlimited premium. And as Matt said, in the quarter, over 20% of the unlimited new customers took unlimited premium. That tells you there's a lot of value in it and a lot of 5G in it. And with the new promo that Matt talked about, we believe that is going to also drive 5G. So, we believe that what we have in the market right now will continue to grow the 5G base. And as said, this is going faster than what we saw in 4G. So, we will continue to monitor, of course. But we see a good uptake on it. And we can also add that, when it comes to the iPad that have been just recently launched, it's also another addition of mmWave and how that comes into the whole ecosystem. So, again, we feel good about the uptake and we feel good about the line of products we have. And we have the promo supporting it. So, that's going to also make it go well together with the C-Band deployment coming later this year. Operator: The next question comes from Phil Cusick of J.P. Morgan. Phil Cusick: I wonder if you can dig into the enterprise and small business results. S&P was up year to year which is great to see. And I'm curious what you see in bookings versus growing revenue this quarter? Hans Vestberg: Tami: Tami: Phil Cusick: Is there any impact here from the One Fiber initiative? Is that helping at all on the enterprise or SMB side? Or is it still too early for them? Hans Vestberg: I think on the enterprise side, of course, we have some opportunities with the fiber. But remember, our priorities was clear. It's getting fiber to our 4G and our 5G network. That's really where we can get the most bang for the buck. And then we do enterprise when we have them. On the small and medium, that's going to take some time. That's what I said before. But now, when we have the 5G Internet, we will actually have fixed wireless access, we have a really good product for small and medium businesses. So, some possibility on enterprise, but they are also still to come. As was said, it's more focused on building the network with fiber, right, so we can see that our customer gets the experience that they need to have when it comes to our exceptionally great 5G with mmWave and C-Band. Matthew Ellis: Still just to follow-on on that, it is part of, as Hans mentioned previously, about building the network once and then monetizing it different ways. Just as we talk about with wireless and 5G, monetizing it in different ways, with the fiber, we have the same opportunity too. So, once you – as you're lighting up those cell sites, when you go past an enterprise building, the opportunity to go in there and have more customers or enterprise customers on net rather than paying a third-party access absolutely is an opportunity for us to create incremental return on that investment in fiber. So, again, another example of multi-use network. Operator: The next question comes from David Barden of Bank of America. David Barden: I guess the first one on the Fios revenue. We saw pretty strong pickup. I know that kind of on a year-over-year basis, there's been a mix shift and an uptake on the higher speed of broadband services, but sequentially it was a big number. I'm wondering if you guys did something on price on the broadband or even on the video that would have contributed to that move. And then the second question, I guess, Matt, you guys threw out a lot of numbers out on Media, 26% advertising growth, 13% owned property growth, 10.4% total revenue growth. Could you kind of break that down what the moving parts are kind of dragging down some of those bigger, higher eye-popping numbers? And is this kind of a one year level set over a depressed 2020 and we're going to return to some kind of more "normal" revenue growth pattern in 2022? Thanks. Matthew Ellis: If I start with the Fios revenue, what you're really seeing here is the impact of what the team started in the first quarter last year. We introduced Mix & Match into our Fios offering. It's been great for our consumer business. We introduced it into Fios in first quarter last year. Obviously, the initial benefit we were seeing there got interrupted as the pandemic got underway. But we now have three quarters of very strong volumes, starting in third quarter last year, fourth quarter and now again in the first quarter here, our best first quarter in total Fios' six years. And so, what that means is you've got an Internet base of customers in Fios that's now more than 5% higher than it was a year ago. And so, that's driving the revenue growth even as you have the secular pressures coming on the video side. It's really volume created as much as step-ups or anything else, although there are obviously step-ups in there and opportunities to move customers to gigabit service and so on. But the strong volumes based off the quality of service, combined with bringing the Mix & Match there, has worked very well for us in consumer mobility, now working well for us in Fios. And as you saw, we brought the Mix & Match construct into our SMB wireless offerings as well. So, very excited about what that's going to do. On the Media revenue side, as you say, the 10.4%, up double digits for the second consecutive quarter, you remember both fourth quarter and now first quarter aren't really lapping COVID impacted quarters. So, what you're seeing here is the benefit of the hard work the team's been doing over the past couple of years. And that's really showing up on the advertising trends, as we talked about there. Offsetting that, to your question, how do you get from those higher numbers down to the 10%, things like search revenue continue to be a headwind and will likely continue to be so. But we're very encouraged by the advertising and the O&O momentum that we have. And as you say now, that's not a one year thing as we go forward. The team's gaining some good momentum. Hans? Hans Vestberg: I just want to reiterate on the Verizon Media Group again. If we go back to where we started the strategy in 2018, we reset the business plan and we start to cut costs, then we reshaped all the products all the way from the owned and operated. And all the OO brands, we combined the ad platform. The work has been immense by the Verizon Media Group team. And now we see sort of the fruits of that hard work with growth in two consecutive quarters with double digits. So, I just want to shout out to the team that this was the plan we set and they are actually delivering on the plan. So, I think we have a great future with these guys. They have clearly a good product portfolio. And digital is going to be important in the future. So by that, I think we're in a good position. Operator: The next question comes from Michael Rollins of Citi. Michael Rollins: I was curious if we could go back to one of the comments you made earlier about Verizon reaching the cumulative cost cutting target of $10 billion. And if you could unpack that in terms of how much have that helped the EBITDA versus the CapEx side of the investment process for Verizon? And then, maybe secondly, how should investors think about the pace going forward of what incremental cost cutting can – like for Verizon over the next three to five years? Thanks. Matthew Ellis: Look, I'm incredibly proud of the team's efforts over the past three plus years now as we've really lent in on identifying ways to continue to make us more efficient and maintain our position having the best cost structure in the industry, which we think is going to continue to be important going forward, obviously. In terms of your first question, there is a split between both CapEx and P&L items behind the $10 billion. It's roughly even between those two, where you see that come from. So on the CapEx side, that means we've been able to do more deployments for the same amount of money than we would have done previously. That's allowed us to do some of the things across the network as we continue to transform the network not just in deploying 5G, but also the Intelligent Edge Network transformation going on, the One Fiber that's the backbone in there as well. That's going to give us benefits for years to come as a result of some of the efficiencies. And then, on the P&L side, some of those have helped contribute to the bottom line, but some of them have also allowed us to reinvest in the business, so that we can continue to be competitive in the marketplace, continue to bring new promotions and so on to our consumers and you see the value of us doing that. And in terms of the pace going forward, just because we've hit the target doesn't mean we slow down. We will have continuous improvement going forward here. The team has got good momentum. And the great news is, we didn't coast to the finish line here, we ran through the finish line, we accelerated through the tape. There is a lot more opportunities for us. Obviously, the last year has identified even more items for us. So, as we go forward, we will continue to increase the efficiency of the business both on the income statement and also from a capital side as well. So, a lot more to come. Hans Vestberg: No. And I just want to agree with Matt. I think the structural changes on the platform thinking and using – making the network with the Verizon Intelligent Edge Network, some of those benefits we haven't even seen yet even with those investments are done. But also, the new structure we have in the group, we have the three strong CEOs running their businesses, has also unveiled much more efficiencies than we have seen before and how they run it. So, I agree with Matt. This is part of our governance constantly to see that we find more efficiencies because that means that we can be even stronger in the market and having the best cost structure for us is important. Michael Rollins: And is this a target you would expect to continue to give further updates on and compare it relative to what the initial $10 billion goal was? Or now that you've achieved the goal, does the progress just get wrapped into the totality of financial performance and outlooks for Verizon? Matthew Ellis: As we go forward here, obviously, over the past three, four years, as we looked at the opportunities ahead of us, this was a major opportunity. So that's how we gave a very specific target. As I mentioned, we will continue to work with this. It will be obviously inherent in our targets. But as I think about the biggest opportunities ahead of us over the next three to four years, they are around growth. Everything we're doing with 5G and all the other parts of our business. So, that's why the targets that we gave at the Investor Day were all about growth, whether that be how quickly we're going to deploy the C-Band that we got, continuing to build out mmWave, the total addressable market for 5G Home, for MEC, and then the revenue growth that we talked about over the next five years. We will obviously continue to drive cost savings and efficiencies throughout the business. But the biggest opportunities for us going forward here when we look at everything in front of us is driving top line growth and we're very excited about pursuing those. Operator: The next question is from Craig Moffett of MoffettNathanson. Craig Moffett: Comcast significantly changed its pricing in the MVNO to now offer sort of family plan discounts. Can you just talk about the renegotiation that you and the cable industry just had on the MVNO and what your view is of the kind of the status of that relationship and how you see it evolving going forward? Obviously, the new pricing is considerably more aggressive and now sits on top of your pricing all the way down in family plans up to about four or five lines. Hans Vestberg: I cannot go into details of any commercial agreements we have. But what I can say is that, we feel good about our network-as-a-service strategy where we have our value – our own sort of premium brand with Verizon. We have the MVNOs addressing a certain part and then we have the Visible and all of that. That's the whole idea. And for us this is accretive. We have a good relationship with our MVNO partners. We see them as enterprise customers, but we also see that this is accretive to us because we have all these. Nobody in the market has the same opportunity as we have to play all the way from our premium Verizon, which you heard Matt and me talk about, how we migrate and we're doing it in a great job, Ronan and team. And then we also have the MVNO partners bringing in customers and revenue and the best return on investment. And ultimately, we start building new markets with Visible and later on this year with TracFone and then we have an unparalleled position to anyone else in the market to be growing. So, I feel good about it. I feel good about the relationship with the MVNOs. We treat them as an important enterprise customers and we will continue to do so. Matthew Ellis: Yeah. I would agree with everything that Hans said. Look, the idea of bundled pricing for customers, when we introduced Share Everything Plans back in 2012, so it's something we've been doing for a long time. It makes a lot of sense. As Hans said, we're glad to have the traffic on our network and it just gives us another opportunity to monetize the network in multiple different ways. Craig Moffett: And if I could just ask one follow-up. Do you have any update on the timing of the TracFone transaction and the progress through regulatory in Washington? Hans Vestberg: I think everything we said from the beginning is holding true. The process is continuing as expected. And as I said, this is a second half of 2021 event when this is going to be approved. So, it's progressing as expected. We don't believe it's going to be earlier. We think it's going to be somewhere in the third quarter, which we said also when we announced it. So, we will give an update when we know more about it. Just a couple of different events still there. But again, it's progressing as we expected from the beginning. Operator: The next question comes from Tim Horan of Oppenheimer. Timothy Horan: Two questions. One, AT&T obviously has phone subsidies for all. Do you think this becomes a permanent fixture in the industry again? And then, secondly, business, I think, communications networking probably transformed more in the last year than the last decade with a lot more collaboration and conferencing. And, obviously, you acquired BlueJeans a year ago. Can you talk about how well integrated that is for the rest of your communication strategy and go-to-market strategy? And maybe, are you creating more UCaaS products or other bundles of SD-WAN services to go after the business market? Thank you. Hans Vestberg: On the first comment, you have seen our strategy, how we address the market. I cannot comment on what our competition is doing. We feel good about our positioning with the promos we're coming out right now and it actually resonates with our customers, the migration path we have and all of that. So, I don't think that you're going to see from us anything like that. So, on the BlueJeans and collaboration tools, we are integrating that every day here in new settings, with new partners all the time, because this is a great asset and we are scaling it right now as we acquired it. So, that feels really good and we still have the whole 5G era and the mobile edge compute area which is going to need video conferencing, et cetera, or communication services. So, there is a lot more to be done there. And we build that into the SD-WAN solutions where Tami and her team are continuously working with our customers that want to migrate right now and we have a great offerings in the market. So, we feel good about that, to be part of that transformation in the market, which is offsetting some of the wireline secular declines that we see as well. So, overall, I feel that we have a good position and a good work. Matt, anything more on that? Matthew Ellis: No. I think, look, the team has done a great job over the past 12 months. Remember, we closed this transaction during the pandemic. So, the ability to integrate and so on, we've done it all virtually and remotely. And so, a lot of good work going on. And as you mentioned, Tim, we see an opportunity for us to broaden the offerings that we have with our enterprise customers and seeing good traction there. So, I think they've done everything we expected to do at this point. Operator: The next question comes from Frank Louthan of Raymond James. Frank Louthan: Can you walk us through plans for the balance sheet? And then, in particular, would you consider monetizing any assets like Verizon Media and so forth to delever? And how we should think about the timing for delevering, if that's changed at all since the Analyst Day? Thanks. Hans Vestberg: Our capital allocation priorities are the same as we said before. Number one, we invest in our business and I think we've been very clear what we're investing right now and the CapEx and the incremental CapEx for the C-Band. Then, secondly, we have clearly outlined we're going to put our Board in the position to continue to grow the dividend. Matt and I feel really confident about that. And then, thirdly is to do as we did after the Vodafone acquisition, to come down again to pre-Vodafone, we call that pre-COVID or pre-C-Band right now, because we want the change here, or a little bit fashionist, so we're doing that. And we see a great moment for that and we have basically a plan for that, given how we're going to generate growth and cash flow over the years. And as Matt outlined when we spoke about this last time, four to five years is what we believe is going to take us to get there. So, that's what we have in play right now and no other things are included or no other new updates neither. So, we are just happy with the first quarter where we generated very good cash, which means that the first quarter is in there for us to start doing our work to get back to the pre-C-Band sort of financial metrics. Matthew Ellis: Hans, building on that, the leverage is – no change since the Investor Day. Good first quarter results. As you think about the revenue targets we've given for the five years, certainly on track there. The only other balance sheet update I'll give you is just on the cash balance. We've obviously had that elevated level since the start of the pandemic. Given the progress we've seen since the start of the first quarter in terms of the vaccination rates in this country and then also the stimulus getting past, we didn't know if that was going to happen or not. And now having the auction behind us, we do think that there is the opportunity for us to start moving cash to what was closer to something of pre-pandemic level. So, now that we've got all those things done. And as we get into the second quarter here, we'll start work on that. Operator: The next question comes from Colby Synesael of Cowen. Colby Synesael: Maybe just a follow-up on that. Free cash flow was pretty strong in the quarter, $5.2 billion. It seems like there were some benefit on the working capital side. Just curious if you talk about how you see that progressing through the remainder of the year and might be implied in terms of free cash flow for the year based on your target of 2.8 turns of leverage by year-end 2021. And then, secondly, I'm not sure if you'll able to give it, but I'm curious if you can give us any color in terms of subscriber numbers for the fixed wireless product at this point. And also just from a housekeeping perspective, what line item are you actually including subs, if it's anywhere at all? And then also, where is the revenue for that being shown? Thank you. Matthew Ellis: Absolutely happy with the free cash flow performance in the first quarter. Obviously, working capital was part of the benefit in there. And as we look at that, there is a couple of things going in different directions. As we saw the increase in equipment volumes, we saw the device payables, the receivables related to that increase. As you would expect, that was a benefit on cash flow last year. We said that would be a headwind this year – hope to be a headwind this year. Absolutely saw that. Offsetting that a little bit was the volumes that we saw in March helped inventory levels, but also we saw really good customer payments in the month of March too as those stimulus payments hit. So, as I think about cash flow for the rest of the year, I would expect the device receivables to continue to be a little bit of a headwind as those return to a more normal level after the lower volumes last year. And then, obviously, we don't have cash tax payments in the first quarter. Those come through the final three quarters of the year. And as we mentioned, we had a couple of favorable items in there last year. So, still feel good obviously about where cash flow is going to play out. So, no update on our year-end leverage target at this point, but really nice to have a strong first quarter in the bank. In terms of the fixed wireless access subscribers, as those expand, we'll start to disclose them. In terms of where the revenue shows up, you're seeing that show up in service revenue as Fios broadband does today. So, that's where the revenue will show up in the income statement. Colby Synesael: So it's actually in the Fios segment opposed to in the… Matthew Ellis: No, no, no. Not the same. Fios revenue show up in service revenue. So, on the same fixed wireless access will also show up as service revenue. And then… Colby Synesael: On the wireless side? Matthew Ellis: It will be on the wireless service revenue, correct. Operator: Your last question comes from Kannan Venkateshwar of Barclays. Kannan Venkateshwar: I guess on the margin front, when you look at the Consumer segment, you have a tailwind from Fios margins as that revenue stabilizes or potentially starts flatlining due to broadband or the mix shifts away from video. And then as volumes pick up and you focus a bit more on volumes over the course of this year, there is a tailwind – I'm sorry, there is a headwind from that. So if you could just talk about the puts and takes when it comes to margins over the course of the year in the Consumer business, that would be useful? And then, secondly, when you think about the stimulus that was passed in December, it looks like some of that money can flow to wireless consumer, the subsidy. The $3 billion subsidy for broadband, I guess, some of that could flow to wireless consumers as well. Are you guys starting to see some of that impact, how big of a tailwind do you expect that to be in the second quarter? Thanks. Matthew Ellis: On the Consumer margins, I think we've historically produced very good margins across the business there and I'd expect that to continue going forward. As you identified, there is always a number of puts and takes out there as we move forward, and certainly, Fios is performing very well and is contributing nicely to that. But as you also rightly pointed out, equipment volumes were up significantly year-over-year. And obviously, that increases the denominator in the margin calculation without really increasing the numerator. So, you've got a number of different puts and takes. You'll have the ongoing impacts of building out the network in there as well. But we feel very good about the margins that we'll have for the rest of the year within Consumer, very much in line with what you would expect. And then, certainly, the seasonality showing up in the fourth quarter with the seasonal volumes that you would expect to see over the course of the holiday period. So, it's certainly to continue to be on track to give the – to meet the EPS guidance we have for the year, Consumer margins need to be a strong contributor to that and I expect they'll be. In terms of stimulus benefits, as I think I mentioned in the comment about working capital, we're seeing very good payment patterns from consumers at this point. And that's where I think we'll see the vast majority of any benefit show up. So, those payments were very strong in the first quarter, and I suspect the stimulus bills had something to do with that. But it means that our consumers are in very good shape as compared to where they otherwise might have been given the impacts of the pandemic going into the second quarter and we feel good about the outlook for the rest of the year ahead of us. Brady Connor: Everybody, we're done for today. Thank you very much for the participation and we'll see you soon. Operator: Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation and for using Verizon conference services. You may now disconnect.
Verizon Communications Inc. at J.P. Morgan Global Technology, Media and Communications Conference
- Hans Vestberg, Chairman and CEO of Verizon, will speak at the J.P. Morgan Conference, highlighting the company's future plans and operations.
- Verizon reported revenues of $134 billion in 2023, emphasizing its significant role in the global technology and communications sector.
- Recent analyst ratings from Tigress Financial and Wells Fargo provide insights into Verizon's financial health and market potential.
Hans Vestberg, the Chairman and CEO of Verizon Communications Inc. (NYSE, Nasdaq: VZ), is scheduled to speak at the J.P. Morgan Global Technology, Media and Communications Conference on May 21, 2024. This event is significant as it provides an opportunity for Verizon, a major player in the global technology and communications sector, to share insights into its operations and future plans. Established in 2000 and based in New York City, Verizon has grown to report revenues of $134 billion in 2023, showcasing its substantial role in providing data, video, and voice solutions. The company's commitment to meeting the increasing demand for mobility, reliable network connectivity, and security is evident in its continuous efforts to enhance its services.
In the backdrop of this conference, Verizon's stock performance and analyst ratings provide a broader context to evaluate the company's market position. On May 17, 2024, Tigress Financial maintained its Underperform rating on Verizon, suggesting a cautious outlook despite advising investors to hold. Similarly, Wells Fargo updated its rating to "Sector Perform," indicating a neutral stance on the stock, which was priced at $40.24 at the time of these assessments. These evaluations, as highlighted by Benzinga, reflect analytical perspectives on Verizon's financial health and market potential.
Verizon's stock, trading on the NYSE, experienced a slight decrease of 0.472% or $0.19, with its price standing at $40.06. The stock's activity during the trading session ranged between $39.83 and $40.41, illustrating the market's fluctuating response to the company's performance and prospects. Over the past year, Verizon's shares have seen a range between $30.14 and $43.42, indicating volatility and investor interest in the telecommunications giant. With a market capitalization of approximately $168.62 billion and a trading volume of about 11.42 million shares, Verizon remains a significant entity in the stock market, reflecting its importance in the technology and communications industry.
The upcoming presentation by Hans Vestberg at the J.P. Morgan conference is not only a platform for Verizon to articulate its achievements and strategies but also a moment for investors and analysts to gauge the company's trajectory in a competitive landscape. The recent analyst ratings and stock performance provide a snapshot of the challenges and opportunities that lie ahead for Verizon, as it continues to navigate the complexities of the global market. As the company leverages its extensive network and platforms to meet evolving customer demands, its financial health and market valuation will remain key areas of interest for stakeholders.
Verizon Receives Upgrade from Tigress Financial
- Tigress Financial upgrades to Buy, raising the price target to $52.
- Verizon's integration of GenAI technologies aims to enhance customer service and operational efficiency.
- The company's focus on AI-driven tools and technologies sets a new standard in the telecommunications industry for customer satisfaction and loyalty.
On Friday, May 17, 2024, Tigress Financial upgraded Verizon (NYSE:VZ) to Buy from Hold, setting a new price target of $52, up from $50. This move reflects Tigress Financial's growing confidence in Verizon's potential for growth, as reported by TheFly. Verizon Communications Inc. is a leading player in the telecommunications industry, known for its extensive wireless and wireline services. The company's efforts to integrate GenAI technologies into its operations are a testament to its commitment to innovation and customer service excellence.
Verizon's strategic focus on enhancing customer service through GenAI technologies is aimed at driving operational efficiencies and fostering stronger customer loyalty. The deployment of innovative, human-assisted GenAI applications is designed to streamline processes and ensure positive customer engagements. This initiative is crucial for Verizon to maintain its competitive edge in the market, where customer satisfaction is key to sustaining growth.
The introduction of Personal Research Assistant technology by Verizon is a significant step towards improving service efficiency. This tool enables Verizon's frontline teams to provide accurate, personalized information swiftly, with a success rate of nearly 95% in responding to customer inquiries. The integration of GenAI applications alongside human representatives enhances the efficiency of service delivery and allows for the building of meaningful relationships with customers.
Verizon's investment in GenAI not only demonstrates its commitment to leveraging cutting-edge technology but also positions the company for sustained growth in a highly competitive market. By focusing on customer satisfaction and loyalty through technological innovation, Verizon sets a new standard in the telecommunications industry. The company's efforts to double its network capacity within the next five years, as shared by Verizon Consumer CEO Sowmyanarayan Sampath in an interview with Bloomberg, highlight the importance of AI in driving future growth.
The recent introduction of groundbreaking AI tools aimed at revolutionizing the customer experience further underscores Verizon's leadership in adopting AI technologies. These tools are designed to enhance transparency, save time, and simplify tasks for employees assisting customers, marking a significant advancement in Verizon's customer service capabilities. With a current market capitalization of roughly $169.34 billion and a trading volume of about 2.47 million shares, Verizon continues to demonstrate its strength and potential for growth in the telecommunications sector.
Verizon Communications Inc. Overcomes Financial Hurdles with Strong Dividend Performance
Verizon Communications Inc. (VZ:NYSE) Navigates Financial Challenges
Verizon Communications Inc. (VZ:NYSE) has been navigating through a challenging financial landscape, marked by a significant 30% drop in its stock value over the past three years. This decline comes in the wake of rising interest rates, which have broadly impacted the market. Despite these hurdles, Verizon's dividend yield has seen an uptick to 6.6%, a notable increase from its typical 4% yield. This rise in dividend yield is particularly significant against the backdrop of its latest quarterly report, which showed that while Verizon's operating revenue held steady at $33 billion, its consolidated net income dipped to $4.7 billion from $5 billion in the previous year. However, the silver lining was the improvement in free cash flow, which climbed to $2.7 billion for the quarter, up from $2.3 billion in the corresponding period last year.
The company's leadership, under CEO Hans Vestberg, remains optimistic, labeling the quarterly results as "strong" and reaffirming the company's trajectory to meet its annual guidance. This guidance projects a 2% to 3.5% growth in wireless service revenue and a 1% to 3% increase in adjusted EBITDA. Despite the modest performance in the quarter, the dividend's security is underscored by a payout ratio based on earnings per share of $1.09, comfortably higher than the quarterly dividend payment of $0.665. This translates to a payout of approximately 61% of its profits to shareholders, with cash dividend payments last quarter totaling $2.8 billion, slightly above the free cash flow of $2.7 billion. This margin does not immediately signal concern, suggesting a sustainable dividend payout.
In the broader context, Verizon's enduring financial stability and the sustainability of its dividend, despite the lackluster growth and economic headwinds, position the company as an attractive option for income investors. The stock's valuation metrics further bolster this view, with Verizon trading at less than 9 times its estimated future earnings and at 1.8 times its book value. Additionally, the company's price-to-earnings-to-growth (PEG) ratio of 1.1 indicates that the stock is reasonably priced, offering a compelling value proposition.
The current market dynamics, characterized by Verizon's stock price at $38.89 with a slight decrease of $0.04 or approximately -0.10%, reflect the stock's resilience amidst market fluctuations. With a trading range over the past year stretching from a high of $43.42 to a low of $30.14 and a market capitalization of about $163.7 billion, Verizon's financial footprint remains substantial. The trading volume of 13.2 million shares underscores active investor interest in the stock. Given these factors, and with expectations of a potential decrease in interest rates, Verizon's stock could emerge as an increasingly attractive investment, particularly for those seeking low-risk opportunities in a volatile market environment.
Verizon Stock Drops 4% Following Q1 Results
Verizon Communications (NYSE:VZ) exceeded analyst expectations for adjusted earnings per share (EPS) in its first-quarter 2024 report, although it slightly missed on revenue targets. Following the earnings announcement, the company's stock saw a drop of more than 4% intra-day today.
Verizon recorded an adjusted EPS of $1.15 for the quarter, which was $0.03 above the analyst forecast of $1.12. Nevertheless, its revenue amounted to $33 billion, just shy of the anticipated $33.23 billion. Year-over-year, Verizon's total operating revenue showed a modest increase of 0.2%, whereas the adjusted EPS was slightly down from $1.20 in the first quarter of 2023.
The company witnessed a 3.3% year-on-year increase in wireless service revenue, totaling $19.5 billion, driven by pricing adjustments and growth in its fixed wireless subscriber base. Although there was a dip in wireless equipment revenue due to fewer upgrades, the overall performance benefited from these revenue gains.
Looking ahead, Verizon set its full-year 2024 adjusted EPS guidance at between $4.50 and $4.70, with a midpoint of $4.60, marginally above the consensus forecast of $4.57. This guidance indicates Verizon's confidence in its strategic initiatives and anticipated future performance.
Verizon Stock Jumps 8% on Strong Q3 & Raised Guidance
Verizon (NYSE:VZ) surpassed Q3 earnings expectations and has increased its free cash flow forecast. As a result, shares jumped more than 8% intra-day today.
The reported adjusted EPS of $1.22 beat the projected $1.18. With operating revenue at $33.3 billion, it matched the anticipated $33.29 billion. Consumer revenue stood at $25.3 billion, beating the predicted $25.02 billion, but business revenue at $7.5 billion fell short of the $7.63 billion estimate. The wireless service revenue was slightly less than expected at $19.3 billion. Verizon gained 100,000 postpaid phone customers, surpassing the projected 68,000.
The company predicts a 2.5-4.5% growth in wireless service revenue and a 2023 free cash flow above $18 billion, up $1 billion from previous estimates.
Verizon Communications Stock Gains on Q2 EPS Beat
Verizon Communications (NYSE:VZ) reported better-than-expected profit figures for Q2, leading to more than a 2% increase in its shares in pre-market today.
The company's EPS stood at $1.21, surpassing the Street estimate of $1.17. However, revenue came in at $32.6 billion, slightly below the Street estimate of $33.35 billion.
Verizon's CEO Hans Vestberg stated that they made progress in their key priorities, which include growing wireless service revenue, achieving healthy consolidated adjusted EBITDA, and increasing free cash flow.
For the full year, Verizon anticipates wireless service revenue growth between 2.5% to 4.5%. The company reaffirmed its full-year EPS forecast of $4.70, while the Street was expecting $4.67.
Moreover, Verizon maintains its capital expenditure projection of $18.25 billion to $19.25 billion, which is slightly ahead of the estimated $18.82 billion.
Verizon Reports Q4 Results, Guidance Misses
Verizon Communications (NYSE:VZ) reported its Q4 results, with EPS of $1.19 meeting the Street expectations. Revenue was $35.3 billion, slightly better than the Street estimate of $35.11 billion. The company expects fiscal 2023 EPS to be in the range of $4.55-$4.85, missing the Street estimate of $4.97.
According to the analysts at Deutsche Bank, the company’s results and guidance reflect the structural competitive challenges the company faces in Consumer Wireless, despite being an otherwise well-managed, high-quality, defensive business.
The root cause of these structural challenges is the combination of Verizon's industry-leading postpaid phone market share (at an estimated 38%); the fact that Verizon's two main competitors in wireless, AT&T and T-Mobile/Sprint, have significantly improved their own execution; and that the Cable industry has increased its share of industry gross and net adds.
