VZ
$47.96
Verizon Communications
($.96)
(1.96%)
Earnings Details
4th Quarter December 2017
Tuesday, January 23, 2018 7:00:29 AM
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Summary

Verizon Communications Misses

Verizon Communications (VZ) reported 4th Quarter December 2017 earnings of $0.86 per share on revenue of $34.0 billion. The consensus earnings estimate was $0.88 per share on revenue of $33.2 billion. The Earnings Whisper number was $0.88 per share. Revenue grew 5.0% on a year-over-year basis.

The company said it expects 2018 earnings growth in the low-single-digit range, or earnings of approximately $3.83 per share and also expects revenue growth in the low single-digits, or revenue of approximately $129.2 billion. The current consensus earnings estimate is $4.11 per share on revenue of $127.32 billion for the year ending December 31, 2018.

Verizon Communications Inc is a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its two segments are Wireless and Wireline.

Results
Reported Earnings
$0.86
Earnings Whisper
$0.88
Consensus Estimate
$0.88
Reported Revenue
$33.96 Bil
Revenue Estimate
$33.21 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Verizon closes 2017 with strong wireless customer growth and retention, well-positioned in new markets

4Q 2017 highlights

$4.56 in earnings per share (EPS), compared with $1.10 in 4Q 2016; adjusted EPS (non-GAAP), excluding special items, of 86 cents, compared with 86 cents in 4Q 2016.

Verizon Wireless: 1.2 million retail postpaid net additions, including 647,000 postpaid smartphone net adds; retail postpaid churn of 1.00 percent, with strong customer loyalty demonstrated by retail postpaid phone churn of 0.77 percent -- less than 0.90 percent for the 11th consecutive quarter.

-- Fios total revenue growth of 2.3 percent, driven by Fios Internet customer growth.

Verizon Communications Inc. (VZ) (VZ) closed 2017 with another quarter of strong Verizon Wireless customer growth and retention, and with core and emerging businesses positioned for 2018 and beyond.

"Verizon finished 2017 with great momentum, led by some of the best customer growth and loyalty results Verizon Wireless has delivered in recent years," said Chairman and CEO Lowell McAdam. "In 2018 we look to drive long-term shareholder value by deploying next-generation network services, leveraging global platforms such as Oath, and using our strategic Humanability approach to turn innovative ideas into realities."

Tax-reform legislation will have a positive impact to cash flow from operations in 2018 of approximately $3.5 billion to $4 billion. The incremental cash flow will be used primarily to strengthen Verizon’s balance sheet. Additionally, Verizon will announce later today how employees will further share in the company’s success, and the company will also be increasing contributions to the Verizon Foundation by $200 million to $300 million over the next two years. These two initiatives have a projected EPS impact of 5 to 6 cents for each of the next two years.

For fourth-quarter 2017, Verizon reported EPS of $4.56, compared with $1.10 in fourth-quarter 2016. On an adjusted basis (non-GAAP), fourth-quarter 2017 EPS was 86 cents, compared with 86 cents in fourth-quarter 2016.

Fourth-quarter 2017 adjusted EPS included a net pre-tax loss from special items of about $2.6 billion: a severance and mark-to-market adjustment of pension and OPEB (other post-employment benefits) liabilities of $1.2 billion dollars; early debt redemption costs of $681 million; a $671 million charge for product realignment of early-stage developmental technologies; acquisition and integration-related charges of $154 million; and a non-cash pre-tax gain on spectrum license transactions of about $144 million. As Verizon noted in an 8-K filing on Jan. 17, the federal Tax Cuts and Jobs Act also resulted in a one-time, after-tax increase to earnings provisionally estimated to be approximately $16.8 billion, or $4.10 per share. This is primarily related to the re-measurement of the company’s net deferred tax liabilities at the new corporate income tax rate.

The cumulative net impact from these items, after tax, was approximately $15.2 billion, or $3.71 per share, in fourth-quarter 2017.

For full-year 2017, Verizon reported $7.36 in EPS, compared with $3.21 in full-year 2016. On an adjusted basis (non-GAAP), 2017 EPS was $3.74, compared with 2016 EPS of $3.87.

Consolidated results

Total consolidated operating revenues in fourth-quarter 2017 were $34.0 billion, up 5.0 percent from fourth-quarter 2016. Full-year 2017 consolidated operating revenues were $126.0 billion. On a comparable basis excluding divestitures and acquisitions (non-GAAP), full-year consolidated revenues declined approximately 2 percent in 2017, compared with 2016.

Net income was $18.8 billion in fourth-quarter 2017. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled approximately $9.2 billion. Consolidated operating income margin was 14.1 percent. Consolidated EBITDA margin (non-GAAP) was 27.2 percent in fourth-quarter 2017, compared with 37.1 percent in fourth-quarter 2016. Adjusted EBITDA margin (non-GAAP) for 2017 was 35.7 percent and 35.5 percent in the same periods, respectively.

Cash flow from operations totaled $25.3 billion in 2017, and capital expenditures totaled $17.2 billion. In 2017, Verizon made $9.5 billion in cash dividend payments to shareholders.

In Verizon’s media business, Oath revenues were $2.2 billion in fourth-quarter 2017, up approximately 10 percent from third-quarter 2017, driven by increased customer advertising spending during the holidays. Verizon expects a normal seasonal trend in Oath revenues between fourth-quarter 2017 and first-quarter 2018.

In telematics, revenues were more than $230 million in fourth-quarter 2017. IoT (Internet of Things) revenues increased approximately 17 percent year over year, and 8 percent on an organic basis (non-GAAP).

Wireless results

Verizon reported a net increase of 1.2 million retail postpaid connections in fourth-quarter 2017. Net phone additions of 431,000 included 647,000 smartphones, compared with 456,000 smartphone additions in fourth-quarter 2016. Total retail postpaid net adds in fourth-quarter 2017 included 193,000 tablet and 550,000 other connected device net adds, led by wearables.

Full-year 2017 postpaid net additions of 2.1 million included 1.8 million smartphones, Verizon’s highest total since 2015. It also included 31,000 tablets and 1.3 million other connected devices.

For the third consecutive quarter, Verizon increased customer accounts, adding 40,000 to its base in fourth-quarter 2017. The company ended 2017 with 116.3 million total retail connections

-- 110.9 million postpaid connections and 5.4 million prepaid connections.

Total retail postpaid churn was 1.00 percent in fourth-quarter 2017, a year-over-year improvement of 10 basis points, driven mainly by retail postpaid phone churn of 0.77 percent. This is the 11th consecutive quarter of retail postpaid phone churn of less than 0.90 percent.

Total revenues were $23.8 billion in fourth-quarter 2017, an increase of 1.7 percent compared with fourth-quarter 2016 and the company’s first year-over-year wireless revenue growth in two years. The momentum in service revenue trends continued, increasing sequentially for the second consecutive quarter, to $15.9 billion, while the year-over-year decline improved to 2.9 percent. For full-year 2017, total revenues totaled $87.5 billion, a decline of 1.9 percent.

Verizon now has approximately 80 percent of its postpaid phone base on unsubsidized service pricing plans, compared with approximately 67 percent at year-end 2016.

Segment operating income in fourth-quarter 2017 was $7.1 billion, and segment operating income margin on total revenues was 29.9 percent. Segment EBITDA (non-GAAP) totaled $9.5 billion in fourth-quarter 2017. Segment EBITDA margin on total revenues (non-GAAP) was 39.8 percent, compared with 36.9 percent in fourth-quarter 2016.

Wireline results

Total wireline revenues increased 0.1 percent year over year in fourth-quarter 2017 and 0.6 percent for the full year, compared with 2016, to $7.6 billion and $30.7 billion, respectively. On an organic basis, excluding revenues from acquired operations (non-GAAP), total wireline revenues declined 3.6 percent year over year in fourth-quarter 2017.

Total Fios revenues grew 2.3 percent, and consumer Fios revenues grew 1.7 percent, comparing fourth-quarter 2017 with fourth-quarter 2016.

In fourth-quarter 2017, Verizon added a net of 47,000 Fios Internet connections and lost a net of 29,000 Fios Video connections, continuing to reflect the shift from traditional linear video to over-the-top offerings. At year-end 2017, Verizon had 5.9 million Fios Internet connections and 4.6 million Fios Video connections.

Wireline operating income was $62 million in fourth-quarter 2017, and segment operating income margin was 0.8 percent. Full-year 2017 segment operating income was $380 million, and segment operating income margin was 1.2 percent.

Segment EBITDA (non-GAAP) was $1.6 billion in fourth-quarter 2017. Segment EBITDA margin (non-GAAP) was 20.9 percent in fourth-quarter 2017, compared with 23.3 percent in fourth-quarter 2016. For the full year, segment EBITDA margin was 21.1 percent in 2017, compared with 18.6 percent in 2016 (which included impacts from a work stoppage).

Outlook and guidance

For 2018, Verizon expects the following:

Full-year consolidated revenues will grow at low-single-digit percentage rates on a GAAP basis. Excluding the impact from the new revenue recognition standard, Verizon is on track to achieve year-over-year wireless service revenue growth by the middle part of 2018. On a GAAP basis, Verizon expects service revenue growth to turn positive around the end of 2018 or early 2019.

Low single-digit percentage growth in adjusted EPS, which includes the dilutive impacts from a full year of depreciation and amortization costs from 2017 acquisitions, the Straight Path acquisition expected to close later in the first quarter, and the ongoing impact of last year’s data center divestitures. This is before the impact of tax reform and the revenue recognition standard.

Capital spending for 2018 will be in the range of $17.0 billion to $17.8 billion, including the commercial launch of 5G.

The expected savings from tax reform will generate a net $3.5 billion to $4.0 billion uplift to cash flow from operations in 2018. This is expected to yield a 55 to 65 cent increase in 2018 EPS, net of impacts from the employee and Verizon Foundation initiatives. The resulting 2018 effective tax rate is projected to be in the range of 24 to 26 percent.

NOTE: See the accompanying schedules and www.verizon.com/about/investors for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.

Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York City, generated $126 billion in 2017 revenues. The company operates America’s most reliable wireless network and the nation’s premier all-fiber network, and delivers integrated solutions to businesses worldwide. Its Oath subsidiary reaches about one billion people around the world with a dynamic house of media and technology brands.

VERIZON’S ONLINE MEDIA CENTER: News releases, stories, media contacts and other resources are available at www.verizon.com/about/news/. News releases are also available through an RSS feed. To subscribe, visit www.verizon.com/about/rss-feeds/.

Forward-looking statements

In this communication we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "estimates," "hopes" or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following important factors, along with those discussed in our filings with the Securities and Exchange Commission (the "SEC"), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; material changes in technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance; our high level of indebtedness; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; the inability to implement our business strategies; and the inability to realize the expected benefits of strategic transactions.

Verizon Communications Inc.
Condensed Consolidated Statements of Income
(dollars in millions, except per share amounts)
3 Mos. Ended
3 Mos. Ended
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
% Change
12/31/17
12/31/16
% Change
Operating Revenues
Service revenues and other
$
27,480
$
26,610
3.3
$
107,145
$
108,468
(1.2
)
Wireless equipment revenues
6,475
5,730
13.0
18,889
17,512
7.9
Total Operating Revenues
33,955
32,340
5.0
126,034
125,980
--
Operating Expenses
Cost of services
7,836
7,006
11.8
29,409
29,186
0.8
Wireless cost of equipment
7,339
7,356
(0.2
)
22,147
22,238
(0.4
)
Selling, general and administrative expense
9,531
5,968
59.7
30,110
31,569
(4.6
)
Depreciation and amortization expense
4,456
3,987
11.8
16,954
15,928
6.4
Total Operating Expenses
29,162
24,317
19.9
98,620
98,921
(0.3
)
Operating Income
4,793
8,023
(40.3
)
27,414
27,059
1.3
Equity in losses of unconsolidated businesses
(6
)
(35
) 82.9
(77
)
(98
)
21.4
Other income (expense), net
(634
)
98
*
(2,010
)
(1,599
)
(25.7 )
Interest expense
(1,219
)
(1,137
) (7.2
)
(4,733
)
(4,376
)
(8.2
)
Income Before Provision for Income Taxes
2,934
6,949
(57.8
)
20,594
20,986
(1.9
)
Benefit (provision) for income taxes
15,849
(2,349
) *
9,956
(7,378
)
*
Net Income
$
18,783
$
4,600
*
$
30,550
$
13,608
*
Net income attributable to noncontrolling interests
$
114
$
105
8.6
$
449
$
481
(6.7
)
Net income attributable to Verizon
18,669
4,495
*
30,101
13,127
*
Net Income
$
18,783
$
4,600
*
$
30,550
$
13,608
*
Basic Earnings per Common Share
Net income attributable to Verizon
$
4.57
$
1.10
*
$
7.37
$
3.22
*
Weighted average number of common shares (in millions)
4,087
4,081
4,084
4,080
Diluted Earnings per Common Share
Net income attributable to Verizon
$
4.56
$
1.10
*
$
7.36
$
3.21
*
Weighted average number of common
shares-assuming dilution (in millions)
4,090
4,087
4,089
4,086
Footnotes:
(1
) Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.
*
Not meaningful
Verizon Communications Inc.
Condensed Consolidated Balance Sheets
(dollars in millions)
Unaudited
12/31/17
12/31/16
$ Change
Assets
Current assets
Cash and cash equivalents
$
2,079
$
2,880
$
(801
)
Accounts receivable, net
23,493
17,513
5,980
Inventories
1,034
1,202
(168
)
Assets held for sale
--
882
(882
)
Prepaid expenses and other
3,307
3,918
(611
)
Total current assets
29,913
26,395
3,518
Property, plant and equipment
246,498
232,215
14,283
Less accumulated depreciation
157,930
147,464
10,466
Property, plant and equipment, net
88,568
84,751
3,817
Investments in unconsolidated businesses
1,039
1,110
(71
)
Wireless licenses
88,417
86,673
1,744
Goodwill
29,172
27,205
1,967
Other intangible assets, net
10,247
8,897
1,350
Non-current assets held for sale
--
613
(613
)
Other assets
9,787
8,536
1,251
Total Assets
$
257,143
$
244,180
$
12,963
Liabilities and Equity
Current liabilities
Debt maturing within one year
$
3,453
$
2,645
$
808
Accounts payable and accrued liabilities
21,232
19,593
1,639
Other
8,352
8,102
250
Total current liabilities
33,037
30,340
2,697
Long-term debt
113,642
105,433
8,209
Employee benefit obligations
22,112
26,166
(4,054
)
Deferred income taxes
31,232
45,964
(14,732
)
Other liabilities
12,433
12,245
188
Total long-term liabilities
179,419
189,808
(10,389
)
Equity
Common stock
424
424
--
Additional paid in capital
11,101
11,182
(81
)
Retained earnings
35,635
15,059
20,576
Accumulated other comprehensive income
2,659
2,673
(14
)
Common stock in treasury, at cost
(7,139
)
(7,263
)
124
Deferred compensation - employee
stock ownership plans and other
416
449
(33
)
Noncontrolling interests
1,591
1,508
83
Total equity
44,687
24,032
20,655
Total Liabilities and Equity
$
257,143
$
244,180
$
12,963
Verizon - Selected Financial and Operating Statistics
Unaudited
12/31/17
12/31/16
Total debt (in millions)
$
117,095
$
108,078
Net debt (in millions)
$
115,016
$
105,198
Net debt / Consolidated adjusted EBITDA
2.6x
2.4x
Common shares outstanding end of period (in millions)
4,079
4,077
Total employees (’000)
155.4
160.9
Quarterly cash dividends declared per common share
$
0.5900
$
0.5775
Footnotes:
(1)
Consolidated adjusted EBITDA excludes the effects of special items and operating results of Divested Businesses, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
$ Change
Cash Flows from Operating Activities
Net Income
$
30,550
$
13,608
$
16,942
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense
16,954
15,928
1,026
Employee retirement benefits
440
2,705
(2,265
)
Deferred income taxes
(14,463 )
(1,063
)
(13,400 )
Provision for uncollectible accounts
1,167
1,420
(253
)
Equity in losses of unconsolidated businesses, net of dividends received
117
138
(21
)
Changes in current assets and liabilities, net of effects from
acquisition/disposition of businesses
(4,947
)
(5,636
)
689
Discretionary contribution to qualified pension plans
(3,411
)
(186
)
(3,225
)
Net gain on sale of divested businesses
(1,774
)
(1,007
)
(767
)
Other, net
672
(3,097
)
3,769
Net cash provided by operating activities
25,305
22,810
2,495
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)
(17,247 )
(17,059 )
(188
)
Acquisitions of businesses, net of cash acquired
(5,928
)
(3,765
)
(2,163
)
Acquisitions of wireless licenses
(583
)
(534
)
(49
)
Proceeds from dispositions of businesses
3,614
9,882
(6,268
)
Other, net
772
493
279
Net cash used in investing activities
(19,372 )
(10,983 )
(8,389
)
Cash Flows from Financing Activities
Proceeds from long-term borrowings
27,707
12,964
14,743
Proceeds from asset-backed long-term borrowings
4,290
4,986
(696
)
Repayments of long-term borrowings and capital lease obligations
(23,837 )
(19,159 )
(4,678
)
Repayments of asset-backed long-term borrowings
(400
)
--
(400
)
Decrease in short-term obligations, excluding current maturities
(170
)
(149
)
(21
)
Dividends paid
(9,472
)
(9,262
)
(210
)
Other, net
(4,852
)
(2,797
)
(2,055
)
Net cash used in financing activities
(6,734
)
(13,417 )
6,683
Decrease in cash and cash equivalents
(801
)
(1,590
)
789
Cash and cash equivalents, beginning of period
2,880
4,470
(1,590
)
Cash and cash equivalents, end of period
$
2,079
$
2,880
$
(801
)
Footnotes:
Certain amounts have been reclassified to conform to the current period presentation.
Verizon Communications Inc.
Wireless - Selected Financial Results
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
% Change
12/31/17
12/31/16
% Change
Operating Revenues
Service
$
15,880
$
16,346
(2.9
)
$
63,121
$
66,580
(5.2
)
Equipment
6,475
5,733
12.9
18,889
17,515
7.8
Other
1,416
1,298
9.1
5,501
5,091
8.1
Total Operating Revenues
23,771
23,377
1.7
87,511
89,186
(1.9
)
Operating Expenses
Cost of services
1,983
2,056
(3.6
)
7,990
7,988
--
Cost of equipment
7,339
7,356
(0.2
)
22,147
22,238
(0.4
)
Selling, general and administrative expense
4,987
5,335
(6.5
)
18,772
19,924
(5.8
)
Depreciation and amortization expense
2,344
2,321
1.0
9,395
9,183
2.3
Total Operating Expenses
16,653
17,068
(2.4
)
58,304
59,333
(1.7
)
Operating Income
$
7,118
$
6,309
12.8
$
29,207
$
29,853
(2.2
)
Operating Income Margin
29.9
%
27.0
%
33.4
%
33.5
%
Segment EBITDA
$
9,462
$
8,630
9.6
$
38,602
$
39,036
(1.1
)
Segment EBITDA Margin
39.8
%
36.9
%
44.1
%
43.8
%
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Verizon Communications Inc.
Wireless - Selected Operating Statistics
Unaudited
12/31/17
12/31/16
% Change
Connections (’000)
Retail postpaid
110,854
108,796
1.9
Retail prepaid
5,403
5,447
(0.8
)
Total retail
116,257
114,243
1.8
3 Mos. Ended
3 Mos. Ended
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
% Change
12/31/17
12/31/16
% Change
Net Add Detail (’000)
Retail postpaid
1,174
591
98.6
2,084
2,288
(8.9
)
Retail prepaid
(184
)
(9
) *
(43
)
(133
) 67.7
Total retail
990
582
70.1
2,041
2,155
(5.3
)
Account Statistics
Retail Postpaid Accounts (’000)
35,404
35,410
--
Retail postpaid connections per account
3.13
3.07
2.0
Retail postpaid ARPA
$
135.78
$
141.89
(4.3
)
$
135.99
$
144.32
(5.8
)
Retail postpaid I-ARPA
$
167.19
$
169.10
(1.1
)
$
166.28
$
167.70
(0.8
)
Churn Detail
Retail postpaid
1.00
%
1.10
%
1.01
%
1.01
%
Retail
1.24
%
1.34
%
1.25
%
1.26
%
Retail Postpaid Connection Statistics
Total Smartphone postpaid % of phones activated
96.7
%
95.2
%
95.4
%
93.4
%
Total Smartphone postpaid phone base
90.1
%
87.3
%
Total Internet postpaid base
19.0
%
18.3
%
4G LTE devices as % of retail postpaid connections
88.3
%
85.0
%
Other Operating Statistics
Capital expenditures (in millions)
$
3,383
$
3,464
(2.3
)
$
10,310
$
11,240
(8.3
)
Footnotes:
(1
) Connection net additions exclude acquisitions and adjustments.
(2
) Statistics presented as of end of period.
(3
) Retail postpaid ARPA - average service revenue per account from retail postpaid accounts.
(4
) Retail postpaid I-ARPA - average service revenue per account from retail postpaid account plus recurring device installment billings.
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
*
Not meaningful
Verizon Communications Inc.
Wireline - Selected Financial Results
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
% Change
12/31/17
12/31/16
% Change
Operating Revenues
Consumer Markets
$
3,188
$
3,232
(1.4
)
$
12,777
$
12,751
0.2
Enterprise Solutions
2,285
2,276
0.4
9,167
9,164
--
Partner Solutions
1,209
1,205
0.3
4,917
4,927
(0.2
)
Business Markets
885
822
7.7
3,585
3,356
6.8
Other
50
72
(30.6
)
234
312
(25.0
)
Total Operating Revenues
7,617
7,607
0.1
30,680
30,510
0.6
Operating Expenses
Cost of services
4,465
4,357
2.5
17,922
18,353
(2.3
)
Selling, general and administrative expense
1,558
1,478
5.4
6,274
6,476
(3.1
)
Depreciation and amortization expense
1,532
1,435
6.8
6,104
5,975
2.2
Total Operating Expenses
7,555
7,270
3.9
30,300
30,804
(1.6
)
Operating Income (Loss)
$
62
$
337
(81.6
)
$
380
$
(294
)
*
Operating Income (Loss) Margin
0.8
%
4.4
%
1.2
%
(1.0
)%
Segment EBITDA
$
1,594
$
1,772
(10.0
)
$
6,484
$
5,681
14.1
Segment EBITDA Margin
20.9
%
23.3
%
21.1
%
18.6
%
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain amounts have been reclassified to conform to the current period presentation.
*
Not meaningful
Verizon Communications Inc.
Wireline - Selected Operating Statistics
Unaudited
12/31/17
12/31/16
% Change
Connections (’000)
Fios Video Subscribers
4,619
4,694
(1.6
)
Fios Internet Subscribers
5,850
5,653
3.5
Fios Digital voice residence connections
3,905
3,895
0.3
Fios Digital connections
14,374
14,242
0.9
HSI
1,109
1,385
(19.9
)
Total Broadband connections
6,959
7,038
(1.1
)
Primary residence switched access connections
2,708
3,230
(16.2
)
Primary residence connections
6,613
7,125
(7.2
)
Total retail residence voice connections
6,804
7,355
(7.5
)
Total voice connections
12,821
13,939
(8.0
)
3 Mos. Ended
3 Mos. Ended
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
% Change
12/31/17
12/31/16
% Change
Net Add Detail (’000)
Fios Video Subscribers
(29
)
21
*
(75
)
59
*
Fios Internet Subscribers
47
68
(30.9
)
197
235
(16.2
)
Fios Digital voice residence connections
(15
)
13
*
10
23
(56.5
)
Fios Digital connections
3
102
(97.1
)
132
317
(58.4
)
HSI
(66
)
(68
) 2.9
(276
)
(282
) 2.1
Total Broadband connections
(19
)
-
*
(79
)
(47
) (68.1
)
Primary residence switched access connections
(122
)
(129
) 5.4
(522
)
(569
) 8.3
Primary residence connections
(137
)
(116
) (18.1
)
(512
)
(546
) 6.2
Total retail residence voice connections
(146
)
(127
) (15.0
)
(551
)
(594
) 7.2
Total voice connections
(279
)
(255
) (9.4
)
(1,118
)
(1,096
) (2.0
)
Revenue Statistics
Fios revenues (in millions)
$
2,959
$
2,892
2.3
$
11,691
$
11,236
4.0
Other Operating Statistics
Capital expenditures (in millions)
$
1,981
$
1,648
20.2
$
5,339
$
4,504
18.5
Wireline employees (’000)
57.1
57.6
Fios Video Open for Sale (’000)
14,287
13,693
Fios Video penetration
32.3
%
34.3
%
Fios Internet Open for Sale (’000)
14,582
13,982
Fios Internet penetration
40.1
%
40.4
%
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain amounts have been reclassified to conform to the current period presentation.
*
Not meaningful
Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon
Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions
(dollars in millions)
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
Consolidated Operating Revenues
$
126,034
$
125,980
Less operating revenues from divested businesses
368
2,115
Less operating revenues from acquisitions
4,300
--
Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions
$
121,366
$
123,865
Year over Year Change
(2.0
)%
Organic IoT Revenues
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
Unaudited
12/31/17
12/31/16
IoT Revenues
$
389
$
333
Less IoT revenues from acquisition
30
--
Organic IoT Revenues
$
359
$
333
Year over Year Change
7.8
%
Consolidated EBITDA, Consolidated EBITDA Margin, Consolidated Adjusted EBITDA, Consolidated
Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Excluding Operating Results from
Divested Businesses
(dollars in millions)
3 Mos.
3 Mos.
3 Mos.
3 Mos.
3 Mos.
3 Mos.
3 Months
3 Months
Ended
Ended
Ended
Ended
Ended
Ended
Ended
Ended
Unaudited
12/31/17
9/30/17
6/30/17
3/31/17
12/31/16
9/30/16
6/30/16
3/31/16
Consolidated Net Income
$
18,783
$
3,736
$
4,478
$
3,553
$
4,600
$
3,747
$
831
$
4,430
Add/(subtract):
Provision for income taxes
(15,849 )
1,775
2,489
1,629
2,349
1,829
864
2,336
Interest expense
1,219
1,164
1,218
1,132
1,137
1,038
1,013
1,188
Other (income) expense, net
634
511
19
846
(98
)
(97
)
1,826
(32
)
Equity in losses of unconsolidated
6
22
28
21
35
23
20
20
businesses
Operating Income
4,793
7,208
8,232
7,181
8,023
6,540
4,554
7,942
Add Depreciation and amortization expense
4,456
4,272
4,167
4,059
3,987
3,942
3,982
4,017
Consolidated EBITDA
$
9,249
$
11,480
$
12,399
$
11,240
$
12,010
$
10,482
$
8,536
$
11,959
Add/subtract special items (before tax):
Severance, pension, and benefit
1,196
--
195
--
(1,589
)
797
3,550
165
charges (credits)
Product realignment
463
--
--
--
--
--
--
--
Gain on spectrum license transactions
(144
)
--
--
(126
)
--
--
--
(142
)
Net gain on sale of Divested Businesses
--
--
(1,774 )
--
--
--
(1,007
)
--
Acquisition and integration related costs
154
166
559
--
--
--
--
--
1,669
166
(1,020 )
(126
)
(1,589
)
797
2,543
23
Consolidated Adjusted EBITDA
$
10,918
$
11,646
$
11,379
$
11,114
$
10,421
$
11,279
$
11,079
$
11,982
Operating Results from Divested Businesses
--
(17
)
(50
)
(104
)
(107
)
(115
)
(120
)
(780
)
Consolidated Adjusted EBITDA Excluding
$
10,918
$
11,629
$
11,329
$
11,010
$
10,314
$
11,164
$
10,959
$
11,202
Operating Results from Divested Businesses
Consolidated Operating Revenues - Quarter
$
33,955
$
32,340
to Date
Consolidated Operating Revenues - Year to Date
$
126,034
$
125,980
Consolidated Operating Income Margin - Quarter
14.1
%
to Date
Consolidated EBITDA Margin - Quarter to Date
27.2
%
37.1
%
Consolidated Adjusted EBITDA Margin - Year
35.7
%
35.5
%
to Date
(1)
Excludes depreciation and amortization expense.
(2)
Certain amounts have been reclassified to conform to the current period presentation.
Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon
Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio
(dollars in millions)
Unaudited
12/31/17
12/31/16
Net Debt
Debt maturing within one year
$
3,453
$
2,645
Long-term debt
113,642
105,433
Total Debt
117,095
108,078
Less Cash and cash equivalents
2,079
2,880
Net Debt
$
115,016
$
105,198
Net Debt to Consolidated Adjusted EBITDA Ratio
2.6x
2.4x
Adjusted Earnings per Common Share (Adjusted EPS)
3 Mos. Ended
3 Mos. Ended
Unaudited
12/31/17
12/31/16
Pre-tax
Tax
After-Tax
Pre-tax
Tax
After-Tax
EPS
$
4.56
$
1.10
Severance, pension, and benefit charges
$
1,196
$
(464
) $
732
0.18
$
(1,589 ) $ 604
$
(985
)
(0.24
)
Early debt redemption costs
681
(272
)
409
0.10
--
--
--
--
Product realignment
671
(210
)
461
0.11
--
--
--
--
Acquisition and integration related costs
154
(59
)
95
0.02
--
--
--
--
Gain on spectrum license transactions
(144
)
53
(91
)
(0.02
)
--
--
--
--
Impact of tax reform
--
(16,761 )
(16,761 )
(4.10
)
--
--
--
--
$
2,558
$
(17,713 ) $
(15,155 )
(3.71
)
$
(1,589 ) $ 604
$
(985
)
(0.24
)
Adjusted EPS
$
0.86
$
0.86
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
Pre-tax
Tax
After-Tax
Pre-tax
Tax
After-Tax
EPS
$
7.36
$
3.21
Severance, pension, and benefit charges
$
1,391
$
(541
) $
850
0.21
$
2,923
$ (1,118 ) $
1,805
0.44
Early debt redemption costs
1,983
(788
)
1,195
0.29
1,822
(718
)
1,104
0.27
Product realignment
671
(210
)
461
0.11
--
--
--
--
Acquisition and integration related costs
884
(334
)
550
0.13
--
--
--
--
Gain on spectrum license transactions
(270
)
102
(168
)
(0.04
)
(142
)
54
(88
)
(0.02
)
Gain on sale of divested businesses
(1,774
)
843
(931
)
(0.23
)
(1,007 )
868
(139
)
(0.03
)
Impact of tax reform
--
(16,761 )
(16,761 )
(4.10
)
--
--
--
--
$
2,885
$
(17,689 ) $
(14,804 )
(3.62
)
$
3,596
$ (914
) $
2,682
0.66
Adjusted EPS
$
3.74
$
3.87
(1)
Adjusted EPS may not add due to rounding.
Verizon Communications Inc.
Non-GAAP Reconciliations - Segments
Segment EBITDA and Segment EBITDA Margin
Wireless
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
Unaudited
12/31/17
12/31/16
Operating Income
$
7,118
$
6,309
Add Depreciation and amortization expense
2,344
2,321
Segment EBITDA
$
9,462
$
8,630
Total operating revenues
$
23,771
$
23,377
Operating Income Margin
29.9
%
27.0
%
Segment EBITDA Margin
39.8
%
36.9
%
Wireline
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
Unaudited
12/31/17
12/31/16
Operating Income
$
62
$
337
Add Depreciation and amortization expense
1,532
1,435
Segment EBITDA
$
1,594
$
1,772
Total operating revenues
$
7,617
$
7,607
Operating Income Margin
0.8
%
4.4
%
Segment EBITDA Margin
20.9
%
23.3
%
12 Mos. Ended
12 Mos. Ended
Unaudited
12/31/17
12/31/16
Operating Income (Loss)
$
380
$
(294
)
Add Depreciation and amortization expense
6,104
5,975
Segment EBITDA
$
6,484
$
5,681
Total operating revenues
$
30,680
$
30,510
Operating Income (Loss) Margin
1.2
%
(1.0
)%
Segment EBITDA Margin
21.1
%
18.6
%
Wireline Operating Revenues Excluding Acquisition
(dollars in millions)
3 Mos. Ended
3 Mos. Ended
Unaudited
12/31/17
12/31/16
Wireline Operating Revenues
$
7,617
$
7,607
Less operating revenues from Acquisition
285
--
Wireline Operating Revenues Excluding Acquisition $
7,332
$
7,607
Year over Year Change
(3.6
)%

Media contact:

Bob Varettoni

908.559.6388

robert.a.varettoni@verizon.com

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