Verizon(VZ)2023-10-26 13:34Revenue Performance - Consolidated operating revenues decreased by 2.6% to $33.336 billion for the three months ended September 30, 2023, compared to $34.241 billion in the same period in 2022[176] - Consumer segment operating revenues decreased by 2.3% to $25.257 billion for the three months ended September 30, 2023, compared to $25.840 billion in 2022[176] - Business segment operating revenues decreased by 4.0% to $7.527 billion for the three months ended September 30, 2023, compared to $7.837 billion in 2022[176] - Total operating revenues decreased by 2.3% to $25.257 billion for the three months ended September 30, 2023, compared to $25.840 billion in the same period in 2022[217] - Wireless service revenue increased by $446 million during the three months ended September 30, 2023, driven by a $348 million increase in postpaid access revenues and a $137 million increase in non-retail service revenue[219] - Wireless equipment revenue decreased by $656 million (11.8%) for the three months ended September 30, 2023, primarily due to a 30% decrease in device upgrades[224] - Fios service revenue remained relatively flat at $2.7 billion for the three months ended September 30, 2023, compared to the same period in 2022[223] - Enterprise and Public Sector revenues decreased by $153 million (3.9%) for the three months and $427 million (3.6%) for the nine months, driven by declines in networking and wireless equipment revenue[238][240][241] - Business Markets and Other revenues decreased by $52 million (1.6%) for the three months and $45 million (0.5%) for the nine months, primarily due to lower wireless equipment sales and reallocations of administrative charges[238][243][244] - Wholesale revenues declined by $105 million (15.9%) for the three months and $196 million (10.1%) for the nine months, driven by reduced traditional voice and network connectivity services[238][246] - Fios revenues remained flat at $230 million for the three months and $690 million for the nine months, showing stable performance in this segment[245] Cost and Expense Analysis - Cost of wireless equipment decreased by 13.1% to $6.353 billion for the three months ended September 30, 2023, compared to $7.308 billion in 2022[178] - Selling, general and administrative expenses increased by 7.7% to $7.995 billion for the three months ended September 30, 2023, compared to $7.422 billion in 2022[178] - Depreciation and amortization expenses increased by 2.5% to $4.431 billion for the three months ended September 30, 2023, compared to $4.324 billion in 2022[178] - Cost of services decreased by $163 million in Q3 2023 due to reduced access costs from competitors' 3G network shutdown and migration of prepaid subscribers to Verizon network[180] - Cost of services decreased by $431 million in the nine months ended September 30, 2023, primarily due to reduced access costs and lower professional services expenses[181] - Cost of wireless equipment decreased by $1.2 billion in Q3 2023 and $3.8 billion in the nine months ended September 30, 2023, driven by a 26% decrease in device upgrades[182] - Selling, general, and administrative expenses increased by $177 million in Q3 2023 due to higher device insurance program costs and business transformation expenses[184] - Selling, general, and administrative expenses increased by $544 million in the nine months ended September 30, 2023, primarily due to higher credit loss provisions and device insurance costs[185] - Depreciation and amortization expenses increased due to the deployment of C-Band network assets[187] - Total operating expenses decreased by 4.2% to $17.710 billion for the three months ended September 30, 2023, compared to $18.491 billion in the same period in 2022[227] - Cost of services decreased by $147 million (3.2%) for the three months ended September 30, 2023, primarily due to a decrease in access costs related to the 3G network shutdown[228] - Wireless equipment cost decreased by $1.2 billion (three months) and $3.5 billion (nine months) due to a 30% and 29% drop in upgrades, respectively, partially offset by a shift to higher-priced equipment[230] - Selling, general, and administrative expenses increased by $99 million (three months) and $424 million (nine months) due to higher credit loss provisions and advertising costs for the Total by Verizon brand and myPlan launch[231][232] - Cost of services decreased by $117 million (4.4%) for the three months ended September 30, 2023, and by $157 million (2.0%) for the nine months ended September 30, 2023, compared to the same periods in 2022[249][250][251] - Cost of wireless equipment decreased by $124 million (9.2%) for the three months ended September 30, 2023, and by $316 million (8.1%) for the nine months ended September 30, 2023, primarily due to lower volumes of wireless devices sold[249][252] - Selling, general and administrative expense increased by $42 million (2.0%) for the three months ended September 30, 2023, and by $118 million (1.9%) for the nine months ended September 30, 2023, driven by higher credit loss provisions[249][253] - Depreciation and amortization expense increased by $48 million (4.4%) for the three months ended September 30, 2023, and by $110 million (3.4%) for the nine months ended September 30, 2023, due to changes in asset mix and usage[249][254] Profitability and Financial Metrics - Consolidated Net Income for the three months ended September 30, 2023 was $4,884 million, compared to $5,024 million in the same period in 2022[201] - Consolidated EBITDA for the three months ended September 30, 2023 was $12,056 million, compared to $11,781 million in the same period in 2022[201] - Consolidated Adjusted EBITDA for the three months ended September 30, 2023 was $12,238 million, compared to $12,218 million in the same period in 2022[202] - Depreciation and amortization expense for the three months ended September 30, 2023 was $4,431 million, compared to $4,324 million in the same period in 2022[201] - Interest expense for the three months ended September 30, 2023 was $1,433 million, compared to $937 million in the same period in 2022[201] - Provision for income taxes for the three months ended September 30, 2023 was $1,308 million, compared to $1,496 million in the same period in 2022[201] - Non-strategic business shutdown costs for the three months ended September 30, 2023 were $158 million[202] - Business transformation costs for the three months ended September 30, 2023 were $176 million[202] - Severance charges for the nine months ended September 30, 2023 were $237 million[202] - Asset rationalization costs for the nine months ended September 30, 2023 were $155 million[202] - Segment operating income increased by $198 million (2.7%) for the three months and $158 million (0.7%) for the nine months, with EBITDA margins rising to 42.8% and 42.5%, respectively[234] - Segment operating income decreased by $159 million (22.8%) for the three months ended September 30, 2023, and by $423 million (20.7%) for the nine months ended September 30, 2023, compared to the same periods in 2022[256] - Segment EBITDA decreased by $111 million (6.2%) for the three months ended September 30, 2023, and by $313 million (6.0%) for the nine months ended September 30, 2023[256] - Special items included in income before provision for income taxes totaled $579 million for the three months ended September 30, 2023, and $1,385 million for the nine months ended September 30, 2023[257][259] Cash Flow and Capital Expenditures - Capital expenditures for the nine months ended September 30, 2023 totaled $14.2 billion, with 2023 expected to be at the upper end of the guidance range of $18.25 billion to $19.25 billion[169] - Cash flows from operating activities increased by $599 million to $28,798 million for the nine months ended September 30, 2023, compared to the same period in 2022[270] - Cash flows from investing activities increased by $7,712 million to $(15,608) million for the nine months ended September 30, 2023, compared to the same period in 2022[270] - Cash flows from financing activities decreased by $6,188 million to $(11,641) million for the nine months ended September 30, 2023, compared to the same period in 2022[270] - Capital expenditures for the nine months ended September 30, 2023 were $14.2 billion, a decrease of $1.6 billion compared to $15.8 billion in the same period in 2022, primarily due to the completion of the accelerated $10 billion capital program related to C-Band deployment[275] - Net cash provided by operating activities increased by $599 million during the nine months ended September 30, 2023 compared to the same period in 2022, driven by improvements in working capital and lower inventory levels[274] - Free cash flow for the nine months ended September 30, 2023 was $14.6 billion, an increase of $2.2 billion compared to $12.4 billion in the same period in 2022, reflecting higher operating cash flows and lower capital expenditures[291] - The company made $3.7 billion in spectrum clearing incentive payments in October 2023, supported by its cash position as of September 30, 2023[273] - Net cash used in financing activities was $11.6 billion for the nine months ended September 30, 2023, primarily driven by $8.2 billion in cash dividends paid and $5.6 billion in repayments and repurchases of long-term borrowings[279][280] - Verizon made payments of $578 million during the nine months ended September 30, 2023 for obligations related to clearing costs and accelerated clearing incentives[305] - Verizon made additional payments of $3.7 billion in October 2023 related to accelerated clearing incentive obligations[305] - Verizon expects to make payments of approximately $400 million for remaining obligations through 2024[305] Debt and Financial Obligations - Total debt as of September 30, 2023 was $147.4 billion, with unsecured debt of $126.4 billion and secured debt of $21.0 billion, compared to $150.6 billion at December 31, 2022[281] - The company posted $2.1 billion of collateral related to derivative contracts as of September 30, 2023, compared to $2.3 billion at December 31, 2022[295] - The impact of a 100-basis-point change in interest rates on floating rate debt would result in a change in annual interest expense of approximately $409 million[296] - The notional amount of interest rate swaps was $26.1 billion as of both September 30, 2023 and December 31, 2022, with a fair value liability of $5.9 billion at September 30, 2023[298] - The fair value of cross currency swaps assets was $357 million at September 30, 2023, compared to $305 million at December 31, 2022[302] - The fair value of cross currency swaps liabilities was $3.1 billion at September 30, 2023, down from $3.6 billion at December 31, 2022[302] - The total notional amount of cross currency swaps was $33.5 billion at September 30, 2023, compared to $35.0 billion at December 31, 2022[302] - The total notional amount of foreign exchange forwards was $995 million at September 30, 2023, up from $920 million at December 31, 2022[303] Network and Spectrum Deployment - C-Band spectrum deployment as of September 30, 2023 covers approximately 233 million people in the U.S., with full access obtained in August 2023[170] - The company is focusing on building its next-generation 5G network and densifying its 4G LTE network to address increasing mobile video consumption and IoT demand[170] Acquisitions and Contingent Payments - Verizon completed the acquisition of TracFone in November 2021 for approximately $3.5 billion in cash and $3.0 billion in common stock[307] - Verizon made contingent consideration payments of $182 million during the nine months ended September 30, 2023 related to the TracFone acquisition[307] - Contingent consideration payments for the TracFone acquisition are expected to continue through 2024[307] Renewable Energy and Sustainability - Verizon has 26 renewable energy purchase agreements (REPAs) with third parties, planning to purchase up to 3.4 gigawatts of capacity across multiple states[292] Customer Metrics and Growth - Total wireless retail connections decreased by 0.4% to 114.124 million as of September 30, 2023, compared to 114.554 million in the same period in 2022[217] - Wireless retail postpaid ARPA (Average Revenue Per Account) increased by 4.5% to $133.47 for the three months ended September 30, 2023, compared to $127.76 in the same period in 2022[217] - Wireless retail postpaid net additions increased by 223,000 to 251,000 for the three months ended September 30, 2023, compared to 28,000 in the same period in 2022[217] - Total broadband net additions increased by 11.8% to 304,000 for the three months ended September 30, 2023, compared to 272,000 in the same period in 2022[217] - Wireless retail postpaid connections increased by 871,000 (3.0%) for the nine months, while Fios internet connections grew by 13,000 (3.5%)[238] - Total broadband net additions increased by 25,000 (23.8%) for the three months and 124,000 (45.6%) for the nine months, reflecting strong growth in broadband services[238] - Wireless retail postpaid phone net additions decreased by 46,000 (23.4%) for the three months and 249,000 (36.6%) for the nine months, indicating slower phone upgrade activity[238]