Why does Verizon use so many non-GAAP financial measures?

Verizon uses non-GAAP financial measures to provide a more insightful view of its operational performance and business trends. Management believes these measures enhance comparability by excluding items like depreciation, amortization, and specific 'special items' (such as impairments, severance, or acquisition costs) that can fluctuate or are considered non-operational. This allows investors to better assess underlying business profitability and compare Verizon's performance against its competitors and its own historical results.

What are some of the key 'special items' that Verizon excludes in its non-GAAP calculations?

Some of the key 'special items' that Verizon excludes from its non-GAAP measures, particularly in calculating Adjusted EBITDA and Adjusted EPS, include: Oath goodwill impairment (related to its media business), severance charges, product realignment charges, acquisition and integration-related charges, and net gains from dispositions of assets and businesses. These are typically one-time or non-recurring events that management believes do not reflect the ongoing operational performance of the business.

How does Verizon define Net Debt and its related ratios?

Verizon defines Net Debt as cash and cash equivalents subtracted from the sum of debt maturing within one year and long-term debt. It also provides Net Unsecured Debt, which further subtracts secured debt from this calculation. These are used in conjunction with Consolidated Adjusted EBITDA (calculated over the last twelve months) to present ratios like Net Debt to Consolidated Adjusted EBITDA and Net Unsecured Debt to Consolidated Adjusted EBITDA. These ratios are presented to help investors evaluate Verizon's ability to service its debt obligations.

What is the purpose of the supplemental Wireless and Wireline segment information?

The supplemental Wireless and Wireline segment information is provided to help investors reconcile the results of Verizon's newly reorganized segments (Verizon Consumer Group and Verizon Business Group) with historical segment reporting. It adjusts for intersegment transactions and other factors to provide a clearer understanding of trends within these core operational areas following the April 1, 2019 strategic reorganization.

VZ 8-K: Earnings & Results

Summary

This 8-K filing from Verizon Communications Inc. (VZ), dated October 25, 2019, primarily serves to attach a press release and financial tables detailing the company's operational and financial performance. A key focus of the filing is the extensive use and definition of non-GAAP financial measures, which Verizon utilizes to provide a clearer perspective on its performance beyond standard accounting principles. These measures, including various forms of EBITDA, Net Debt ratios, and Adjusted Earnings Per Share (EPS), are intended to offer investors a more comparable view of operational profitability and business trends, minimizing the impact of capital structure differences, taxes, depreciation policies, and "special items" like goodwill impairments, severance charges, and acquisition-related costs. Investors reviewing this filing will find that Verizon emphasizes these non-GAAP metrics to assess underlying business performance and comparability to peers. The company explicitly states its belief that these adjusted figures are crucial for evaluating operational effectiveness, strategic reorganization impacts (such as the new Wireless and Wireline segment reporting), and the ability to service debt. The detailed explanations of how these non-GAAP measures are calculated are provided to ensure transparency and aid investor understanding in evaluating Verizon's financial health and operational trends.

Key Highlights

1Verizon Communications Inc. filed an 8-K on October 25, 2019, attaching a press release and financial tables.
2The filing extensively defines and explains various non-GAAP financial measures used by the company.
3Key non-GAAP metrics detailed include Consolidated EBITDA, Consolidated Adjusted EBITDA, EBITDA Margins, Net Debt to Consolidated Adjusted EBITDA Ratio, and Adjusted Earnings per Common Share (Adjusted EPS).
4Verizon explains that non-GAAP measures are used to provide a clearer view of operational profitability and business trends by excluding certain items.
5Items excluded in non-GAAP calculations include depreciation, amortization, interest, taxes, equity in losses/earnings of unconsolidated businesses, and specific 'special items'.
6Special items mentioned that are excluded from Adjusted EBITDA include Oath goodwill impairment, severance charges, product realignment, acquisition/integration costs, and net gains from dispositions.
7The filing also references supplemental information for Wireless and Wireline segments to reconcile new segment reporting structures with historical data following a strategic reorganization.

VERIZON COMMUNICATIONS INC 8-K Report, Financial Results (Oct 25, 2019)

Summary

Key Highlights

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