8-KEarnings & ResultsRegulation FDOther Events+1

VERIZON COMMUNICATIONS INC 8-K Report, Financial Results (Apr 24, 2020)

Filed April 24, 2020For Securities:VZ

Summary

This 8-K filing from Verizon Communications Inc. (VZ) dated April 24, 2020, primarily focuses on the company's operational and financial impacts stemming from the COVID-19 crisis in the first quarter of 2020. Verizon details the extensive measures taken to protect employees and maintain connectivity for customers, including shifting a large portion of its workforce to remote work and temporarily closing most retail stores. The company also highlights its commitment to the FCC's 'Keep Americans Connected' pledge, which involved waiving late fees and not terminating services for customers unable to pay due to COVID-19. Financially, Verizon noted an estimated $0.04 per share impact on Q1 2020 earnings due to increased credit loss allowances. While retail consumer and small business activity saw significant declines, the company experienced increased demand from Global Enterprise and Public Sector clients for critical connectivity. Verizon maintained a strong liquidity position with $7.0 billion in cash and cash equivalents as of March 31, 2020, and $9.4 billion in unused revolving credit capacity, though it acknowledged increased borrowing costs and potential capital market access restrictions.

Key Highlights

  • 1Verizon has implemented extensive business continuity plans in response to COVID-19, including moving over 115,000 employees to remote work and closing nearly 70% of company-owned retail stores.
  • 2The company participated in the FCC's 'Keep Americans Connected' pledge, waiving late fees and suspending service terminations for eligible customers, which led to an increase in delinquencies.
  • 3Q1 2020 earnings were impacted by an estimated $0.04 per share due to a $228 million increase in the allowance for credit losses, driven by higher expected customer payment relief.
  • 4Verizon saw significant declines in wireless retail postpaid gross additions and device activations for consumer and small business segments, alongside reduced Fios internet net additions.
  • 5Conversely, the Global Enterprise and Public Sector segments experienced increased demand for critical connectivity services, with wireless retail postpaid gross additions growing significantly in these areas.
  • 6Verizon maintained a strong liquidity position with $7.0 billion in cash and cash equivalents as of March 31, 2020, and had substantial unused capacity on its revolving credit facility.
  • 7The company raised $3.5 billion through commercial paper issuance in April 2020, despite acknowledging increased borrowing costs and potential restrictions in capital markets due to the crisis.

Frequently Asked Questions

The primary impact of COVID-19 on Verizon's Q1 2020 financial results was an estimated reduction of $0.04 in earnings per share. This was largely due to an increase in the allowance for credit losses, driven by higher expected customer payment relief under the 'Keep Americans Connected' pledge and increased delinquencies across retail and small business accounts.

Verizon implemented significant operational changes, including transitioning over 115,000 employees to remote work, temporarily closing nearly 70% of its company-owned retail stores, limiting customer-focused field operations, and enhancing safety protocols for essential on-site employees. They also provided additional compensation and benefits to frontline workers.

As of March 31, 2020, Verizon had a strong liquidity position with $7.0 billion in cash and cash equivalents and $9.4 billion in unused revolving credit capacity. While acknowledging increased borrowing costs and potential capital market access restrictions, Verizon believes its cash on hand, expected operational cash flow, and other financing sources are sufficient to meet its ongoing requirements.

Consumer and small business segments saw diminished activity, with significant decreases in device volumes, upgrades, and activations, leading to lower equipment revenue. Roaming revenues also declined due to reduced travel. Conversely, Global Enterprise and Public Sector clients experienced increased demand for critical connectivity. Verizon Media saw a reduction in advertising revenue due to paused or canceled campaigns.