01—Abstract
Summary
Summary of the 8-K filed January 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Verizon's 8-K (Item 2.02) furnishes its fourth-quarter and full-year 2023 results.
Full-year 2023 reported EPS was $2.75a, down from $5.06 in 2022, while adjusted EPS (excluding special items) was $4.71 versus $5.18. Total operating revenue fell 2.1% to $134.0 billion, driven by a 10.6% decline in wireless equipment revenue, while wireless service revenue rose 3.2% to $76.7 billion. Fourth-quarter reported EPS was $(0.64), reflecting roughly $7.8 billion of pre-tax special items, chiefly a $5.8 billion goodwill impairment in the Verizon Business reporting unit, alongside a $992 million pension/OPEB remeasurement charge, $325 million of asset rationalization, a $296 million severance charge, $227 million of acquisition-related amortization, and a $100 million legal settlement.
Cash generation was a bright spot. Operating cash flow rose to $37.5 billionb from $37.1 billion, and free cash flow increased to $18.7 billion from $14.1 billion, helped by capex falling to $18.8 billion from $23.1 billion. Net unsecured debt was $126.4 billion, and the net unsecured debt to adjusted EBITDA ratio was 2.6x, a 0.1x improvement year over year.
Consolidated adjusted EBITDA was $47.8 billionc for the full year, essentially flat with 2022's $47.9 billion. Momentum in customer growth was notable: full-year postpaid net additions rose 26% and fixed wireless access added 1.5 million subscribers.
For 2024, management guided to wireless service revenue growth of 2.0% to 3.5%, adjusted EBITDA growth of 1.0% to 3.0%, adjusted EPS of $4.50 to $4.70d, and capex of $17.0 to $17.5 billion. The guidance implies modest earnings pressure and a lower capex budget, with the stock's direction hinging on whether wireless growth can offset continued wireline declines in the Business segment.
02—Key points
Key Highlights
- Full-year 2023 reported EPS of $2.75 vs. $5.06 in 2022; adjusted EPS of $4.71 vs. $5.18, excluding special items.
- Q4 2023 reported EPS of $(0.64), driven by a $5.8 billion goodwill impairment in the Verizon Business reporting unit and about $7.8 billion of total pre-tax special items.
- Full-year free cash flow rose to $18.7 billion from $14.1 billion, as capex fell to $18.8 billion from $23.1 billion and operating cash flow reached $37.5 billion.
- Total operating revenue declined 2.1% to $134.0 billion, though wireless service revenue grew 3.2% to $76.7 billion.
- Fixed wireless access added 989,000 net connections for the full year (1.5 million per company summary), and Verizon is ahead of schedule toward its 4-5 million FWA subscriber goal by end-2025.
- Net unsecured debt was $126.4 billion, with a net unsecured debt to adjusted EBITDA ratio of 2.6x, a 0.1x improvement year over year.
- 2024 guidance: wireless service revenue growth of 2.0%-3.5%, adjusted EBITDA growth of 1.0%-3.0%, adjusted EPS of $4.50-$4.70, and capex of $17.0-$17.5 billion.
03—Questions
Frequently Asked Questions
Why did Verizon report a Q4 2023 net loss despite stable adjusted EBITDA?
The reported loss was driven by special items totaling about $7.8 billion pre-tax, most significantly a $5.8 billion goodwill impairment in the Verizon Business reporting unit. Other items included a $992 million pension/OPEB remeasurement charge, $325 million of asset rationalization, a $296 million severance charge, and a $100 million legal settlement. Consolidated adjusted EBITDA excludes these items and was $11.7 billion, in line with the prior year.
How strong is Verizon's cash flow and debt position?
Operating cash flow of $37.5 billion and free cash flow of $18.7 billion both improved on 2022. Net unsecured debt of $126.4 billion equals roughly 2.6x adjusted EBITDA, an improvement from 2.7x a year earlier. Net unsecured debt did rise $4.2 billion sequentially, mainly from the $3.7 billion C-Band spectrum payment to satellite operators.
What is driving growth in the wireless business?
Growth came from pricing actions, a larger allocation of administrative and telco recovery fees into wireless service revenue, premium plan adoption, and fixed wireless access. Full-year wireless service revenue rose 3.2% to $76.7 billion, and total postpaid net additions rose 26%. Consumer postpaid phone gross additions in Q4 grew nearly 17%, the best performance in four years.
What pressures does Verizon face heading into 2024?
Business segment performance is weakening, with full-year operating income down 21.5% and segment EBITDA margin down to 21.8% from 22.3%, reflecting declines in high-margin wireline revenue. Wireless equipment revenue fell 10.6% as upgrade activity slowed. The 2024 adjusted EPS guidance of $4.50-$4.70 sits below 2023's $4.71 at the midpoint, implying flat-to-lower earnings.
Are the non-GAAP figures comparable to GAAP results?
Verizon presents adjusted EPS, adjusted EBITDA, and free cash flow as supplements to GAAP results, not replacements. Adjusted EPS excludes amortization of acquisition-related intangibles, severance, pension charges, the goodwill impairment, and other special items, so investors should reconcile these figures to GAAP. Verizon does not provide reconciliations for its 2024 forecasts because it cannot predict special items without unreasonable effort.
04—Continue