01—Abstract
Summary
Summary of the 8-K filed April 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Verizon's first-quarter 2024 results, released April 22, 2024, showed resilient wireless service revenue but pressure on earnings and profitability.
Total operating revenue was $33.0 billiona, up 0.2% year over year, while wireless service revenue grew 3.3% to $19.5 billion on pricing actions, premium plan adoption and fixed wireless growth. Consolidated net income fell to $4.7 billion from $5.0 billion, and GAAP EPS declined to $1.09 from $1.17. Adjusted EPS, which excludes amortization of acquisition-related intangibles and a $106 million Costa Rica legacy legal charge, was $1.15 versus $1.20 a year earlier.
Consolidated Adjusted EBITDA rose modestly to $12.1 billionb from $11.9 billion. Cash generation and balance sheet metrics were mixed. Operating cash flow fell to $7.1 billion from $8.3 billion, mainly due to higher interest expense from lower capitalized interest and a $365 million discretionary pension contribution.
Capital expenditures dropped sharply to $4.4 billionc from $6.0 billion, lifting free cash flow to $2.7 billion from $2.3 billion. Net unsecured debt declined to $126.0 billion, and the net unsecured debt to Adjusted EBITDA ratio held at 2.6x. Interest expense rose 35.5% to $1.6 billion, a notable drag on net income.
Segment trends diverged. Consumer performed well, with operating income up 3.8%d, segment EBITDA up 3.6%, and postpaid phone net losses of 158,000, the best first quarter since 2018.
Verizon Business was weaker, with revenue down 1.6%, operating income down 27.6%, and segment EBITDA down 7.2% on continued wireline declines. Management reaffirmed 2024 guidance, including 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 $4.70, and capex of $17.0 to $17.5 billion.
02—Key points
Key Highlights
- Total operating revenue of $33.0B, up 0.2% YoY; wireless service revenue of $19.5B, up 3.3%, driven by pricing actions and premium plan adoption.
- GAAP EPS of $1.09 vs. $1.17 a year ago (down 6.8%); Adjusted EPS of $1.15 vs. $1.20, excluding $221M intangible amortization and a $106M Costa Rica legacy legal charge.
- Consolidated Adjusted EBITDA of $12.1B, up from $11.9B; net income declined to $4.7B from $5.0B as interest expense rose 35.5% to $1.6B.
- Free cash flow of $2.7B, up from $2.3B, supported by capex falling to $4.4B from $6.0B, even as operating cash flow dropped to $7.1B from $8.3B.
- Fixed wireless growth continued: 3.4M total FWA subscribers, with 354K FWA net additions in Q1 (203K Consumer, 151K Business, a Business record).
- Verizon Business weakness: operating income down 27.6% to $399M and segment EBITDA down 7.2% to $1.5B on wireline revenue declines.
- Net unsecured debt of $126.0B, down $0.4B QoQ; net unsecured debt to Adjusted EBITDA steady at 2.6x. 2024 guidance reaffirmed.
03—Questions
Frequently Asked Questions
Did Verizon meet its financial expectations in Q1 2024?
Verizon reported results broadly in line with its 2024 trajectory and said it remained on track to meet full-year guidance. Wireless service revenue growth of 3.3% and Adjusted EBITDA growth of about 0.5% were positive, but GAAP and Adjusted EPS both declined year over year, and Business segment results were weaker.
Why did EPS decline despite revenue and EBITDA growth?
The primary drivers were higher interest expense, which rose to $1.6B from $1.2B due to lower capitalized interest and higher rates, along with higher SG&A expenses (up 8.5%). Special items also weighed on GAAP EPS, including a $106M legacy legal charge, while amortization of acquisition intangibles, excluded from Adjusted EPS, was $221M.
How strong is Verizon's cash flow and balance sheet?
Free cash flow improved to $2.7B from $2.3B because capex fell substantially. Operating cash flow was weaker at $7.1B, affected by higher interest costs and a $365M pension contribution. Net unsecured debt was $126.0B and the leverage ratio of 2.6x was flat versus year-end 2023 and improved 0.1x year over year, which indicates a stable but still substantial debt load.
What are the main risks highlighted for investors?
Key concerns include rising interest expense, declining wireline revenue in the Business segment, and slower growth in wireless equipment and upgrade activity (equipment revenue down 6.9%). Consumer postpaid phone net losses persisted, though they improved year over year, and management's 2024 guidance depends on sustaining wireless pricing gains and fixed wireless growth.
What is management's outlook for 2024?
Verizon reaffirmed its 2024 outlook: 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 $4.70, capex of $17.0 to $17.5 billion, and an adjusted effective tax rate of 22.5% to 24.0%. Management also expects positive Consumer postpaid phone net additions for the full year.
04—Continue