01—Abstract
Summary
Summary of the 8-K filed July 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Verizon's second-quarter 2024 results, reported July 22, 2024, showed modest top-line growth driven by wireless service, with consolidated operating revenue of $32.8 billiona, up 0.6% year over year, and total wireless service revenue of $19.8 billion, up 3.5%.
Consolidated adjusted EBITDA rose to $12.3 billionb from $12.0 billion, while GAAP EPS was $1.09 versus $1.10 a year earlier and adjusted EPS was $1.15 versus $1.21. Net income fell 1.3% to $4.7 billion, mainly because interest expense rose 32% to $1.7 billion on lower capitalized interest and higher rates. Management reiterated full-year 2024 guidance for 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.
Balance-sheet and cash-flow trends were mixed but improving on leverage. Net unsecured debt fell to $122.8 billionc, and the net unsecured debt to adjusted EBITDA ratio improved to 2.5x from 2.6x. Free cash flow for the first half of 2024 was $8.5 billion, up from $8.0 billion, helped by a sharp drop in capex to $8.1 billion from $10.1 billion, which management says returns the company to historic capital intensity.
Operating cash flow fell to $16.6 billiond from $18.0 billion because of higher cash taxes and interest costs. Operating momentum was strongest in broadband and fixed wireless, with 391,000 total broadband net additions and 3.8 million fixed wireless subscribers, up roughly 69% year over year. Consumer postpaid phone net losses narrowed to 8,000 from 136,000, and Verizon Business posted its best postpaid phone net adds since Q4 2022.
Offsetting these were continued wireline declines at Verizon Business, where segment operating income fell 6.2%, and a drop in wireless equipment revenue of 5.3% from lower upgrade volumes. Investors should weigh the improving subscriber trends and leverage against rising interest costs and pressure in wireline.
02—Key points
Key Highlights
- Consolidated operating revenue of $32.8 billion, up 0.6% year over year; service and other revenue rose 1.8% while wireless equipment revenue fell 5.3%.
- Total wireless service revenue of $19.8 billion, up 3.5% year over year, with a sequential increase of more than $250 million.
- Consolidated adjusted EBITDA of $12.3 billion, up from $12.0 billion; GAAP net income was $4.7 billion, down 1.3%, as interest expense rose 32.1% to $1.7 billion.
- GAAP EPS of $1.09 versus $1.10 a year earlier; adjusted EPS of $1.15 versus $1.21, excluding $355 million of pre-tax special items (intangible amortization and a pension remeasurement charge).
- Net unsecured debt of $122.8 billion; net unsecured debt to consolidated adjusted EBITDA improved to 2.5x from 2.6x at year-end 2023.
- First-half 2024 free cash flow of $8.5 billion, up from $8.0 billion, as capital expenditures fell to $8.1 billion from $10.1 billion; operating cash flow fell to $16.6 billion from $18.0 billion.
- Full-year 2024 guidance reaffirmed: adjusted EBITDA growth of 1.0% to 3.0%, adjusted EPS of $4.50 to $4.70, wireless service revenue growth of 2.0% to 3.5%, and capex of $17.0 to $17.5 billion.
03—Questions
Frequently Asked Questions
Did Verizon meet its guidance and remain on track for full-year 2024?
Yes. Management said the company remains on track to meet its full-year 2024 guidance and reaffirmed all targets, including 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. Q2 wireless service revenue growth of 3.5% sits within the 2.0% to 3.5% range for the full year.
Why did adjusted EPS decline even though adjusted EBITDA increased?
Adjusted EPS fell to $1.15 from $1.21 mainly because interest expense rose 32.1% to $1.7 billion, driven by lower capitalized interest and higher interest rates on outstanding debt. Higher depreciation and amortization, which rose 2.8% to $4.5 billion, also weighed on earnings. These costs offset the EBITDA gain, which came from wireless service revenue growth and lower upgrade volumes.
How is Verizon's balance sheet and debt position trending?
Leverage improved. Total unsecured debt fell $3.1 billion sequentially to $125.3 billion, and net unsecured debt dropped to $122.8 billion. The net unsecured debt to adjusted EBITDA ratio improved to 2.5x from 2.6x at year-end 2023. Debt maturing within one year rose to $23.3 billion from $13.0 billion at year-end 2023, so investors should monitor near-term refinancing needs.
What is driving subscriber growth, and where is the weakness?
Growth came mainly from fixed wireless access, with 378,000 FWA net additions and more than 3.8 million subscribers, up about 69% year over year. Consumer postpaid phone net losses narrowed to 8,000 from 136,000, and Verizon Business added 156,000 postpaid phone net adds. Weakness remained in Verizon Business wireline revenue, which declined, and in Consumer prepaid, which lost 624,000 subscribers, including 410,000 tied to the Affordable Connectivity Program shutdown.
Why did operating cash flow decline while free cash flow increased?
Operating cash flow fell to $16.6 billion from $18.0 billion in the first half, due to higher cash taxes and higher interest expense. Free cash flow rose to $8.5 billion because capital expenditures dropped by about $2.0 billion to $8.1 billion. Management said the lower capex reflects a return to historic levels of capital intensity, so part of the improvement may not repeat in future periods.
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