Why did Verizon's reported net income and EPS fall so sharply in Q3 2024?

The decline was driven mainly by special items totaling $2.3 billion pre-tax. These included a $1.7 billion severance charge tied to a voluntary separation program for U.S.-based management and other headcount reductions, a $374 million asset and business rationalization charge, and $186 million of acquisition-related intangible amortization. Excluding these items, adjusted EPS was $1.19, compared with $1.22 a year earlier, a much smaller decline.

Is Verizon on track to meet its 2024 financial guidance?

Yes, according to management. Verizon reaffirmed guidance for total 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 billion to $17.5 billion, and an adjusted effective tax rate of 22.5% to 24.0%. Management said wireless service revenue and adjusted EBITDA were trending at or above the midpoint of their ranges. The company does not provide reconciliations for these forward-looking adjusted measures because special items are unpredictable.

How healthy is Verizon's balance sheet and debt position?

Leverage improved modestly. Net unsecured debt was $121.4 billion at the end of Q3 2024, down about $0.8 billion year over year and $1.4 billion sequentially. The net unsecured debt to consolidated adjusted EBITDA ratio was 2.5x, versus 2.6x a year earlier. Unsecured debt to LTM net income rose to 12.3x from 10.6x, largely because of lower LTM net income after the Verizon Business goodwill impairment and the severance charges. Debt maturing within one year increased to $21.8 billion from $13.0 billion at year-end 2023.

What do the cash flow trends mean for the dividend and capital allocation?

Year-to-date operating cash flow fell to $26.5 billion from $28.8 billion, mainly due to higher cash taxes and interest expense. Free cash flow of $14.5 billion was roughly flat, and dividends paid were $8.4 billion for the nine months. Verizon raised its quarterly dividend to $0.6775 per share from $0.6650. Coverage remains a key monitoring item for investors, since dividends paid already absorb most of free cash flow. Pending acquisitions such as Frontier, along with spectrum purchases and debt repayments, also draw on the same cash.

Which parts of the business are growing, and which are under pressure?

Consumer wireless and fixed wireless access are the growth engines, with Consumer postpaid phone net additions turning positive and FWA reaching nearly 4.2 million subscribers. Pricing actions are supporting ARPA growth. The pressure points are wireline and enterprise. Verizon Business revenue fell 2.3% year over year, and Business segment EBITDA declined 3.7% as wireline revenue continued to erode. Wireless equipment revenue also fell 8.1% because of lower upgrade volumes, which weighs on total top-line growth.

VZ 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 22, 2024. Cited figures are marked; the original filing is the authoritative source.

Verizon's third-quarter 2024 results, reported October 22, 2024, showed resilient mobility and broadband growth alongside a sharp GAAP earnings decline driven by special items.

Total operating revenue was $33.3 billion^a, essentially flat year over year, as 1.7% growth in service revenue was offset by an 8.1% decline in wireless equipment revenue. Total wireless service revenue rose 2.7% to $19.8 billion, supported by pricing actions and fixed wireless access (FWA) growth. Reported EPS fell to $0.78 from $1.13 and net income dropped to $3.4 billion from $4.9 billion, primarily because of a $1.7 billion severance charge tied to a voluntary separation program and other headcount reductions, plus a $374 million asset and business rationalization charge and $186 million of acquisition-related amortization.

Excluding special items, adjusted EPS was $1.19^b versus $1.22 a year earlier. Operating fundamentals were mixed but mostly constructive. Consolidated adjusted EBITDA grew to $12.5 billion from $12.2 billion, and Consumer postpaid phone net additions turned positive at 81,000 after a 51,000 loss a year earlier.

Fixed wireless reached its subscriber target about 15 months early, with nearly 4.2 million subscribers and 363,000 net additions in the quarter. Verizon Business remained under pressure from wireline declines, with segment EBITDA down 3.7%^c. Management reaffirmed 2024 guidance, saying wireless service revenue and adjusted EBITDA were trending at or above the midpoint of the ranges.

Balance sheet and cash flow remain central to the investment case. Year-to-date operating cash flow was $26.5 billion^d, down from $28.8 billion, reflecting higher cash taxes and interest expense. Free cash flow was $14.5 billion, roughly flat, and capital expenditures were $12.0 billion year to date.

Net unsecured debt fell to $121.4 billion, with a net unsecured debt to adjusted EBITDA ratio of 2.5x, an improvement from 2.6x a year earlier. The quarterly dividend was raised to $0.6775 per share from $0.6650. The filing also references the pending Frontier Communications acquisition and the Vertical Bridge tower lease agreement, both of which are relevant to future leverage and growth.

02—Key points

Key Highlights

Total operating revenue of $33.3 billion was essentially flat year over year (0.0%), with service revenue up 1.7% offset by an 8.1% decline in wireless equipment revenue.
Reported EPS was $0.78 versus $1.13 a year earlier, while adjusted EPS (excluding special items) was $1.19 versus $1.22, reflecting $2.3 billion of pre-tax special charges including a $1.7 billion severance charge.
Total wireless service revenue rose 2.7% to $19.8 billion, driven by pricing actions and fixed wireless growth.
Fixed wireless access reached nearly 4.2 million subscribers, hitting the company's target 15 months ahead of schedule, with 363,000 net additions in the quarter.
Consumer postpaid phone net additions were 81,000, a turnaround from a 51,000 loss in the prior-year quarter, and Business added 158,000 postpaid phone net additions.
Consolidated adjusted EBITDA was $12.5 billion, up from $12.2 billion, while the net unsecured debt to adjusted EBITDA ratio improved to 2.5x.
Year-to-date free cash flow was $14.5 billion, roughly flat, though operating cash flow declined to $26.5 billion from $28.8 billion on higher cash taxes and interest; 2024 guidance was reaffirmed.

03—Questions

Frequently Asked Questions

Why did Verizon's reported net income and EPS fall so sharply in Q3 2024?
The decline was driven mainly by special items totaling $2.3 billion pre-tax. These included a $1.7 billion severance charge tied to a voluntary separation program for U.S.-based management and other headcount reductions, a $374 million asset and business rationalization charge, and $186 million of acquisition-related intangible amortization. Excluding these items, adjusted EPS was $1.19, compared with $1.22 a year earlier, a much smaller decline.
Is Verizon on track to meet its 2024 financial guidance?
Yes, according to management. Verizon reaffirmed guidance for total 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 billion to $17.5 billion, and an adjusted effective tax rate of 22.5% to 24.0%. Management said wireless service revenue and adjusted EBITDA were trending at or above the midpoint of their ranges. The company does not provide reconciliations for these forward-looking adjusted measures because special items are unpredictable.
How healthy is Verizon's balance sheet and debt position?
Leverage improved modestly. Net unsecured debt was $121.4 billion at the end of Q3 2024, down about $0.8 billion year over year and $1.4 billion sequentially. The net unsecured debt to consolidated adjusted EBITDA ratio was 2.5x, versus 2.6x a year earlier. Unsecured debt to LTM net income rose to 12.3x from 10.6x, largely because of lower LTM net income after the Verizon Business goodwill impairment and the severance charges. Debt maturing within one year increased to $21.8 billion from $13.0 billion at year-end 2023.
What do the cash flow trends mean for the dividend and capital allocation?
Year-to-date operating cash flow fell to $26.5 billion from $28.8 billion, mainly due to higher cash taxes and interest expense. Free cash flow of $14.5 billion was roughly flat, and dividends paid were $8.4 billion for the nine months. Verizon raised its quarterly dividend to $0.6775 per share from $0.6650. Coverage remains a key monitoring item for investors, since dividends paid already absorb most of free cash flow. Pending acquisitions such as Frontier, along with spectrum purchases and debt repayments, also draw on the same cash.
Which parts of the business are growing, and which are under pressure?
Consumer wireless and fixed wireless access are the growth engines, with Consumer postpaid phone net additions turning positive and FWA reaching nearly 4.2 million subscribers. Pricing actions are supporting ARPA growth. The pressure points are wireline and enterprise. Verizon Business revenue fell 2.3% year over year, and Business segment EBITDA declined 3.7% as wireline revenue continued to erode. Wireless equipment revenue also fell 8.1% because of lower upgrade volumes, which weighs on total top-line growth.

04—Continue

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