EX-99 2 a2017q4exhibit99.htm EX-99 Exhibit
Exhibit 99
vzlogo.jpg


News Release


FOR IMMEDIATE RELEASE
Media contact:
January 23, 2018
Bob Varettoni
 
908.559.6388
 
robert.a.varettoni@verizon.com


Verizon closes 2017 with strong wireless customer growth and retention, well-positioned in new markets

4Q 2017 highlights
•
$4.56 in earnings per share (EPS), compared with $1.10 in 4Q 2016; adjusted EPS (non-GAAP), excluding special items, of 86 cents, compared with 86 cents in 4Q 2016.
•
Verizon Wireless: 1.2 million retail postpaid net additions, including 647,000 postpaid smartphone net adds; retail postpaid churn of 1.00 percent, with strong customer loyalty demonstrated by retail postpaid phone churn of 0.77 percent -- less than 0.90 percent for the 11th consecutive quarter.
•
Fios total revenue growth of 2.3 percent, driven by Fios Internet customer growth.

NEW YORK - Verizon Communications Inc. (NYSE, Nasdaq: VZ) closed 2017 with another quarter of strong Verizon Wireless customer growth and retention, and with core and emerging businesses positioned for 2018 and beyond.
“Verizon finished 2017 with great momentum, led by some of the best customer growth and loyalty results Verizon Wireless has delivered in recent years,” said Chairman and CEO Lowell McAdam. “In 2018 we look to drive long-term shareholder value by deploying next-generation network services, leveraging global platforms such as Oath, and using our strategic Humanability approach to turn innovative ideas into realities.”
Tax-reform legislation will have a positive impact to cash flow from operations in 2018 of approximately $3.5 billion to $4 billion. The incremental cash flow will be used primarily to strengthen Verizon’s balance sheet. Additionally, Verizon will announce later today how employees will further share

Page 1

in the company’s success, and the company will also be increasing contributions to the Verizon Foundation by $200 million to $300 million over the next two years. These two initiatives have a projected EPS impact of 5 to 6 cents for each of the next two years.
For fourth-quarter 2017, Verizon reported EPS of $4.56, compared with $1.10 in fourth-quarter 2016. On an adjusted basis (non-GAAP), fourth-quarter 2017 EPS was 86 cents, compared with 86 cents in fourth-quarter 2016.
Fourth-quarter 2017 adjusted EPS included a net pre-tax loss from special items of about $2.6 billion: a severance and mark-to-market adjustment of pension and OPEB (other post-employment benefits) liabilities of $1.2 billion dollars; early debt redemption costs of $681 million; a $671 million charge for product realignment of early-stage developmental technologies; acquisition and integration-related charges of $154 million; and a non-cash pre-tax gain on spectrum license transactions of about $144 million. As Verizon noted in an 8-K filing on Jan. 17, the federal Tax Cuts and Jobs Act also resulted in a one-time, after-tax increase to earnings provisionally estimated to be approximately $16.8 billion, or $4.10 per share. This is primarily related to the re-measurement of the company’s net deferred tax liabilities at the new corporate income tax rate.
The cumulative net impact from these items, after tax, was approximately $15.2 billion, or $3.71 per share, in fourth-quarter 2017.
For full-year 2017, Verizon reported $7.36 in EPS, compared with $3.21 in full-year 2016. On an adjusted basis (non-GAAP), 2017 EPS was $3.74, compared with 2016 EPS of $3.87.

Consolidated results
Total consolidated operating revenues in fourth-quarter 2017 were $34.0 billion, up 5.0 percent from fourth-quarter 2016. Full-year 2017 consolidated operating revenues were $126.0 billion. On a comparable basis excluding divestitures and acquisitions (non-GAAP), full-year consolidated revenues declined approximately 2 percent in 2017, compared with 2016.
Net income was $18.8 billion in fourth-quarter 2017. EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) totaled approximately $9.2 billion. Consolidated operating income margin was 14.1 percent. Consolidated EBITDA margin (non-GAAP) was 27.2 percent in fourth-

Page 2

quarter 2017, compared with 37.1 percent in fourth-quarter 2016. Adjusted EBITDA margin (non-GAAP) for 2017 was 35.7 percent and 35.5 percent in the same periods, respectively.
Cash flow from operations totaled $25.3 billion in 2017, and capital expenditures totaled $17.2 billion. In 2017, Verizon made $9.5 billion in cash dividend payments to shareholders.
In Verizon’s media business, Oath revenues were $2.2 billion in fourth-quarter 2017, up approximately 10 percent from third-quarter 2017, driven by increased customer advertising spending during the holidays. Verizon expects a normal seasonal trend in Oath revenues between fourth-quarter 2017 and first-quarter 2018.
In telematics, revenues were more than $230 million in fourth-quarter 2017. IoT (Internet of Things) revenues increased approximately 17 percent year over year, and 8 percent on an organic basis (non-GAAP).

Wireless results
•
Verizon reported a net increase of 1.2 million retail postpaid connections in fourth-quarter 2017. Net phone additions of 431,000 included 647,000 smartphones, compared with 456,000 smartphone additions in fourth-quarter 2016. Total retail postpaid net adds in fourth-quarter 2017 included 193,000 tablet and 550,000 other connected device net adds, led by wearables.
•
Full-year 2017 postpaid net additions of 2.1 million included 1.8 million smartphones, Verizon’s highest total since 2015. It also included 31,000 tablets and 1.3 million other connected devices.
•
For the third consecutive quarter, Verizon increased customer accounts, adding 40,000 to its base in fourth-quarter 2017. The company ended 2017 with 116.3 million total retail connections -- 110.9 million postpaid connections and 5.4 million prepaid connections.
•
Total retail postpaid churn was 1.00 percent in fourth-quarter 2017, a year-over-year improvement of 10 basis points, driven mainly by retail postpaid phone churn of 0.77 percent. This is the 11th consecutive quarter of retail postpaid phone churn of less than 0.90 percent.
•
Total revenues were $23.8 billion in fourth-quarter 2017, an increase of 1.7 percent compared with fourth-quarter 2016 and the company’s first year-over-year wireless revenue growth in two years. The momentum in service revenue trends continued, increasing sequentially for the second consecutive quarter, to $15.9 billion, while the year-over-year decline improved to 2.9 percent. For full-year 2017, total revenues totaled $87.5 billion, a decline of 1.9 percent.
•
Verizon now has approximately 80 percent of its postpaid phone base on unsubsidized service pricing plans, compared with approximately 67 percent at year-end 2016.
•
Segment operating income in fourth-quarter 2017 was $7.1 billion, and segment operating income margin on total revenues was 29.9 percent. Segment EBITDA (non-GAAP) totaled $9.5 billion in fourth-quarter 2017. Segment EBITDA margin on total revenues (non-GAAP) was 39.8 percent, compared with 36.9 percent in fourth-quarter 2016.

Page 3

Wireline results
•
Total wireline revenues increased 0.1 percent year over year in fourth-quarter 2017 and 0.6 percent for the full year, compared with 2016, to $7.6 billion and $30.7 billion, respectively. On an organic basis, excluding revenues from acquired operations (non-GAAP), total wireline revenues declined 3.6 percent year over year in fourth-quarter 2017.
•
Total Fios revenues grew 2.3 percent, and consumer Fios revenues grew 1.7 percent, comparing fourth-quarter 2017 with fourth-quarter 2016.
•
In fourth-quarter 2017, Verizon added a net of 47,000 Fios Internet connections and lost a net of 29,000 Fios Video connections, continuing to reflect the shift from traditional linear video to over-the-top offerings. At year-end 2017, Verizon had 5.9 million Fios Internet connections and 4.6 million Fios Video connections.
•
Wireline operating income was $62 million in fourth-quarter 2017, and segment operating income margin was 0.8 percent. Full-year 2017 segment operating income was $380 million, and segment operating income margin was 1.2 percent.
•
Segment EBITDA (non-GAAP) was $1.6 billion in fourth-quarter 2017. Segment EBITDA margin (non-GAAP) was 20.9 percent in fourth-quarter 2017, compared with 23.3 percent in fourth-quarter 2016. For the full year, segment EBITDA margin was 21.1 percent in 2017, compared with 18.6 percent in 2016 (which included impacts from a work stoppage).
Outlook and guidance
For 2018, Verizon expects the following:
•
Full-year consolidated revenues will grow at low-single-digit percentage rates on a GAAP basis. Excluding the impact from the new revenue recognition standard, Verizon is on track to achieve year-over-year wireless service revenue growth by the middle part of 2018. On a GAAP basis, Verizon expects service revenue growth to turn positive around the end of 2018 or early 2019.
•
Low single-digit percentage growth in adjusted EPS, which includes the dilutive impacts from a full year of depreciation and amortization costs from 2017 acquisitions, the Straight Path acquisition expected to close later in the first quarter, and the ongoing impact of last year’s data center divestitures. This is before the impact of tax reform and the revenue recognition standard.
•
Capital spending for 2018 will be in the range of $17.0 billion to $17.8 billion, including the commercial launch of 5G.
•
The expected savings from tax reform will generate a net $3.5 billion to $4.0 billion uplift to cash flow from operations in 2018. This is expected to yield a 55 to 65 cent increase in 2018 EPS, net of impacts from the employee and Verizon Foundation initiatives. The resulting 2018 effective tax rate is projected to be in the range of 24 to 26 percent.
NOTE: See the accompanying schedules and www.verizon.com/about/investors for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this document.

Verizon Communications Inc. (NYSE, Nasdaq: VZ), headquartered in New York City, generated $126 billion in 2017 revenues. The company operates America’s most reliable wireless network and the nation’s premier all-fiber network, and delivers integrated solutions to businesses worldwide. Its Oath subsidiary reaches about one billion people around the world with a dynamic house of media and technology brands.

####


Page 4

VERIZON’S ONLINE MEDIA CENTER: News releases, stories, media contacts and other resources are available at www.verizon.com/about/news/. News releases are also available through an RSS feed. To subscribe, visit www.verizon.com/about/rss-feeds/.

Forward-looking statements
In this communication we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following important factors, along with those discussed in our filings with the Securities and Exchange Commission (the “SEC”), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; material changes in technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance; our high level of indebtedness; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; the inability to implement our business strategies; and the inability to realize the expected benefits of strategic transactions.



Page 5
Verizon Communications Inc.
Condensed Consolidated Statements of Income



(dollars in millions, except per share amounts)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
%
Change
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
%
Change
Operating Revenues
 
 
 
 
 

 
 
 
 
 
 
Service revenues and other
 
$
27,480

 
$
26,610

 
3.3

 
$
107,145

 
$
108,468

 
(1.2
)
Wireless equipment revenues
 
6,475

 
5,730

 
13.0

 
18,889

 
17,512

 
7.9

Total Operating Revenues
 
33,955

 
32,340

 
5.0

 
126,034

 
125,980

 
—

Operating Expenses
 
 
 
 
 


 
 
 
 
 


Cost of services
 
7,836

 
7,006

 
11.8

 
29,409

 
29,186

 
0.8

Wireless cost of equipment
 
7,339

 
7,356

 
(0.2
)
 
22,147

 
22,238

 
(0.4
)
Selling, general and administrative expense
 
9,531

 
5,968

 
59.7

 
30,110

 
31,569

 
(4.6
)
Depreciation and amortization expense
 
4,456

 
3,987

 
11.8

 
16,954

 
15,928

 
6.4

Total Operating Expenses
 
29,162

 
24,317

 
19.9

 
98,620

 
98,921

 
(0.3
)
Operating Income
 
4,793

 
8,023

 
(40.3
)
 
27,414

 
27,059

 
1.3

Equity in losses of unconsolidated businesses
 
(6
)
 
(35
)
 
82.9

 
(77
)
 
(98
)
 
21.4

Other income (expense), net
 
(634
)
 
98

 
*

 
(2,010
)
 
(1,599
)
 
(25.7
)
Interest expense
 
(1,219
)
 
(1,137
)
 
(7.2
)
 
(4,733
)
 
(4,376
)
 
(8.2
)
Income Before Provision for Income Taxes
 
2,934

 
6,949

 
(57.8
)
 
20,594

 
20,986

 
(1.9
)
Benefit (provision) for income taxes
 
15,849

 
(2,349
)
 
*

 
9,956

 
(7,378
)
 
*

Net Income
 
$
18,783

 
$
4,600

 
*

 
$
30,550

 
$
13,608

 
*

Net income attributable to noncontrolling interests
 
$
114

 
$
105

 
8.6

 
$
449

 
$
481

 
(6.7
)
Net income attributable to Verizon
 
18,669

 
4,495

 
*

 
30,101

 
13,127

 
*

Net Income
 
$
18,783

 
$
4,600

 
*

 
$
30,550

 
$
13,608

 
*

Basic Earnings per Common Share
 
 
 
 
 


 
 
 
 
 


Net income attributable to Verizon
 
$
4.57

 
$
1.10

 
*

 
$
7.37

 
$
3.22

 
*

Weighted average number of common shares (in millions)
 
4,087

 
4,081

 


 
4,084

 
4,080

 


Diluted Earnings per Common Share (1)
 
 
 
 
 


 
 
 
 
 


Net income attributable to Verizon
 
$
4.56

 
$
1.10

 
*

 
$
7.36

 
$
3.21

 
*

Weighted average number of common shares-assuming dilution (in millions)
 
4,090

 
4,087

 
 
 
4,089

 
4,086

 


Footnotes:
 
(1)
Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.
*
Not meaningful






Verizon Communications Inc.
Condensed Consolidated Balance Sheets
(dollars in millions)
Unaudited
 
12/31/17

 
12/31/16

 
$ Change
Assets
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
2,079

 
$
2,880

 
$
(801
)
Accounts receivable, net
 
23,493

 
17,513

 
5,980

Inventories
 
1,034

 
1,202

 
(168
)
Assets held for sale
 
—

 
882

 
(882
)
Prepaid expenses and other
 
3,307

 
3,918

 
(611
)
Total current assets
 
29,913

 
26,395

 
3,518

Property, plant and equipment
 
246,498

 
232,215

 
14,283

Less accumulated depreciation
 
157,930

 
147,464

 
10,466

Property, plant and equipment, net
 
88,568


84,751


3,817

Investments in unconsolidated businesses
 
1,039

 
1,110

 
(71
)
Wireless licenses
 
88,417

 
86,673

 
1,744

Goodwill
 
29,172

 
27,205

 
1,967

Other intangible assets, net
 
10,247

 
8,897

 
1,350

Non-current assets held for sale
 
—

 
613

 
(613
)
Other assets
 
9,787

 
8,536

 
1,251

Total Assets
 
$
257,143


$
244,180


$
12,963

Liabilities and Equity
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Debt maturing within one year
 
$
3,453

 
$
2,645

 
$
808

Accounts payable and accrued liabilities
 
21,232

 
19,593

 
1,639

Other
 
8,352

 
8,102

 
250

Total current liabilities
 
33,037

 
30,340

 
2,697

Long-term debt
 
113,642

 
105,433

 
8,209

Employee benefit obligations
 
22,112

 
26,166

 
(4,054
)
Deferred income taxes
 
31,232

 
45,964

 
(14,732
)
Other liabilities
 
12,433

 
12,245

 
188

Total long-term liabilities
 
179,419

 
189,808

 
(10,389
)
 
 
 
 
 
 
 
Equity
 
 
 
 
 


Common stock
 
424

 
424

 
—

Additional paid in capital
 
11,101

 
11,182

 
(81
)
Retained earnings
 
35,635

 
15,059

 
20,576

Accumulated other comprehensive income
 
2,659

 
2,673

 
(14
)
Common stock in treasury, at cost
 
(7,139
)
 
(7,263
)
 
124

Deferred compensation – employee stock ownership plans and other
 
416

 
449

 
(33
)
Noncontrolling interests
 
1,591

 
1,508

 
83

Total equity
 
44,687

 
24,032

 
20,655

Total Liabilities and Equity
 
$
257,143

 
$
244,180

 
$
12,963

Verizon - Selected Financial and Operating Statistics
Unaudited
 
12/31/17

 
12/31/16

Total debt (in millions)
 
$
117,095

 
$
108,078

Net debt (in millions)
 
$
115,016

 
$
105,198

Net debt / Consolidated adjusted EBITDA(1)
 
2.6x

 
2.4x

Common shares outstanding end of period (in millions)
 
4,079

 
4,077

Total employees (‘000)
 
155.4

 
160.9

Quarterly cash dividends declared per common share
 
$
0.5900

 
$
0.5775

Footnotes: 
(1)
Consolidated adjusted EBITDA excludes the effects of special items and operating results of Divested Businesses, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.

Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows


(dollars in millions)
Unaudited
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
$ Change
Cash Flows from Operating Activities
 
 
 
 
 
 
Net Income
 
$
30,550

 
$
13,608

 
$
16,942

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization expense
 
16,954

 
15,928

 
1,026

Employee retirement benefits
 
440

 
2,705

 
(2,265
)
Deferred income taxes
 
(14,463
)
 
(1,063
)
 
(13,400
)
Provision for uncollectible accounts
 
1,167

 
1,420

 
(253
)
Equity in losses of unconsolidated businesses, net of dividends received
 
117

 
138

 
(21
)
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses
 
(4,947
)
 
(5,636
)
 
689

Discretionary contribution to qualified pension plans
 
(3,411
)
 
(186
)
 
(3,225
)
Net gain on sale of divested businesses
 
(1,774
)
 
(1,007
)
 
(767
)
Other, net
 
672

 
(3,097
)
 
3,769

Net cash provided by operating activities
 
25,305

 
22,810

 
2,495

Cash Flows from Investing Activities
 
 
 
 
 
 
Capital expenditures (including capitalized software)
 
(17,247
)
 
(17,059
)
 
(188
)
Acquisitions of businesses, net of cash acquired
 
(5,928
)
 
(3,765
)
 
(2,163
)
Acquisitions of wireless licenses
 
(583
)
 
(534
)
 
(49
)
Proceeds from dispositions of businesses
 
3,614

 
9,882

 
(6,268
)
Other, net
 
772

 
493

 
279

Net cash used in investing activities
 
(19,372
)
 
(10,983
)
 
(8,389
)
Cash Flows from Financing Activities
 
 
 
 
 
 
Proceeds from long-term borrowings
 
27,707

 
12,964

 
14,743

Proceeds from asset-backed long-term borrowings
 
4,290

 
4,986

 
(696
)
Repayments of long-term borrowings and capital lease obligations
 
(23,837
)
 
(19,159
)
 
(4,678
)
Repayments of asset-backed long-term borrowings
 
(400
)
 
—

 
(400
)
Decrease in short-term obligations, excluding current maturities
 
(170
)
 
(149
)
 
(21
)
Dividends paid
 
(9,472
)
 
(9,262
)
 
(210
)
Other, net
 
(4,852
)
 
(2,797
)
 
(2,055
)
Net cash used in financing activities
 
(6,734
)
 
(13,417
)
 
6,683

Decrease in cash and cash equivalents
 
(801
)
 
(1,590
)
 
789

Cash and cash equivalents, beginning of period
 
2,880

 
4,470

 
(1,590
)
Cash and cash equivalents, end of period
 
$
2,079

 
$
2,880

 
$
(801
)
Footnotes:
Certain amounts have been reclassified to conform to the current period presentation.


Verizon Communications Inc.
Wireless – Selected Financial Results


(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
%
Change
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
%
Change
Operating Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Service
 
$
15,880

 
$
16,346

 
(2.9
)
 
$
63,121

 
$
66,580

 
(5.2
)
Equipment
 
6,475

 
5,733

 
12.9

 
18,889

 
17,515

 
7.8

Other
 
1,416

 
1,298

 
9.1

 
5,501

 
5,091

 
8.1

Total Operating Revenues
 
23,771

 
23,377

 
1.7

 
87,511

 
89,186

 
(1.9
)
Operating Expenses
 
 
 
 
 


 
 
 
 
 


Cost of services
 
1,983

 
2,056

 
(3.6
)
 
7,990

 
7,988

 
—

Cost of equipment
 
7,339

 
7,356

 
(0.2
)
 
22,147

 
22,238

 
(0.4
)
Selling, general and administrative expense
 
4,987

 
5,335

 
(6.5
)
 
18,772

 
19,924

 
(5.8
)
Depreciation and amortization expense
 
2,344

 
2,321

 
1.0

 
9,395

 
9,183

 
2.3

Total Operating Expenses
 
16,653

 
17,068

 
(2.4
)
 
58,304

 
59,333

 
(1.7
)
Operating Income
 
$
7,118

 
$
6,309

 
12.8

 
$
29,207

 
$
29,853

 
(2.2
)
Operating Income Margin
 
29.9
%
 
27.0
%
 


 
33.4
%
 
33.5
%
 


Segment EBITDA
 
$
9,462

 
$
8,630

 
9.6

 
$
38,602

 
$
39,036

 
(1.1
)
Segment EBITDA Margin
 
39.8
%
 
36.9
%
 
 
 
44.1
%
 
43.8
%
 
 
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
 

Verizon Communications Inc.
Wireless – Selected Operating Statistics


Unaudited
 
12/31/17

 
12/31/16

 
% Change
Connections (‘000)
 
 
 
 
 
 
 
 
 
 
 
 
Retail postpaid
 
 
 
 
 
 
 
110,854

 
108,796

 
1.9

Retail prepaid
 
 
 
 
 
 
 
5,403

 
5,447

 
(0.8
)
Total retail
 
 
 
 
 
 
 
116,257

 
114,243

 
1.8

 
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
%
Change
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
%
Change
Net Add Detail (‘000) (1)
 
 
 
 
 
 
 
 
 
 
 
 
Retail postpaid
 
1,174

 
591

 
98.6

 
2,084

 
2,288

 
(8.9
)
Retail prepaid
 
(184
)
 
(9
)
 
*

 
(43
)
 
(133
)
 
67.7

Total retail
 
990

 
582

 
70.1

 
2,041

 
2,155

 
(5.3
)
Account Statistics
 
 
 
 
 


 
 
 
 
 


Retail Postpaid Accounts (‘000) (2)
 
 
 
 
 


 
35,404

 
35,410

 
—

Retail postpaid connections per account (2)
 
 
 
 
 


 
3.13

 
3.07

 
2.0

Retail postpaid ARPA (3)
 
$
135.78

 
$
141.89

 
(4.3
)
 
$
135.99

 
$
144.32

 
(5.8
)
Retail postpaid I-ARPA (4)
 
$
167.19

 
$
169.10

 
(1.1
)
 
$
166.28

 
$
167.70

 
(0.8
)
Churn Detail
 
 
 
 
 


 
 
 
 
 


Retail postpaid
 
1.00
%
 
1.10
%
 


 
1.01
%
 
1.01
%
 


Retail
 
1.24
%
 
1.34
%
 


 
1.25
%
 
1.26
%
 


Retail Postpaid Connection Statistics
 
 
 
 
 


 
 
 
 
 


Total Smartphone postpaid % of phones activated
 
96.7
%
 
95.2
%
 


 
95.4
%
 
93.4
%
 


Total Smartphone postpaid phone base (2)
 
 
 
 
 


 
90.1
%
 
87.3
%
 


Total Internet postpaid base (2)
 
 
 
 
 


 
19.0
%
 
18.3
%
 


4G LTE devices as % of retail postpaid connections
 
 
 
 
 


 
88.3
%
 
85.0
%
 


Other Operating Statistics
 
 
 
 
 


 
 
 
 
 


Capital expenditures (in millions)
 
$
3,383

 
$
3,464

 
(2.3
)
 
$
10,310

 
$
11,240

 
(8.3
)
Footnotes:
(1)
Connection net additions exclude acquisitions and adjustments.
(2)
Statistics presented as of end of period.
(3)
Retail postpaid ARPA - average service revenue per account from retail postpaid accounts.
(4)
Retail postpaid I-ARPA - average service revenue per account from retail postpaid account plus recurring device installment billings.
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
*
Not meaningful

 

Verizon Communications Inc.
Wireline – Selected Financial Results


(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
%
Change
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
%
Change
Operating Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Markets
 
$
3,188

 
$
3,232

 
(1.4
)
 
$
12,777

 
$
12,751

 
0.2

Enterprise Solutions
 
2,285

 
2,276

 
0.4

 
9,167

 
9,164

 
—

Partner Solutions
 
1,209

 
1,205

 
0.3

 
4,917

 
4,927

 
(0.2
)
Business Markets
 
885

 
822

 
7.7

 
3,585

 
3,356

 
6.8

Other
 
50

 
72

 
(30.6
)
 
234

 
312

 
(25.0
)
Total Operating Revenues
 
7,617

 
7,607

 
0.1

 
30,680

 
30,510

 
0.6

Operating Expenses
 
 
 
 
 


 
 
 
 
 


Cost of services
 
4,465

 
4,357

 
2.5

 
17,922

 
18,353

 
(2.3
)
Selling, general and administrative expense
 
1,558

 
1,478

 
5.4

 
6,274

 
6,476

 
(3.1
)
Depreciation and amortization expense
 
1,532

 
1,435

 
6.8

 
6,104

 
5,975

 
2.2

Total Operating Expenses
 
7,555

 
7,270

 
3.9

 
30,300

 
30,804

 
(1.6
)
Operating Income (Loss)
 
$
62

 
$
337

 
(81.6
)
 
$
380

 
$
(294
)
 
*

Operating Income (Loss) Margin
 
0.8
%
 
4.4
%
 


 
1.2
%
 
(1.0
)%
 


Segment EBITDA
 
$
1,594

 
$
1,772

 
(10.0
)
 
$
6,484

 
$
5,681

 
14.1

Segment EBITDA Margin
 
20.9
%
 
23.3
%
 
 
 
21.1
%
 
18.6
 %
 
 
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain amounts have been reclassified to conform to the current period presentation.
*
Not meaningful




Verizon Communications Inc.
Wireline – Selected Operating Statistics


Unaudited
 
12/31/17

 
12/31/16

 
%
Change
Connections (‘000)
 
 
 
 
 
 
 
 
 
 
 
 
Fios Video Subscribers
 
 
 
 
 
 
 
4,619

 
4,694

 
(1.6
)
Fios Internet Subscribers
 
 
 
 
 
 
 
5,850

 
5,653

 
3.5

Fios Digital voice residence connections
 
 
 
 
 
 
 
3,905

 
3,895

 
0.3

Fios Digital connections
 
 
 
 
 
 
 
14,374

 
14,242

 
0.9

HSI
 
 
 
 
 
 
 
1,109

 
1,385

 
(19.9
)
Total Broadband connections
 
 
 
 
 
 
 
6,959

 
7,038

 
(1.1
)
Primary residence switched access connections
 
 
 
 
 
 
 
2,708

 
3,230

 
(16.2
)
Primary residence connections
 
 
 
 
 
 
 
6,613

 
7,125

 
(7.2
)
Total retail residence voice connections
 
 
 
 
 
 
 
6,804

 
7,355

 
(7.5
)
Total voice connections
 
 
 
 
 
 
 
12,821

 
13,939

 
(8.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
%
Change
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
%
Change
Net Add Detail (‘000)
 
 
 
 
 
 
 
 
 
 
 
 
Fios Video Subscribers
 
(29
)
 
21

 
*

 
(75
)
 
59

 
*

Fios Internet Subscribers
 
47

 
68

 
(30.9
)
 
197

 
235

 
(16.2
)
Fios Digital voice residence connections
 
(15
)
 
13

 
*

 
10

 
23

 
(56.5
)
Fios Digital connections
 
3

 
102

 
(97.1
)
 
132

 
317

 
(58.4
)
HSI
 
(66
)
 
(68
)
 
2.9

 
(276
)
 
(282
)
 
2.1

Total Broadband connections
 
(19
)
 
—

 
*

 
(79
)
 
(47
)
 
(68.1
)
Primary residence switched access connections
 
(122
)
 
(129
)
 
5.4

 
(522
)
 
(569
)
 
8.3

Primary residence connections
 
(137
)
 
(116
)
 
(18.1
)
 
(512
)
 
(546
)
 
6.2

Total retail residence voice connections
 
(146
)
 
(127
)
 
(15.0
)
 
(551
)
 
(594
)
 
7.2

Total voice connections
 
(279
)
 
(255
)
 
(9.4
)
 
(1,118
)
 
(1,096
)
 
(2.0
)
Revenue Statistics
 
 
 
 
 


 
 
 
 
 


Fios revenues (in millions)
 
$
2,959

 
$
2,892

 
2.3

 
$
11,691

 
$
11,236

 
4.0

Other Operating Statistics
 
 
 
 
 


 
 
 
 
 


Capital expenditures (in millions)
 
$
1,981

 
$
1,648

 
20.2

 
$
5,339

 
$
4,504

 
18.5

Wireline employees (‘000)
 
 
 
 
 
 
 
57.1

 
57.6

 
 
Fios Video Open for Sale (‘000)
 
 
 
 
 
 
 
14,287

 
13,693

 
 
Fios Video penetration
 
 
 
 
 
 
 
32.3
%
 
34.3
%
 
 
Fios Internet Open for Sale (‘000)
 
 
 
 
 
 
 
14,582

 
13,982

 
 
Fios Internet penetration
 
 
 
 
 
 
 
40.1
%
 
40.4
%
 
 
Footnotes:
The segment financial results and metrics above are adjusted to exclude the effects of special items, as the Company’s chief operating decision maker excludes these items in assessing business unit performance.
Intersegment transactions have not been eliminated.
Certain amounts have been reclassified to conform to the current period presentation.
*
Not meaningful



Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon


Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions
(dollars in millions)
Unaudited
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

Consolidated Operating Revenues
 
$
126,034

 
$
125,980

Less operating revenues from divested businesses
 
368

 
2,115

Less operating revenues from acquisitions
 
4,300

 
—

Consolidated Operating Revenues Excluding Divested Businesses and Acquisitions
 
$
121,366

 
$
123,865

Year over Year Change
 
(2.0
)%
 
 

Organic IoT Revenues
(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

IoT Revenues
 
$
389

 
$
333

Less IoT revenues from acquisition
 
30

 
—

Organic IoT Revenues
 
$
359


$
333

Year over Year Change
 
7.8
%
 
 


Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon


Consolidated EBITDA, Consolidated EBITDA Margin, Consolidated Adjusted EBITDA,
Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Excluding
Operating Results from Divested Businesses
(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 9/30/17

 
3 Mos. Ended 6/30/17

 
3 Mos. Ended 3/31/17

 
3 Mos. Ended 12/31/16

 
3 Mos. Ended 9/30/16

 
3 Mos. Ended 6/30/16

 
3 Mos. Ended 3/31/16

Consolidated Net Income
 
$
18,783

 
$
3,736

 
$
4,478

 
$
3,553

 
$
4,600

 
$
3,747

 
$
831

 
$
4,430

  Add/(subtract):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Provision for income taxes
 
(15,849
)
 
1,775

 
2,489

 
1,629

 
2,349

 
1,829

 
864

 
2,336

    Interest expense
 
1,219

 
1,164

 
1,218

 
1,132

 
1,137

 
1,038

 
1,013

 
1,188

    Other (income) expense, net
 
634

 
511

 
19

 
846

 
(98
)
 
(97
)
 
1,826

 
(32
)
    Equity in losses of unconsolidated
businesses
 
6

 
22

 
28

 
21

 
35

 
23

 
20

 
20

Operating Income
 
4,793

 
7,208

 
8,232

 
7,181

 
8,023

 
6,540

 
4,554

 
7,942

Add Depreciation and amortization expense
 
4,456

 
4,272

 
4,167

 
4,059

 
3,987

 
3,942

 
3,982

 
4,017

Consolidated EBITDA
 
$
9,249

 
$
11,480

 
$
12,399

 
$
11,240

 
$
12,010

 
$
10,482

 
$
8,536

 
$
11,959

  Add/subtract special items (before tax):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Severance, pension, and benefit charges (credits)(2)
 
1,196

 
—

 
195

 
—

 
(1,589
)
 
797

 
3,550

 
165

Product realignment
 
463

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Gain on spectrum license transactions
 
(144
)
 
—

 
—

 
(126
)
 
—

 
—

 
—

 
(142
)
Net gain on sale of Divested Businesses
 
—

 
—

 
(1,774
)
 
—

 
—

 
—

 
(1,007
)
 
—

Acquisition and integration related costs(1)(2)
 
154

 
166

 
559

 
—

 
—

 
—

 
—

 
—

 
 
1,669

 
166

 
(1,020
)
 
(126
)
 
(1,589
)
 
797

 
2,543

 
23

Consolidated Adjusted EBITDA
 
$
10,918


$
11,646


$
11,379


$
11,114


$
10,421


$
11,279

 
$
11,079

 
$
11,982

Operating Results from Divested Businesses(1)
 
—

 
(17
)
 
(50
)
 
(104
)
 
(107
)
 
(115
)
 
(120
)
 
(780
)
Consolidated Adjusted EBITDA Excluding Operating Results from Divested Businesses
 
$
10,918

 
$
11,629

 
$
11,329

 
$
11,010

 
$
10,314

 
$
11,164

 
$
10,959

 
$
11,202

Consolidated Operating Revenues - Quarter to Date
 
$
33,955

 
 
 
 
 
 
 
$
32,340

 
 
 
 
 
 
Consolidated Operating Revenues - Year to Date
 
$
126,034

 
 
 
 
 
 
 
$
125,980

 
 
 
 
 
 
Consolidated Operating Income Margin - Quarter to Date
 
14.1
%
 
 
 
 
 
 
 

 
 
 
 
 
 
Consolidated EBITDA Margin - Quarter to Date
 
27.2
%
 
 
 
 
 
 
 
37.1
%
 
 
 
 
 
 
Consolidated Adjusted EBITDA Margin - Year to Date
 
35.7
%
 
 
 
 
 
 
 
35.5
%
 
 
 
 
 
 
(1) Excludes depreciation and amortization expense.
(2) Certain amounts have been reclassified to conform to the current period presentation.


Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon


Net Debt and Net Debt to Consolidated Adjusted EBITDA Ratio
(dollars in millions)
Unaudited
 
12/31/17

 
12/31/16

Net Debt
 
 
 
 
Debt maturing within one year
 
$
3,453

 
$
2,645

Long-term debt
 
113,642

 
105,433

Total Debt
 
117,095

 
108,078

Less Cash and cash equivalents
 
2,079

 
2,880

Net Debt
 
$
115,016

 
$
105,198

Net Debt to Consolidated Adjusted EBITDA Ratio
 
2.6x

 
2.4x


Adjusted Earnings per Common Share (Adjusted EPS) (1) 
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

 
Pre-tax
Tax
After-Tax
 
Pre-tax
Tax
After-Tax
 
EPS
 
 
 
$
4.56

 
 
 
$
1.10

Severance, pension, and benefit charges (credits)
$
1,196

$
(464
)
$
732

0.18

$
(1,589
)
$
604

$
(985
)
(0.24
)
Early debt redemption costs
681

(272
)
409

0.10

—

—

—

—

Product realignment
671

(210
)
461

0.11

—

—

—

—

Acquisition and integration related costs
154

(59
)
95

0.02

—

—

—

—

Gain on spectrum license transactions
(144
)
53

(91
)
(0.02
)
—

—

—

—

Impact of tax reform
—

(16,761
)
(16,761
)
(4.10
)
—

—

—

—

 
$
2,558

$
(17,713
)
$
(15,155
)
(3.71
)
$
(1,589
)
$
604

$
(985
)
(0.24
)
Adjusted EPS
 
 
 
$
0.86

 
 
 
$
0.86


Unaudited
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

 
Pre-tax
Tax
After-Tax
 
Pre-tax
Tax
After-Tax
 
EPS
 
 
 
$
7.36

 
 
 
$
3.21

Severance, pension, and benefit charges
$
1,391

$
(541
)
$
850

0.21

$
2,923

$
(1,118
)
$
1,805

0.44

Early debt redemption costs
1,983

(788
)
1,195

0.29

1,822

(718
)
1,104

0.27

Product realignment
671

(210
)
461

0.11

—

—

—

—

Acquisition and integration related costs
884

(334
)
550

0.13

—

—

—

—

Gain on spectrum license transactions
(270
)
102

(168
)
(0.04
)
(142
)
54

(88
)
(0.02
)
Gain on sale of divested businesses
(1,774
)
843

(931
)
(0.23
)
(1,007
)
868

(139
)
(0.03
)
Impact of tax reform
—

(16,761
)
(16,761
)
(4.10
)
—

—

—

—

 
$
2,885

$
(17,689
)
$
(14,804
)
(3.62
)
$
3,596

$
(914
)
$
2,682

0.66

Adjusted EPS
 
 
 
$
3.74

 
 
 
$
3.87


(1)
Adjusted EPS may not add due to rounding.

Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon


Segment EBITDA and Segment EBITDA Margin
Wireless
(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

Operating Income
 
$
7,118

 
$
6,309

Add Depreciation and amortization expense
 
2,344

 
2,321

Segment EBITDA
 
$
9,462

 
$
8,630

 
 


 
 
Total operating revenues
 
$
23,771

 
$
23,377

Operating Income Margin
 
29.9
%
 
27.0
%
Segment EBITDA Margin
 
39.8
%
 
36.9
%
 
Wireline
(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

Operating Income
 
$
62

 
$
337

Add Depreciation and amortization expense
 
1,532

 
1,435

Segment EBITDA
 
$
1,594

 
$
1,772

 
 
 
 
 
Total operating revenues
 
$
7,617

 
$
7,607

Operating Income Margin
 
0.8
%
 
4.4
%
Segment EBITDA Margin
 
20.9
%
 
23.3
%


(dollars in millions)
Unaudited
 
12 Mos. Ended 12/31/17

 
12 Mos. Ended 12/31/16

Operating Income (Loss)
 
$
380

 
$
(294
)
Add Depreciation and amortization expense
 
6,104

 
5,975

Segment EBITDA
 
$
6,484

 
$
5,681

 
 
 
 
 
Total operating revenues
 
$
30,680

 
$
30,510

Operating Income (Loss) Margin
 
1.2
%
 
(1.0
)%
Segment EBITDA Margin
 
21.1
%
 
18.6
 %

Verizon Communications Inc.
Non-GAAP Reconciliations - Consolidated Verizon


Wireline Operating Revenues Excluding Acquisition
(dollars in millions)
Unaudited
 
3 Mos. Ended 12/31/17

 
3 Mos. Ended 12/31/16

Wireline Operating Revenues
 
$
7,617

 
$
7,607

Less operating revenues from Acquisition
 
285

 
—

Wireline Operating Revenues Excluding Acquisition
 
$
7,332

 
$
7,607

Year over Year Change
 
(3.6
)%