Verizon Beats Estimates - Guides Up
July 22, 2021
Verizon reported second-quarter earnings today highlighted by an
increase in 5G phone adoption, customer and sequential wireless service
revenue growth, and superior network reliability. Based on its strong
results, Verizon revised its revenue and adjusted EPS guidance upward
for the full year.
The firm had Q2 net income of $5.95
billion, or $1.40 a share, compared with $4.84 billion, or $1.13 a
share, a year earlier. So, Verizon earned $1.37 a share adjusted, up
from $1.18 a share a year prior and more than the consensus, which
called for $1.30 a share.
The Telco’s Q2 operating revenue rose
to $33.76 billion from $30.45 billion. Wall Street was looking for
$32.77 billion in revenue.
executing on our multipurpose network strategy and producing positive
results in each of our five growth vectors, recording strong second
quarter results. With more connections on our network than anyone else,
our already excellent network performance improved in the quarter and
was recognized by RootMetrics as the best overall network performance
for the 16th time in a row. We are also expanding our 5G Ultra Wideband
and 5G Home markets," said Verizon Chairman and CEO Hans Vestberg. "We
are excited about our momentum leading into the second half of the year.
We are on track to close both the Tracfone and Verizon Media
transactions, and will continue to bring value and choice to our
second-quarter 2021, Verizon reported EPS of $1.40, compared with $1.13
in second-quarter 2020. On an adjusted basis*, second-quarter 2021 EPS,
excluding special items, was $1.37, compared with adjusted EPS of $1.18
in second-quarter 2020.
Second-quarter 2021 EPS
included a net pre-tax gain from special items of $182 million,
consisting of a pre-tax gain of approximately $1.3 billion related to a
pension remeasurement credit, and a pre-tax loss of $1.1 billion from
early debt redemption costs.
In second-quarter 2021,
Verizon announced an agreement to sell Verizon Media to Apollo funds,
with an expected close date in second-half 2021. After the announcement,
certain assets of the Verizon Media business were classified as an
"Asset Held for Sale." As a result, Verizon no longer depreciated or
amortized these assets, which resulted in a partial quarter benefit of 3
cents per share in the second quarter. This benefit will continue until
the deal closes.
“Second quarter results
were exceptional, both financially and operationally,” said Verizon
Chief Financial Officer Matt Ellis. “Our strong first half performance
and the momentum in our business gives us the confidence to raise our
total wireless service revenue growth guidance to between 3.5 percent
and 4 percent, an update from prior guidance for 2021 total wireless
service revenue growth of at least 3 percent. We are also raising our
adjusted EPS guidance* to the range of $5.25 to $5.35, an update from
prior guidance for 2021 adjusted EPS* of $5.00 to $5.15."
- Total consolidated
operating revenues in second-quarter 2021 were $33.8 billion, up
10.9 percent from second-quarter 2020, and an increase of 5.3
percent from second-quarter 2019. This increase was the result of
wireless revenue growth, strong Fios and Verizon Media results, and
increased wireless equipment revenue.
- First-half 2021 cash
flow from operations totaled $20.4 billion, a decrease from $23.6
billion year over year, primarily driven by higher cash taxes and
higher working capital requirements due to greater volumes. The cash
tax impact was the result of a one-time benefit received in
second-quarter 2020, as well as a pandemic-related postponement of
payments in second-quarter 2020.
- Capital expenditures
in first-half 2021 were $8.7 billion. Capital expenditures continue
to support the growth in traffic on the company's 4G LTE network and
the continued expansion of the company's 5G Ultra Wideband and 5G
Nationwide networks. Capital expenditures related to C-Band were
more than $160 million in first-half 2021.
- Verizon's unsecured
debt balance increased year over year by $39.4 billion to $141.6
billion at the end of second-quarter 2021, but improved by
approximately $6.0 billion sequentially from the end of
first-quarter 2021. The company’s net unsecured debt* as of the end
of second-quarter 2021 increased by $42.5 billion year over year to
$136.8 billion, and its net unsecured debt to adjusted EBITDA ratio*
was approximately 2.9 times.
- The company
continues to provide new and existing consumers with more value in
upgraded offerings; seven entertainment options, including gaming;
and more choice through its Mix and Match pricing in both wireless
and home broadband plans.
- With Verizon's
company-operated retail stores fully opened and consumer behavior
closer to pre-pandemic levels, Consumer built momentum throughout
the quarter and timed its promotions to take advantage of the
economic recovery and increased customer activity. This increased
activity and Consumer's differentiated customer proposition drove 5G
adoption and step-ups to premium unlimited plans. Consumer ended
second-quarter 2021 with approximately 20 percent of wireless phone
customers having 5G-capable devices.
- Total Verizon
Consumer revenues were $23.5 billion, an increase of 11.2 percent
year over year, and an increase of 6.7 percent from second-quarter
2019. This increase was primarily driven by wireless equipment
revenues of $4.7 billion, which rebounded above pre-pandemic
- Consumer wireless
service revenues were $13.8 billion in second-quarter 2021, a 5.4
percent increase year over year, and a 2.5 percent increase from
second-quarter 2019. This increase was driven by customer growth,
continued adoption of wireless unlimited and premium unlimited
plans, products, such as billed content, as well as reseller and
prepaid. This growth also came despite minimal contributions from
- Total wireless
retail postpaid churn was 0.83 percent in second-quarter 2021.
Wireless retail postpaid phone churn was 0.65 percent, a record-low
retail postpaid phone churn outside of second-quarter 2020 and
third-quarter 2020, which were heavily impacted by the pandemic.
- In second-quarter
2021, Consumer reported 350,000 wireless retail postpaid net
additions. This consisted of 197,000 phone net additions and 234,000
other connected device net additions, offset by 81,000 tablet net
- The quality and
reliability of the company's Fios service continued to drive strong
demand for broadband as Consumer reported 92,000 Fios Internet net
additions in second-quarter 2021. Consumer Fios revenues of $2.9
billion in second-quarter 2021 were the highest since the company's
new operating structure was introduced in 2019. The company's
trailing 12-month total Fios Internet net addition performance is
the highest since 2015. Consumer reported 62,000 Fios Video net
losses in second-quarter 2021.
- In second-quarter
2021, Consumer segment operating income was $7.5 billion, an
increase of 6.1 percent year over year, and segment operating income
margin was 31.9 percent, a decrease from 33.5 percent in
second-quarter 2020. Segment EBITDA* totaled $10.4 billion in
second-quarter 2021, an increase of 4.9 percent from second-quarter
2020. Segment EBITDA margin* was 44.3 percent in second-quarter
2021, a decrease from 47.0 percent in second-quarter 2020, primarily
resulting from higher activations.
second-quarter 2021, as the economy reopened, Business customers
took advantage of promotions and an advanced communications,
security and video collaboration product portfolio, creating strong
momentum in Small and Medium Business and the first quarter of
Global Enterprise growth since the onset of the pandemic.
- Total Verizon
Business revenues were $7.8 billion, up 3.7 percent year over year,
and relatively flat from second-quarter 2019.
- Business wireless
service revenues were $3.1 billion in second-quarter 2021, an 8.0
percent increase year over year, and an increase of 11.4 percent
from second-quarter 2019. This increase was led by Small and Medium
Business and Global Enterprise.
- Total wireless
retail postpaid churn was 1.30 percent in second-quarter 2021, and
wireless retail postpaid phone churn was 1.07 percent.
- Business reported
178,000 wireless retail postpaid net additions in second-quarter
2021, including 78,000 phone net additions.
- In second-quarter
2021, Business segment operating income was $856 million, a decrease
of 9.5 percent year over year, and segment operating income margin
was 11.0 percent, a decrease from 12.6 percent in second-quarter
2020. Segment EBITDA* totaled $1.9 billion in second-quarter 2021, a
decrease from $2.0 billion in second-quarter 2020. Segment EBITDA
margin* was 24.1 percent, a decrease from 26.2 percent in
second-quarter 2020, driven by higher wireless equipment volumes and
- Total Verizon Media
revenues were $2.1 billion in second-quarter 2021, an increase of
approximately 50 percent from second-quarter 2020, and an increase
of approximately 13 percent from second-quarter 2019. Media
continued its recent trends and delivered strong performance driven
by high customer engagement with its brands and demand for its
Outlook and guidance
Verizon is updating
financial guidance for full-year 2021.
- The company now
expects total wireless service revenue growth of 3.5 percent to 4
percent, an update from prior guidance for 2021 total wireless
service revenue growth of at least 3 percent. Service and other
revenue for 2021 is no longer comparable year over year as the
company’s planning assumption now includes the closing of the
Verizon Media transaction at the end of third-quarter 2021. For this
reason, the company is withdrawing its service and other revenue
growth guidance at this time.
- The company now
expects adjusted EPS* of $5.25 to $5.35, an update from prior
guidance for 2021 adjusted EPS* of $5.00 to $5.15.
continues to expect the following results for full-year 2021:
- Adjusted effective
income tax rate* in the range of 23 percent to 25 percent.
- Capital spending to
be in the range of $17.5 billion to $18.5 billion, including the
further expansion of 5G mmWave in new and existing markets, the
densification of the 4G LTE wireless network to manage future
traffic demands and the continued deployment of the company's fiber
infrastructure. Expenditures related to the deployment of the
company's C-Band 5G network will be in addition to this amount, and
the company previously announced an incremental $10 billion of
capital expenditures from 2021 to 2023, of which $2 billion to $3
billion is expected in 2021.