Verizon Communications Inc. Q3 2023 Earnings Call

In a recent earnings call, Verizon Communications Inc. (NYSE:VZ) showcased a robust performance in the third quarter of 2023. CEO Hans Vestberg announced the company's highest ever EBITDA at $12.5 billion and a wireless service revenue growth of 2.7%.

With $6 billion in cash flow and 239,000 net adds in postpaid subscribers, Verizon is advancing its market presence in both prepaid and business segments. The company is also on track with its broadband expansion, aiming to cover over 100 million households with a mix of fixed wireless access and fiber solutions.

Key Takeaways

• Verizon's third-quarter earnings highlighted a record $12.5 billion EBITDA and a 2.7% increase in wireless service revenue.
• The company achieved 239,000 net adds in postpaid subscribers and aims to expand fixed wireless access subscribers to 8-9 million by 2028.
• Verizon plans to accelerate Fios growth, targeting 35-40 million fiber passings post-Frontier acquisition.
• Significant investments in AI and mobile edge compute capabilities are underway, with a focus on sustainable growth in service revenue, EBITDA, and cash flow.
• The company's network strategy prioritizes reliability and includes expanding fixed wireless access coverage to 90 million homes within four years.

Company Outlook

• Verizon intends to increase its broadband customer base, currently at 11.9 million, and double its fixed wireless access subscribers by 2028.
• The company's convergence model aims to reduce churn by 50% in mobility and potentially 40% in fiber when services are bundled.
• New revenue streams from network slicing and satellite connectivity are anticipated, along with a strong entertainment offering.

Bearish Highlights

• Potential headwinds for free cash flow in 2024 are expected due to increased cash taxes and capital expenditures.
• The current customer upgrade cycle for phones has lengthened to approximately 40 months, resulting in a 10% decrease in upgrades.

Bullish Highlights

• Verizon reported seven consecutive quarters of year-on-year growth in its postpaid business.
• The company has seen a 500 basis point increase in wireless market share in areas with fiber, suggesting a successful marketing and distribution strategy.
• The perks portfolio, with 7 million subscriptions, is expected to double, enhancing customer loyalty and reducing churn.

Misses

• No specific misses were reported from the earnings call.

Q&A Highlights

• CEO Hans Vestberg discussed the potential of millimeter wave technology for multi-dwelling units and the monetization of network usage.
• Concerns about growth potential compared to competitors were addressed, with a commitment to customer value and dynamic promotional strategies.
• The company's focus on organic growth was reiterated, with no current plans for significant third-party capital investments.

Verizon's performance in the third quarter reflects a company strategically positioning itself for sustainable growth through innovative services and strategic investments. With a record EBITDA and continued expansion in both its mobility and broadband segments, Verizon is poised to maintain a strong presence in the telecommunications industry. The company's disciplined approach to operational execution and growth, alongside its commitment to building reliable networks, suggests a positive outlook for the future.

InvestingPro Insights

Verizon's strong third-quarter performance aligns with several key metrics and insights from InvestingPro. The company's record EBITDA of $12.5 billion and 2.7% growth in wireless service revenue are reflected in its solid financial position. According to InvestingPro data, Verizon's revenue for the last twelve months as of Q2 2023 stood at an impressive $134.24 billion, with an EBITDA of $48.11 billion over the same period.

The company's focus on sustainable growth and cash flow is underscored by its dividend strategy. An InvestingPro Tip highlights that Verizon "has raised its dividend for 20 consecutive years," demonstrating a commitment to shareholder returns that aligns with its robust financial performance. This is further supported by the current dividend yield of 6.2%, which InvestingPro data indicates is significant for shareholders.

Verizon's market position as a "prominent player in the Diversified Telecommunication Services industry" is another InvestingPro Tip that reinforces the company's strong performance and strategic initiatives outlined in the earnings call. This status is reflected in Verizon's substantial market capitalization of $175.28 billion.

The company's focus on customer value and dynamic promotional strategies is complemented by the InvestingPro Tip noting that the "stock generally trades with low price volatility," which may appeal to investors seeking stability in the telecommunications sector.

For readers interested in a deeper dive into Verizon's financial health and market position, InvestingPro offers 8 additional tips, providing a comprehensive analysis of the company's strengths and potential areas for growth.

Full transcript – Verizon Communications (VZ) Q3 2023

Brady Connor

Good morning. Hello, everybody. Welcome to the Essex House and welcome to our event this morning, and for everybody on the webcast, thank you for listening in. We got a couple of items that I need to cover upfront first. And I'm missing the clicker. Is there a clicker? Okay, there we go. Safe Harbor statement. So, our presentation today contains things about statements that they are forward-looking and contain risks and uncertainties.

Hans Vestberg

Good morning. And welcome to Verizon Third Quarter Earnings Call as well as a Broadband Update. Very happy to see so many in the room, but of course, also happy for everyone joining on the webcast. Let me kick this off. I'm going to — we have an agenda that is pretty simple. I'm going to talk about the highlights of the third quarter, then we're going to do some — a little bit of strategic updates and we're going to end up with Tony talking about the results and capital allocation.

(The full transcript continues with further details of the Q&A discussion and more specifics on the financial performance and future projections of Verizon Communications Inc.)