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01/10 17:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Verizon's earnings call highlights strong financial performance, including increased guidance for EBITDA and EPS, and robust free cash flow projections. The strategic focus on customer-centricity, broadband growth, and AI integration is promising. However, management's avoidance of specifics on certain issues and the potential challenges in legacy business divestitures slightly temper the outlook. Overall, the positive guidance and strategic initiatives suggest a likely stock price increase in the near term.
Postpaid phone gross adds 8.4% increase year-over-year. This growth was offset by churn of 0.91%, resulting in postpaid phone net losses of 7,000 in the quarter. Healthy retention benefits were observed from converged customers.
Consumer upgrades 16% year-over-year increase in the third quarter. This was tied to the best value guarantee, which resonated with customers.
Core prepaid net adds 47,000 net adds, marking the fifth consecutive quarter of positive subscriber growth. Strength attributed to key brands and expansion of total wireless distribution.
Broadband net adds 306,000 net adds. The broadband base increased by 1.3 million subscribers year-over-year, reaching over 13.2 million subscribers. Fios internet contributed 61,000 net adds, the best quarterly result in 2 years.
Fixed Wireless Access (FWA) net adds 261,000 net adds. Annualized revenue surpassed $3 billion, showing continued growth.
Consolidated revenue $33.8 billion, up 1.5% year-over-year. Wireless service revenue grew by over $400 million year-over-year, a 2.1% increase, driven by ARPU growth, fixed wireless access adoption, and add-on services.
Wireless equipment revenue 5.2% higher year-over-year, driven by higher gross adds and upgrade rates.
Consolidated adjusted EBITDA $12.8 billion, up 2.3% year-over-year. Year-to-date adjusted EBITDA increased by almost $1.3 billion compared to 2024, driven by pricing actions and cost reduction.
Adjusted EPS $1.21, up 1.7% year-over-year, driven by growth in adjusted EBITDA.
Cash flow from operating activities $28 billion for the first 9 months of the year, up over $1.5 billion or 5.8% year-over-year.
CapEx $12.3 billion through the end of the third quarter, compared to $12 billion in the prior year period.
Free cash flow $7 billion for the third quarter, a nearly 17% improvement year-over-year. Year-to-date free cash flow was $15.8 billion, a 9% increase year-over-year.
Net unsecured debt $112 billion at the end of the quarter, a $9.4 billion improvement year-over-year. Net unsecured debt to consolidated adjusted EBITDA ratio dropped to 2.2x, inside the target leverage range ahead of schedule.
Fios Internet: Achieved 61,000 net adds, marking the best quarterly result in 2 years. Demand for Fios is driving expansion to more premises within the footprint.
Fixed Wireless Access (FWA): Added 261,000 net subscribers, with annualized revenue surpassing $3 billion. The business is seen as sustainable long-term.
Starry Acquisition: Announced acquisition to enhance MDU capabilities, combining Verizon's scale with Starry's expertise.
Frontier Acquisition: Expected to close in early 2026, enabling Verizon to serve approximately 29 million fiber passings and creating significant cross-sell opportunities.
Tillman Initiative: Partnership to expand Fios broadband offerings to markets outside Verizon and Frontier footprints.
Cost Transformation: Plans to aggressively reduce the cost base, including operating expenses and capital spend, while maintaining investments in growth areas.
AI Integration: Focus on leveraging AI to simplify offers, improve customer experience, reduce churn, and enhance operational efficiency.
Customer-Centric Growth: Shift to a customer-first focus, aiming to grow the customer base profitably and improve retention.
Convergence Strategy: Leveraging the Frontier acquisition to drive mobility and broadband growth through cross-selling.
Legacy Business Exit: Plans to sunset or exit legacy businesses lacking a path to profitable market leadership.
Customer Growth Challenges: Verizon has not been able to fully capitalize on its strong network foundation to drive customer growth. The company is at a critical inflection point and needs to shift to a customer-first focus to redefine its trajectory. There is a need to significantly raise its game to win responsibly in the market.
Churn and Retention Issues: Postpaid phone churn rate of 0.91% resulted in net losses of 7,000 postpaid phone customers in the quarter. Retention benefits are seen in converged customers, but overall churn remains a challenge.
Cost Structure and Efficiency: The company acknowledges the need to reduce costs across all aspects of its business, including cost of services and SG&A. There is a focus on driving significant cost savings to fund investments in customer experience and marketing.
Reliance on Price Increases: Verizon's financial growth has relied too heavily on price increases, which is not a sustainable strategy. This approach has led to higher churn and challenges in achieving subscriber growth.
Competitive Pressures: The company faces significant competition in the market, which has impacted its ability to translate network investments into market wins. Verizon aims to compete by offering a superior customer value proposition and experience.
Integration and Execution Risks: The pending acquisition of Frontier presents integration challenges, including capturing mobility volume from broadband customers and cross-selling broadband to the existing mobility base. Effective execution is critical to realizing revenue synergies.
Legacy Business Challenges: Verizon plans to sunset or exit legacy businesses where there is no clear path to profitable market leadership. This presents challenges in managing transitions and reallocating resources effectively.
Capital Allocation and Debt Management: The company is focused on optimizing its capital allocation framework, including debt repayment and strategic investments. Managing a net unsecured debt of $112 billion while maintaining financial flexibility is a challenge.
Revenue and Financial Guidance: Verizon remains on track to deliver its full-year financial guidance, including adjusted EBITDA growth, adjusted EPS growth, and free cash flow. The company expects higher free cash flow in 2026 and 2025, even with the Frontier acquisition.
Customer Growth and Retention: The company aims to grow its customer base profitably across mobility and broadband subscription businesses. Verizon plans to increase its share of net adds, particularly in postpaid, and improve customer retention through enhanced customer experience and loyalty initiatives.
Convergence and Frontier Acquisition: The pending acquisition of Frontier is expected to close in Q1 2026, enabling Verizon to serve approximately 29 million fiber passings. This creates significant cross-sell opportunities between mobility and broadband services, driving revenue synergies.
Cost Transformation: Verizon plans to aggressively reduce its cost base, simplify operations, and sunset or exit legacy businesses without a clear path to profitability. This includes a multi-year effort to create a leaner and more efficient business.
AI and Innovation: The company intends to leverage AI to enhance customer experience, reduce churn, and improve operational efficiency. AI will be used for personalized marketing, simplifying offers, and reducing costs across business processes.
Capital Allocation and Efficiency: Verizon will optimize its capital allocation framework, focusing on growth areas like C-band build-out and fiber expansion. The company is committed to maintaining its dividend, repaying debt, and ensuring value-creating capital returns.
Dividend Increase: In September, Verizon raised the dividend for the 19th consecutive year, reflecting a continued commitment to shareholder returns.
The earnings call reveals several challenges: low AECO prices, production curtailments, and market oversupply, leading to declining production and revenue challenges. Despite some positive aspects like the share buyback program and improved capital efficiency, the overall sentiment is negative due to significant risks and uncertainties highlighted in the Q&A section. Management's reluctance to provide specific guidance further adds to the uncertainty. The negative sentiment is compounded by the lack of a clear path to achieving financial targets amidst challenging market conditions.
Verizon's earnings call highlights strong financial performance, including increased guidance for EBITDA and EPS, and robust free cash flow projections. The strategic focus on customer-centricity, broadband growth, and AI integration is promising. However, management's avoidance of specifics on certain issues and the potential challenges in legacy business divestitures slightly temper the outlook. Overall, the positive guidance and strategic initiatives suggest a likely stock price increase in the near term.
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