Brady Connor :

Thanks, Brad. Good morning, everyone, and welcome to our Second Quarter Earnings Conference Call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I'd like to draw your attention to our Safe Harbor statement, which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our Investor Relations website. This presentation contains certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning we posted to our Invest Relations website a detailed review of our second quarter results. You'll find additional details in the earnings materials on our website. With that, I'll turn the call over to Hans.

Tony Skiadas :

Thanks Hans and good morning. Our second quarter results reflected accelerated growth in wireless service revenue and adjusted EBITDA, as we continue to generate strong free cash flow. These results were driven by strong operational execution in both consumer and business, which led to sequential net add improvements in postpaid phones, fixed wireless access, and prepaid excluding SafeLink. Within consumer, postpaid phone gross adds were approximately 1.8 million in the second quarter, a 12% year-over-year increase. This marks the sixth consecutive quarter with year-over-year growth. Excluding our second number offering, consumer post-paid phone gross adds grew 5% year-over-year. Consumer post-paid phone churn was 0.79% in the second quarter, up slightly from the prior year period. This was in-line with our expectations as we recently implemented several price increases that are expected to generate well over $1 billion in annualized wireless service revenue. We believe the majority of the pricing churn is now behind us and we continue to expect full-year consumer postpaid phone churn to be flat or slightly better than last year. Consumer postpaid phone net losses were 8,000 for the second quarter, which marks a significant improvement both sequentially and year-over-year. For the full year, we expect to deliver positive consumer postpaid phone net adds without the contribution from our second number offering. Moving to prepaid, we continue to make progress with our core brands while navigating the conclusion of the ACP program. Overall prepaid net losses were 624,000, including 410,000 losses related to the ACP shutdown, the vast majority of which are in our SafeLink brand. Excluding SafeLink, prepaid net losses were 12,000, a substantial improvement compared to the prior year period. Visible and total wireless continue to expand and perform well, while our operational execution with Straight Talk continues to improve. We exited the quarter with good momentum and prepaid, setting the stage for a stronger performance in the second half of 2024 and positioning us well for 2025. On the business side, postpaid phone net adds were 156,000 in the second quarter, the best performance in the last six quarters. We saw a strong sequential improvement of phone net adds across small and medium businesses, as well as enterprise and public sector customers. Turning to broadband, our total broadband net additions were 391,000 for the quarter, representing the eighth consecutive quarter with over 375,000 broadband net adds. In fixed wireless access, we continue to focus on building a long-term sustainable business. Total fixed wireless net adds were 378,000 in the quarter, up sequentially. This brings our base above 3.8 million subscribers, up nearly 69% year-over-year. Consumer fixed wireless net adds were 218,000, a 15,000 sequential increase as we continue to see healthy demand for reliable broadband even in a seasonally softer quarter. Verizon business continued strong execution with 160,000 fixed wireless access net adds, a quarterly record. Demand for the service is strengthening as small businesses and enterprises continue to trust the reliability of the product and speed and ease of deployment. Overall, Fios Internet net adds totaled 28,000 for the quarter. We are pleased with the continuous growth of Fios, even with the effects of the ACP shutdown and lower move activity. We ended the quarter with over 11.5 million broadband subscribers, a 17% increase from a year ago. Our broadband growth continues to significantly outpace that of the broader market, given our superior network experience and strong execution. Moving to the financials, we delivered another solid quarter and remain on track to meet our full year financial guidance. Consolidated revenue for the second quarter totaled $32.8 billion, a 0.6% increase year-over-year. That growth was driven by service and other revenue which grew 1.8% year-over-year, partially offset by declines in wireless equipment revenue, as total upgrades were down nearly 13% year-over-year. Wireless service revenue totaled $19.8 billion, a sequential increase of more than $250 million, and year-over-year growth of 3.5% or $660 million. The increase was primarily driven by consumer wireless service revenue, which grew 3.7% year-over-year to $16.3 billion. Consumer postpaid ARPA grew 5% year-over-year, reflecting the benefits of pricing actions and fixed wireless growth. In addition, myPlan helps to drive ARPA growth through premium mix adoption and [Perk] (ph) revenue. As Hans said, we now have over 30% of our consumer phone lines on myPlan and expect this to expand meaningfully going forward. FWA revenue which is included in wireless service revenue was $514 million for the quarter, up more than $200 million versus the prior year period. Launched at scale in 2021, our FWA business is expected to generate more than $2 billion in revenue this year with prospects for continued healthy growth. Prepaid revenue for the quarter declined $162 million versus the prior year period. The headwind to wireless service revenue growth from the ACP shutdown was approximately 30 basis points within the range we provided last quarter, and the margin impact was insignificant. With the majority of ACP disconnects now behind us and the momentum growing in our core prepaid brand, we are better positioned for the remainder of the year and heading into 2025. Consolidated adjusted EBITDA for the second quarter totaled $12.3 billion an increase of 2.8% year-over-year. The improved operating leverage reflects the lower upgrade activity and our disciplined approach to growth. We are making progress in our ongoing cost efficiency program and recently introduced new measures to improve our operating efficiency, including a voluntary separation program announced in June. Adjusted EPS in the quarter was $1.15, down 5% compared to the prior year period. Growth in adjusted EBITDA was offset by below-the-line items, including higher interest expense, predominantly due to lower capitalized interest as we put more C-band spectrum into service. Cash flow from operating activities totaled $16.6 billion for the first half of the year compared to $18 billion in the prior year period. The results reflect higher cash taxes of approximately $1.7 billion, predominantly due to the unwind of bonus depreciation, as well as higher interest expense primarily driven by the decrease in capitalized interest. Capital spending for the first half of the year totaled $8.1 billion. This was $2 billion less than the same period last year as we have returned to historical levels of capital intensity. The network build remains ahead of schedule with C-band deployed on nearly 60% of our planned sites. Our full year guidance for CapEx spending remains unchanged at a range of $17 billion to $17.5 billion. The net result of cash flow from operations and capital spending is free cash flow of $8.5 billion for the first half of 2024. This represents an increase of nearly 7% or approximately $550 million from the prior year period, despite higher cash taxes and interest expense. We expect to generate strong cash flow in the back half of the year that will support paying down debt. Net unsecured debt at the end of the quarter was $122.8 billion, an improvement of $3.2 billion compared to the previous quarter and $3.7 billion lower year-over-year. Our net unsecured debt to a consolidated adjusted EBITDA ratio was 2.5 times, an improvement from 2.6 times last quarter. The strength of our results and momentum in our business put us in a great position to execute on our capital allocation priorities. In particular, we remain on track to further reduce the leverage on our balance sheet in the second half of the year. In summary with 2024, reaching its midpoint, the team's strong execution and operating momentum is translating into results. We have good momentum in mobility as reflected by the strong gross add growth and continue to take share in broadband through fixed wireless access and Fios. Importantly, we are accomplishing this with a disciplined approach, balancing growth and profitability providing the confidence to deliver on our 2024 financial guidance. With that, I will turn it back to Hans for his final remarks before opening the call to your questions.

Brady Connor :

Thanks Hans. Brad, we're ready for the first question.

John Hodulik:

Great. Thank you and good morning, guys. Two questions, if I can. First, on ACP, was there any impact on the broadband side in the quarter? And do you expect any lingering impact from ACP, either in prepaid or postpaid or broadband, as we look out into the second half? And then second on upgrades, obviously another strong quarter with record, I think, record low upgrades. Given the AI phones coming out in the second, third quarter, how do you expect that to trend? And what do you expect the impact to be on the financials of the wireless business as we look out into the second half?

Tony Skiadas:

Yeah, thanks. Good morning John. In terms of ACP updates, let me give you a couple of things here. So as we said previously, the majority of the ACP exposure is in our prepaid business. And as we said last time, we had about 1.1 million prepaid subs that benefited from the ACP program. In the quarter -- in the second quarter, we saw about 400,000 prepaid disconnects. This is the vast majority of what we expected. There is minimal impact on the postpaid side as I think was part of your question. We saw some pressure in Fios in terms of gross add opportunity. If we look ahead in the third quarter, we expect some disconnects in prepaid and a small number across other products. In terms of revenue, we also said that any impact that we would see we'd see on service revenue up to 50 basis points of headwind and we're tracking inside of that number right now. And even with the disconnects, the margin exposure from ACP was insignificant in the second quarter. So we will continue to keep everyone updated as we progress here.

Brady Connor:

Yeah, great. Thanks John. Brad we are ready for the next question.

Simon Flannery:

Great. Thank you very much. On fixed wireless, you talked about the strong momentum. You obviously have a lot of C-band still to build out would expand your addressable market. I guess you're going to hit the $4 million, the low end of your guide probably in the August timeframe. So help us think about what's the potential beyond the $4 million to $5 million. And when you can give us more clarity on your opportunity there? I think you've talked before about plenty of excess capacity. And then there were media reports the other day about you looking potentially to monetize towers. Could you just talk about how you're thinking about tower sales or other real estate, other asset monetization? Thank you.

Simon Flannery:

Thanks, Hans.

Operator:

The next question comes from Jim Schneider of Goldman Sachs. Your line is open sir.

Hans Vestberg:

So on the broadband, I think again, we are between 375,000 to 400,000 net adds in broadband this quarter, been it for quite a while. So we see it as a very healthy. I think also we have a really good offering. And now with myHome that we just announced, I think we are going to be even stronger on it. So we see it healthy. Of course, Fios is by far the best fiber product in the market. And then fixed wireless access, the differentiation of the product, how we deploy it, how the customer provision it so different. And with all the streaming agreements we have right now, we can scale that horizontally to all our customers. So I see it is a very healthy business for us today. When it comes to our capacity on fixed wireless access -- yet again, I mean as we said, less than -- around 50% of all the traffic is now on C-band. So we have a way to go and we have deployed only a portion. So as we deploy more, we of course open up more opportunities. Finally, and maybe Tony has some addition. On the volume growth, I'm excited of what we have done in the consumer side with myPlan, and all the new innovations were done with our customers, and we see it resonate with the market. And clearly, quarter-by-quarter, we have improved both our revenue but also operation volumes on postpaid. Prepaid you saw it yourself, a big step forward on prepaid this quarter. And then our business side, I mean Kyle and the team has been now for I’m not sure how many quarters been around 125, up to 150 net adds on wireless. So all-in-all, I see that with the offerings that we put into the market, the refresh of the brand that is supporting that we are in a good position going into the second half of this year. Tony, any additions to that?

Jim Schneider:

Thanks.

Operator:

The next question comes from Sebastiano Petti of JPMorgan. Your line is open sir.

Hans Vestberg:

Thank you. I'll start and Tony will give you the details. As we said before, I mean the second-line offering is straight into our strategy. The strategy is to build the network ones and have as many profitable connections on top of it in order to get the best return on invested capital. And you can see that is really happening, and that's been a very big focus for us. Tony will give you some more details on how it looks in the second half here. On the programs of cost, we put in last year a couple of really large programs all the way from agreement with HL together with large customer care changes. Many of those are now coming into the base, and that's why you see the leverage. But we also have quite a lot of new things coming up. And as you rightfully mentioned, we have a voluntary separation program that is ongoing right now. We also have all the efficiencies with AI that is coming through. And of course we continue with our disciplined approach on investments. So all-in-all, there is more things to come. And -- but we have gotten leverage from some of the things we did last year, Tony.

Sebastiano Petti:

Great. Thank you for the question.

Operator:

The next question comes from Michael Rollins of Citi. Your line is open.

Hans Vestberg:

Thank you Mike. I think in general, when we see the value accretion we have done recently, very much about new offerings to see that our customers are getting more value from the offerings we have. We have done some price adjustments historically. I think that Sampath in the consumer side has said that he would get better balance between volume and value increases. So that's what you see right now. And then on the business side, we have constantly done a great job. I mean Kyle and his team has constantly continue with a really high market share, continue to gain in every area like government, large enterprise and SMBs. So in the quarter you saw that the offerings we're doing with myHome and the additions on myPlan. And of course, with also the new offerings in business, Business Complete which is a new way to serve our SMBs. All of them are accretive and value but also giving our customers better services. So that's how we continue to work. And we are in sort of the third-phase of wireless where wireless is so important for our customers, and we see it also as an opportunity with the largest direct-to-consumer business in the country to actually add support with them with new services and layering on. Tony?

Michael Rollins:

Yeah, thanks.

Operator:

The next question comes from David Barden of Bank of America. Please go ahead with your question sir.

Hans Vestberg:

Hi, David. Good morning. So look as we said before, finding the right balance of P&Q. And I think you've heard Sampath and I talk about something like 80-20 price-volume mix last year was more like 100, so clearly making progress on that. And keep in mind, we have a very high-quality customer base, and we see it in the results quarter-after-quarter. And I think you see the momentum in both gross adds and in net adds in the quarter, and it is very high-quality growth, both on the consumer and the business side. Business had a very strong quarter as well on volumes. And you also see the growth in fixed wireless access. We did 378,000 fixed wireless access net adds that continue to provide a tailwind to service revenue. So we are trying to find that right balance of P&Q, and I think the results reflect that.

Brady Connor:

Thanks Dave. Brad we are ready for the next question.

Peter Supino:

Good morning. Thanks. A question about capital allocation. As we approach 2025 and your leverage target, I'm wondering how you would encourage us to think or how you do think about the possibility of building more fiber as opportunity costing that against share repurchases. I wonder how you think about the returns on each of those projects. And separately, to the extent that capital is scarce, is there an argument for maintaining leverage at a constant level and even more of above? Thank you.

Brady Connor:

Thanks Peter. Brad, we are ready for the next question.

Craig Moffett:

Thanks. I want to return to the upgrade cycle. Apple is obviously betting that they can drive a significant upgrade cycle with AI. I wonder if you could just talk about the percentage of phones in your base that are, I believe Apple's requirement will be 8 gigabytes of RAM and -- meaning it's going to be the iPhone 15 Pro or Pro Max. What percentage of your phones are already of that level? And how many would presumably require upgrades? And then how you just -- how do you think about how quickly that upgrade cycle comes and what that might mean in terms of the cost and margins for your wireless business?

Brady Connor :

Great, thanks Craig. Brad, we are ready for the next question.

Frank Louthan:

Great. Thank you. To what extent do you think that fixed mobile conversion will be more of the norm in the US? And given your smaller wireline footprint, do you think you need to expand your fiber-to-the-home assets? Or how would you address that? And then want to clarify the target leverage you are looking for, is that 2.2 times total leverage or 2.2 times unsecured? Thanks.

Tony Skiadas:

Yes. So Frank, on the leverage metric, the long-term goal is 1.75 to 2 on the unsecured. And then we said we would consider buybacks when we got to 2.25, again unsecured.

Brady Connor:

Yeah, thanks Frank. We are ready for the next question.

Timothy Horan:

Hi, guys. Focusing back on the network. I know the C-band initial deployments were just for a portion of the spectrum and they weren't used in the full range of technologies. And I know you said 60%. Can you talk about -- where are you with kind of upgrading to the entire C-band level of spectrum and to Massive MIMO and also then to stand-alone? And kind of related to this, I know you saw some major network improvements with the initial upgrades or build out to C-band. Can you talk about what you're seeing when you go back with the second upgrade? And I have a follow-up on what you do with AI? Thank you.

Tony Skiadas:

Yes. Thanks, Hans. So just a couple of other points. On C-band, we are seeing good improvements in churn 3 basis points. On gross adds, we see about 9 basis points gross add strength. And as we deploy suburban and rural gross adds are up threefold in those markets. And then premium mix continues to be stronger as well of about 10%. And we do have now at this point nearly 60% of our planned sites are now deployed with C-band. So really making really good progress.

Hans Vestberg:

We can do mobile edge compute without SA. We have done that for five years. Then there are some efficiencies on especially private networks and deployment with SA. But again, you need a full ecosystem all the way from the devices and the network features and the core in order to do that. So it is a little bit of a holistic thinking again when we work it, but we can already deliver that right now. When it comes to GenAI in mobile edge compute, that -- we don't have that to our customers right now. But the conversation with many of both the cloud players as well as enterprises of doing that when they have commercial products, and not only training large language modules. And that's how we designed our network. So that's why I'm excited of it. At the same time, we already have four GenAI products in the market that is deployed on 40,000 agents to all our stores, et cetera personalization, more efficiency for customer and employee experience. And we see a great opportunity for that. So there are multiple opportunities with AI for us and we have been on to it for a long time.

Brady Connor:

Thanks Tim. Brad we are ready for the next question.

Walter Piecyk:

Thanks. Tony, I think in the prepared remarks, you referenced voluntary separation program in June. I wonder if you can give us a sense of -- I mean I know you've done these in the past potential EBITDA benefit. And just remind us, does this result like in, I guess, onetime charges relative to the severance or the separation payments that are made and just kind of quantify that a bit, if you can?

Walter Piecyk:

Okay. And then Hans, it is not a reported number, but you can kind of calculate what wholesale revenue looks like and we know who the principal driver of that is. It seemed like that was kind of strong this quarter sequentially. I don't know, if there is some seasonality there. I'm looking last year and the year before, it doesn't seem like that. So is this a good thing or a bad thing, obviously, because it could imply stronger growth at a wholesale customer at the expense of your retail business. And just can you give us a sense in general of your outlook for that line. There has been some discussion and debate about how some terms can change or other offloading activities can occur for that customer. So just if you can comment on the quarter and just generally your outlook for wholesale in terms of a component of your sectors of growth, like how important is wholesale in terms of meeting the growth targets that you promised the Board?

Tony Skiadas:

Yes. Look, I mean the – it is very profitable business, as Hans said and is a great contribution to revenue and EBITDA consistent with the strategy to monetize the network, and we are very comfortable with the arrangements we have, but that's as far as we can go.

Hans Vestberg:

We are well positioned in that area. And again if the market go convergence between mobility and broadband, we will be there to serve our customers either with Fios and fixed wireless access. And right now, that's working really good for us. So we are happy with our assets we have and how we're deploying them right now. We're looking into how we can continue to meet our customer demands. And now we also launched, as you saw in the quarter on the consumer side, myHome where we have all the benefits we had from myPlan. We are moving over to myHome. I feel good about what our consumer division is doing on broadband and mobility at the moment with the product. We are Number One in the market, so we just need to continue to keep the lead and continue to keep innovating, and I feel good about the consumer team doing that.

Brady Connor:

Thanks Walt. Brad, we are ready for the next question.

Sam McHugh:

Good morning guys. Two quick questions. In the last few years, you've gone through quite a big reinvestment phase, I guess in the consumer division with the launch of myPlan, the refresh of the brand this quarter. As we look out kind of the next two or three years and take a big step back, should we think you are now at a place where EBITDA can sustainably grow ahead of service revenues? Yes, that's question one. And the second part just a clarification. Tony, you mentioned something about 2H wireless service revenue trends versus the first half. If you wouldn't mind just repeating it, that would be very helpful. Thank you.

Tony Skiadas:

Thanks. Hi, Sam. So on the service revenue for the second half, what we said is we expect to see sequential growth in service revenue in the second half. And when we talked about the assumptions that we had in the guide, we said, look we had pricing actions that we've already taken and you see that well over $1 billion. We also said we have an improving volume profile in consumer and you see that progress. Fixed wireless access continues to scale. And we have over $500 million now in fixed wireless access revenue on a run rate of over $2 billion and that base of business continues to grow. We also said we had headwinds in prepaid, and that's improving, and we will see that improving as time goes on and then from our amortization. And the promo discipline continues to be encouraging, and we say we see a similar level year-over-year. So those assumptions haven't changed and we feel really good about the performance on service revenue, and the momentum we have in the business heading into the second half.

Brady Connor:

Great. Thanks Sam. Brad, we have time for one last question, please.

Bryan Kraft:

Thanks good morning. I have one for Tony and one for Hans. Tony, regarding free cash flow, it's up, I think, about 12% year-over-year in the first half. do you anticipate being able to grow free cash flow this year? Or is the year-to-date growth we've seen more a function of favorable timing in the first half with higher CapEx and working capital usage coming in the second half? And then Hans, you had talked quite a bit about Verizon's strong position for AI and enterprise. Is there anything you can share on what you're seeing in 5G enterprise adoption and also on the sales pipeline activity that you are seeing? Thank you.

Tony Skiadas:

Thanks. Hi Bryan. So on free cash flow, overall the cash generation of the business continues to be very strong. In the first half of the year, free cash flow was $8.5 billion, up 7% and we were able to grow cash flow in the second quarter, even with an incremental $1.7 billion in cash taxes. And as we said in April, we expect free cash flow to have a similar shape to last year and build throughout the year. And we still see the same puts and takes on free cash flow for the full year, as we described back in January. And within that framework, we see slightly more incremental pressure from cash taxes. And offsetting that is the lower upgrades, and we'll have to see where that goes. But overall, the strong position and cash flow puts us in a position to pay down debt in the second half of 2024, and we are on track to do so.

Brady Connor:

Great. Brad that’s all the time we have for today.

Brady Connor :

Thanks, Brad. Good morning, everyone, and welcome to our First Quarter Earnings Conference Call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I'd like to draw your attention to our Safe Harbor Statement, which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC which are available on our investor relations website. This presentation contains certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our investor relations website a detailed review of our first quarter results. You'll find additional details in the earnings materials on our website. With that, I'll turn the call over to Hans.

Tony Skiadas :

Thanks, Hans, and good morning. Our first quarter results demonstrate the strong execution of our team, building on the momentum from 2023 and delivering solid results in our three priorities of Wireless Service revenue, adjusted EBITDA, and free cash flow. We saw further improvements in postpaid phone net adds and another strong quarter of growth in our broadband subscriber base. We accomplished this while maintaining our promotional discipline as evidenced by our year-over-year adjusted EBITDA growth of 1.4% and more than 16% year-over-year free cash flow growth. Consumer post-paid phone net losses were 158,000 for the quarter, better versus the prior year by 105,000, driven by improvements in both gross adds and churn. As Hans mentioned, this represents our best first quarter performance in consumer post-paid phone net adds since 2018. We continue to see improved operational performance with consumer post-paid phone gross adds up more than 5% year-over-year. And as you heard from Hans, we exited the quarter with good momentum. The changes we made over the last few quarters, including launching a regional sales structure and updating our sales compensation plans, provide the right framework for our go-to-market approach. We believe these changes, combined with the continued success of myPlan and increased utilization of C-band, will help us sustain our momentum. Consumer postpaid phone churn of 0.83% represents a 1 basis point improvement year-over-year. This result is a reflection of the strength of our value proposition, as well as our high quality customer base. The first quarter post-paid phone net add improvement coincided with a further decline in upgrades, which were down nearly 21% year-over-year. We continue to see success with our disciplined and segmented approach to customer offers in alignment with our strategy. On the business side, we delivered 90,000 postpaid phone net adds. Business volume results were challenged early in the quarter as the team implemented pricing increases in January. However, we saw positive net add momentum built throughout the quarter and we exited the quarter well positioned to continue to build on operational improvements in both mobility and broadband. That sales performance helped Verizon business achieve fixed wireless access net adds of 151,000, their best quarterly result to-date. We've been pleased with how businesses have adopted FWA and we continue to see strong demand from small businesses and enterprises which are attracted to the ease of deployment, reliability, and the flexibility of the product. Fixed wireless net adds for consumer were 203,000 resulting in a consolidated total of 354,000. This reflects the attractiveness of FWA as an alternative to traditional cable broadband, even in the market that saw muted activity. We continue to be comfortable with this pace of growth, believing it provides the right combination of base growth, ARPU accretion, and the superior experience our customers expect on the Verizon network. And our third-party Net Promoter Scores for our FWA product continue to outpace traditional cable broadband offerings, as we remain focused on building a long-term sustainable business. Overall, broadband net adds were 389,000, including 53,000 Fios Internet net adds. We're pleased with how Fios continues to grow in the marketplace, even as move activity across the country remains lower than prior years. We finished the quarter with over 11.1 million broadband subscribers, including over 3.4 million on FWA. We've now added more than 3 million broadband subscribers in the last two years alone. On prepaid, starting this quarter, we are disclosing subscriber results with and without our SafeLink brand. This disclosure provides improved transparency into our prepaid results. As a reminder, SafeLink is our government subsidy program brand offering and holds the majority of our ACP customers. The actions we've taken to scale Visible and Total by Verizon, as well as address operational execution with Straight Talk, drove improvements in our prepaid performance. Prepaid net losses excluding SafeLink were better by 146,000 year-over-year. While we are pleased to see the improvements, we still have work to do to address challenges in the prepaid business. That includes navigating the uncertainty around ACP, and we recently announced plans to provide accessible, affordable, and reliable connectivity options for those who need it most. As a reminder, we have approximately 1.1 million prepaid ACP subscribers as of the end of the first quarter. We expect the elimination of the program to result in lower wireless service revenue but have minimal impact on our adjusted EBITDA. Moving to our financials, consolidated revenue for the quarter was $33 billion, up 0.2% year-over-year. The benefits of the pricing actions we took in the quarter, combined with improved operating metrics, offset the year-over-year decrease in wireless equipment revenue due to lower upgrades. Wireless service revenue growth was 3.3% for the first quarter. This represents a significant acceleration in our revenue growth as the full year 2023 growth rate, excluding the reallocation of certain revenues, was only 1.3%. Consumer led the way with wireless service revenue growth of 3.4%, driven by ARPA growth of 4.4%, and improved year-over-year postpaid phone net add performance. In addition to targeted pricing actions, ARPA continues to benefit from the further adoption of myPlan. myPlan has been instrumental in growing our premium mix, which now stands at 42% of our postpaid phone base. We're also starting to see a growing impact from perk revenue as we scale the number of subscriptions. With over 20% of the postpaid base on myPlan, we see further opportunities for ARPA accretion as we expect to double the number of customers on myPlan in our postpaid base by the end of this year. For the first time, we are disclosing fixed wireless access revenue within our externally released results. FWA revenue, which is included in wireless service revenue, was $452 million for the quarter, up nearly $200 million versus the prior year. Headwinds in prepaid revenue continue to partially offset the gains from ARPA performance in wireless service revenue. For the quarter, prepaid revenue declined $106 million versus the prior year. While this is an improvement over the prior quarter, it represented an approximately 60 basis point drag on total wireless service revenue growth. Consolidated adjusted EBITDA was approximately $12.1 billion for the quarter, an increase of 1.4% compared to the prior year driven by the growth in wireless service revenue, as well as the impact of lower upgrade volumes. With a full quarter's impact from our recent pricing actions, we anticipate the second quarter's adjusted EBITDA growth to accelerate year-over-year. Operating expenses, excluding depreciation and amortization and special items were down 0.5% year-over-year. Lower cost of equipment and cost of services were partially offset by an increase in SG&A. Adjusted EPS in the quarter was $1.15, down 4.2% compared to the prior year, as gains in adjusted EBITDA were more than offset by higher interest expense, predominantly due to the lower capitalized interest, now that a large portion of the C-band spectrum licenses have been placed into service. Free cash flow for the first quarter was $2.7 billion, up over 16% or nearly $400 million from the first quarter of 2023. On a full year basis, nothing has changed. With free cash flow, we still expect the same puts and takes we shared with you in January. As Hans said, we expect free cash flow to build throughout the year, similar to 2023. Cash flow from operating activities came in at $7.1 billion. Within the quarter, we saw year-over-year pressures from higher interest expense, primarily related to the reduction in capitalized interest. We also made a discretionary pension contribution of $365 million prior to the closing of the retiree pension annuity transaction that we previously disclosed. CapEx for the quarter was $4.4 billion compared to $6 billion in the prior year as a result of our return to BAU levels of spend and historical levels of capital intensity. Our full year guidance of $17 billion to $17.5 billion in CapEx spending remains unchanged. Net unsecured debt at the end of the quarter was $126 billion, a $3.7 billion improvement year-over-year, and a nearly $400 million improvement sequentially. During the quarter, we issued our sixth green bond for $1 billion with proceeds committed to fund additional renewable energy purchases. Net unsecured debt was also impacted by payments of approximately $270 million related to clearance of our C-band spectrum licenses, which are now substantially complete. While these payments do not affect our free cash flow, they are a use of cash. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times in-line with the previous quarter. Given the strength and momentum of our business, we continue to see a clear path to meaningfully delever the balance sheet in the second half of this year. In closing, I'm happy with our start to 2024, and our results from the first quarter set us up well to deliver on our financial guidance for the year. Our disciplined approach continues to put us in a strong position to execute on our capital allocation priorities. Our focus remains on driving operational improvements throughout the year. With that, I will now turn the call back to Hans for his closing thoughts before opening the call up for your questions.

Brady Connor :

Thanks, Hans. Brad, we're ready for the first question.

Simon Flannery:

Great. Thank you very much and good morning. Hans, maybe we can talk about the consumer a little bit. It was good to see the churn number. Perhaps you'd just talk a little bit about the impact of the pricing there. It seems like it had a drag on business but less of a drag on consumer. And just -- what are you seeing overall in the wireless market growth, it seems like the industry is continuing to grow, there's been some competitive moves by some of the cable companies recently, maybe just comment on the overall environment out there and your ability to sustain this, as well as the low upgrade rates. And then just a quick one, Tony, for you on cash flow. Thank you for the comments around the pacing through the year. Could you just talk about working capital and the impact this quarter? It seemed like there were some drags from that on the quarterly number. Thanks.

Tony Skiadas :

Yeah, sure. So good morning, Simon. So a couple of points on churn. So the results on C-band are significantly better. We see, you know, strong churn performance, higher premium mix, and also higher gross adds in C-band markets. And, you know, overall in 2024, it's reasonable to expect similar or lower churn in the consumer business compared to 2023. And then on your cash flow question, in the prepared remarks, we said that free cash flow would have a similar shape to last year and build throughout the year. We do expect free cash flow to be up meaningfully in the second quarter. We still see the same puts and takes on free cash flow for the full year as we described in January. So nothing's really changed there. On your question on the quarter, let me start with operating cash flow and let me unpack that for you. So we saw the discretionary pension contribution in the quarter. That was $365 million in connection with the pension annuitization transaction that we announced in early March. As we said previously, the lower capitalized interest from C-band now manifests itself in operating cash flow, and that was about $300 million higher year-over-year. And the third point I'd make is, you know, we're funding the business for growth and very, very confident in our ability to execute and you saw that again. You saw the growth in the fourth quarter with strong gross adds and we followed that up with 5% gross add growth in the consumer business in the first quarter. And with that growth comes working capital timing that will settle in the second quarter. But overall we're very confident in the cash generation of the business and nonetheless we expect to generate strong free cash flow and we see no obstacles in paying down debt in a meaningful way in the second half of 2024.

Brady Connor:

Yeah, thanks Brad. We're ready for the next question.

John Hodulik:

Great, thanks and good morning, guys. First, just a couple of quick follow-ups on Simon's question. For number one, the positive commentary you guys talked about with March, does that suggest you guys could be positive in terms of consumer phone adds in the second quarter. That's number one. Number 2, the price increase seemed to be digested pretty well and you actually saw churn come down. Does that suggest you guys have more pricing power than you thought and we could see, and maybe not just for you but for the industry, and we could see more in the future that's number two. And then on ACP, I noticed you guys announced some new plans with free sort of low-end plans on the broadband side with free service for six months. You've talked about some of the headwinds as ACP goes away, but do you believe that there's an opportunity to potentially win some broadband subs as that plays out? Thanks.

Tony Skiadas:

Sure. And John, good morning. So in terms of ACP, we stopped enrollments in February and still accepting transfers through May. As we said previously and -- in the prepared remarks, the majority of the exposure is in the prepaid business, and we have 1.1 million prepaid subs that are in the ACP program. We've said previously that the guidance assumed that the ACP funding stays intact. The impact or any impact would be seen on service revenue up to potential 50 basis points of headwind. And the margin exposure from ACP is actually very small. It was insignificant in the first quarter. And if nothing changes and the funding goes away in May, as is planned, then we have plans in place to address it, both from retention and potential acquisition opportunities as well. And obviously we'll continue to help everybody -- update everybody as we know more.

Brady Connor:

Okay thanks John. Brad, we're ready for the next question.

Michael Rollins:

Thanks and good morning. I was curious if you could unpack a bit more of how you're thinking about the up-tiering opportunities within the post-paid phone base. And as you look at the Perks, is there a way that we should think about the revenue contribution from Perks and where that can go over time as an incremental way for Verizon to monetize the base?

Tony Skiadas:

Sure. And Mike, just a couple other points. So we did see 4.4% ARPA growth in the first quarter. And as Hans talked about in myPlan, the premium mix is very strong. It's 42% of the lines in the base. And the Perk attach rates have steadily increased and then will continue to increase. So we feel really good about that and the discipline we see on promotions as well and keeping the amortization pressure in check.

Hans Vestberg :

Thank you. First of all, we're on track for our cost target that we have given to the market -- to The Street. Secondly, many of the larger sort of transactions and platform transactions we started already last year, the outsourcing to ATL, the customer care changes we did, which are large transactions, without any interruptions for our customers who have done those, they are coming into the base in 2024 and of course, full year ‘25. Then what I'm adding now is our opportunities in AI. Many of these things, of course, already thought about, but of course we see a great opportunity with AI to serve our customers better. We are already using, for example, personalization in myPlan with AI, and we are using it in our network when it comes to performance of the capacity deployment, as well as power consumption. So we are using AI and generative AI already now commercially. So this is not the playing ground for us. We just see more opportunities. On the flip side, of course we also see revenues. Our network was built for AI. That was my thought when I built Verizon Intelligent Edge Network five years ago or six years ago, that we're going to have compute and storage at the Edge. AI is sort of built for that with the low latency we have on the 5G network. And as we are deploying our 5G right now, with the mobile edge compute and AI, this is a great long-term opportunity for us using AI. So there are multiple places we see efficiencies, but also revenue opportunities with all the new technologies coming. Tony, anything else on the savings?

Michael Rollins:

Thank you.

Operator:

The next question comes from Kannan Venkateshwar of Barclays. Your line is open, sir.

Hans Vestberg :

Kannan, thank you for the question. First of all, I think I said it in the beginning of the year, we're getting into a phase of the heavy investment, a lot of changes in our asset structure. We're coming into a phase where we have all the assets we need and we're executing on it. And you see the operation excellence coming out from it the last three quarters. I have a team that in many facets have actually changed quite a lot. We added two new team members this quarter. I feel really good where we stand with assets right now and how we're executing. And of course I can never say never to look into assets. That's my fiduciary responsibility. But I rather right now execute on what I have. And you see the performance when we have that with the C-band millimeter wave, the broadband growth we have, almost 400,000 again this quarter. So that's my main focus. When it comes to some of the other things, at the end you mentioned, I think we are using our base of distribution to actually work with all the streaming services. And we are uniquely positioned. We have the biggest distribution or direct-to-consumer in the market. We are taking leverage that for our customers and for our shareholders, but also seeing that we help some of these larger streaming services to see that they get better churn and of course better access to the best consumer base in the United States of America. So we will continue to do that and see that we're doing it in the right way. But again, I'm pleased with the asset base we have today.

Brady Connor:

Thanks, Kannan. Brad, we're ready for the next question.

David Barden:

Hey, guys. Thanks for taking the questions. I guess my first one was just about the kind of the balance of revenue growth. I think that you guys talked about kind of a 60-40 balance of pricing and volumes is more normal. And over the last year it was more skewed to pricing. I was wondering if you could kind of talk about the relatively healthy 5% growth in gross adds versus what we're watching this quarter happened which is a decline in accounts. Could you talk a little bit about how you balance the relationship between accounts and gross new subscribers? And then the second question is just more of a housekeeping question which is you guys introduced the second number add-on this past quarter. There's been a lot of questions about where does that show up in the numbers. I'm guessing not in the sub-numbers. It’s probably -- could you kind of elaborate about -- where we find that in the numbers? Thank you so much.

Tony Skiadas:

Yes, so Dave, on the second number, it is included in the line counts. I mean, the one thing we would say is it gives customers flexibility. They can add and remove it as desired. The adoption so far has been good, just a few points on that. It was very low single digit percentage of phone gross adds in the quarter for consumer. And we believe there's a limited market for this. As Hans said, it's ARPA and revenue accretive and it's high margin business. There's no incremental device. There's no incremental data usage and the results in the quarter reflect the strength of our core business. So we -- as Hans said, we would take this profitable connection any day of the week.

David Barden:

Got it. And just to be totally clear, Tony, so of the five-point something gross add growth year-over-year in the quarter, maybe 1% or 2% of that was the second number add-ons, which might not continue because there's a finite market for that.

David Barden:

Perfect. Okay, thank you.

Operator:

The next question comes from Sebastiano Petti of J.P. Morgan. Your line is open, sir.

Hans Vestberg :

Thank you Sebastiano. Yeah, when we talk about the broadband, first of all I think Fios continue to be the stellar product, best fiber product in the market, both for businesses and for consumer. You see us continue -- it's a little bit up and down depending on mover markets and all of that, but we are very consistent on growth in that area, very pleased with that product. On the fixed wireless access, we continue to see very, very good net promoter score, the easiness of installing it, the greatness of the product, the quality of the product, all that plays in. So I just see that when we roll out our C-band we get new opportunities. On the consumer side, that we saw of course as an obvious use case. On the business side, we're seeing new use cases that we didn't see before. I mean, all the way from coffee shops replacing cable with fixed wireless access to large enterprises actually replacing with fixed wireless access as well for different use cases. So we had a super quarter in fixed wireless access in the business side this quarter. But again, we are dimensioning ourselves to be around 400 net adds quarter-by-quarter. That's how Joe, our Head of Network, is deploying the capital, the resources so we can handle it. So we're again pleased with that. We said it also was a little bit slower broadband market in the beginning of the year. The exit rates were better at the end of the quarter. So all-in-all good. On the 5G use cases, yeah, now we start talking more and more about private networks because the number of them are many -- then the value of them are still fairly small. But you know, when we build that base of private network, managed spectrum for enterprises, that's over time is going to be a great opportunity for our enterprise sales force to add in, do the mobile edge compute. And as I said, AI is like, that's how we built our mobile edge compute network. And we already have mobile edge compute in many of our sites across the country in order to be able to meet that compute and storage. So over time, long-term, and we are a long term company. We're going to be around for many, many years being telecoms. This is absolutely the right investment. Nobody else has built a network as we have done when it comes to AI network compute storage at the edge on the wireless network.

Operator:

The next question comes from Tim Horan of Oppenheimer. Your line is open.

Tony Skiadas :

Sure. So on the ARPA growth, again you see the progress on gross adds and you saw the 5% growth on gross adds. You see the progress with myPlan and the continued premium mix has been very, very strong on myPlan, and that's continued. We see a further runway for growth, and you saw it in the first quarter. And as we said in the prepared remarks, we'll see a full quarter's effect of the pricing changes that we announced in the consumer business. And that launched in March. You'll see a full quarter's effect in the second quarter. So we feel very good about the progress on ARPA and that the team is making. And then on your second question, I'm sorry?

Tony Skiadas :

Yeah, we're not going to give multiyear targets here, but we like the shape of the growth right now. We said we're on track with our service revenue growth through the year and the team is very focused on us. We said we were going to be phone net add positive in consumer and that's on track as well. And on the debt, so look, we're not going to give any targets on paying down debt. Our focus is on continuing to generate strong free cash flow to pay down debt in a meaningful way. In the second half of the year, we're on track to do that. We have 3.6 billion of unsecured maturities due this year. About half of that was addressed in the first quarter. And you should expect us to be opportunistic as the year goes on.

Operator:

The next question comes from Craig Moffett of MoffettNathanson. Your line is open.

Hans Vestberg :

Thank you Craig. Great question. First of all, as we all know, right now the FCC doesn't have any spectrum to auction out them -- and they don't even have an approval to do it. So that's sort of constrained. Then it could, of course be secondhand market spectrum. We feel good about -- we have only deployed a piece of our C-band so far. So we have quite a lot left in -- our many of the sites have 60 megahertz or maybe at best 80. We have 161 megahertz nationwide. So we have quite a lot left of spectrum. And remember, That was the decision I, together with the board, took. We bought spectrum for decades, not for the next two quarters or something like that. So we feel really good about it. Then any opportunistic spectrum coming up, it's hard to predict. And even on whatever regulation is going to be around screens and that. I don't know. The only thing I know, I've sit here on a better position ever say, with my millimeter way, my C-band, my low-band, and how I build a network. And sometimes it's opportunistic spectrum is going to cost me a lot both for my customer interaction because some spectrum is not in the devices. I need new radios, new software. So you need to think when you re-engineer the network to see that you have the right spectrum all the way up to the customer. And I think that no one is even close to our team or radio planning doing that. But all-in-all, we feel good about where we are today. Let's see what's going to happen in the market of spectrum.

Hans Vestberg :

A little bit early to say, and ultimately it's actually a call or return on investment that we do daily here. Should we put up a new tower? Should we densify? Should we put up new elements? Or should we add more spectrum? That's a regional, almost on ZIP code level that the team is going through this. So every time you see spectrum coming out in the secondhand market historically, you make a calculation. We feel good about the position we have again here with all the spectrum we have to make those choices internally rather than betting on external assets coming in. We don't need that. We have everything in-house right now for quite a while.

Hans Vestberg :

Thank you, Craig.

Operator:

The next question comes from Greg Williams of TD Cowen. Your line is open.

Hans Vestberg:

I can take the first question -- the second question first. As we haven't done any open access deals yet, you can see that the appetite hasn't been that big. Anyhow, we're going to evaluate any type of opportunities that can fortify how we deliver to our customers. So far in this environment, with the very high capital cost, et cetera. It hasn't -- we haven't find a good return on investment on it. And again, we are very financially prudent. And remember, we have fixed wireless access, we have our Fios, we sort of -- we have [own this] (ph) economics on basically everything we're doing. That's why our return on investment is the highest in the industry and our EBITDA is the highest. We will continue to be disciplined. That doesn't mean I'm not going to look into other models, but right now there have not been any models that is appealing to me and the team and for our shareholders.

Greg Williams:

Got it. Thank you.

Operator:

The next question comes from Bryan Kraft of Deutsche Bank. Your line is open.

Hans Vestberg :

Thank you. On the BEAD funding, yeah, I think that has been widely reported in the press. It is of course a complicated process to get the BEAD money out, et cetera. So we bid where we see it makes sense with return on investment and the subsidy is coming in there. There are some other broadband money coming into the market from the previous funds which were winning. We just had some quite large wins here recently in Pennsylvania. So we're using it but we do it when it makes sense from a profitable point of view. But again, it's probably going to take some time when we see this money rolling out. Second question is for you. I [think you remember] (ph) …

Bryan Kraft:

Thank you very much.

Operator:

Your last question will come from Peter Supino of Wolfe Research. Your line is open, sir.

Hans Vestberg :

Thank you. On the SG&A, we're very focused on seeing that we continue to get full leverage on the growth that we have right now. So the team is really focused on taking out costs. And I said, we are on track with that. We have a lot of initiatives ongoing. Tony will give you some more puts and takes on the SG&A in the quarter. On the millimeter wave MDU solution, that is progressing. We have said it will come in the second half, latter part of this year, in commercial. But we're piloting it right now and it's performing really well. So we feel really good about it. And it will over time, of course, add opportunity for us on MDUs that we haven't served with a fixed wireless access so far. So it will be an addition over time. Tony?

Peter Supino:

Thank you very much.

Operator:

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Verizon Conferencing services. You may now disconnect.

Brady Connor:

Thanks, Brad. Good morning, everyone, and welcome to our fourth quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I'd like to draw your attention to our safe harbor statement, which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our Investor Relations website a detailed review of our fourth quarter and full year results. You'll find additional details in the earnings materials on our Investor Relations website. We'd like to note that Verizon's fourth quarter reporting earnings per share were negatively impacted by a number of special items, which are discussed in the written remarks available on our Investor Relations website. The largest of the impacts was also disclosed in our 8-K filing last Wednesday. Excluding these special items, adjusted EPS for the fourth quarter was $1.08. With that, I'll turn the call over to Hans.

Tony Skiadas:

Thanks, Hans, and good morning. Executing on our plan, we finished the year strong and delivered on our financial guidance. We exited the year with good momentum and remain committed to our three priorities of growing wireless service revenue, adjusted EBITDA and free cash flow. In 2023, we set out to improve our operational performance while sustaining financial discipline. Our fourth quarter and full year results confirm that our strategy is working and that we can deliver strong financials and improve key operating metrics. Consumer postpaid phone net adds totaled 318,000 for the quarter, a substantial improvement of 369,000 sequentially and 277,000 compared to the prior year. Our Consumer postpaid phone churn of 0.88% represents a stable result even after we implemented over $1 billion of annualized pricing actions in 2023. While we do not provide specific guidance on volumes, we wanted to share a couple of items as we look into 2024. In the first quarter, we are taking additional targeted pricing actions that we expect will result in incremental pressure on Consumer postpaid phone churn in the period. However, we expect to deliver positive Consumer postpaid phone net adds in full year 2024 as we execute on our strategy of growing our subscriber base while being financially disciplined. Postpaid phone gross adds in the quarter were up nearly 17% year-over-year. This represents our best quarterly Consumer gross add performance in four years. Our attractive myPlan offers combined with our segmented approach to the market, regional sales structure and disciplined promotional strategy continued to deliver strong results. Additionally, postpaid upgrades remained lower as compared to the prior year. The Consumer postpaid upgrade rate was 4.4% in the fourth quarter, down 120 basis points year-over-year as a result of approximately 19% fewer upgrades. As Hans said, we continue to see better performance in markets where we have deployed C-Band. In our first 76 C-Band markets, fourth quarter Consumer postpaid phone gross add growth was 8 percentage points better than in non-C-Band markets. Additionally, Consumer postpaid phone churn in C-Band markets was 4 basis points better than in non-C-Band markets. The strong momentum in the quarter combined with the continued deployment of our C-Band network positions us well in 2024. The quality of the business we are writing in Consumer remains high as myPlan continues to drive premium plan adoption. The premium take rate in C-Band markets for the quarter was more than 10 percentage points higher than in non-C-Band markets. Consumer ARPA of $134.10 represents an increase of 4.7% year-over-year. This was driven by new customer additions, premium plan adoption and fixed wireless subscriber growth. We expect continued and healthy organic ARPA growth in 2024. Our prepaid results remain challenged in the fourth quarter. This is in part to seasonally weaker national retail sales volumes, which is the primary sales channel for our TracFone brands. We also continue to see pricing pressures from low-end postpaid offerings. Prepaid net losses for the quarter were 289,000. During the quarter, we saw continued strong growth within the Visible and Total by Verizon brands, which we will continue to scale. The team is also focused on our partnerships to improve the performance of the Straight Talk brand. We believe we're taking the right steps to better position our offerings in the market and expect to see some stabilization in 2024. Verizon Business delivered another strong quarter with 131,000 phone net adds, which as Hans mentioned, is our 10th consecutive quarter above 125,000. The Business Markets Group had its best phone net add performance in the last two years, demonstrating how our value proposition is resonating with small and medium businesses. Similar to Consumer, we are taking pricing actions in the first quarter in Business that could result in elevated phone churn in the period. However, we are confident that we will continue to deliver strong business volumes in 2024. Moving on to broadband, we delivered 413,000 net additions in the quarter continuing the pace of over 400,000 broadband net adds for the fifth consecutive quarter. We see strong demand for both our fiber and fixed wireless offerings, and we continue to see positive responses from customers regarding the quality and reliability of our services. In fixed wireless, we delivered 375,000 net adds for the quarter, growing the base to over 3 million subscribers. We launched C-Band in early 2022, and our fixed wireless success in the last two years reflects the strong demand for high-quality broadband and the strength and reliability of our product. Notably, in the fourth quarter, over 80% of our consumer fixed wireless gross adds came from C-Band markets. The growth trajectory for fixed wireless continues to be robust and we are ahead of schedule to achieve our 4 million to 5 million subscriber goal by year-end 2025. Fios Internet net adds were 55,000, down 4,000 year-over-year. We are pleased with the success of Fios with strong gross adds and retention, reflecting the quality and overall value of the product. We expect broadband subscriber momentum to extend into 2024 as we continue deployment of our C-Band spectrum, further expand our Fios footprint and bring new products and offers to the market. Let's now look at our financials. Consolidated revenue for the fourth quarter was $35.1 billion, down 0.3% year-over-year. This change can be attributed to the wireless equipment revenue, which was approximately 2% lower than the prior year as total postpaid upgrades declined by approximately 18%. Total wireless service revenue was $19.4 billion, up 3.2% year-over-year. Strong revenue benefited from targeted pricing actions, more customers selecting premium unlimited plans and growth in fixed wireless access. This was partially offset by pressure from prepaid, which reduced total wireless service revenue growth by approximately 70 basis points year-over-year as well as promo amortization. Consolidated adjusted EBITDA in the quarter was $11.7 billion, a decrease of 0.6% compared to the prior year. Higher wireless service revenue and the benefits of lower upgrades were more than offset by higher marketing and bad debt expense and ongoing declines in Business wireline revenue. Adjusted EBITDA margin of 33.2% was relatively flat year-over-year. In 2023, we implemented transformations within our Consumer customer care group as well as Business managed services. We are pleased with what we have achieved this year and our cost saving measures are meeting our expectations. We expect further progress on our cost efficiency program in 2024. Adjusted EPS was $1.08 in the quarter, resulting in full year adjusted EPS of $4.71. Turning to our cash flow summary, cash flow from operating activities for the fourth quarter was $8.7 billion, bringing the total for 2023 to $37.5 billion. This marks a year-over-year improvement of over $300 million, primarily due to working capital improvements. CapEx for the quarter came in at $4.6 billion compared to $7.3 billion in the prior year. The full year CapEx totaled $18.8 billion, which represents a more than $4 billion reduction in capital spending from 2022 as we come down from our peak C-Band spending level. Free cash flow for the fourth quarter was $4.1 billion, bringing our year-to-date total to $18.7 billion, a $4.7 billion increase over the prior year, driven by operational improvements and the lower CapEx spending that we previously noted. We are pleased to have delivered on our guidance of more than $18 billion of free cash flow for the full year, which reflects our balanced and strategic approach to delivering profitable growth. Net unsecured debt at the end of the quarter was $126.4 billion, a $1.6 billion improvement year-over-year. Net unsecured debt increased sequentially primarily due to settling the $3.7 billion in incentive payments to satellite operators for our remaining C-Band spectrum. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times as of the end of the fourth quarter, in-line with the prior two quarters. We expect deleveraging of the balance sheet to accelerate in 2024 as CapEx comes down to BAU levels and we continue to generate strong cash flow. Additionally, we continue to benefit from our approach to managing long-term debt and have only $3.6 billion of unsecured debt maturing in 2024. Overall, I'm pleased with our momentum exiting the year and our performance in 2023, delivering an improved operational profile while also meeting our financial guidance. Now, I want to take a few moments to look ahead and walk through our 2024 guidance. Our 2024 guidance demonstrates our expectations for accelerating wireless service revenue growth. As a reminder, the reported 2023 wireless service revenue growth of 3.2% included approximately 190 basis points of benefit from a reallocation of other revenues. Excluding this reallocation, the 2023 wireless service revenue growth was 1.3%. For 2024, we expect total wireless service revenue to grow between 2% and 3.5%. This will be driven by anticipated positive postpaid phone net additions in both Consumer and Business, continued fixed wireless access subscriber growth, further adoption of premium unlimited plans, growth in products and services, and pricing action benefits. We expect consolidated adjusted EBITDA to grow by 1% to 3% versus the prior year. This outlook reflects expected higher wireless service revenue and the impact of our cost transformation initiatives, partially offset by continued pressure in Business wireline revenues and increased wireless network operating expenses. Full year adjusted earnings per share is expected to be $4.50 to $4.70. As noted, we expected adjusted EBITDA to grow in 2024, offset by certain below-the-line impacts. Specifically, higher interest expense is expected to impact adjusted EPS by $0.16 to $0.19, over 75% of which is driven by the continued reduction in capitalized interest related to the C-Band licenses being placed into service. In addition, EPS is expected to be impacted by approximately $0.07 to $0.09 of higher pension and OPEB expense, primarily due to the expiration of certain credits. This impact will flow through the other income and expense line on our income statement. We expect depreciation and amortization to be relatively flat in 2024 compared to 2023. Our adjusted effective income tax rate is expected to be in the range of 22.5% to 24% based on current legislation. As discussed in prior quarters, capital spending for the full year is expected to be between $17 billion and $17.5 billion, down from $18.8 billion in 2023. While we are not providing guidance on 2024 free cash flow, we wanted to provide some additional color to aid with your analysis. Tailwinds to free cash flow will come from our adjusted EBITDA growth outlook as well as the expected $1.5 billion reduction in CapEx in 2024 based on the midpoint of our guided CapEx range. Offsets will be higher interest expense and higher cash taxes. As a reminder, the majority of the higher interest expense relates to reductions in capitalized interest. Such interest was recognized in cash flow from investing prior to placing the C-Band spectrum into service. The higher cash taxes are primarily related to the continued phaseout of bonus depreciation in 2024 based on current legislation. Overall, we expect a strong free cash flow profile that will support our capital allocation priorities and position us for meaningful unsecured debt reduction in 2024, which we expect to come in the latter half of the year. With that, I will now turn the call back over to Hans for his closing thoughts.

Brady Connor:

Thanks, Hans. Brad, we're ready for the first question.

John Hodulik:

Hey, thanks. Good morning, guys. I'd love to drill down on the couple of things. Firstly, the sub trends, 17% growth is some real momentum. I know, Hans, you talked about a number of sort of potential drivers, but if there's anything you could sort of be specific and sort of talk about what drove that in the quarter and is that likely to continue? Also, the account growth, is that likely to continue? And then, you talked about some churn on the price increase. Anything you could say about sort of the net add momentum as we look into '24? That's first. And maybe for Tony, nice service revenue growth. Any additional info you can kind of give us to sort of unpack that in terms of the price increase impact versus last year and what you're seeing in terms of tier, that would be great. Thanks.

Tony Skiadas:

Hey, John, it's Tony. Good morning. So, just to add on to what Hans mentioned, we did really well in Tier 1 markets. As we mentioned in the prepared remarks, about 8 percentage points better, and we were also net add positive in both Tier 2 and Tier 3 markets as well. We improved our competitive positioning against all providers. We continue to build out C-Band as we said earlier and -- in suburban and rural markets and we see further opportunity there. And as Hans mentioned, we have strong momentum in the VBG side as well on both mobility and FWA. So, good results. And then, on your question on service revenue, so we feel really good about the shape of service revenue in 2024. The guidance that we gave of 2% to 3.5% reflects accelerated growth, and we talked about the jump off point of 1.3% in the prepared remarks. The midpoint of our guidance range implies over $2 billion of service revenue growth. If we think about the assumptions in the guide, in terms of tailwinds, as you know, we've executed a number of pricing actions, both in the back half of 2023 that do carry into 2024, as well as in recent weeks, we've taken further pricing actions in both Consumer and Business that will provide a tailwind. We also have an improving volume profile in our Consumer business. As we said in the prepared remarks, we expect to have positive phone net adds in Consumer in 2024 and stable Business volumes as well. And then, the third tailwind I'd point to is an increasing contribution from fixed wireless access. We have really good momentum and over 3 million subs in the base. In terms of headwinds, prepaid has been a drag on service revenue both in the fourth quarter and the full year. It was about $142 million in the fourth quarter, and we expect the prepaid headwinds continue into 2024 as we stabilize that business. And then on promo amortization, that continues to be a headwind with the increase in 2024 similar to the increase we experienced in 2023. But when you put that all together, we like the trajectory of service revenue.

Brady Connor:

Yes, Brad, we're ready for the next question.

Simon Flannery:

Great. Thank you very much. Good morning. Just following up there on the fixed wireless, could you just give us a little bit of color around how the churn is performing? What are you seeing in terms of those cohorts that have had the service for some time? And any comments on sort of capacity and so forth? And also, are you seeing emerging seasonality in this product driven by strong back-to-school in Q3 and then maybe a little bit softer in Q4? And then, anything you can -- color you can provide on your exposure to ACP and how that may affect you and your latest thoughts on the BEAD program? Thank you.

Tony Skiadas:

Yeah. And then just one additional point there. So, the longer-dated churn, Simon, is very strong, and we're very pleased with the progress thus far. On your other question, on ACP, just maybe a few points to make here. The guidance assumes that the ACP funding remains intact. In the event the funding goes away, we have plans to address it and we'll see what happens there. The majority of the exposure on ACP is in our prepaid business. We have about 1.2 million prepaid subs that benefit from the ACP program, and that's less than 10% of our prepaid base. On the postpaid side, we have minimal exposure to ACP, both Fios and postpaid wireless. And the margin exposure from ACP is very, very small.

Simon Flannery:

Great. And just one follow-up. On the fiber build, is that again about 500,000 homes passed this year?

Simon Flannery:

Thanks so much.

Operator:

The next question comes from Phil Cusick of JPMorgan. Your line is open, sir.

Hans Vestberg:

Sure. I can just start by saying, but I'm going to hand it over to Tony, I think you're spot on. On myPlan, and I said it in my opening remarks, stellar performance so far on myPlan. But it's not only that the plan is good, it's both flexible, you have cost control and our customers get value of it. And I think that goes back to the what I talked about for years, disciplined approach, but also very segmented. And that's what's happening right now, and we can see that we allocate money to the right product, to the right customer in the right market. So, there's a lot of that. But Tony will give you a little bit of rundown on the numbers.

Phil Cusick:

And in terms of the durability of postpaid and growth there?

Phil Cusick:

That's great. Thanks for everything, guys.

Operator:

The next question comes from Michael Rollins of Citi. Your line is open, sir.

Hans Vestberg:

Thanks, Mike. I think when it comes to our pricing and our promotions, I think we look more about we are the leader in the market. We look at the different segments we have to see that we have the right offerings for right customer with the right value. That's the focus we have had for, I would say, the last two years, very much focused on our customer base and the consumers and the customers we can attract to Verizon. And so far, that disciplined approach we have. You saw the fourth quarter, for example, we invested a little bit more because we have really good momentum. So sometimes, we're going to invest more, but it's always going to be with return on investment in mind to see that we're doing the right for all our stakeholders. So that's the focus we'll have on the pricing we have both on broadband and on wireless. On the cost program, '23 was a big year for us. You're probably following all our press releases, but we did a lot in customer care. We did a lot with the managed services with outsourcing with HCL. We implemented some really large IT systems and application that's going to be a fantastic platform. We continue to deploy our offshore centers and being even stronger using that as a platform on the basis that we created the Verizon Global Services, the 1st of January '23. So, I'm really pleased with the platforms, and that means we're on track for the savings we talked about going into '24, it's more about the same. Tony?

Michael Rollins:

And just one other. Where are you in process of restructuring the Business wireline operations? And how close are you to an inflection where that segment can stabilize financially or potentially eventually grow at some point? Thanks.

Michael Rollins:

Thanks.

Operator:

The next question comes from Frank Louthan of Raymond James. Please go ahead, sir.

Hans Vestberg:

You're right. Last year, we did a lot of changes. But looking at the result, I think many of the changes was absolutely right, all the way from our structural changes to go-to-market, the product. And also, we did quite a lot of management changes, getting the -- many of the executives in new positions, including then recruiting a new CMO, Leslie Berland. We're excited to have her on. I think where we are with our brand and with our offerings, we're in a great place. But you know you cannot sit still here and that's why we recruited Leslie. Leslie will work with the full team to see how we continue to refine the leadership in the brand, because we are the number one brand in the market. We're just going to refine that, but we're not going to sit still. So, I think Leslie has been here for two weeks. So, I see a lot of great initiatives and ideas, and we will work together with her to make this company even better.

Brady Connor:

Yeah, thanks, Frank. Brad, we're ready for the next question.

David Barden:

Hey, guys. Thanks for taking the questions. A couple if I could. Just the first, you went out of your way to highlight how well fixed wireless access is doing in the C-Band markets. These are kind of the main markets, probably the densest markets. Obviously, we're going to see the C-Band deployment expand, both in terms of spectrum density and in terms of geography. 350,000 has been kind of the baseline expectation for fixed wireless access adds. In the current C-Band deployment, would you be willing to put a stake in the ground? Where could that go? Could that double by the time we get the full C-Band out there by the end of next year? That's the first question. And I guess the second question, Tony, you gave us the kind of moving parts, the EBITDA growth, 2%, that's about $0.75 billion after tax, interest expense at $0.175, that's about $3 billion -- $0.75 billion after tax, $1.5 billion CapEx savings. So, the big moving part that none of us really know is the cash tax and how that might impact free cash flow, whether free cash flow could be up a little bit, down a little bit. Could you be more transparent around that moving part? Thank you so much.

Tony Skiadas:

And Dave, just on your question on cash taxes, so we said, we're going to be pressured by the phaseout of bonus. We did see a tax benefit in 2023 from the spectrum clearing payments. And if you think about the headwind, we'd see it at about $2 billion right now, and we'll have to see how things play out with what the proposed legislation is.

Brady Connor:

Yeah, thanks, Dave. Brad, we're ready for the next question.

Craig Moffett:

Yes, hi. I wonder if you could talk about your market growth expectations for postpaid coming into the year. I know you're the first one to report, so we haven't seen the results from anyone else yet. But what's your sense of what we can expect in terms of total postpaid and maybe total phone growth for 2024 market-wide?

Craig Moffett:

Can I just maybe drill down a little bit though? I mean, the growth numbers we've seen have been as high as 6 million-plus. Is that a feasible growth rate? Population growth, including immigration, is more like 3 million. Is your sense as you go into set your own expectations for the year that we'll see some deceleration? Or is your sense that there's still something going on that's keeping growth so far in excess of population growth?

Craig Moffett:

Great. Thank you.

Operator:

The next question comes from Kannan Venkateshwar from Barclays. Your line is open, sir.

Hans Vestberg:

Thank you, Kannan. I have to go back a little bit when it comes to our broadband strategy. We have a multipurpose network. We're building networks once and we have multiple options at the edge. That was sort of the infancy of the Verizon Intelligent Edge Network. From the data center to the edge, we have harmonized everything, we have fiber in between everything, we have multi-routers, we have one transport network, that is super important. It's sort of the brain of the network. Then, at the edge, we have optionality, what type of access we have. In the ILEC, of course, we're going to continue with our success in Fios, and outside we're doing fixed wireless access. But it gave us optionality over time. I like owner's economics. I think that, that makes us very competitive in pricing and offerings to our customers. There are, of course, a lot offerings from people that want to ship in capital, but ultimately, it has paid off for us to be very, very prudent in financial discipline with our own money. But you can never out-rule, but that's really my view on it. But I'm creating optionality with the network, and Joe and his team are super agile if we need to be within that. On the wireless, I would say, I mean, if you look at our Business side, they have great offerings in the market. They have taken the fair share over 10 quarters, and then have also made new offerings so they can expand. So, I think they both have done quantity and value. And wireless, of course, on the Consumer side, they have historically had more ARPA increase with new offerings, new pricing, new products rather than volumes, but you have seen us performing in the last part of the year. And I think Sampath and his team, they have said that they want to increase their part of getting new customers. But again, it will be financial discipline, and we should get the right customers. And if you look at our quality of our consumer base, it's just amazing, and we will continue to be financially prudent on that, but clearly, we want to have more volumes, and -- but not to any cost. We will do it with the right cost and the right product to our customers.

Brady Connor:

Thanks, Kannan. Hey, Brad, we're ready for the next question.

Peter Supino:

Hi, thanks. Good morning. On the subject of consumption and network utilization, I wondered if you could update us on the number of gigabytes per month that postpaid phone customers are consuming nowadays. And extending that thought over the next few years, does that growth and the robust FWA business that you're building suggest that we should prepare for densification or other radio access network or spectrum costs for capacity over the next several years, certainly not a 2024 question? Thanks.

Peter Supino:

Great. Thanks, Peter.

Operator:

The next question comes from Bryan Kraft of Deutsche Bank. Your line is open, sir.

Hans Vestberg:

Yeah. Thank you, Bryan. Let me start with the market in the fourth quarter. We don't know. I mean, the others haven't reported. We only know that we have performed really well. And -- but that has been -- it's not the one-quarter phenomena. If you think about from the second quarter, third quarter, even in the first quarter, we were sequentially improving all the time, and we have done that in a very disciplined ways with a lot of actions, and that we need to keep up. And then, the comment on how the quarter shaped, so you probably talk about Consumer more than anything else. I think we're solid through the quarter. There was nothing sort of different in -- during the month in the quarter. We were solid through the quarter doing well performance. On the lead, as I said before, we take that very seriously. I cannot comment what media doing. We work with all the agencies to see that we are following this up and we have revealed all the information we have, so we don't have any more. We have also disclosed how much lead cable we have in the network, which is very little. But again, we take it serious and work with all the agencies.

Brady Connor:

Yeah. Thanks, Bryan. Hey, Brad, we have time for one more question.

Walter Piecyk:

Thanks. Hey, Hans, this is -- I apologize, probably the fourth time you're coming back to the gross add question. But I think earlier you made mention of kind of the change in structure from nationalization to localization. I think that was something that Sampath has had kind of stated as one of his specific things and probably something that maybe could be more sustainable than just a change in a rate plan that obviously could be replicated or just addresses the market. So, just a couple of questions on that. First, if you think about kind of the ramp in fourth quarter, I know this is kind of a soft question, but like the impact of localization and that change in the structure of the sales organization versus myPlan, which had a larger impact? And then, I guess more importantly, the sustainability, meaning that, yeah, you typically do see sequential growth seasonally around this time of year, obviously more pronounced this year than past, but are we going to see even more sequential growth or more abnormal growth in the first half of the year as some of the implementation of that localization continues, or have we largely already seen that impact as we go into 2024? Thank you.

Tony Skiadas:

Yeah, Walt, just to add on to what Hans said, the regional structure is a lot closer to the customer, and we've run the business this way for many, many years. And we can do things like different promos for different markets and local resources, and decision making and the localization offset some of the price ups as well. So, we feel really good about where we're heading, especially with the Tier 2 and Tier 3 rollouts with C-Band and the opportunity that provides.

Hans Vestberg:

Thank you, Walt. I think this is something that we have been very disciplined. Our capital allocation priorities are clear. Number one, money to the business, basically our CapEx. Number two, continue to put the Board in a place where they can continue to increase our dividend. And number three, paying down debt. When we come down to 2.25 times, we have said we will start considering buybacks, but our ultimate long-term goal is to get around 2 times. So, yeah, that's the plan. But of course, it will play in where the market is, where the interest rates are, where the capital, and where the equities. But clearly, that's the plan we have right now and the Board is fully tuned to that plan.

Brady Connor:

Yeah, thanks, Walt. Brad, back to you.

Brady Connor:

Thanks, Brad. Good morning, everyone, and welcome to our third quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I’d like to draw your attention to our Safe Harbor statement which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon's filings with the SEC which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our Investor Relations website, a detailed review of our third quarter results. You will find additional details in the earnings materials on our Investor Relations website. With that, I'll turn the call over to Hans.

Tony Skiadas :

Thanks, Hans and good morning. Our results for the third quarter continue to demonstrate our progress towards our three priorities, growing wireless service revenue, and driving EBITDA and free cash flow. As Hans said, we are executing on our plan and remain on track to meet our financial guidance for 2023. We've talked about improving our operational performance while maintaining financial discipline with the third quarter results representing another proof point that demonstrates we can deliver improving key metrics and strong financials. Consumer postpaid phone net losses totaled $51,000 for the quarter, an improvement of $85,000, sequentially and $138,000 compared to the prior year. During the quarter, we executed well in a low switcher environment, enabling postpaid phone gross add growth of 2.3% year-over-year. Our postpaid phone churn of 0.85% represents a stable result even after implementing over $1 billion of annualized pricing actions in 2023. Our segmented approach to the market and the structure and discipline of our promotional strategy helped to deliver strong postpaid phone gross adds and lower postpaid upgrades. The third quarter’s consumer upgrade rate of 3.6% is down 150 basis points year-over-year. The quality of the business we are writing in consumer remains high as myPlan continues to drive an elevated premium mix. Consumer ARPA of $133.47 increased sequentially by 1.2% and year-over-year by 4.5%. We expect to deliver further ARPA growth as a result of the innovations of myPlan, as well as our most recent pricing actions. Verizon Business delivered another strong quarter with 151,000 phone net adds, which as Hans mentioned is our ninth consecutive quarter above 125,000. While the macroeconomic environment is uncertain and businesses are more cautious than a year ago, mobility continues to be a top investment priority for our Business customers. We expect to continue to deliver strong volumes and expand their relationships by leveraging our position as the wireless market share leader for small and medium businesses, large enterprises and public sector customers. Moving on to broadband, we delivered 434,000 net additions continuing the pace of over 400,000 net adds for the fourth quarter in a row. Customers are drawn to the quality of our service and overall value proposition for both FWA and Fios. For fixed wireless, gross add expansions grew 384,00 net adds for the quarter growing the base to nearly 2.7 million subscribers. The addition of the second tranche of C-band spectrum will help us continue our FWA momentum as we work to build a long-term sustainable business. Fios Internet net adds were 72,000, up 11,000 year-over-year. We are pleased with the success of FiOS with strong gross adds and retention reflecting the quality and overall value of the product. For prepaid, net loss is up $207,000 represents the sequential improvement from the second quarter. We expected a better trajectory for the remainder of the year, as the teams continue to scale some of our key brands such as Visible, and Total by Verizon and execute on our ongoing integration efforts. Let's now look at our financials. Consolidated revenue for the third quarter was $33.3 billion, down 2.6% year-over-year. The decline can be attributed to wireless equipment revenue, which was approximately 12% lower than the prior year as postpaid upgrades declined 26%. Total wireless service revenue was $19.3 billion, up 2.9% year-over-year and up $217 million sequentially. Strong revenue benefited from targeted pricing actions, more customers selecting premium unlimited plans and growth and fixed wireless access. Additionally, as a result of our discipline around promotions and lower upgrade volumes, we saw further reduction in headwinds to service revenue growth associated with promo amortization. This was partially offset by pressure from prepaid, which reduce total wireless service revenue growth by approximately 60 basis points year-over-year. Consolidated adjusted EBITDA in the quarter was $12.2 billion, an increase of $267 million sequentially and up 0.2%, compared to the prior year. Adjusted EBITDA margin improved by 100 basis points year-over-year, primarily driven by improved wireless service revenue and lower consumer postpaid upgrades. Operating expenses, excluding depreciation and amortization and special items were down approximately 4% year-over-year, primarily due to the lower cost of equipment from reduced upgrade volumes. While bad debt is up year-over-year, it was once again flat sequentially consistent with the first half of the year. We continue to make progress on our cost efficiency program, having recently implemented transformations within our consumer, customer care group, as well as business manage services. We are on track to deliver $200 million to $300 million of savings in 2023 building momentum to generate incremental savings in 2024. Adjusted EPS was $1.22 and includes $0.03of pressure from a reduction in capitalized interest due to the early clearance of C-band spectrum. We currently anticipate another incremental $0.03 to $0.04 in the fourth quarter. Turning the attention to cash flow. Cash flow from operating activities for the third quarter was $10.8 billion, bringing the 2023 year-to-date total to $28.8 billion. The year-to-date performance is up approximately $600 million compared to the prior year, primarily due to working capital improvements associated with fewer upgrades and lower inventory levels partially offset by higher interest payments. Customer payments continue to be healthy with consistent performance throughout the year. CapEx for the quarter came in at $4.1 billion, totaling $14.2 billion year-to-date. At this point, we expect 2023 CapEx to come in at the upper end of our guidance range of $18.25 billion to $19.25 billion. The third quarter was a second consecutive quarter operating at our business as usual runrate. As a result, we would expect a reduction of approximately $4 billion of CapEx in 2023, compared to the prior year. Free cash flow for the third quarter was $6.7 billion, bringing our year-to-date total to $14.6 billion, a $2.2 billion improvement over the prior year. As Hans mentioned, we have generated more free cash flow in the first three quarters of this year than in all of 2022. Based on our year-to-date results and the strength of our core business, we are pleased to raise our 2023 free cash flow guidance by $1 billion to more than $18 billion. We are raising guidance even with CapEd at the upper end of our range and absorbing the headwinds from interest expense. Strong free cash flow provides flexibility and enables us to deliver on our capital allocation priorities. As Hans said, within the third quarter, we executed a successful $2.6 billion debt tender, of which a majority was floating rate, while also increasing our dividend once again. Additionally, given our cash position and the performance of the business, this month we paid approximately $3.7 billion of spectrum clearing cost, primarily using operating cash flow. The remaining spectrum payments are minimal and will be made in 2024. Net unsecured debt at the end of the quarter was $122.2 billion, an improvement of $4.3 billion from the end of second quarter, and $7.1 billion lower year-over-year. We ended the quarter with $4.2 billion of cash on hand, which we are using to pay the clearing cost I just described. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times as of the end of the third quarter, representing a 0.1, churn improvement year-over-year. Overall, I'm pleased with our ability to deliver stronger operational and financial trends. We are focused on finishing the year strong with continued improvements in volumes and financials, setting us up for meaningful deleveraging opportunities in 2024. I will now turn the call back to Hans for his closing thoughts before we open it up to your questions.

Brady Connor:

Thanks, Hans. Brad, we are ready to take questions this morning.

Phil Cusick:

Hi guys. Thank you. Two if I can. Tony, how should we think about the pieces of free cash flow growing our stability next year? And after making the C-band relocation payments, what obligations other than the dividend will prevent you from delivering? And then Hans as a follow-up, there's a lot of speculation about M&A in the fiber and wireless spaces lately. Can you talk about any interest you have in buying fiber or wireless assets in the market? And if so, what might be criteria for that? Thank you.

Tony Skiadas :

Hi Phil. Good morning. So on the cash generation, so we're very pleased thus far. I'll start with where we are in the third quarter. So we're pleased with the cash generation of the business. The performance of the business, and as you saw the continued discipline that we had with promos and retention gave us the confidence to raise the free cash flow guide by $1 billion to more than $18 billion. And that's with CapEx at the upper end of the range and also with higher interest expense. So we feel very good about the balance of the year and are positioning heading into next year. Obviously, we're not going to guide on 2024 at this time, but I can share some qualitative aspects as we look ahead to free cash flow for 2024. On the plus side, we continue to focus the team on an improving EBITDA profile and that's a big focus of the team. With respect to CapEx, we said a couple of times here in the past that we expect to run at $17 billion to $17.5 billion for 2024, which is back to a business as usual level of spend that you've seen from us. And then we also strive to make continued improvements in working capital. And then offsetting that, we expect higher interest costs from both in the rate environment and the reduction in capitalized interest due to the early clearing of the C-band spectrum. And then with taxes, as you know, under current legislation, taxes are going to be pressured by the continued phase out of bonus depreciation and we'll see how that plays out. And, so heading into 2024, we continue to focus on strong free cash flow generation and opportunities for meaningful debt reduction. And we don't see any obstacles of Delevering. Thanks. Okay guys.

Operator:

The next question comes from Simon Flannery of Morgan Stanley. Your line is open sir.

Hans Vestberg :

Simon, I can start with fixed wireless access. As you can see, we continue on that rhythm with the 354, 000 every quarter. The additional C-band we got, used a couple of weeks ago we initially go straight to augmenting our urban areas. We’ve already had the sites and then in the early part of next year, we will also start deploying that in suburban and rural areas. And of course, that's an even greater opportunity for us because there are more underserved markets and our fixed wireless actually come extremely quickly into those markets. So that's will just fortify our situation and how we want to roll this out. We have a target of $4 million to $5 million subscribers by 2025. We keep that of course, we have dimension on network for way more and the team, of course, have a have the internal targets that were set by me. But right now, there's nothing else that we want to deliver this target as well to the market. We always want to deliver what we tell the market and we're going to do that. And then we have a conversation about that when we've passed it.

Simon Flannery:

Right. Thanks a lot.

Operator:

The next question comes from John Hodulik of UBS. Your line is open sir.

Hans Vestberg :

Thanks, John. on the upgrade, as we're seeing now for a couple of quarters, when we started our segmented approach on the consumer side, where we actually tried to meet our customers in different segments with the right offerings. That of course, have driven a lower upgrade rate. But as we are not doing a peanut butter spread sort of that everybody gets everything. So we're really trying to see that we have the right offer for our customer and what is giving me confidence is that our gross adds just continued to grow for us. So we have the right offering in the market together with myPlan. Of course, fourth quarter is always a little bit higher on upgrades because that's normally a seasonality. But in general, I see that our model is working and this is both helping our customers with the right offerings. But not only that is helping us with the bottom-line and the cash flow generation that we're very focused here at Verizon. And then on the C-band, we see the same things as we have discussed before. We see lower churn where we deploy C-band. We see better step ups in those regions. And then on top of it, we increased fixed wireless access. So there's no difference on that. So I think we – same, same and that's why we're so excited by C-band continue to roll out and I have gotten hold of old C-band here, just a couple of weeks ago.

Brady Connor :

Brad we are ready for the next question.

Brett Feldman:

Thanks, for taking the question. Coming back to service revenue growth is we're looking ahead into next year and maybe digging a little bit into ARPU drivers, I know you don't report postpaid, phone ARPU, but it's clearly an important component of what drives your ARPA. And I was hoping you could give us some insight into how you're thinking about those drivers next year? So for example, are you still - you still see opportunity to make further pricing adjustments in the base? Could you maybe give us some insight into what the mix is looking like? And are you continuing to see the highest tiered plans being among the most popular? And then, are there any headwinds that might be emerging in the ARPU dynamic we need to be taking account for? Thank you.

Tony Skiadas :

And then, Brett, on the - on your service revenue question, just some qualitative thoughts for you. On the plus side, I would say, look the pricing actions we took this year, obviously have a tailwind in the fourth quarter and carry over into next year. So we continue to see momentum there. Also, as I mentioned earlier, we do expect an improving volume profile in the consumer business. So that's something that the team is very focused on. Fixed wireless access continues to scale. So, as I mentioned earlier, another 384,000 net adds, even as Hans said, and taking away the discount as well. So the momentum is strong there. And continued increase premium mix with myPlan. So myPlan is seeing roughly 70% premium mix and we're very pleased with the progress there. And we're also seeing some of the headwinds from the promo amortization starting to ease a little bit, that's starting to flatten out, which is good news. And also a function of all the discipline that we've had this year. And then offsetting that, as we've mentioned in the prepared remarks, prepaid continues to be a headwind the in the near term as we continue to work to improve the business and that's still ongoing. So those are the puts and takes in terms of service revenue.

Brady Connor :

Brad, we are ready for the next question.

Michael Rollins:

Thanks and good morning. I'm curious if you can unpack the ways in which Verizon will look to achieve its cost-cutting targets through 2025, as well, as how much of those benefits could come through in 2024 versus 2025? And then just separately on prepaid, just an update would be great on the integration of TracFone? And how Verizon is thinking about the opportunities and timing of potentially taking some of those prepaid customers and migrating them over to your postpaid base. Thanks.

Tony Skiadas :

Sure. Thanks. And Mike, just a couple of other additional points that Hans mentioned. So, we're on track to deliver $2 billion to $3 billion as Hans said. $200 million to $300 million of that will come this year in 2023 in EBITDA and that was already contemplated in the guide. Hans mentioned a lot of the initiatives. The other item I would mention is we are being very disciplined in business wireline by deemphasizing low margin deals. So that's something that the team is very, very focused on, as well. We're not going to give cost targets for ‘24 at this time, but we feel good that we have a good foundation that are driving EBITDA improvements and you saw it in the quarter with both sequential and year-over-year improvements in EBITDA that's going to set the foundation for improving EBITDA profile in 2024.

Michael Rollins:

Thanks.

Operator:

The next question comes from Bryan Kraft of Deutsche Bank. Your line is open, sir.

Hans Vestberg :

Hi, Bryan. And the first, yeah, our assumption has changed on fixed wireless access because our technology has improved more than we thought from the beginning. That means that we can take on even more capacity. And we're only on the first inning on the software improvements, and our optimization of the network. I think Joe and his team is doing a fantastic job with it. Customers are using it on the consumer side, equally much as on the Fios. So that there's no different on usage. So I think we have a great path forward with technology and we are not seeing everything we can do still with the fixed wireless access when it comes to software development, radio improvements, et cetera. So I'm - I have no hesitation over the assumption with that made. They are actually having better assumptions today. When it comes to millimeter wave, that is playing a vital role for us for many reasons. First of all, it takes in all high density areas. They take the majority of the capacity. And that's very important for several reasons. I unleashed a mid-band spectrum in order to have better performance on the street, but also in fixed wireless access. So millimeter wave will continue to play a very vital role. As we have said several times, we built very few - very quickly in all major places. And now we're sort of augmenting where we see a lot of traffic. On top of that, of course, we see opportunities for using our millimeter wave also for MDUs over the time to see that we address that market with fixed wireless access. So, all in all, we still have a lot of technology evolution to see that we can serve even more customers with even better performance and more capacity. So, I'm very happy and as you've seen on fixed wireless access, our MPS scores is all out to the shot. I mean the customers loves it. It is easy. It's quick to deploy itself to install. So I think we hit it clearly with this product and we want to push it with our team and see the customer gets the right products.

Brady Connor :

Brad, we are ready for the next question.

Frank Louthan:

Great. Thank you very much. Quick question. I apologize if this was addressed. Can you quantify how much of the interest expense going from capitalization to the income statement from C-band? And then secondly, where are you as far as being able to utilize the fixed wireless to help reduce cost or type two circuits and that's sort of thing? Thank you.

Tony Skiadas :

And then, Frank on the on the capitalized interest question, in the quarter, we saw about $0.03 of pressure from capitalized interest from the time we got the licenses. And then, for the fourth quarter, we estimate $0.03 to $0.04 of pressure from capitalized interest. So hope that helps.

Brady Connor :

Brad, we are ready for the next question.

David Barden:

Hey guys. Thanks for taking the question. Two if I could. Just the first one, Hans, at the very beginning of the call, you said that you were being really successful at three things, mobility, broadband, and private networks. And we haven't really heard a lot about what you're doing in private networks. What your goals are, what you're successes has been. So if you could elaborate a little bit on what that is and why it's one of the big three things that we should care about Verizon being good at it will be super helpful. And then the second is maybe this is for Tony. Just, I think we just touched on a little bit, but the, the success that you guys have been having in the postpaid phone subscriber net adds in business, could you elaborate a little bit on where that's coming from? Like, given that the consumer isn't growing, how is it that the business continues to be so successful quarter-after-quarter-after-quarter and should we assume that that just can continue? Thank you so much.

Tony Skiadas :

Sure. So, Dave, a couple things. We're pleased again with the strong results from Kyle and the team. We saw a great phone net adds in the quarter, 151,000 and over 430,000 year-to-date. And we saw healthy demand across the board. That would be enterprise public sector and small medium biz. And that performance is in a very uncertain environment and as Hans said, these strong results validate that the businesses continue to trust the Verizon network even during uncertain economic times. And, we do see certain pressures in certain sectors and we're certainly not immune to it. But we're not seeing anything significant and from a competitive standpoint, I would tell you that we're being very disciplined and we're not going to chase the bad deals that are that are better unprofitable. The other thing I would mention is FWA volumes also continue at a strong pace and in business. And we had a hundred and 132,000 net adds in the third quarter and over 400,000 year-to-date. So we have great momentum heading into the fourth quarter here and as we set up for next year.

Hans Vestberg :

I'm very happy with the choices. I think, as always, when you make a change and we did quite a big change. And I think six out of the eight seats in the leadership team changed in one swoop. I think we had good alignment from the first week. What we need to do, all the way from Kyle, Tony and Sam, Pat which was very important and Joe which is sort of the four operational units. And you can see the results right now. I mean the guys are executing extremely well. So I'm happy with it. I want to push them even harder but these guys are really good. They take hard pressure and they deliver on it. So, I'm happy on the choices and the team is doing well.

Brady Connor :

Brad, we are ready for the next question.

Craig Moffett :

Hi, thank you. Maybe starting with Tony, Tony can you talk about what contribution you're getting from your wholesale wireless revenue that the cable industry scales? And then, could you talk about what benefits that's having in terms of margin accretion and what have you? And then, I wonder if you just - how we should think about potential risk to that revenue stream as ComCast and Charter start to roll out strand on the small cells to potentially offload more of that traffic onto their own networks.

Brady Connor :

All right. Thanks Craig. Brad we're ready for the next question.

Kannan Venkateshwar:

Thank you. So maybe Hans, you in terms of fixed wireless business, when you think about the capacity that you have with C-band and you've talked a couple of times about momentum heading into next year, as you expand into other footprints, is there any kind of a goal post that you have in terms of the kind of growth here - growth aspirations that you have to balance it with a capacity use that the network may have. So the 350, 400, kind of a number, does it go to 500 or is there some kind of a framework you guys are thinking about in terms of your aspiration there? Thanks.

Kannan Venkateshwar:

Great. Thank you.

Operator:

The next question comes from Greg Williams of TD Cowen. Your line is open.

Hans Vestberg :

Okay. On the, KPIs, you are correct and we rollout the C-bandwidth we have better retention and better step-ups. And of course, we also expect that we can take share. I think in the consumer side and the business in both sides, we see opportunities as we come with the fixed files access to this market and with the C-band. So there is share gains. We are planning to do here and our teams are very focused on it going forward. The second question was around fiber. In our ILEC, I guess and we're not holding back on that. I mean, first of all, you saw how great we're doing this quarter with Fios. We'll continue to invest in Fios and see we have our customers. Outside the Fios, our primary strategy is to build on a One Fiber and the fix wireless access to capture the market before anybody else is even the remotely there. That's what we do. Then over time, as I said hundred times, I got to have optionality if I would have another access technology over time. But that's not in the chords right now. We have all the capacity and the technology out in the fields right now and the quicker we can come out, the quicker we can meet the demand that’s out there and meeting the customer that wants our broadband, which is a lot of them.

Brady Connor :

Hey Brad, we have time for one more question, please.

Tim Horan:

Thanks, guys. Hans, stepping back a second, can you talk about the ability for yourselves and industry demand of how all the investments in the last few years both accelerating growth in free cash flow, how important is pricing here because inflations were only 4%, GDP is growing about 5%, inflation is probably above 4% again next year or we are not really seeing much revenue growth. So, what you think needs to be done for the industry to kind of monetize all the investments? Thanks.

Tim Horan:

And related to that, I know you want to get that EBITDA back to pre-auction levels. Do you have a kind of a time frame on that and just remind us what - how do you do that?

Tim Horan:

Thank you.

Hans Vestberg :

Before we close, I want to take a moment to address the humanitarian crisis in Israel and Palestine. That has continued to escalate over the past few weeks. At Verizon we stand against terrorism in all its forms and condemn the violence that has claimed the lives of so many innocent civilians. The Verizon Foundation has committed a $2 million donation to organizations supporting relief efforts. And we continue to waive international long distance charges for calls and text from US to the region. My hope is that we will move to a peaceful resolution as soon as possible. In the meantime, we need to come together as a society and lean into what connects us, not what divides us.

Brady Connor:

Thanks, Brad. Good morning, everyone, and welcome to our second quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I’d like to draw your attention to our Safe Harbor statement which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our Investor Relations website, a detailed review of our second quarter results. You will find additional details in the earnings materials on our Investor Relations website. With that, I'll now turn the call over to Hans.

Tony Skiadas:

Thanks, Hans, and good morning. Our results for the second quarter demonstrate our progress towards our three priorities of growing wireless service revenue, delivering healthy consolidated adjusted EBITDA, and increasing free cash flow. Our focus on execution is working, and we remain on track to meet our financial guidance for 2023. We are happy with our progress, but we have more work to do. We are focused on continuing to improve our performance, while remaining financially disciplined. In the second quarter, our consumer segment demonstrated better operating results, both sequentially and year-over-year in postpaid phone net adds. Additionally, we experienced continued strong performance within our business segment, both in terms of mobility and FWA subscriber growth. The results reflect the benefits of our ongoing C-band deployment and improved go-to-market execution. Consumer postpaid phone net losses totaled 136,000 for the quarter compared to 215,000 net losses in the second quarter of 2022. Consumer postpaid phone gross adds were strong once again, up 6.9% year-over-year, driven by new-to-Verizon gross adds, which increased approximately 19% over the prior year period. We also saw notable growth in consumer postpaid ARPA, which was up 6.2% year-over-year. The recent launch of myPlan reflects a more segmented and targeted approach. While it's still early, myPlan is driving a significantly higher premium mix, with nearly 70% of myPlan customers taking the Unlimited Plus option. We are also encouraged by the step activity we are seeing. Consumer postpaid phone churn for the quarter was 0.76%, up one basis point compared with the same period last year. Higher involuntary churn drove the year-over-year increase, offsetting a modest improvement in voluntary churn. Our involuntary churn rates remain at pre-pandemic levels and were flat for the third consecutive quarter. It is important to note our performance in existing C-band markets. In the 46 markets where we initially deployed C-band, postpaid phone gross add growth was more than 100 basis points higher in the quarter than in non C-band markets. Additionally, phone churn was four basis points lower in C-band markets, and our premium mix in C-band markets was 11 percentage points higher. Let's now look at our business results. Verizon Business once again delivered solid performance and continues to expand on its industry-leading wireless market share. Demand continues to be strong in all three customer groups, resulting in 144,000 phone net adds for the second quarter, compared to 227,000 for the same period last year, which benefited from some large deals. As Hans mentioned, this marks the eighth consecutive quarter where we have delivered over 125,000 business phone net adds. We continue to win high value business based on the strength of our network performance and value proposition. Notably, we had a recent government contract win where we took share from two of our competitors at attractive ARPUs. Moving on to broadband, we maintained our strong performance, with 418,000 total broadband net additions in the second quarter. In the past four quarters, we've added more than 1.6 million broadband subscribers, growing our total broadband subscriber base by more than 21% during that time. Growth in FWA remained healthy, with 384,000 net adds, up from 256,000 in the prior year period. We now have nearly 2.3 million customers on our FWA product, and we expect growth to continue at a fairly similar pace in the third quarter. On the Fios side, internet net adds for the second quarter were 54,000, up from 36,000 in the second quarter of last year. Despite continued softness in household move activity, gross adds rose year-over-year, and our retention levels continue to be strong. Our value market team continues to take steps to address some of the softness we saw in the first half of the year. Prepaid net losses totaled 304,000 in the second quarter. Our year-to-date net add performance should represent the low point as we continue to make progress integrating TracFone, while taking actions to better position us for growth, including scaling our Visible and Total by Verizon brands. As Hans mentioned, we expect to see sequential improvements beginning in the third quarter. Let's now look at our financials, starting with consolidated revenue for the quarter, which was $32.6 billion, down 3.5% year-over-year. The decline can be attributed to reduced wireless equipment revenue, which was nearly 21% lower than the prior year, as postpaid phone upgrade activity declined 34% versus the same period last year. Service and other revenue grew 0.8%, driven by wireless service revenue growth. Total wireless service revenue was $19.1 billion, up 3.8% year-over-year and more than $200 million sequentially. In the second quarter, we continued to benefit from pricing actions, including a recent change to our Verizon Mobile Protect offering. Additionally, the larger allocation of our administrative and telco recovery fees from other revenue into wireless service revenue, and growth in fixed wireless access, drove revenue improvements. These benefits were partially offset by continued pressure from the amortization of handset promotions. We are on track to deliver our wireless service revenue guidance for the year. We continue to assess opportunities to take targeted pricing actions to better monetize our products and services as we deliver great value for our customers. For example, we recently announced an increase in our FWA bundle pricing for new customers, which we expect will provide service revenue benefits in the second half of the year. Additionally, we expect less pressure from the amortization and promotional cost in the second half of the year, given the softer upgrade environment and our disciplined approach to promotional spending. Consolidated adjusted EBITDA in the quarter was $12 billion, up 0.8% compared to the prior year. Adjusted EBITDA margin improved by 160 basis points over the prior year, primarily driven by lower consumer postpaid upgrade volumes, and improved service revenue. These benefits were partially offset by higher marketing expenses in the quarter related to the myPlan launch, as well as a $194 million increase in bad debt year-over-year. Bad debt was relatively flat from the prior quarter, and payment trends remained consistent with recent quarters and pre-pandemic levels. Operating expenses, excluding depreciation and amortization and special items, were down 5.9% year-over-year, primarily due to lower cost of equipment from reduced upgrade volumes. As Hans mentioned, we continue to execute on our cost savings program, including through initiatives within our Verizon Global Services organization. During the quarter, we took actions to rationalize our workforce as we continue to see benefits from rationalizing certain legacy wireline products. We are on track to deliver $200 million to $300 million of savings this year from our transformation efforts, and continue to make progress towards achieving our goal of $2 billion to $3 billion of annual cost savings by 2025. Cashflow from operating activities for the second quarter was $9.7 billion, and for the first half of the year totaled $18 billion, compared to $17.7 billion in the prior year period. The increase continues to be related to working capital improvements associated with lower inventory levels and fewer upgrades, which were offset in part by higher cash income taxes and interest expense. CapEx for the quarter came in at $4.1 billion, which reflects the completion of our $10 billion accelerated C-Band program. Capital spending for the first half of the year totaled $10.1 billion, which was over $400 million less than last year. We continue to expect 2023 capital spending to be within our guidance of $18.25 billion to $19.25 billion. Our peak capital spend is behind us, and we are now at a business-as-usual run rate for CapEx, which we expect will continue into 2024. The net result of cashflow from operations and capital spending is free cashflow for the quarter of $5.6 billion. Free cashflow for the first half of the year is $8 billion, a nearly $800 million improvement from the previous year, driven by a combination lower CapEx spend compared to the prior year, and operating cashflow benefits previously mentioned. While we do not normally guideline free cash flow, our strong results give us a clear line of sight to more than $17 billion of free cash flow for the full year. Net unsecured debt at the end of the quarter was $126.6 billion, an improvement of $3.2 billion compared to the end of the previous quarter, and $4.1 billion lower year-over-year. We ended the quarter with $4.8 billion of cash on hand. We are well positioned with respect to our unsecured debt maturities, with no remaining obligations for the rest of the year. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.6 times as of the end of the second quarter, a 0.1 time improvement both sequentially and year-over-year. We continue to monitor the current interest rate environment closely given recent comments from the Federal Reserve on planned rate increases later in the year. As previously stated, we expect higher interest expense to impact our full year earnings per share by $0.25 to $0.30, and there's no change to that view. Our strong second quarter results support our capital allocation priorities, which remain unchanged. Before I hand the call back to Hans, I'd like to address the recent media reports on lead sheath cables in our network. Here is what we currently know. We still have some legacy lead sheath cable in our copper network. As a result of the age of this infrastructure and the history of the industry, records are incomplete as to exactly how much of the cable at our network has led sheathing. However, to give you a sense of the scale of the infrastructure we are talking about, our copper network is comprised of less than 540,000 miles of cable, roughly half of which is aerial, and lead sheath cable makes up a small percentage of our copper network. This number excludes the network elements previously owned by MCI and XO communications because we are still reviewing the historical records of those companies. When not disturbed, the likelihood of exposure to lead from lead sheath cables is low. In addition, because the lead sheath cable was used as a feeder and distribution cable and does not run into individual homes or apartments, it is generally in locations that minimize the potential for public contact. We are working with a third party expert to conduct our own testing at our sites that were identified by the media. We will not have the results of our testing for several weeks. When we have the results of our testing, we will work closely with our industry and others to address any concerns and issues. Now, I think it's important to address a question we've received from a lot of investors, which is about the process for and potential cost of removal of the lead sheath cable in our network. Given where we are in this process, it is far too soon to make any projection on what the potential financial impact might be to the company. There are a number of unknowns in this area, including whether there is a health risk presented by undisturbed lead sheath cable, and if there is a risk, how that risk should be addressed. As a result, we do not believe there's a meaningful way to estimate any potential cost to the company or that any such estimate would even be useful. We won't be able to provide any additional color during the Q&A session. As we have more information we can share on the topic, we will certainly do that. I will now turn the call back to Hans for his closing thoughts before we open it up to your questions.

Brady Connor:

Okay. Thanks, Hans. Brad, we’re ready to take the first question.

John Hodulik:

Great. Thanks. Good morning, guys. Looks like a nice beat on the consumer side, really driven by the postpaid ARPA growth of about 6%. Could you guys sort of pull that apart a little bit and maybe talk about the sustainability of that and the service revenue growth you saw as we head into the second half? I mean, I think you've got some - you lapsed some price increases, but you've got some other price increases coming through and some of the promotional stuff rolling off. And then maybe just quickly on the lead, obviously you guys can't quantify it, but when you guys say low exposure of the 540,000 miles of copper, is that single-digit? Can you guys tighten up that number for us a little bit? That'd be great. Thanks.

Tony Skiadas:

Yes, thanks, Hans. Good morning, John. So, on the service revenue, we're very confident in the guide. You mentioned tough comps that we face in the second half. When you think about the second half of the year, let me unpack some of the drivers for you. As you know, we executed a number of targeted pricing actions between the price ups on the Legacy Unlimited plans that we did earlier in the quarter, as well as most recently changes to our handset insurance program and price changes on FWA bundles. Secondly, we had the introduction of myPlan back in May. That's helped with premium mix and you heard that we're roughly 70% taking the Unlimited Plus plan. As Hans mentioned, we see an increase in contribution from fixed wireless access. We have 2.3 million subs in the base, and we have great momentum on FWA. And then fourth, we see continued improvements in year-over-year consumer postpaid volumes, and you saw that in the quarter. And then lastly, when you think about the promo amortization, the revenue impact from promotions and the promo amortization has decelerated in recent quarters, and that's - it's basically a function of our disciplined approach to promotions and retention. So, when you put that all together, we're very confident that all the initiatives here will continue to drive the meaningful revenue growth in the second half.

Tony Skiadas:

Yes, and to add on to that, John, we're still reviewing the records, and we mentioned that we're still reviewing the historical records of the former MCI and XO network. So, that work is still ongoing as well. So, we still have more work to do there, and as we learn more, we'll keep you updated.

Brady Connor:

Yes. Thanks, John. Brad, we're ready for the next question.

Brett Feldman:

Thanks for taking the question, and I think I'll follow up on consumer volumes you alluded to in responding to John. It was great to see the consumer phone losses improve year-over-year. But I know your ambition is to do better than that. How do you think about path, getting back to net growth in consumer postpaid phones? Do you think you're going to need to take further actions in terms of the product mix or pricing or even any additional internal adjustments, or do you think you have the pieces in place and it's really just a matter of driving better execution against that framework? Thank you.

Brett Feldman:

And how do we think about a timeline for getting to sustainably positive net adds in consumer? Is that something that would be a reasonable expectation once you have C-band fully deployed?

Brett Feldman:

All right, thank you.

Operator:

The next question comes from Simon Flannery of Morgan Stanley. Your line is open, sir.

Hans Vestberg:

Thank you, Simon. When it comes to the C-band, I said we’re ahead of the plan. As soon as we get hold of the next tranche of spectrum, the team is ready to continue to deploy that. That's going to give us both more capacity, but of course more coverage as well. So, it gives us both. And as you have seen the numbers we talk about here, as soon as we deploy C-band, we get better uptake from our wireless customers. And of course, we'll open up fixed wireless access. So, that should be positive over time for us. And when it comes to this lingering question about capacity, we don't have any capacity problems. I mean, the guys are doing an enormously good job, as always when it comes to Verizon and capacity network planning. Joe and the team are on it all the time and seeing that we're doing the right for our customers. And remember, we are building a multipurpose network. That means that we have one radio that serve multiple opportunities, wireless, fixed wireless access, in some cases private networks. So, all that is in one, and that's efficiency and the scale we're bringing right now, which we expected when we start with 5G and the C-band to see that we get the leverage model over time. But of course, it's going to roll out over the next year. So, I’m confident that this will create more opportunities for us now when we get hold of the next tranche of the C-band spectrum.

Simon Flannery:

Great. Thanks so much.

Operator:

The next the next question comes Phil Cusick of JPMorgan. Your line is open, sir.

Hans Vestberg:

I’ll start with the second question and Tony can come back on the first. On the private wireless, what we have found out during the work we've been doing is that private 5G networks is something really, really valuable for enterprises and SMBs. And the main reason is that the capacity on it, the speed and the security, it basically starts as a Wi-Fi replacement on the license spectrum, and then you start adding onto it. It usually start with one factory, and if you see that it’s working there, they do it in all factories. We have a growing list of new customers coming in, in the first phase. I would say this is a new business for us that again, is building on the same investment, the same Verizon Intelligent Edge network. I don't think we should expect that it's a billion-dollar business this year, but that definitely over time, this is a very important lever for Kyle and his team for growth in the service revenue and actually doing even better with enterprises. So, it's going to take some time, but I’m really pleased what I've seen in the last couple of quarters how this is turning out. And I would say we have now an ecosystem with devices, with radio-based stations, with integrators and all of that, which we haven't had before. So, I'm more optimistic than a long time that private networks will be something. And as you know, I mean, we were way ahead of anybody else on this field, and that's why I feel really confident we will take more than our fair share.

Phil Cusick:

Thanks, Tony.

Operator:

The next question comes from Frank Louthan of Raymond James. Your line is open, sir.

Hans Vestberg:

On the broadband side, I think I got the question like that, the correlation between the fixed wireless access and the Fios. I mean, let me say that, I mean, on the fixed wild access right now, we are growing that base, of course, mainly outside the (indiscernible) because that's just how it is because the Fios is so strong. So, we're doing great on the Fios business. And as you've seen, even though it's a softer housing movement season than before, we're doing great. I mean, over 50,000 again on Fios. So, Fios is doing really well. And then of course we have a portion of converged customers that is now growing. It's not growing that to come to European levels or something, but it's growing. The good thing for us is we have owners’ economics on everything, fixed wireless access, wireless, Fios. We have one network with our own fiber. And that, of course, gives us opportunity to meet customer demands if they want convergence or not, and that nobody else has in the industry. So, really pleased with the development of broadband for us. We outlined this as one of the most important 5G innovations we've done. We add substantial new customers there. So, now this is a great opportunity there. And as you saw right now, we continue doing as we've done. I mean, we have now 2.3 billion customers on fixed wireless access. We can now start with different tiers, different pricings, so we can meet customer demands that have different requirements. And that's just good for us, but it's also really good for our customers because they can choose between different models depending on what needs to have.

Hans Vestberg:

And then you had a question on upgrades, and as you've seen in promos, that is clearly down in the second quarter and the first quarter as well. There are many reasons for it. Some are, of course, that we are much more financially disciplined. That's very important. But it also has haven't been any major new devices coming out. It'll probably come one in the second half. It usually comes. So, we're going to see that. But I don't foresee that we will come back to the levels we've seen before from a point of view of Verizon. We think that we are going to be disciplined. We're going to offer devices and promos and upgrades where there's the best for the segment and for the customer, but we'll not come back to the levels that we saw before.

Brady Connor:

Yes, thanks, Frank. Brad, we're ready for the next question.

David Barden:

Hey, guys, thanks for taking the questions. So, I wanted to come back to the relationship between Verizon and the cable industry. Before the lead, this was the big issue. And there were two pillars to the idea behind the relationship between Verizon and the cable industry. One was that somehow, Verizon had negotiated a deal with the cable industry that they would guarantee to make money no matter how much data cable consumers took. And the second was that that deal would never end. It was going to be forever. And so, I feel like the messaging on that has started to change from Verizon a little bit, and that maybe that the idea that cable industry's guaranteed to make money in the relationship between Verizon and cable, regardless of data consumption, that that's not true, and that this deal isn't permanent, that it could change at some future time, even though the DOJ - obviously, you need to have some deal, but it doesn't have to be this deal. And I was wondering if you could kind of just address that for us right now. Thank you,

David Barden:

Thank you.

Operator:

The next question comes from Michael Rollins of Citi. Your line is open, sir.

Hans Vestberg:

Hey, Mike, thank you for the question. On the question about different models over time, how we can charge for 5G, I think we find a good model within myPlan right now, with different type of network options. Then you can take your perks. All of it is accretive for us. You should just see the first sort of launch here as the first time we come out with a platform. We see multiple opportunities, how you can sort of diverse that one in different ways to meet different customer demand. So, you will probably see more of that going forward. I will do that. So, clearly, very important to us that we continue to meet our customers with new plans and things like that. But now we have a great base that is myPlan. On the CapEx side, I think we have gone over sort of a fairly long hump here, coming from Verizon Intelligent Edge network, investing in fiber, investing to in all the parts on millimeter wave, then coming into the hump of C-band. Now, we’re coming into the BAU. As far as we can see right now is BAU is around 17 to 17.5, and that's going to see that we can deploy the C-band, getting all the benefits we talked about. 4G is coming down. Fiber is more success-based. So, there's a lot of things happening in there, but we're really confident that we can be on those levels and our team is really doing a great job.

Operator:

The next question comes from Craig Moffett of MoffettNathanson. You may go ahead, sir.

Hans Vestberg:

Thank you, Craig. I’ll start with the fixed wireless access question because I think that is an important one, and the lead, we will hear from Tony on that one. On the fixed wireless access, you are right. I mean, we are now running on a fairly high level, adding a broadband subscriber quota. Remember, we have defined, we are roughly in, I would say, a little bit over 70 of the PEAs of C-band so far out of 402. So, that, of course, is how many OFS are open for sales we can do right now. So, that is a little bit. The next step going to be the next tranche coming in. And I said, we're well ahead to the 4 million to 5 million. The team is doing a great job. You also saw that we now are doing some great work on how we can address MDUs in a very efficient way. We're in the beginning of that. So, all in all, I think that fixed wireless access and how we’re managing our network is going great. And of course, as a ambitious leader as I am, I expect that we can do better, of course. But right now, that's the forecast we have to 4 million to 5 million, and we're really doing well. And this customer satisfaction on fixed wireless access is so good. It's so simple. You install it yourself, you get broadband immediately. So, we are just meeting a consumer demand that no one else is doing, basically. So, I'm really pleased with the product. We talked about this being one of the most important 5G applications, and now you can see what it means to us and how important it's going to be over time.

Brady Connor:

Yes. Thanks, Craig. Brad, we’re ready for the next question.

Bryan Kraft:

Hi, good morning. I want to ask too, if I could, I guess first just on the lead issue, I was wondering if you thought this might lead to an acceleration in copper network retirements and therefore an accelerated reduction in fixed costs for legacy networks. It seems like an opportunity in cases where communities might want to not have lead cable in their communities, even if it isn't actually shedding any lead. And then secondly, I just had a follow up to Simon's question earlier. Can you talk about how the remaining C-band deployments will affect the fixed wireless opportunity in rural areas? Specifically, how much of an expansion in the rural footprint will that represent versus the available footprint today for fixed wireless? And would that include a lot of areas that aren't served by anything today except for copper infrastructure? So, kind of the true rural areas. Thank you.

Bryan Kraft:

Great. Thank you very much, Hans.

Operator:

The next question comes from Tim Horan of Oppenheimer. Your line is open, sir.

Hans Vestberg:

There were many questions in all there. So, let me start with the change of discounts that we did on fixed wireless access. Again, we have a premium product. We have different type of optionalities for our customers in order to pick and choose what the best tier is or what the best service is. So, we think that this is just natural when you have passed over 2 million subscribers on fixed wireless access. And I think - just think about when we started with Unlimited, you start with one plan, and then you start to work with different segmentation, because ultimately we are in a very, very big consumer business where so many differentiated customers that needs different type of services. So, just think about it as a very natural step for us in order to serve our customers in a good way. Then I hand it over to Tony for the next question.

Tim Horan:

And then on the worker lead exposure.

Brady Connor:

Yes. Thanks, Tim. Brad, we’re ready for the next question.

Peter Supino:

Hi. Thank you. I wanted to ask two questions, one on upgrade rates and the other on FWA. On upgrade rates, I wondered if you could discuss why they've fallen so much and whether it's sustainable, what the risks are to recent trend. And on FWA, just wonder if you could discuss the service price increase that we learned about this week. Thanks.

Peter Supino:

Thank you.

Operator:

The final question for today, we'll come from Walter Piecyk of LightShed. Your line is open, sir.

Operator:

Walter, please check the mute button on your phone.

Brady Connor:

We can hear you, Walt. Go.

Brady Connor:

Yes.

Hans Vestberg:

Yes, thank you. On the upgrade, I cannot - I don't know anything about any launch or the product, how exciting it's going to be, but ultimate, that usage usually drive more upgrades. So, let's see what's going to happen this time and when it comes out. But we're always excited to see Apple coming out with a new phone. Hopefully, they're coming in this one. I cannot reveal what they are doing, but clearly, we're excited for that. On the CapEx, yes, you should talk to us. We know more about this than other companies. I would say we have a really good sustainable level of this. Densification is part of our strategy already. So, and many of the things that we already are deploying on C-band, we deploy sort of for the full spectrum already from the beginning. Then we turn on when we get those tranches. So, there's a lot of things that my team has done over years in order to be as efficient as possible with CapEx. That's why I feel really good on our sort of BAU around 17 to 17.5. I feel really good about that because we go through the extremely detail. So, we feel confident.

Brady Connor:

Yes. Thanks, Walt. Brad, that was all the time we had for today.

Brady Connor:

Thanks, Brad. Good morning, everyone, and welcome to our first quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg; as well as our current Chief Financial Officer, Matt Ellis and Chief Financial Officer designate, Tony Skiadas. Before we begin, I would like to draw your attention to our safe harbor statement which can be found on slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our Investor Relations website a detailed review of our first quarter results. Please note that, during the first quarter in order to better serve our customers we reorganized the customer groups within our business segment. We now report the following customer groups

Matt Ellis:

Thank you, Hans. And good morning. Our results for the first quarter reflect the steps we have taken to improve our performance. C-band and the investments in our network are having a positive benefit on customer and overall network experiences. And as Hans mentioned, we are seeing a direct benefit around fixed wireless and phone gross adds among other metrics, where we operate C-band but more work remains to be done. Taking a look at operating results of the first quarter, let's start with consumer postpaid phones, which had $263,000 net losses for the quarter compared to $292,000 net losses for the prior year period. Consumer postpaid phone gross adds was strong across the quarter, up over 11% year-over-year continuing the momentum from the second half of last year. Our efforts around the segmentation of our base and our more targeted go-to-market approach and offerings to those different customer groups have been key drivers behind our improved gross add performance. Consumer postpaid phone churn for the quarter was 0.84%, up 7 basis points compared to the same period last year. We are now seeing a return of involuntary churn rates to pre-pandemic levels. As for voluntary churn, performance was mixed across the quarter starting off elevated as we saw normal holiday season activity extend into the early parts of the first quarter. But as the quarter progressed, we saw improvements in terms of year-over-year churn performance, exit in the quarter with voluntary churn rates in line with last year. While we have more work to do to improve consumer net adds, we are encouraged by the double-digit percentage improvement in gross adds combined with the improved churn level at the end of the first quarter. We entered the second quarter with significantly better momentum than a year ago. Moving on to the business segment. Verizon business again delivered strong results. We saw solid demand across our three customer groups and had 136,000 phone net adds for the first quarter compared to 256,000 for the same period last year. The year-over-year change was primarily due to a couple of large deals that contributed to our net adds results a year ago. Additionally, we saw an increase in churn due to business customers being more cautious around spending and the restructurings Hans noted in his remarks. Moving along to broadband on a consolidated basis, we delivered 437,000 net additions in the first quarter, the most in a decade. As expected, we saw another quarter of sequential growth in fixed wireless with 393,000 net adds, up from 379,000 in the prior quarter. Customer satisfaction remains high as evidenced by NPS scores, as well as encouraging churn trends around the more tenured cohorts of customers. On the fire side, Internet net adds for the first quarter was 67,000, up from 60,000 in the first quarter of last year. Customers continue to be attracted to our high-quality broadband products, which is reflected in the year-over-year increase in FiOS gross adds even in an environment with lower move volumes versus the prior year. FiOS retention rates continue to be strong with our best churn performance in more than five years. While the first quarter results were prepaid were below our expectations, we remain confident in the value market opportunities and the benefits of having a portfolio of assets and plans to satisfy the needs of all of our customers. You heard from Hans some of the actions we are taking to create long-term value. As expected in the short-term these actions are having a negative impact on our prepaid net ads. Together with the elevated disconnects and our SafeLink brand that Hans referenced, we expect pressure on prepaid net adds to increase in the second quarter before they abate later in the year. Moving on to the financials. Consolidated revenue for the quarter was $32.9 billion, down 1.9% year-over-year primarily due to equipment revenue being lower by 9% as well as continued declines in business wireline services. Wireless service revenue was $18.9 billion, up 3.0% year-over-year. As we discussed on our fourth quarter earnings call, results for the first quarter included a benefit of approximately 185 basis points associated with the large allocation of administrative and telco recovery fees from other revenue into wireless service revenue. This benefit was partially offset by the impact associated with the shutdown of our 3G network completed at the end of the fourth quarter. The shutdown resulted in the removal of approximately 1.1 million retail connections and the corresponding loss of revenue for the first quarter and beyond. We continue to see pressure on service revenue from the cost of promotions and the amortization impact in the first quarter. Additionally, we see pressure from prepaid revenue as a result of lower subscribers versus prior year. To help offset these pressures, we've recently implemented additional pricing actions across our business and consumer segments. We expect to see the benefits of these actions ramp across the second quarter as the business segment began billing customers closer to the end of the first quarter, while consumers started earlier this month. As a result of these combined pricing actions, we anticipate approximately $75 million of incremental quarterly revenue moving forward. Additionally, the consumer team is working to improve efficiencies around device promotions and credits that we expect to yield revenue benefits across the remainder of the year. We believe that the actions the teams are taking will grow the top line driving both EBITDA and cash flow. To complement this, the team expects to make additional progress across 2023 on the development and implementation of cost efficiency initiatives resulting in a meaningful savings run rate at the end of the year. During the first quarter, operating expenses excluding depreciation and amortization were down 2.4% year-over-year, primarily due to lower cost of equipment from reduced upgrade volume which helped to offset an increase in bad debt of approximately $200 million. Similar to involuntary churn rates, bad debt expense reflects the return of collections to pre-pandemic levels. While up year-over-year, bad debt expense is relatively consistent with the prior quarter. Cash flow from operating activities for the first quarter totaled $8.3 billion, compared to $6.8 billion in the prior year. This increase was primarily due to working capital improvements, driven by lower inventory levels, coupled with fewer upgrades and a modest improvement in customer payment patterns, despite the current macroeconomic conditions. CapEx for the quarter came in at $6.0 billion, which includes most of the remaining $1.75 billion of C-band-related spending in our guidance. With the conclusion of the program, we would expect a step down in the pacing of overall CapEx throughout the remainder of the year and continue to expect 2023 capital spending to be within our guidance of $18.25 billion to $19.25 billion. The net result of cash flow from operations and capital spending is free cash flow for the quarter of $2.3 billion, up $1.3 billion versus last year. Total unsecured debt for the quarter was $132.0 billion, an increase of $1.4 billion compared to the end of 2022 and $5.3 billion lower year-over-year. This resulted in net unsecured debt to adjusted EBITDA ratio of 2.7 times as of the end of the first quarter. A 0.1 times improvement compared to the first quarter of 2022 and flat from the prior quarter. We continue to have very low near-term unsecured debt maturities with the only maturity remaining in 2023 and being approximately $600 million due in the second quarter. I wanted to take a moment to acknowledge that this will be my last earnings call as Verizon's CFO. It has been a fulfilling 10 years at Verizon and a privilege to serve as CFO and I'm thankful to everyone that has made it such a rewarding experience. From our talented finance team to my fellow executive team members to all of you that have had the pleasure of getting to know, I want to say thank you. Verizon is in good hands with Tony as its CFO. I've worked closely with him since my first day at the company and I know he will always strive to drive the business forward in a way that puts Verizon and its shareholders first. I truly look forward to seeing what he and the entire Verizon team will achieve, as I chair them on from the sidelines, as an enthusiastic customer and shareholder. With that, I will now turn the call back to Hans for concluding comments, before we open up to your questions.

Brady Connor :

Thanks Hans. Brad, we're ready to take questions this morning.

John Hodulik:

Great. Good morning guys. And Matt thanks for all the help over the years and best of luck to you in the future. If I could just start with a couple of wireless questions. First on the gross side of the consumer side, obviously, some strength there. Any other detail you can give us in terms of what's driving the double-digit improvement. I think AT&T saw a decline. It just any change in the promotional posture or anything you're doing there? And then on the other side of the ledger churn, obviously, up a little bit year-over-year but it sounds like you're making some trends. Did you guys make any pricing changes on the consumer side in the first quarter? And just -- any comments around the sustainability of those improvements as we look forward throughout the year? Thanks.

Matt Ellis:

Thanks Hans. Good morning John. So on the churn side; certainly we saw improvement as the quarter went on. We had a lot of carryover from holiday level churn in January by the time we got to March we saw a much better momentum there. So that's the jump-off point as we go into second quarter. The pricing changes that you mentioned in your question really didn't go into effect until we came to the moving from Q1 to Q2, so that will be incremental to the results of the business here as we get into the rest of the year. So -- but as Hans said really a case of rebuilding from the momentum last year that was a year ago was not where we wanted it to be. At the midpoint of the year, we talked about taking actions and you see the results of those actions showing up in the results. And so the team is focused on continuing to build from there.

Brady Connor:

Thanks John. Brad, we’re ready for the next question.

Brett Feldman:

Yeah. Thanks for taking the question. I'd also like to reiterate my thanks to Matt for all his help over the years. My question is about fixed wireless. So when I look at the formal remarks document you put out, it looks like you still have just over 40 million households where that can get your fixed wireless service. The reason I bring it up is that would appear to be a fraction of the availability of your ultra-wideband network, which now covers over two-thirds of the population. So, I was wondering, how do we think about the game plan for expanding the distribution of the fixed wireless service now that you have significantly expanded the ultrabroadband -- ultra-wideband network? And how do we think about the cadence of quarterly fixed wireless and agent here? Is there still going to be a tailwind, or are we getting to a point where it's leveling now? Thank you.

Brett Feldman:

Thank you.

Operator:

The next question comes from Simon Flannery of Morgan Stanley. Your line is open.

Hans Vestberg:

Thank you, Simon. On the capacity, the guys is great. First of all were used on an initial trends of spectrum that we're using as I said, we were fixed wireless access on the ultra-wideband. We have so much more capacity coming. On top of that, all the new features you have with advanced 5G carrier action we have new devices coming out that can handle different spectrum. So there are so many more things, I feel really confident that, we will manage this capacity without any problems to the levels we have talked about and way beyond that. Then of course, as I talked with many of you guys, if it comes a moment that we have a community that have a lot of fixed will have over time other opportunities of sales splitting, et cetera. We are not even close to that today. So, I feel really good about, how the guys are managing the network and the opportunities we're building on our C-band here. As I said on the 4G fixed price actions, they were more opportunistic and selling when we see that we have capacity, but not sort of where we see that we have that full. We're not selling any more. But this expansion is right now on 5G Ultra Wideband. When it comes to the new team the big changes I've seen first of all, the first big change is that these guys are operational day one. I mean, both Kyle and Sampath straight into. If you look at Sampath, he's very much focused both on the customer dimension and seeing that we were improving the momentum we have right now on gross ads and churn and see that we actually improving through the year. But it also works with our offerings and our operations see that we're even stronger locally. Kyle on the other hand continuing the work of Sampath great momentum on Business Wireless as we continue this quarter private networks is really taking off. And then on top of that working with a wireline decline to see that we're taking out cost at the same time managing our contract and I don't think there's no one better than Kyle. He knows the network that more than anybody else. So I think that's the main focus and they've been really fast. And then of course the transitions between Tony and Matt is going extremely simple because these guys have worked together for 10 years. Tony is already into all the operations working very closely with the new leaders all the way from Joe that's running networking Kyle and Sampath. So I feel good. I feel really good and confident about it and it's very clear that the priorities there. So maybe, Tony you can say something about your priorities.

Simon Flannery:

Great. Thank you very much, and good luck.

Operator:

The next question is from Phil Cusick of JPMorgan. Your line is open, sir.

Hans Vestberg:

Okay. That was a lot of questions in one. I will start on the high level here on the – as we said earlier, the payment patterns are basically same as pre – we have a high-quality customer base. We see this is very healthy at the moment all the way. I will ask Matt to expand on that because looking backwards. And then when it comes to the question on prepaid or value segment yes, as we said in an opening here, I mean the negative number is I would say 100% coming from SafeLink, which is a government-subsidized brand. But there are other puts and takes there as well. I think that the visible brand is doing well. We're just ramping up total wireless which is an important piece of it not having all the things coming through there. So – and then of course we have the network migration still happening. So it's combination of a lot of things on the different brands. Our confidence is that we will improve that at the latter part of the year when some of these things are moving out. So that's a general comment maybe on the churn piece Matt, if you say something.

Phil Cusick:

Thanks. If I can just follow-up, was there any conversion from prepaid to postpaid, or I may have missed it?

Phil Cusick:

Great. Thanks, again, Matt.

Operator:

The next question comes from David Barden of Bank of America. Your line is open.

Hans Vestberg:

I will start and then I will toss the question on cost to Tony, and I will start with your second question. So the team, I think, we just need to divide the wireless question that you have. On the business side, I think, it's clear we're really strong. We are taking market share. The team is working through SMB government and large enterprises with our offerings where the network is the key contributor. Kyle will continue that work and the drumbeat we have there. On the consumer side, I think, that Sampath and I are 100% the line that we are in a momentum where we are now going to continue to improve our net additions on consumer, but most importantly is to grow in the service revenue. But of course, we want customers as well. But mostly important is growing the service revenue and expanding the cash flow and EBITDA. That's really the main focus for Sampath that were 100% the line on. But that also means that we need to take customers. And I think that we will continue to evolve our proposition and coming with new products. So I feel encouraged what I've seen so far and the thinking that Sampath and the team have, but we need to stay tuned for some of the new things coming, Tony?

David Barden:

Yes. Good. Thank you.

Operator:

The next question comes from Michael Rollins of Citi. Your line is open.

Hans Vestberg:

I can start. I mean we -- I can on a high level say, we continue to see the trend from our customer on postpaid going to unlimited and then go to unlimited premium. That continues to team is doing great work to see that we're doing that transition. And -- but we still have opportunities. We still have customer meter plans. We still have a portion or One Unlimited can go to unlimited premium. So we still see that as an important growth trajectory for our ARPU going forward. And then on the upgrades, I mean, we have talked about before, I mean, the market indication is that, it's going to be a little bit smaller switcher pool. That doesn't mean that we feel that we shouldn't be taking more fair share. We should definitely do that and continue to see that our customers that we have, we're expanding with them and then we're actually bringing new customers. So, I think, that's what we see right now. But, again, we have good momentum with all the offerings we have. I expect my consumer team come out with new offerings as well. So -- and continue that drum beat. Matt?

Michael Rollins:

Thanks. And if I could just throw one other out there. Just from a government program perspective, can you share how Verizon participates in ACP? And any new thoughts on potentially participating in the BEAD program?

Michael Rollins:

Thanks.

Operator:

The next question comes from Craig Moffett of MoffettNathanson. Your line is open, sir.

Hans Vestberg:

I will start here. First of all, what we see right now is we have a clear value proposition when we roll out the C-band. We have great, great uptake step-ups from our customers when they see the C-band. And you know better than anybody else how much of that spectrum we have right now, which is a very little bit. And with all that we get this momentum that's why I feel so good about it. And then as Matt said our churn a little bit elevated, but it's also improving in the quarter. So, we're working on that. And having a gross the gross add momentum at the same time. That tells you something about where we're going right now heading. And then we have Sampath in the role that really know operational execution. So, I think we have all that and we have the best network clearly and it's just going to get better. I mean with every measurement we do right now, we are clearly come out as number one. And the only thing I know for sure, we're going to extend that leadership with the C-band continue to roll out. So, our proposition is very clear continue to have the best network have a good proposition for our customer because you need to continue to do new offerings to the consumer group because their behaviors are changing as well. That's why we came with it +play. We're listening to customers to make it easier and all of that. And you haven't seen the loss from us. So, I think that we're building on all the strength we have and those strengths are even getting stronger.

Operator:

The next question comes from Tim Horan of Oppenheimer. Your line is open.

Hans Vestberg:

So, on the network you're absolutely right. We have on the C-band where you started to roll it out in the majority of the 60, 70 markets we're rolling out right now, we're using 60 megahertz. And you know we have an average 160 megahertz and in many places even up to 200 megahertz. So, it's an enormous difference when it comes from 60 to 160 megahertz, how much more capacity there is and on top of that of course we are adding new type of software features like carrier gauge [ph], the chip is getting better in devices both the handset and the fixed wire access devices. So, that's going to enhance the capacity for us. And as I said we were very focused to see that we materialize our business cases for the C-band all the way from consumer and business wireless to fixed wire access and mobile edge compute and private networks. So, we focus on the revenue generation of it and we'll continue to do so. But clearly it's going to be a step-up when we get the next tranche. And we're going to open more homes for households penetrated with fixed-line access and we're going to have much more markets covered by the C-band. So, we're just going to continue that journey as fast as we can.

Hans Vestberg:

I would say as we said from the beginning which many people doubted, we can use our existing 4G grid for the C-band. There is -- we don't need any new. However, we always build some new sites. We find new areas where there have been capacity constrained. We'll continue to do that as well. But mainly our C-band is using the 4G grid in order to see that the coverage is coming out there. And this year we're going to build a little bit more sizeable [ph] than we've normally done and the -- and our 4G spectrum, AWS and et cetera is covering 300 million pops a day. And that's where we be large band right now.

Brady Connor:

Yes. Great Tim. Thanks. Brad, we’re ready for the next question.

Kannan Venkateshwar:

Thank you. Hans, strategically you face a few choices, which I think are contradictory in some way and there is an attempt to grow gross adds, obviously, but SG&A is growing faster than revenues and so that puts pressure on margins. And it also comes with cash flow trade-offs. And we are trying to increase price to offset this margin impact but that comes with churn trade-offs. So ultimately when you think about your growth model or the growth have to double, what's the north star, is it unit growth? And are you willing to sacrifice margins and cash flow to get to that turnaround point, or is it margins? Even if it comes at the expense of unit growth, because it does feel like there is a choice that has to be made at some point. And I'm just wondering what the metric is that you're most focused on? Thanks.

Tony Skiadas:

To just add on to what Hans mentioned. I mean, we have to be disciplined and segmented in how we approach the market. Our focus is on volumes that drive profitable revenue growth. So the team is laser focused on that.

Operator:

The next question is from Peter Supino of Wolfe Research. Your line is open, sir.

Hans Vestberg:

That's clear. I mean and that's why our organization both on the consumer side and the business side and our network side it's more regional right now, because we're following the deployment of the network and doing marketing and outreach to our customers on fixed virus access that really want to have it when we open up. So clearly you're right there is also opportunity in the urban places where we get more capacity or more coverage and as it goes for the suburban and the rural.

Operator:

Your last question will come from Frank Louthan of Raymond James. Your line is open.

Hans Vestberg:

You need to repeat the first question. You're talking about SaaS revenues?

Hans Vestberg:

Yes. We don't disclose the SaaS revenue specifically. So yes.

Brady Connor:

Okay. And then what was the second part of the question, Frank?

Hans Vestberg:

In general, I think the churn characteristics all the new customers coming in is even better than before for many reasons as you said yourself. And then the type of customers I think Matt talked a little bit on the type of gross adds we're getting is new customers to Verizon, where they come in. And of course, we have opportunities to upgrade them, step up them and also having opportunities for our converged offerings. So really good quality of the customers coming in as Matt said, as well. So we feel really good about the growth momentum we have and the customers we are getting.

Operator:

Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Brady Connor :

Thanks, Brad. Good morning, and welcome to our fourth quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg; and Matt Ellis, our Chief Financial Officer. Before we begin, I'd like to draw your attention to our Safe Harbor statement, which can be found on Slide 2 of the presentation. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, we posted to our Investor Relations website, a detailed review of our fourth quarter and full year results. I hope you all had a chance to read the material. I'm going to briefly discuss the financial highlights before turning the call over to Hans to lead a discussion on our strategy, guidance and forward-looking view of the business. Slide 3 shows a summary of our results. Consolidated total operating revenue was $35.3 billion in the fourth quarter, up 3.5% year-over-year. Wireless service revenue grew 5.9% year-over-year in the fourth quarter benefiting from unlimited plan migrations, our best fourth quarter total postpaid net additions in seven years, pricing actions that we began implementing in June of 2022 and a full quarter contribution from TracFone. Consolidated adjusted EBITDA was $11.7 billion for the fourth quarter, down 0.2% year-over-year. Wireless service revenue growth was offset by higher promotional expense, declines in our high-margin legacy wireline business and inflationary cost pressures. Adjusted earnings per share in the fourth quarter was $1.19, a decrease of 10.5% compared to the similar period in 2021, driven by higher interest expense, depreciation and lower pension-related income. Finally, we delivered $14.1 billion of free cash flow for the full year 2022 and exited the year with a net unsecured debt to adjusted EBITDA ratio of 2.7x. With that, I'll now turn the call over to Hans.

Matthew Ellis :

Thank you, Hans, and good morning. I want to spend some time walking you through our 2023 guidance while also commenting on our longer-term outlook. Our 2023 guidance reflects momentum we have exiting 2022, which we expect to drive wireless service revenue growth. For 2023, we expect total wireless service revenue to grow between 2.5% and 4.5%, driven by increased penetration of premium unlimited plans, scaling of fixed wireless, continued growth in products and services, such as content and device protection plans and the full year impact of our pricing actions taken in 2022. As noted in our earnings materials, our wireless service revenue growth outlook includes an approximately 190 basis point benefit from a larger allocation of our administrative and telco recover fees, which partially recovered network operating costs to wireless service revenue from other revenue. In addition, we expect promo amortization to be approximately $1 billion higher than last year. We expect adjusted EBITDA to be within a range of $47.0 billion to $48.5 billion. This outlook reflects expected higher wireless service revenue offset by wireline and other revenue declines and higher marketing and network operating expenses. Full year adjusted earnings per share is expected to be $4.55 to $4.85. As noted on our third quarter earnings call, high interest rates are expected to result in approximately $0.25 to $0.30 of interest expense pressure in 2023 due to higher floating rate debt costs and higher securitization costs for our growing device payment portfolio. We continue to believe we have the right debt structure for the long term and have managed the balance sheet appropriately by keeping short-term maturities to a minimum in this higher interest rate environment. Higher rates of pension and OPEB, in addition to the lower pension asset base resulting from negative returns in 2022, are also expected to impact our adjusted EPS by approximately $0.12 to $0.15 compared to 2022. This flows through other income and expense in our income statement. Finally, we expect approximately $0.03 to $0.05 of impact from higher depreciation expense primarily driven by the C-band equipment being put into service across '22 and into '23. Our adjusted effective income tax rate is expected to be in the range of 22.5% to 24.0% based on current legislation. Capital spending for the full year is expected to be between $18.25 billion and $19.25 billion, including the final approximately $1.75 billion of the incremental $10 billion of C-band-related capital spending and we continue to expect total capital spending to be approximately $17 billion in 2024. The reduction from the $23.1 billion CapEx in 2022 is expected to drive higher free cash flow in 2023 despite increases in cash interest and cash taxes. As previously discussed, we will complete our accelerated $10 billion C-Band program this year after which all C-band capital expenditures will be part of our business-as-usual capital program. Looking beyond 2023, given our exit rate from 2022 we don't expect to hit the long-range outlook as we projected at the Investor Day last year. However, due to the way we have positioned our network and service offerings coming into 2023, we do expect increasing growth in revenue and cash flow in subsequent years. I will now turn it back over to Hans.

Brady Connor :

Thanks, Hans. Brad, we're ready to take questions. .

Simon Flannery :

I had a couple of questions on the guidance. The first one is how are you thinking about your confidence and the visibility of this guide as compared to a year ago. Obviously, we had the war and stuff like that. But I think the reductions in guidance, obviously, were a concern for investors. So as you went through this process was it deliberate conservatism that you were trying to bake in to make sure that you could hit, and I think, Hans, you might have mentioned exceed the guidance with additional steps. So that kind of setup would be great. And then I guess for Matt, you called out some of the pressures on the bottom line, but you had a $0.30 range on your EPS guide. I think it was $0.15 a year ago. And it sounded like on the items you gave, the range wasn't that wide. So perhaps you can just give us some color on what caused you to be as wide this year on the EPS?

Matthew Ellis :

Thanks, Hans. Good morning, Simon. So look, as you think about the guide for the year, obviously, there's a number of items in there, as I think about the range. We can get to the top end of the range there with strong execution, the activity around the cost program scaling, that flywheel moving faster than our base assumption. And just if we see more volumes come through the business there. Obviously, the low end will reflect the promo environment, the overall competitive environment and then we'll see items like inflation and so on. So the range of the EPS guide, I think very similar to the EBITDA guide that we've given. And I think it reflects as we come into this year, when you think about some of the unknowns will play out here in the macro environment and the competitive environment, we feel it's the right range to have for 2023. As Hans said, there's a lot of things for us to stay focused on, and make sure we produce the best result possible.

John Hodulik :

Can we talk about consumer margins within the guidance. They were down about almost 400 basis points in '22. And Matt and Hans, you guys gave some good color on some puts and takes around promotions around Verizon Global Services and I think, I guess, higher marketing and network operation cost. But I guess any other puts and takes to call out. And as we look into '23 as part of the guidance, should we expect the consumer margins to sort of flatten here? And do you guys have visibility that as you guys -- a lot of these initiatives take hold that we can start to see some improving margins on the consumer side?

Matthew Ellis:

Yes. Thanks, Hans. So as you think about the year-over-year reduction in '22. Remember, at the start of the year, we said that we expected about a 200 basis point impact because of the inclusion of TracFone in the business for the year. Obviously, accretive in absolute terms. But from a margin standpoint, we did expect to see that. So then obviously, there's some other items in there. We talked a little bit about the inflation impact last year. Obviously, the competitive environment and the promo piece in there as well. So there will be some things that we have the opportunity to improve on this year's synergies from within TracFone as we move more customers over to our own network will be an upside. But then as we mentioned in the prepared remarks, obviously, the promo amortization is expected to be up on a year-over-year basis as the delay between being at these higher levels from a cash basis and then that flowing through on an accounting basis. So when you net those things out, expect something initially on a probably a similar type of level in '23 to '22 with some opportunities to push that as we go forward into subsequent years.

Brett Feldman :

I'm actually going to stick with consumer. And I was hoping we can get a little more insight into two different tools you're using to go to market. The first is Welcome Unlimited, you've been advertising it quite a bit, and you've mentioned it a couple of times during your prepared remarks. I'm wondering to what extent are you finding that Welcome Unlimited is indeed a popular plan with new consumers versus the extent to which it's driving wireless shoppers into your channels where you're actually more frequently converting them into a higher-tiered plans? That's the first question. And then it seems like you have been reluctant to make greater use of device promos. Obviously, you were using them to some extent last year. How are you thinking about the role of device promos as you go to market this year and you look to sort of sustain these positive consumer phone net adds?

Operator:

The next question comes from Phil Cusick of JPMorgan.

Hans Vestberg :

I can start, and then Matt can break down the numbers you're talking about. I mean, yes, on the premium segment, there is seasonality in the first quarter, and I don't think that's going to be different this year. However, our work is to keep up the momentum that we had from the fourth quarter into this year, where we had good store traffic quarter-over-quarter and also high conversion rate. But it also means that we need agile and see what's happening in the market. And it's a little bit early to do any guidance or something like that, which we're not doing on net adds. But clearly, there is going to be seasonality, but we have good momentum, and we're going to continue to execute and be very close to the market. Matt?

Operator:

The next question is from David Barden of Bank of America.

Hans Vestberg :

Why don't you start, Matt, and I take the second question on the C-band.

Hans Vestberg :

Yes. And it's, of course, a focus for us to continue to grow the cash flow, as I said so many times. So we will continue on that work. When it comes to the C-band, first of all, we have said from the beginning, the C-band acquisition we did is a multi-decade spectrum. It's going to -- it's so much and in so many years. And of course, that was a deliberate decision because we believe we're going to be in wireless business for the eternity of Verizon's history. So that's very important. However, when it comes to C impacts, and I think I mentioned some of them, if you think about fixed wireless access, the majority of all new customers are coming on the C-band right now. That's a clear indication. Without the C-band, we couldn't grow the broadband right now. We did a history high 1.4 billion net adds in the year of broadband subscribers. So of course, a lot of contributor to C-band, and that's a clear metric to have. The other metrics you have is, of course, unlimited premium, where we say that actually, we're performing very well where we have deployed a C-band in order to get customers to step up. And the step-up is very important. We are in a multi-subscription business or we are in a subscription business. And the more you can see that you're upgrading the price, the P on that quantity, it's enormously important for a long-term value for our customers, important. The third one that is coming, and I mentioned also when I opened is, of course, private 5G networks, mobile edge compute, all that is, of course, going to be very much supported by the C-band as well. There we will come back and start reporting on that when we feel that, that is coming into the play from a more significant portion. But mobility -- and remember also that we had the wireless business side, the business side actually growing because of the reliability of our network and the resilience of our network, which is how our enterprise customers are buying from us when it comes to wireless business. So I think there are many metrics that you can see already now that is really connected to the C-band. Then I just want to remind you it's almost less -- I think it's one year since we got -- since we launched the C-band. It's only one year, and we're going to cross 200 million POPs. We have never built so fast in the entire history of the company, and we're well ahead of the plan to hit the 250 million POPs that we said at Investor Day by end of '24. So I think that this is really a game changer in the market. And we see performance-wise, we're outperforming. We have the most resilient 5G network in the nation and we are just starting, just starting with 60 and 100 megahertz. And as you heard me talking, we have 160 in average, it's going to be 200 later on. It is a game changer, and we can already see it right now, and we see already metrics right now that is proving it.

Michael Rollins :

Two questions, if I could. The first one, as you mentioned earlier in the discussion that you pulled back from some of those longer-term targets that you had previously you added the 3-plus percent service revenue and other growth for this year and 4-plus percent for next year. Can you unpack the categories that are at or above the plan from a few years ago? And then the areas of shortfall and if those areas, do you view those as temporary or more permanent changes in the opportunity for Verizon?

Matthew Ellis :

Yes. Thanks, Hans. So Mike, as you think about the conversation we had last year and we talked about the long-term outlook, we provided the piece parts. Maybe if I go through some of those and where we are. Some of them were absolutely where we expected to be. Think about nationwide broadband with the year we had on FWA, but also FiOS and the expectation to continue to see very good progress there. That's very much in line with the expectations we outlined a year ago. Also, our business segment mobility results with six consecutive quarters above 150,000 net adds, very much in line with the expectations that we had at the Investor Day. A couple of areas where we are behind versus our expectation at that point in time. Firstly, you need to think one of them, the mobile edge compute and 5G private networks. You're talking about the technology adoption there on a new technology, that adoption curve. A little slower than maybe we would have liked, but as you heard from Hans in the prepared remarks, feel enough we're starting to see some momentum there. So I still feel good about the opportunity there, but the pace of the adoption curve a little different than we hoped it might be. But the upside there still looks very good. And then, of course, the other one, consumer mobility at this time a year ago, we had higher expectations for '22 than where we ended up. Obviously, a lot of that variance occurred in the first part of the year, and you saw the actions taken, but as you think about the piece parts of the long-term outlook that we described a year ago and then how those have played out in the past 12 months. Hopefully, that gives you a little more color in terms of where things are moving along very much in line and where we also saw some areas where we had to -- we have opportunity to see further improvement as we go forward.

Craig Moffett :

Sorry, I hope you can hear me. So Hans, I wonder if you could just talk a bit about your bundling strategy, particularly on the consumer side, with both the strength now in fixed wireless, but also FiOS. Is it your view that going forward, the consumer is going to buy wireless and wireline or fixed access together? Or is that more of a sort of a financial bundling strategy rather than a real product bundling strategy?

Craig Moffett :

And are there big differences between the way you think about it in FiOS versus non-FiOS markets?

Operator:

The next question comes from Kannan Venkateshwar of Barclays.

Hans Vestberg :

Thank you. No, good question. I think that as you heard us at least, I mean, we think that the profitable growth is the most important, both to have the right customers retained with us and the ones we're getting. So that's an overarching measurement we need to have. Then, of course, it's always going to be new customers that are important for our base. But remember also, this market right now, if you talk about the premium segment, there are, of course, a certain amount of switchers in the market, and then there are a certain amount of people going from pre to postpaid. That is no infusion of new customers in the system. So they're coming from two sources. And you need to think about how you do that. And I think we have great opportunities right now with the TracFone brands we have to see and total wireless to see that we are taking care of that pre to post migration, which we've not been part of before. We still have some work with the IT stacks and all of that. But clearly, today, we're running on both sides. And on the switcher pool, yes, there we're going to be seeing that we're prudent and disciplined, but we will go for the units we think are the right. It's a subscription model long term that is even more important to increase the P sometimes than increasing the Q because this is long term that you stay with the customers to get the long-term value from them. But it's a balance of it all the time and that we will continue to have.

Doug Mitchelson :

You talked about amortization being up $1 billion for phone subsidies to catch up with cash spending. Embedded in all your guidance is cash spending at peak levels? Is there a scope for it still to go higher? I know it depends on the competitive environment that it could eventually improve. But are we at peak levels, and it's just a question of amortization catching up. And I'm curious, when you think about the service revenue guide for wireless, are there any price increases anticipated in that guide? And kind of what level of price increase? I know it's a sensitive topic, but just curious how we should think about that revenue growth.

Matthew Ellis :

Yes. On the promotion piece, you've got the understanding of the accounting treatment versus the cash there, Doug, and certainly, our assumption is that the marketplace will continue to be competitive, but we're not going to go into the 100% details of what's in the guide there. But we do assume that we'll continue to see competitive level in line with the past couple of years. And then as Hans said, we'll continue to look for ways to put plans in the marketplace to reduce the level of subsidy out there as well, and we'll continue to push those opportunities.

Tim Horan :

Matt, can you talk about your goals for free cash flow? And specifically, how much do you think you can reduce the debt buy per year kind of going forward at this point? And then secondly, can you talk about the gating factor for fixed wireless growth it seems like you're implying with your '25 guidance that this is kind of a good run rate, but yet your speeds are going to be increasing threefold and coverage, you're going to basically get a massive amount of capacity kind of going out there. But do you think this is a good run rate for fixed wireless or can accelerate?

Matthew Ellis :

Hey, Tim, on the free cash flow question. So absolutely, one of our goals is to continue to grow cash flow. Hans mentioned that you should measure us on revenue growth, EBITDA growth and cash flow growth and that cash flow growth is something we expect to be able to continue to generate going forward. Obviously, the capital reduction from the high point in '22 to the guide we gave for this year and then an even lower amount next year will be a positive towards that as we continue to obviously make progress on the income statement as well. You should see that contribute there as well. So that puts us in a position where we can start to see accelerated levels of debt reduction versus what you've seen in the past year or so. So that's the targets we have ahead of us and look forward to discussing progress against as we go forward here.

Operator:

The final question for today will come from Bryan Kraft of Deutsche Bank.

Hans Vestberg :

Yes. So it's a multifaceted question on the fourth quarter. Of course, on the business-to-business side, SMBs continue very strong. And as I said, they need store digital storefront and a mobile-first strategy in today's world after COVID. So I think that we have been performing very well. On the enterprise side, it's a little bit different, but we see that bring your own device is going down, and we see more companies saying that they want the company phone, which is of course, helping us here. And that we -- that trend we have seen for a couple of quarters. So I think both of them are pretty solid. On the consumer side, as I said, we had positive net adds. We had also, as I said before, a little bit spill over from the churn from the price increase at the beginning of the quarter. And then there was actually fewer days of sales in the fourth quarter than a normal quarter. So I don't think there are any new things more than what I said. Customers were a little bit later in the holiday season to do. They had higher intent when it comes to consumers, but it was nothing macroeconomical different than I talked about. Matt and I talked about the bad debt and the delinquency being like pre-COVID or equal or better than pre-COVID. So no, there's nothing there. We are, of course, watching it. But so far, we continue to progress well.

Brady Connor :

Thanks, Bryan. Brad, that's all the time we have today.

Brady Connor:

Thanks, Brad. Good morning, and welcome to our third quarter earnings conference call. This is Brady Connor and I am here with our Chairman and Chief Executive Officer, Hans Vestberg; and Matt Ellis, our Chief Financial Officer. As a reminder, our earnings release, financial and operating information and the presentation slides are available on our Investor Relations website. A replay and transcript of this call will also be made available on our website. Before we get started, I’d like to draw your attention to our safe harbor statement on Slide 2. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon’s filings with the SEC, which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Now, let’s take a look at consolidated earnings for the third quarter. In the third quarter, we reported earnings of $1.17 per share on a GAAP basis. Reported third quarter earnings include a pre-tax loss from special items of approximately $881 million. This includes a net pre-tax charge of approximately $645 million, primarily related to a mark-to-market adjustment for our pension liabilities and the impacts of amortization of intangible assets related to TracFone and other acquisitions of $236 million. Excluding the effects of these special items, adjusted earnings per share was $1.32 in the third quarter. With that, I will now turn the call over to Hans to take us through a recap of the third quarter.

Matt Ellis:

Thank you, Hans and good morning everyone. Our results from the third quarter were not yet where we would like them to be. But as you heard from Hans, the actions we have taken in the past two quarters are gaining traction in the marketplace. As a result, we saw positive developments in store traffic and consumer phone gross adds further gains in broadband and a sequential improvement in our financial results. We anticipate that we will be able to build on this momentum as we head into the fourth quarter. Let’s now walk through results from the third quarter, beginning with an overview of our postpaid mobility results on Slide 7. Our strategy for mobility growth is to drive revenue growth by attracting and retaining high-quality customers and migrating them into premium tiers. Premium penetration in the consumer segment increased to approximately 42% at quarter end, a sequential increase in line with prior quarters even with the introduction of the Welcome plan and the current economic backdrop. As a result of the continued increase in Premium plan penetration, combined with the benefit from our admin fee increase and the impact from metered price-ups, consumer postpaid ARPA increased 3.8% year-over-year. Overall, phone gross adds were up approximately 5% year-over-year, reflecting continued strength in business as well as the improvement in consumer gross adds. With the impact of 3Q churn, which increased as expected as a result of our recent pricing actions, phone net adds were 8,000 for the quarter. Business delivered 197,000 postpaid phone net adds in the quarter, their fifth consecutive quarter exceeding 150,000. The results were again balanced across the three customer groups, with enterprise delivering their best-ever phone net add performance and SMB and public sector both seeing double-digit phone gross add growth. On the Consumer side, postpaid phone gross adds were up 1.3% year-over-year, a notable sequential improvement from an 11% decline in Q2. The launch of the Welcome plan and the Apple One Unlimited plan helped to generate more store traffic while providing another avenue to compete outside of promotional spend. We have now seen year-over-year improvement in phone gross add performance for four consecutive months through September and anticipate another low single-digit year-over-year growth performance in the fourth quarter. As expected, the pricing actions we took around administrative fees and metered plans led to an increase in disconnects. With certain price-ups being phased in throughout the third quarter, we would anticipate some disconnect pressure to carryover into Q4. Taken together, we currently expect the gross add and disconnect performance to result in positive consumer phone net adds in the fourth quarter. Let’s now discuss broadband performance on Slide 8. Total broadband net adds were 377,000 in the quarter, reflecting a strong demand for reliable and high-value broadband offerings. Fixed wireless access momentum continued throughout the third quarter. We added 342,000 net adds, up from 256,000 in 2Q, reflecting increased demand across business and consumers. More than 75% of our consumer net adds are coming from urban and suburban locations with data usage that continues to mirror our Fios customers. We anticipate further share gains in this space as we continue to expand our household coverage and begin to realize benefits from our offering in the prepaid segment. We also added 61,000 Fios Internet net adds during the third quarter, reflecting improved gross outperformance from Q2 as well as continued strong retention levels. Our ability to grow Fios in spite of some secular headwinds due to lower move activity shows that the quality, value and reliability that Fios offers, continues to resonate strongly with customers. We further expanded our nationwide broadband opportunity by adding more fixed wireless households and businesses covered as well as growing our Fios open-for-sale within our ILEC footprint. Total fixed wireless household coverage surpassed 40 million in the quarter, including over 30 million covered by 5G Ultra Wideband. Fios open for sale is now at 16.9 million, a year-to-date increase of 410,000 and we remain on track to hit our full year target of 550,000. Now, let’s talk about the value market on Slide 9. Our work to integrate TracFone continues, highlighted by the launch of our new prepaid brand, Total By Verizon, late in the quarter as well as the launch of fixed wireless for our prepaid customers earlier this month. For the quarter, we delivered positive prepaid net adds of 39,000, which excludes a base adjustment of 102,000 primarily relating to a competitor’s 3G network shutdown. We saw significant improvement in TracFone’s performance, which had positive net adds for the first time since Q1 2021. With our current momentum, combined with the launch of our new brand and fixed wireless, we are excited about our positioning and ability to further grow in the value market, bringing more connectivity and benefits to customers in this space. Now, let’s move to the consolidated financial results on Slide 10. On a consolidated basis, total revenue was up 4.0% year-over-year as wireless service revenue growth and higher wireless equipment revenue more than offset wireline declines and the net impact of last year’s M&A activity. As a reminder, the third quarter last year only had 2 months of Verizon Media activity before its divestiture. Total wireless service revenue growth was up 10.0% from the prior year primarily driven by our ownership of TracFone, continued effectiveness of our Premium Unlimited strategy and business volumes. The core business is strong as wireless service revenue, excluding all TracFone activities, grew above 3%. Additionally, we saw a benefit from the pricing actions taken earlier in the year, which we previously said would generate roughly $1 billion across Q3 and Q4. These actions helped to generate a sequential increase of $494 million in wireless service and other revenue and an increase of $345 million of adjusted EBITDA as total adjusted EBITDA came in at $12.2 billion for the quarter. We continue to feel the pressures of higher device subsidies and promotional spending despite taking steps throughout Q3 to be disciplined, including the launch of the Welcome plan, which comes with our device subsidy. Inflationary pressures remain elevated both from a year-over-year and sequential point of view with the increase from Q2 primarily coming from higher electricity rates. Expectations for full year 2022 impacts of inflation remain consistent with comments during our Q2 earnings call. To further mitigate inflation impacts, we have started a new cost savings program that we expect will provide a reduction in annual cost of $2 billion to $3 billion by 2025. This program will be focused on several areas within the business, including digitalization efforts to enhance the customer experience and streamlining internal operations through automation and process enhancements. While part of this will benefit the bottom line, a portion of these savings will be reinvested into the business to help accelerate opportunities. As Brady noted, adjusted EPS for the third quarter was $1.32. In addition to the impact from EBITDA, this reflects sequential pressures in interest expense due to rate increases and a reduction in other income associated with non-cash changes to pension and OPEB. Based on year-to-date interest rate increases and market expectations for additional Federal Reserve actions this year, we now estimate cash interest expense for 2022 to be about $400 million higher than our expectation coming into the year. We anticipate this pressure will continue into next year given the full year impact from interest rate increases, providing an EPS headwind in 2023. Likewise, the impact from non-cash pension cost due to higher interest rates and lower return on assets this year is expected to put additional pressure on below-the-line items for 2023. Now, let’s take a look at our third quarter consumer financial results. Total consumer revenue for the quarter grew 10.8% year-over-year driven by wireless service revenue growth of 11.0% as well as higher equipment revenue. Wireless service revenue increases were the result of the inclusion of TracFone, core wireless service revenue growth and the impact of the pricing actions. Total Fios revenue was up versus the same period a year ago by 0.3% as growth from our Internet base offset the revenue impact of a 9% year-over-year decline in video subscribers. Fios content costs have also dropped resulting in an improved margin profile that we expect will continue to benefit from further shifts away from video. Consumer EBITDA was $10.6 billion, up 0.7% compared to the same period last year. The pricing actions as well as the full inclusion of TracFone results more than offset the pressures from higher promotional activity and the impact of inflation. Next, let’s take a closer look at the Business financial results on Slide 12. The Business segment’s wireless results remained strong in 3Q, though wireline service revenue declines continued due to ongoing secular headwinds. Wireless service revenue growth of 5.7% was up from 3.0% last quarter, aided by pricing actions as well as continued growth in our customer base. Wireline revenue declined by 6.7% versus prior year. Operating trends are consistent with prior quarters. Though in Q3, we saw a sequential increase in USF revenue due to higher rates. Business EBITDA was $1.8 billion for the quarter, down 6.7% from the prior year. In addition to pressure from wireline, we experienced higher growth related costs as wireless sales volumes were up by 15% from the prior year. Now let’s move on to Slide 13 and the cash flow summary. Cash flow from operating activities for the first three quarters of 2022 totaled $28.2 billion compared with $31.2 billion in the prior year period as working capital impacts from higher device activations and increased inventory levels continue, as we expected. Capital spending for the first three quarters of the year totaled $15.8 billion, an increase of $2.0 billion compared to last year. C-band spending was $4.5 billion for the first 9 months of the year. The net result of cash flow from operations and capital spending is free cash flow of $12.4 billion for the first three quarters of the year. We exited the quarter with $129.3 billion of net unsecured debt, a sequential improvement of $1.3 billion, resulting in a net unsecured debt-to-adjusted EBITDA ratio of 2.7x. As Hans mentioned earlier, our low unsecured bond maturities over the remainder of this year and next and strong operational cash flow generation puts our balance sheet in a strong position. Payment trends remain at or better than pre-COVID levels, and the quality of our postpaid base has never been better as evidenced by recent asset-backed securities prospectus filings. As we look at Q3 results, we delivered the sequential revenue and EBITDA growth that we had anticipated from the actions taken in 2Q. Our guidance for 2022 remains unchanged. We are building momentum and remain confident that our strategy will deliver strong cash flow growth into the future. It is this confidence, combined with the health of our balance sheet, that enabled us to recently increase our dividend for the 16th consecutive year. We recognize the importance of the dividend to our shareholders, and we intend to continue to put the Board in a position to approve annual increases. I will now turn the call back to Hans for concluding comments before we open up to questions. Thank you.

Brady Connor:

Thanks, Hans. Brad, we’re ready to take questions.

John Hodulik:

Great. Thanks, guys. Two quick ones, if I can. First, I know you guys don’t – you often hold off on giving guidance until the fourth quarter call, but it sounds like you got a number of sort of below-the-line headwinds to growth next year. But what’s the prognosis for EBITDA growth in ‘23 given all the moving parts and all the cost savings you have coming through? And then secondly, on postpaid phone churn, it ticked up. And just looking for clarifications on Matt’s comments that it’s going to stay elevated. How do you expect that to progress as we move through ‘23? And what do you think is really driving? It sounds like you obviously you had the price increase. But just fundamentally, are the prices at Verizon just too high at this point given what we’re seeing from a macro environment and given the – something approaching network parity that we have in the market today? Thanks.

Matt Ellis:

Yes. Thanks, Hans. And John, so maybe the second part of your question first around churn and is our pricing in the right place, I’d point you to the fact that our gross adds were up almost 5% on a year-over-year basis in 3Q. So obviously, our offerings continue to resonate with customers, obviously, built on having the best network, and consumers continue to see the value of that. So continue to believe that the gross add traffic will be there, and we will get our fair share. On the churn side, just to put it in perspective, the pricing actions we took across both the metered plans and the fees touch more than 75 million phone customers. And so the uptick in churn that we saw in the quarter was highly expected. We kind of mentioned that 90 days ago that we expected it to happen. But the financial benefits came through as well, which was exactly as we expected and was the right approach to take. So obviously, the impact of those changes will mitigate as we go forward here, and we will continue to make sure that our churn is where it needs to be to ensure the right results. In terms of the first part of your question, you’re right, we will speak to you more specifically about 2023 on the next call. We’re obviously in the middle of our planning cycle right now. But you should certainly expect us to build on the momentum that you saw us deliver in the third quarter. You saw that wireless service revenue up sequentially 2%. As Hans mentioned, EBITDA up sequentially about 3%, that gives us a good platform to build on here in 4Q and then as we head into ‘23. And then you mentioned below the line, there will be some pressures next year. I’m not going to quantify those now. But as you think about the specifics of those, some of those we’ve spoken to all of you about before. When we came out of the C-band auction, we said that we would expect depreciation to increase and capitalized interest to reduce as we’ve deployed C-band sites and put them on there and really having kind of significant year-over-year impacts in ‘23 and ‘24. So that’s in line with what we’ve been talking about for a while. And then you layer on top of that, obviously, interest rates are higher, and we will have a full year impact of that next year. And that impacts both the interest expense line, but also other non-cash below-the-line items around pension and OPEB, where the imputed interest cost will be higher with the higher macro rates and then also starting the year with lower assets because of the performance this year. So we will obviously quantify those things. But as we think about ‘23, we had good momentum coming out of 3Q on a sequential basis, look to build on that in 4Q, continue to generate significant amounts of cash flow that puts us in a position to be successful going forward.

Hans Vestberg:

Yes.

Operator:

Thank you. The next question comes from Brett Feldman of Goldman Sachs. Your line is open, sir.

Hans Vestberg:

Thank you, Brett. When it comes to our national broadband strategy, first of all, I think it’s working really good for us. You saw in the quarter adding 377,000. The Fios footprint continue to be extremely high-quality customers and continue to grow. We will continue to expand that footprint. Outside that, we, of course, have a very high focus on fixed wireless access because the speed to market, because the demand in the market right now is high for broadband. And of course, we have a very disruptive model where it takes low single digits minutes to actually get broadband at home. It’s a total different product when it comes to fixed wireless access. So we capture the market as soon as we can right now, and you see on our growth rates that is happening both for Consumer as for Business. But as you rightfully said, we are deploying the network as we speak, and we are just into certain markets given on the C-band, we will have more and more markets. And as we stated in the remarks, I mean, we are now covering 40 million households with our fixed wireless access. So we will continue to expand that, and we have plans and execution. It’s working well. The quality is improving. The customer satisfaction is really high on fixed wireless access and of course, there are the competition in these areas are of course not equally good customer satisfaction. So no, I think – we think – we are confident that this is a good strategy for us. Then when it comes to our fiber, you’re absolutely right. We have done enormous investment in fiber. We want owners’ economics on our network, and we are getting that because with the majority of all the 5G sites have our own fiber, and we’re now passing 50% by year-end on all our sites. Some sites will never need fiber. So it’s not like 100% is the end goal. But in order to have a good experience for our customers, that’s what we’re doing. Then we want to see opportunities, especially for the Business side to use that fiber footprint outside. I’d like to see that some customers can get a better or we can substitute third-party fiber that we are getting from others. But clearly, focus on fiber in the Fios footprint, fixed wireless access going as fast as we can outside that. So yes, we are confident about the strategy, and it’s working. We have talked about for several years. We come out with new products, that’s going to be multi-spectrum. That’s going to handle everything from 4G, C-band, 10-millimeter wave. So the resilience and the performance and quality of the products is even getting better. So yes, that’s where we are.

Brett Feldman:

Great. Thank you.

Operator:

Thank you. The next question comes from Simon Flannery of Morgan Stanley. Your line is open, sir.

Hans Vestberg:

Yes. I can start on the enterprise side with the mobile edge compute, which we – and the private 5G networks. As I said a couple of times before – right now, we had three different sort of use cases on the edge computing

Simon Flannery:

Thanks a lot.

Operator:

Thank you. The next question comes from Phil Cusick of JPMorgan. Your line is open.

Hans Vestberg:

I can start on the Business side. We have seen strong business growth on the wireless side for five consecutive quarters. So clearly, what we see is that both from the government, from large enterprises, small and medium businesses, they rely on the – on high-performing networks is extremely important, and that’s what we’re giving them. And that’s why we are growing. I mean we have had a really good run on it, and the team is doing a great job. I mean this quarter was 197,000 net – phone net adds in the Business segment. And as Matt said, it’s across over all the three segments

Phil Cusick:

I’m sorry, Hans, if I can just...

Phil Cusick:

I just wanted to follow up on Hans, the question was more what are people using this for, right? So industry penetration is very high. Everybody is looking at around trying to figure out where we’re going. Are these – do you think these are second lines being bought for maybe sort of high security measures? What’s the usage look on the growing lines in Business versus maybe the new lines in Consumer? We’re just trying to get an idea of what’s driving this strength. And it’s not just you, it’s across the board.

Matt Ellis:

Yes. And Phil, just maybe building on that a little bit. Certainly, the continued strong employment position feeds into this. That’s very much the positive. But look, I think the other thing as you think about Business to think about is the depth of the relationships we have with Business customers over many years from both wireless and our legacy wireline relationships and the quality of the network continues to matter to our Business customers and our team have been very effective at selling into those customers. But if you are – if the suggestion from anything that you have been hearing is these are secondary lines with low usage on it, that couldn’t be more further from the truth. These are absolutely primary lines. We see it in the usage. Certainly, as businesses continue more and more people in mobile, and we see that. But these are absolutely primary use lines, and we know that from the usage we see on that. In terms of on the consumer side, on accounts, certainly, that trend is something that continued into 3Q. And – but you also saw the positive momentum from a gross add standpoint, and that feeds through into the account trend also moving in a better line than it was. And as we said in the prepared remarks, we expect 4Q to have positive phone net adds and that should show up in the trend on the accounts side as well. So, look, overall gross adds are up 5%, and they were up on a year-over-year base in consumer. So, there is a lot of good things going on. And then within our base, we just have to keep reminding people of the value. The team is doing an outstanding job there, and they have got more to bring to the market here as we go forward.

Matt Ellis:

Yes. It’s mix. You have got to think about the contribution from Welcome in two ways. One, obviously, in terms of the number of adds that people signed up for, but more importantly, the number of additional visits to the stores that it drove. Because certainly, some people who came in to Welcome, but it also gave us the opportunity to talk to more customers coming into the stores about all of our plans. So, we would have a good number of customers that came in because they seem to Welcome pricing, but then actually purchased one of our Mix & Match price plans as well. So, we don’t really have a specific breakout there for you, but definitely a contributor to the increase in store traffic and the increase in gross adds.

Brady Connor:

Yes. Thanks Phil. Brad, we are ready for the next question.

David Barden:

Hi guys. Thanks so much for taking the question. I guess two, if I could. I would like to ask a corollary to Phil’s question there, which is – obviously, we had like negative 11% gross adds last quarter, positive 1% in consumer this quarter. Where are those gross adds coming from? I think you highlighted that you felt there was a hole in the portfolio with respect to BYOD. I would suggest that the BYOD concentrated players, maybe the cable players, are maybe ones that are giving you market share or maybe you have seen something else in the porting ratios that have changed the game. I would be interested in where you think this SoGA shift is coming from? And then the second piece, Matt, your exposure on the balance sheet to variable rates, rising rates is not because you have floating rate debt per se but because you took actions in terms of swaps and hedges to create that variable rate exposure. Theoretically, you could buy your way out of that if you felt that was an economic way to go. Arguably, you could maybe take those losses through to your adjusted EPS, and then it could affect your earnings per share trajectory. Is there any part of you that thinks that there is an economic opportunity that might present itself to reverse gear in some of that variable rate exposure? Thanks.

Matt Ellis:

Yes. Hi. On the question around interest rates, so we have absolutely had a targeted rate of effective variable to fix, and that served us very well, continues to serve us very well over the course of the economic cycle. And we think that creates value over the course of the cycle for the company, and obviously, shareholders as well. As you mentioned, Dave, obviously, this year has seen significant increase there. And so some of those hedges have obviously moved around in value. I couldn’t be happier with the work the treasury team has done, not just this year, but over many years now to not just manage the overall debt profile, but also the interest rate expense. You see that in the income statement over the past few years, where even as our debt has gone up to pay for the C-Band acquisition and so on, our total interest expense cost has actually remained relatively flat. So, we will continue to manage the balance sheet there. And as you mentioned, if there is opportunities to create incremental value, I think our track record would tell you very strongly that you should expect us to be doing everything taking full advantage of those.

Brady Connor:

Thanks Dave. Brad, we are ready for the next question.

Michael Rollins:

Thank you and good morning. When you look across the strategic products, postpaid phones for consumer and business and Fios broadband, what’s the risk that customers trade-down in rate plan tiers if the U.S. goes into recession? And then pivoting over to the value segment, has Verizon begun to migrate any prepaid customers to the postpaid base? And can you size the future opportunity and timing for this possible migration? And then just one more, if I could, on prepaid. Is there an update on the size and timing of savings, especially for roaming when you think about the TracFone integration?

Matt Ellis:

Yes. A couple of follow-ups there, Mike. So, the risk of trading down, we have obviously seen a number of different economic cycles during the life of the wireless business. And we don’t historically see significant amounts of trade-down during a macro downturn. So, I don’t expect anything different, again, because the value that people place on their connectivity products, whether that’s broadband or wireless, is higher than ever. So, we will obviously monitor it closely, but history would suggest the risk of that is not that high. And then your last question around integration on roaming, we should largely have the roaming integration, all of the customers, over onto the Verizon network during 2023. We haven’t quantified the benefit there, but obviously significant. But that will be – that should be in the financials by the end of next year.

Brady Connor:

Yes. Thanks Mike. Brad, we are ready for the next question.

Tim Horan:

Thank you. So, C-Band build-outs going faster and it sounds like better than expected. So, Matt, can you talk about when you think you will largely be done with that spending and maybe just the ultimate – thinking on the ultimate POPs covered and capacity that you are adding? Any color there would be great?

Matt Ellis:

Yes. So, Tim, just on the – exactly what Hans said on the timing. If you think about it, we are still spending on the LTE network today, and that’s obviously 10-plus years from when we launched. So, that’s because the usage on the network continues to grow, the utility people get from it continues to grow. And that’s why you see our customer base expanding as a result. But as you think about connecting the dots here, as we said, we will be close to 200 million – well, we will cross 200 million POPs in the first quarter of next year. The $10 billion will largely be spent – we said there would be a stub left over to next year, so that kind of overlaps there. So, think about it from the standpoint, the $10 billion took care of covering the first roughly 200 million POPs. Then the rest of it goes into BAU. And you create space in BAU because those 200 million POPs have now got C-Band coverage. We said over half of our base has a 5G compatible device in their hands. And so the usage growth in those areas is going on C-Band. That means we don’t have to continue spending on LTE in those markets. And then combined with other programs that are coming to an end on the peak spend, such as OneFiber, Intelligent Edge Network, that’s the space for the C-Band continued build, both from a coverage and a capacity standpoint, to be in the BAU-level spend, just like as we continue to expand the LTE network for many years. It was part of the BAU-level spend. So, absolutely peak level this year. CapEx comes down next year. And then I would expect even further in ‘24 as the $10 billion is completely gone, as we spoke about earlier this year. And that obviously has a positive impact on free cash flow and the decisions we will be able to have in front of us as a result of that going forward. So, couldn’t be happier with the pace at which the team has built it out and spent that money, unbelievable work the team has done there. And it puts us in a great place to reduce CapEx going forward.

Matt Ellis:

I think Kyle has said pretty clearly that you should expect – where you get 4G today, you should be expecting to get 5G in the future as we continue to build out.

Tim Horan:

Good. Thank you.

Operator:

The next question comes from Craig Moffett of MoffettNathanson. Your line is open.

Hans Vestberg:

Hey Craig. I think first of all, we have seen some early steps of convergence in a market where mobility and home is going together. Of course, ultimately, the customers will define is that the best model. I think we are in a great position for obvious reasons, where we deploy our fixed – remember, when we deploy our network on the C-Band, we start in urban and suburban. And that’s of course, also where the fixed wireless access opportunity arises. So, then the combination of fixed and home and mobile is emerging there. So, we are going to play on that. And you have seen we have offerings on that in the market and also working with our Fios footprint equally much. We have the optionality. And the customers will decide if that is a good way forward. I think we are in a very strong position. We have owners’ economics on all our home broadband and all our mobility and being able to see that we can follow the market. And it goes back a little bit to what I have said before. We need to be agile and be surgical in different segments. If we see that, for example, convergence is happening in certain segments, we quickly come out with offerings and do that. And that’s what the team is working with constantly right now. And if that is a trend going there and it’s just accentuated, we are going to be super well positioned for that. If it’s not, we are also super positioned for keeping it separate. We are going to see that the market. We are going to drive the market. We think it’s strength for us that we have owners’ economics on both mobility and broadband. So, we will drive it where we see a good traction on it. And as you have seen already, we have already offerings out there, and we will continue to do so.

Operator:

Thank you. Your last question will come from Frank Louthan of Raymond James. Your line is open.

Hans Vestberg:

I think when it comes to the consumer churn, as Matt explained, the vast majority in the third quarter was coming from the price adjustments we did, which was a deliberate decision we took in the second quarter, and it was as expected. That was the larger piece of it in the churn. And as Matt said before, our job right now is to continue to drive this downwards and see that, that is evaporating out there. We have some leakage into the – into October from it because – given how the price adjustments come out in the market.

Frank Louthan:

Alright. Great. Thank you very much.

Brady Connor:

Thanks Brad. Good morning and welcome to our second quarter earnings conference call. This is Brady Connor. And I am here with our Chairman and Chief Executive Officer, Hans Vestberg; and Matt Ellis, our Chief Financial Officer. As a reminder, our earnings release, financial and operating information and the presentation slides are available on our Investor Relations website. A replay and transcript of this call will also be made available on our website. Before we get started, I’d like to draw your attention to our Safe Harbor statement on Slide 2. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon’s filings with the SEC, which are available on our website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Now, let’s take a look at consolidated earnings for the second quarter. In the second quarter, we reported earnings of $1.24 per share on a GAAP basis. Reported second quarter earnings include a pre-tax loss from special items of approximately $435 million, including a net pre-tax charge of approximately $198 million related to a mark-to-market adjustment for our pension liabilities. In addition, the impact of amortization of intangible assets related to TracFone and other acquisitions was $237 million. Excluding the effects of these special items, adjusted earnings per share was $1.31 in the second quarter. With that, I will now turn the call over to Hans to take us through a recap of the second quarter.

Matt Ellis:

Thank you, Hans and good morning everyone. As Hans said, this was a challenging quarter and our results did not meet the expectations we have set for ourselves. We have implemented multiple actions to better position Verizon for the future. At the same time, we expect the market environment to continue to be very competitive for the remainder of 2022. Before discussing our expectations for the remainder of the year, let’s walk through results from the second quarter, beginning with an overview of our postpaid mobility results on Slide 7. Our runway for mobility growth is predicated on driving our customer base into higher value data plans and we continue to make good progress in the second quarter. Premium penetration within our consumer base increased to 39% at quarter end and 57% of new accounts in the quarter selected Premium Unlimited and step-ups within our existing base remained healthy. This activity helped drive a 2.4% year-over-year increase in consumer postpaid ARPA. Our recent administrative fee increase and economic adjustment charge began to show up on customers’ bills in the last few days of the second quarter and we expect close to a full quarter’s benefit to revenue and ARPA trends in the third quarter, while our metered price changes will be phased in throughout the third quarter, which will provide an additional uplift. We reported postpaid phone net adds of 12,000 in the second quarter as strong business results more than offset softer consumer performance. Business delivered 227,000 postpaid phone net adds in the quarter. We continue to see strong demand across all lines of the business group, as phone gross adds were up nearly 30% from the same period a year ago and we expect this strong performance to continue. On the consumer side, postpaid phone net losses were 215,000 in the quarter and stemmed from two main drivers. First, churn increased by 10 basis points compared to the same period last year. Higher involuntary churn contributed roughly half of the increase due to the expiration of state consumer protection policies and less stimulus funding. This was coupled with an 11% decline in phone gross adds from the prior year, driven by the competitive offerings in the marketplace. As Hans indicated, we recently introduced a Welcome plan in order to drive demand for more price-conscious consumers, particularly as they make spending adjustments due to the effects of higher inflation. This new plan is well positioned to attract new customers, especially for those who bring their own device. It is our most basic Unlimited offering with no device promotions or many of the other features available in Mix & Match Unlimited to plans. We reserve our most generous acquisition and retention offers for consumers willing to select our Premium Unlimited plans and we believe that opportunities exist to better serve these high-value customers. Upgrade activity remained elevated throughout the quarter, reflecting loyalty within our core customer base, while also serving to drive greater premium adoption. As a result, total postpaid phone activations across consumer and business were up 8% from the same period last year. Let’s now discuss broadband performance on Slide 8. During the second quarter, we continued to scale and grow our nationwide broadband opportunity with additional expansion of fixed wireless households and businesses covered. In addition, we expanded Fios availability to add additional 150,000 homes during the quarter and are on track to achieve our target of 550,000 incremental homes open for sale in 2022. Total broadband net adds were 268,000 in the quarter, an increase of 39,000 sequentially in what is traditionally a seasonally softer quarter. Fixed wireless momentum accelerated as we added 256,000 subscribers in the quarter, up from 194,000 in 1Q. Fixed wireless net adds have increased every month throughout 2022 and we expect to continue that trend in the third quarter. We also added 36,000 Fios Internet net adds during the second quarter. While Fios Internet churn remains well below pre-pandemic levels, we are seeing softer gross adds due to lower-than-expected switching activity from moves and fewer new home purchases. We recently introduced Fios Mix & Match 3.0 that aligns our Fios and fixed wireless pricing and better positions us to grow joint account penetration. Now, let’s talk about the value market on Slide 9. Our integration of TracFone is on track and the team remains focused on enhancing the customer value proposition and delivering cost synergies through migrating off-net customers onto the Verizon network. Our TracFone brands had net prepaid losses of 227,000 in the second quarter and total Verizon prepaid net losses were 229,000. These results exclude a base adjustment of 402,000 related to a competitor’s 3G shutdown. Our prepaid volumes were impacted by aggressive postpaid promotions. As we made progress on our TracFone integration initiatives, we will be better positioned to serve those customers wanting to migrate to postpaid offerings. Our business case had anticipated subscriber losses during the early phase of the integration period, which we expect to continue into the second half of the year. However, should customer preferences shift to the value market and make recessionary concerns we would expect to see some benefits. Prepaid ARPU was $31.26 in the quarter, up modestly on a sequential basis and we expect it to remain stable going forward. Now, let’s move to the consolidated financial results on Slide 10. On a consolidated basis, total revenue was relatively flat year-over-year, as wireless service revenue growth and higher wireless equipment revenue were offset primarily by wireline declines and the net impact of last year’s M&A activity. Total wireless service revenue growth was 9.1%, primarily driven by our ownership of TracFone, further progress on our Premium Unlimited strategy and strong business volumes. Service and other revenue was down 3.9% for the quarter as the revenues lost from Verizon Media more than offset net incremental revenue from TracFone. Adjusted EBITDA was $11.9 billion for the quarter, down 2.6% year-over-year due to the divestiture of Verizon Media, higher device subsidies and promotional spending associated with the increased wireless activations, wireline revenue declines and inflationary cost pressures. Regarding inflation, we are seeing the pressures within our cost structure, most notably on labor costs, utilities and transportation and logistics expenses. We expect these pressures to accelerate in the second half of the year and have an impact on profitability and earnings. As Brady and Hans highlighted, adjusted EPS for the second quarter was $1.31, down 5.8% from the prior year. This primarily reflects the impact of our adjusted EBITDA results and higher D&A related to our C-Band rollout. Now, let’s take a look at our second quarter consumer financial results. Total consumer revenue for the quarter grew 9.1% year-over-year, driven by the inclusion of TracFone, higher equipment revenue, and core wireless service revenue growth. Wireless service revenue was up 10.5% year-over-year, also driven by the inclusion of TracFone and postpaid ARPU growth. Total Fios revenue was flat versus the same period a year ago, as internet growth was offset by video and voice declines. Consumer EBITDA was $10.4 billion, down 0.3% compared to the same period last year. Our higher contribution from TracFone was more than offset primarily by higher promotional activity. Consumer EBITDA margin was 40.5% in the quarter. Now, let’s take a close look at the business financial results on Slide 12. The Business segment’s wireless results remained strong in 2Q, while wireline service declines continued amid a softening economy and ongoing secular headwinds. Wireless service revenue growth of 3.0% was up from 2.1% last quarter. Small and medium business continued its strong momentum, accelerating growth for the second consecutive quarter, while Global Enterprise had its best performance since the first quarter of 2020. Business wireline declines were elevated this quarter, in part due to foreign currency and federal USF, which together impacted growth by more than 300 basis points year-over-year. The secular process from technology migration continued to weigh on legacy voice and data services. And we expect this trend to continue. Business EBITDA was $1.7 billion for the quarter, down 6.5% from the prior year. In addition to wireline revenue declines, we experienced elevated device subsidies related to the 15% year-over-year increase in wireless activations in the quarter. EBITDA margin was 22.9% in the second quarter. Moving on to Slide 13 on the cash flow summary, cash flow from operating activities for the first half of 2022 totaled $17.7 billion compared with $20.4 billion in the prior year period. The reduction was primarily due to working capital impacts from higher device activations and increased inventory levels as part of our supply chain management in the current environment. Capital spending for the first half of the year totaled $10.5 billion, an increase of $1.8 billion compared to last year, driven by C-Band spending of $2.8 billion. The net result of cash flow from operations and capital spending is free cash flow of $7.2 billion for the first half of the year. We exited the quarter with $130.6 billion of net unsecured debt, a sequential improvement of $5 billion, resulting in a net unsecured debt to adjusted EBITDA ratio of 2.7x. In a period of rising interest rates, our balance sheet is in a strong position, with less than $2 billion of unsecured bonds maturing in the next 18 months. Lastly, let’s move to an update on guidance for the remainder of the year. Based on our current expectations, we are updating our guidance for the year. We now expect wireless service revenue growth to be in the range of 8.5% to 9.5%, down from the prior 9% to 10% range. The pricing actions already implemented are expected to contribute approximately $1 billion in the second half of 2022. However, this benefit is expected to be offset by the accounting impact of promotional activity and the impact of lower net adds. As a result of the reduction in wireless service revenue expectations and anticipated ongoing wireline pressures, we now expect service and other revenue growth to be in the range of minus 1% to flat. We are lowering our adjusted EBITDA growth expectations for the full year to a range of minus 1.5% to flat versus our prior range of 2% to 3%. This revised outlook accounts for higher levels of activations driven by our promotional activity, inflation-driven costs that we discussed previously, the reduction in wireless service revenue and business wireline revenue headwinds. Our guidance assumes Consumer EBITDA margin in 3Q to be similar to margins seen in the first half, with typical seasonality in 4Q. Business EBITDA margins in the second half of 2022 are expected to be in line with those reported in the first half of the year. Finally, we are lowering our full year adjusted EPS guidance to a range of $5.10 to $5.25 versus the prior $5.40 to $5.55 range. This fee reflects the reduction in adjusted EBITDA as well as incremental cash interest expense versus our expectations at the beginning of the year of about $300 million for the full year compared with the $150 million to $200 million we estimated last quarter, due to updated market expectations for additional Fed fund rate increases. For CapEx, we are reiterating prior guidance of $16.5 billion to $17.5 billion for business-as-usual capital and $5 billion to $6 billion of C-Band-related spending. In closing, we are confident in our strategy and believe that our assets position us well to generate long-term shareholder value. I will now turn the call back to Hans for concluding comments before we open up to questions. Thank you.