Verizon has reported first-quarter results highlighted by strong earnings per share performance, increased cash flow, and a further commitment to network investment.
For first-quarter 2020, Verizon reported EPS of $1.00, compared with $1.22 in first-quarter 2019. On an adjusted basis (non-GAAP), first-quarter 2020 EPS, excluding special items, was $1.26, compared with adjusted EPS of $1.20 in first-quarter 2019. The company estimates that first-quarter 2020 EPS and adjusted EPS included approximately negative 4 cents of COVID-19-related net impacts, primarily driven by an increase to its bad debt reserve.
“Verizon began 2020 with strong operational performance,” said Chairman and CEO Hans Vestberg. “In an unprecedented time, Verizon took decisive and balanced actions that will serve our stakeholders in the long term, including protecting our employees, maintaining our network quality and reliability, serving our customers, and supporting our communities.
“We will emerge from this crisis stronger, knowing we provided critical connectivity to our customers, and especially our first responders, while maintaining our commitment to investing in our 5G and Fiber strategies. We are particularly proud of our employees who continue to deliver essential services to our customers and those on the front lines so they can serve others.”
First-quarter 2020 EPS included a pre-tax loss from special items of about $1.4 billion, which consisted of a $1.2 billion loss related to the FCC’s recently completed spectrum Auction 103 and a net charge of $182 million related to a mark-to-market adjustment for pension liabilities.
In first-quarter 2020, Verizon’s results also included the continued effects of a reduction in benefits from the adoption of a revenue recognition standard, primarily due to the deferral of commission expense. The net impact was 3 cents in first-quarter 2020.
Highlights
Total consolidated operating revenues in first-quarter 2020 were $31.6 billion, down 1.6 percent from first-quarter 2019. This decline was primarily the result of growth in wireless service revenue in the Consumer and Business segments, more than offset by sharp reductions in equipment revenue, after social distancing measures were adopted in March, limiting in-store customer engagement.
First-quarter 2020 cash flow from operations totaled $8.8 billion, an increase of $1.7 billion from first-quarter 2019. This year over year growth was primarily the result of Voluntary Separation Program payments and voluntary pension contributions made in first-quarter 2019 that did not repeat this year, as well as working capital improvements this quarter.
Capital expenditures in first-quarter 2020 were $5.3 billion. Capital expenditures continue to support the capacity for unprecedented traffic growth across Verizon’s networks and the deployment of fiber and additional cell sites to support the company’s 5G Ultra Wideband rollout.
In 2018, Verizon announced a goal to achieve $10 billion in cumulative cash savings by the end of 2021. This initiative has yielded $6.3 billion of cumulative cash savings since the program began and is on track to achieve its target.
Bad debt expenses increased in first-quarter 2020 as a result of changing expectations around customer payments during the COVID-19 crisis. The company increased its bad debt reserve in first-quarter by $228 million based on the expected number of customers who will seek payment relief under the Keep Americans Connected pledge.
The company ended first-quarter 2020 with $7 billion of cash on hand, an increase of $4.5 billion from year-end 2019. Carrying a higher cash balance is part of the company’s liquidity planning strategy, which included a $3.5 billion bond offering completed in March.