Verizon Communications Inc.

Good morning and welcome to the Verizon first quarter 2019 earnings conference call. At this time all participants have been placed in a listen only mode and the floor will be open for questions following the presentation. To ask a question press star 1 on your touch tone phone. If at any point your question has been answered you may remove yourself by pressing star 2. Today's conference is being recorded. If you have any objections you may disconnect at this time. It is now my pleasure to turn the call over to your host, Mr. Brady Conner, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our first quarter earnings conference call. This is Brady Conner, and I'm here with Hans Vestberg, our Chairman and Chief Executive Officer, 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 I get started, I'd like to draw your attention to our safe harbor statement on slide two. 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 on our website. The quarterly growth rates disclosed in our presentation slides and during our formal remarks are on a year-over-year basis, unless otherwise noted as sequential. Now let's take a look at consolidated earnings for the period. For the first quarter of 2019, We reported earnings of $1.22 per share on a GAAP basis. These reported results include a net pre-tax benefit of $96 million related to a pension remeasurement triggered by the voluntary separation program. The net impact after tax was a benefit of approximately $71 million, or two cents per share, resulting in adjusted earnings per share of $1.20. This represents growth of 2.6% on an adjusted basis compared to $1.17 a year ago. Let's now move to slide four and take a closer look at our earnings profile for the first quarter. As a reminder, at the beginning of 2018, we adopted accounting standard ASC606 for revenue recognition, which results in a reduction in wireless service revenue, offset by an increase in wireless equipment revenue, and a deferral of commission expense in both our wireless and wireline segments. As we discussed previously, we expect a smaller benefit in 2019 than we realized last year from the adoption of the standard, primarily due to the deferral of commission expense. The reduction in benefit creates a year-over-year headwind to consolidated earnings per share and adjusted earnings per share. For the first quarter, the impact was a $0.03 year-over-year headwind to earnings per share. This headwind is expected to continue until the end of 2020. In addition, as of January 1st, 2019, we adopted accounting standard ASC 842 for leases. This will primarily result in a gross up on the balance sheet for all operating leases. Upon adoption, we recorded approximately $22.1 billion in operating lease obligations on our consolidated balance sheet. In addition, the lease standard affects our earnings per share primarily due to the expensing of certain lease costs. As highlighted on our last call, we expect this impact to result in a one to two cent per quarter headwind on earnings per share through 2019. For the first quarter, this headwind was one cent on earnings per share. As you look at slide four, you can see that the 2.6% growth in adjusted EPS includes both the impacts from the deferral of commission expense related to the revenue recognition standard and the adoption of the leasing standard. This highlights the strong underlying performance of the business. Matt will take you through the details and key drivers later in the call. Before we do that, I'll turn the call over to Hans for his opening remarks.

Thank you, Brady, and welcome everyone to the first earnings call in the 5G mobility era. Once again, Verizon has led the world in the development of new technologies with the launch of our 5G ultra-wideband mobility network and the Motorola 5G smartphone. We launched our first two cities, Chicago and Minneapolis, and continue to deploy infrastructure in more cities, prioritizing cities that have made it easy to build there. Our initial launches are performing as expected, on a brand new technology being deployed for the first time in the world. As more features within the network enhances become available for deployment through ongoing software innovation, we will provide increased coverage, improved capacity and greater throughput. For our 5G Home product, we are on track to launch additional markets when new customer equipment under the global standards becomes available in the second half of the year. These enable us to apply our learnings from the initial commercial launch in 2018 to a broader base of customers. I'm super proud of what Verizon team has achieved so far. And I'm pushing our teams for many more milestones and industry firsts that will give our customers the best experience. 5G has been a huge focus for us. But it hasn't taken away from our ability to enhance and improve the best-in-class 4G LTE network and superior customer experience. The network team continues to deploy leading technologies that improve our customers' experience. We have 4G LTE advanced capability in over 1,500 markets across the U.S. and continue to be recognized by third parties for our superior network performance. Our one fiber deployment is rapidly expanding the multipurpose fiber network outside our landline footprint. This will enable new revenue opportunities in the large enterprise, small businesses, public sector and the wholesale businesses, while also delivering expense reductions opportunities. We have ramped up installation to a run rate over 1,000 root miles per month, which puts us at the top of all major US fiber providers. All of this is being accomplished within the current levels of our CAPEX guidance. We're now two years into the implementation of our next generation, Intelligent Edge Network, which we expect to be largely completed by 2021. We're realizing significant deficiencies and cost savings from our network transformation initiatives. and expect the CAPEX and the OPEX benefits to extend well beyond the investment period. With our unique set of assets, including our wide portfolio of spectrum, dense fiber network architecture, and software-defined network capabilities, Verizon remains the clear network performance leader in today's marketplace. And we're best positioned to capitalize on all the opportunities that 5G will bring to bear. Our ambition remains to provide the most advanced next-generation network performance in the world. As I have said many times before, the combination of our intelligent edge network and the 5G technology capabilities will deliver eight network currencies to our customers and open up a new world of innovation that will transform the way we work, live and play. We're leading in the world in 5G, extending our leadership position in 4G, executing on the fundamentals, and creating new ways to leverage our vast distribution capabilities through our network as a service strategy, and focus our partnership and key elements in driving increased value for our customers. Therefore, we are excited to announce we partnered with Google to offer YouTube TV to our customers wherever they want it and on whatever platform they choose. Our new partnership allows our wireless mobility customers to take their YouTube TV with them on the go. Our wireless 5G home customers to add premium content from YouTube TV to their internet bundle. And gives our consumer Fios broadband customers even more options when it comes to content and services. 2019 is shaping up to be an exciting year for Verizon. We have started the year with a solid financial result for the first quarter, led by strong growth in wireless service revenue and earnings per share. We're confident in the current state of our business, and we're a good momentum going into the second quarter. I'm proud of the team's flawless execution in times of so much change and transformation in the company. We have maintained our disciplined approach to capital allocation, focused on investing in our networks, supporting a consistent dividend policy and strengthening our balance sheet as shown by our recently announced leverage target. We're well positioned to deliver on all of our capital allocation goals in the years ahead. We're highly confident in our underlying business and go-to-market strategy as we now have moved to our new Verizon 2.0 structure as of 1st of April. The new structure positioned us to better serve our customers and provide solutions to their needs regardless of their underlying technology. We will begin reporting in the new structure starting with the second quarter results. With that said, I will now hand the call over to Matt to discuss our financial results.