Verizon Communications Inc.

Good morning and welcome to the Verizon second 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 second 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 second quarter of 2019, we reported earnings of $0.95 per share on a GAAP basis. These reported results include a pre-tax charge of approximately $1.5 billion related to early debt redemption costs. The impact after tax was approximately $1.1 billion or $0.28 per share, resulting in adjusted earnings per share of $1.23. This represents growth of 2.5% on an adjusted basis compared to $1.20 a year ago. Let's now move to slide four and take a closer look at our earnings profile for the second quarter. Consistent with the approach we discussed last quarter, we have illustrated the ongoing impacts to earnings from the adoption of accounting standard ASC 606 for revenue recognition, as well as the adoption of ASC 842 for leases. As we pointed out last quarter, we expect a smaller benefit in 2019 than we realized last year from the adoption of ASC 606, primarily due to the deferral of commission expense. The reduction in benefit creates a year-over-year headwind to both reported earnings per share and adjusted earnings per share. The impact was a $0.03 headwind in the quarter and $0.06 year-to-date. As a reminder, this headwind is expected to continue until the end of 2020. At the beginning of this year, we adopted accounting standard ASC 842 for leases, which resulted in a gross up on the balance sheet for all operating leases. In addition, the lease standard affects our earnings per share primarily due to the expensing of certain lease costs. As highlighted previously, we expect this to result in a one to two cent per quarter headwind on earnings per share throughout 2019. For the second quarter, this headwind was one cent on earnings per share. As you can see on the slide, the 2.5% 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. With that, I'll now turn the call over to Hans.

Thanks, Brady, and thanks, everybody, for joining this second quarter earnings call. We had a strong second quarter. It was fueled by a very good wireless service revenue growth as well as a strong EPS, adjusted EPS growth as well. So I think the team had a good quarter with a lot of focus on execution. At the same time, our operational metrics was good with net additions on the wireless side as well as a very low churn. That, in combination with a very solid capital allocation, as well as efficiency coming out from our capital allocation process, all in all also ended up to a very good cash flow. So if I sum it up very quickly, a very good quarter from us financially. Together with our work in the network, which is so important to us when we're building our network as a service, we also won all the top third-party measurements. We won from J.D. Power the 23rd consecutive time. When it comes to root metrics, a 12 straight win there as well. So we are really getting the right feedback from the market and the measurements that is really valuable in this market. At the same time, we won some more spectrum in the millimeter wave. auction which is now adding up to our portfolio which means that we have a portfolio for the 5G era where we can build capacity and we can build coverage which we have said all the time we're going to build a real 5G with all the eight currencies that I've talked about before. We also have launched quite a lot of cities here lately adding up so we are on track for the 30 markets that we have said we will do this year. At the same time we continue to add new devices to the portfolio. The latest one was the Enzigo MiFi 5G device that we launched recently and now four different devices on 5G. We're also very focused on the fiber because ultimately if you're going to do 5G you need fiber and our fiber deployment is now in more than 60 cities And we had 1,400 route miles a month in average in this quarter, which means that we increased from the first quarter, continued this so important build for our overall Intelligent Edge network and for the 5G deployment we're doing. When it comes to Verizon 2.0 and its transformation, one of the proof points is, of course, today that we now are reporting Verizon Consumer Group and Verizon Business Group as segments in the earnings release that we're doing today. I can also say that we get a lot of good traction with our customers, especially with enterprise customers with the new support and the new go-to-market we have where we can show the full portfolio of Verizon and seeing that we have the right support also for the people in the line meeting our customers every day. At the same time, we continue with the network as a service concept where we have now announced our collaboration with YouTube TV where we're going to offer that both to our FIUS customers but also to the wireless customers. Again, working on the model where we outlined earlier this year how we can partner with some of these content players instead of investing ourselves in it and seeing that we can bring a seamless service for our customer but also making it very efficient for ourselves. and for our customers. We also had continued and finalized the voluntary separation program in the quarter and we have done quite a lot of that and that in total now puts us up to have a competitive cost base and actually done quite a lot of these changes recently. So I would say that we are doing this transformation from a position of strength and I'm really proud of the team that have done all of these changes and transformation in the last 12 months and delivering these results at the same time. And it really sets us up to continue to be very competitive in this market and definitely to continue to be the leader in this market. So I'm proud of the team and what we're producing this quarter. By that, I hand it over to Matt to go over the financials more in detail. Thanks, Hans.