Verizon Communications Inc.

Good morning and welcome to the Verizon First Quarter 2021 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 touchtone 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 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 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 posted on our website. The quarterly growth rates discussed 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 first quarter. In the first quarter, we reported earnings of $1.27 per share on a GAAP basis. Reported first quarter earnings include a pre-tax loss from a special item of approximately $223 million related to the sale of certain wireless licenses. Excluding the effects of this special item, adjusted earnings per share was $1.31 in the first quarter. On April 8th, we announced a recall process for approximately 2.5 million Jetpack units, which impacted some customers enrolled in our distance learning programs. The overall impact included within consolidated operating income was approximately $160 million during the quarter, split between $100 million in the business segment and the remaining $60 million in consumer. The impact included within reported and adjusted earnings per share was $0.03 in the first quarter. With that, I'll now turn the call over to Hans to take us through a recap of the first quarter.

Thanks, Brady, and welcome to all to this first quarter earnings call. We marked more than one year since the devastating effects of COVID-19. While we see significant progress in vaccination, customer sentiment, and recovery of our economy, there's still a lot to go before we're back to normal. I'm proud of how Verizon has responded during this period for all our stakeholders as we have executed our balanced stakeholder-driven strategy And as I said, during the worst period of the pandemic, Verizon will come out stronger as a company when this is over. During the last 12 months, we have progressed all our position with customers, employees, and added great assets to an already strong position. And today we stand stronger than ever to compete in the market and serve our customers. Looking back on the quarter, We amplified and accelerated our strategy through our average 160 megahertz nationwide position in C-band. And as we laid out in our invest today, the combination of C-band and our millimeter wave places us in a unique position of strength to execute on all 5G opportunities, 5G home, 5G mobility, and 5G mobile edge compute. On top of that, we have all our five vectors of growth in play together with our network leadership and a strong network as a service foundation. And the progress we made in the quarter confirms that our strategy is working. We had growth in all our businesses for the first time since the launch of Verizon 2.0. We had growth in both EPS and cash flow. With all this work by our great team, We have a head start in the post-COVID era with a clear and differentiated strategy, diverse go-to-market models, network leadership, industry-leading partner ecosystem, and a strong brand, all of which together provides a great platform and foundation to achieve our growth targets for 2021 and beyond. Let me talk about some of the highlights from the first quarter. Our network team continues to do great things, by leading the network performance in the market, as well as deploying more assets than ever before. Millimeter waves, C-band, 4G, 5G, and fiber. I have a lot of confidence that this team will accelerate our network leadership. Our unique mix and match model continues to deliver with the migration to unlimited and unlimited premium in the quarter, as well as building on our exclusive offerings like Disney+, and the most recent Discovery Plus that was launched earlier in the quarter. And we're pleased with the Discovery Plus with the current enrollment rates we have seen so far. Our brand and responsible business framework, Cities and Verizon, continue to set standards in the industry. Verizon was recognized by Fast Company as the sixth most innovative company in the corporate social responsibility earlier this quarter. Brand finance recognizes us as the most valuable telecom brand. Within ESG, we have ambitious goals, such as our commitment to be net zero in the carbon emission by 2035. Our longstanding focus on diversity, equity, and inclusion is evidenced by the fact that we have 100% pay equity by gender globally and by race, ethnicity in the United States. And earlier this week, we also launched our 2020 ESG report. We continue with a high level of deployment of millimeter wave and fiber in the quarter, and we're on the track to deliver on our operational targets for the year. We brought 5G service to several additional cities. We currently have 30 5G home and 67 5G mobility cities live, and more to come. We recently signed our first European private 5G deal with Associated British Ports. We also expanded our 5G edge partnership with AWS with private 5G and edge computing to our customers. We continue to scale our network as a service strategy across new markets and verticals through a diverse set of partnerships. We have partnered with leading brands across diverse verticals. such as Honda to innovate connected and autonomous driving, Deloitte and SAP to create a 5G and edge computing retail digital platform that will provide retailers with real-time operations data, and DreamScape and Arizona State University to build and commercialize immersive learning and training. At our investor day, We shared with you our plans and commitment for C-band and ultra-wideband deployment, which continues to progress well. Our intent is to invest $10 billion of incremental C-band CAPEX to accelerate the integration of this capacity into our network. Our recent design deals with Crown Castle and SBA to accelerate our C-band deployment and look forward to providing further updates on the build status throughout the year. We have already ordered half of the total network equipment needed from our 5G suppliers to support C-band deployments in 2021. And the satellite operators are on track to clear the spectrum between third and fourth quarter of 2021 for the first tranche of spectrum. In addition, we continue to expand our ultra-wideband coverage in Q1. We deployed 3,600 new ultra-wideband sites, and to date we have close to 21,000 sites on air, and on track to reach 30,000 by end of this year. OneFiber formed a strategic backbone of our intelligent edge network, and we continue to expand fiber deployment, and to date we have deployed more than 42,000 route miles. We were also pleased with the low rates we achieved for long-term financing of this critical strategic investment. We view the record investor demand as supportive of our strategy and our financial discipline. Lastly, we are also very proud to offer prominent roles to nine diversity and inclusion financial firms as part of the 25 billion U.S. dollar financing. As I outlined earlier, our investments in our network and customers are generating solid revenue growth across all three of our operating groups. Our success in mix and match continue to drive uptake of unlimited plans and higher ARPA, supporting year-over-year growth of 2.4% in wireless service revenue, up from 2.2% in the fourth quarter last year. Ronan and the team closed out Q1 with strong momentum, and I'm excited to see their Q2 performance now that almost all of our stores have reopened. In addition, we see solid growth in Fios and with Fios Internet reporting the best first quarter net ads in six years. Additionally, Verizon Media Group continues to contribute meaningful growth, including the second consecutive quarter of double-digit growth year-over-year on the top line. With that, let me ask Matt to provide some deeper insight to the financial of the first quarter.