Verizon Communications Inc.

Good morning, and welcome to the Verizon First Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open up 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 over the call to your host, Mr. Brady Conner, Senior Vice President, Investor Relations.

Thanks, Angela. 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. Now let's take a look at consolidated earnings for the first quarter. In the first quarter, we reported earnings of $1.09 per share on a GAAP basis. Reported first quarter earnings include a pre-tax loss from special items of approximately $1.5 billion. This includes a pre-tax loss of approximately $1.2 billion from early debt redemption costs. In addition, the impact of amortization of intangible assets related to TrackPhone and other acquisitions was $238 million. Excluding the effects of these special items, adjusted earnings per share was $1.35 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.

Thank you, Brady. Good morning and thanks for joining us for this earnings call. It was great to see so many of you at our investor day earlier in March. During the first quarter, the team stayed focused and continued to execute on our network as a service strategy. This strategy underpins our five vectors of growth and a diverse path to revenue growth that set us apart and set us up for today and tomorrow. To that end, I'm pleased with the progress we've made across our five vectors during the first quarter. We continued to make headway towards our long-term targets and delivered a solid start to the year, even in the face of competitive and macroeconomic pressures. Matt will go deeper on these topics later on. With that, let's get into the results at the high level. Our first quarter adjusted EPS results of $1.35 proves our ability to execute and deliver profitability. This demonstrates our unique position of having both a focused strategy and strong execution capabilities to meet the needs of our four stakeholders in the growing 5G economy. It all starts with our network expansion and execution. As you've heard me say many, many times, mobility, broadband, and cloud are the essential pieces of the 21st century's infrastructure. We're already taking advantage of this infrastructure and capitalizing on an addressable market that is growing as consumers and businesses adopt 5G. We saw this growth in our wireless sales, our customer loyalty, and the rapid expansion of our fixed wireless business in this quarter. Across the business, our wireless activations were up 11% year-over-year, and we delivered our best Q1 phone net ad performance since 2018. Additionally, our fixed wireless started to benefit from the launch of CBAN during the quarter, helping to amplify our national broadband strategy and deliver our highest broadband net ads in over a decade. We continue to deploy CBAN rapidly. enabling more and more of our customers to enjoy our ultra-wideband experience, while also accelerating and amplifying our 5G revenue opportunities. A strategic pillar in our network expansion is our C-band build-out, which, combined with our continued millimeter wave rollout, further establish and strengthen our network leadership, with RootMetrics ranking us again as the most reliable 5G network in the United States, and we have just started with the C-band deployment. At the Super Bowl, we demonstrated the power of 5G to deliver new in-stadium and home experiences. For example, fans streaming the halftime show had access to multiple camera angles over our network to fully immerse in the entertainment experience. Only something that can be done with 5G Ultra. This is just a taste of the new customer experience we and our partners are beginning to build on 5G Ultra. This is all based on a strong belief in giving our customer maximum optionality, like mix and match, multi-club partners that allow our business customer choice for a digital transformation on 5G Mobile Edge compute. choice on premium experience with Verizon Up, and choices of streaming services with exclusive deals only on Verizon. Just this week, we announced HBO Max will be offered on our Plus Play platform. We're empowering our customers to choose the services they need, and we're delivering on it. Our Disneyland focus is reflected in our first quarter result, as we saw continued momentum with step-ups and elevated device upgrades from our customers. As we previously mentioned, as technology megatrends further shift how we will work and live, 2022 is a year for Verizon to scale execution. The world continues to transition toward increased connectivity, and the telecommunication industry's role in building our future has never been more vital. Through our key investments across our portfolio of assets, we will continue to build on our unique competitive position in the industry and drive growth across all of our five vectors. As I said before, 5G adoption is already much faster than what we saw when we changed from 3G to 4G. A year after 4G launched, less than 10% of the users had a compatible device. A year after the launch of 5G dynamic spectrum sharing, about 24% of our customers were on 5G devices. 5G device penetration is significant, and we expect it will reach 60% of our wireless consumers by the end of 2023, up from 40% at the end of the first quarter. Let me now talk about the momentum in our business group. Verizon business group continues to have a very strong momentum in wireless. I'm proud to report that Tammy and her team delivered the best quarterly phone net ad since we formed Verizon Business Group, and they are just getting started. We're also rapidly building our 5G mobile edge compute and private 5G networks. Verizon was first in the industry to offer MEC services. This quarter, we partnered with Cisco to deliver the low latency connectivity necessary for autonomous vehicles. As the partner of choice across all categories, we also made our first 5G agreement with a premium global automaker, and we will bring 5G connectivity to the next generation of Audi models, starting with their 2024 vehicles. This IoT momentum expands across all our verticals with another strong net-add performance this quarter. We're also seeing very promising progress in our private 5G network capabilities, offering small, mid-market, and large enterprise and client turnkey plug-and-play services. I'm also pleased to share that our C-band launch and aggressive execution generated nationwide customer enthusiasm for our broadband offerings. Total new broadband customers were the highest in over a decade, with 229,000 net ads driven by a strong increase of 194,000 fixed wireless access net ads. And this is not the one-off. You can see from the current broadband trends that the demand for fixed wireless is extremely high and growing. In the consumer business, we grew postpaid average revenue per account by 2.6%. As our users upgraded new 5G packages, ARPA growth is a major part of the strategy that we presented at the investor date. In the value market, the track for integration continues to unlock an addressable consumer market that we have only just scratched the surface of. We now have the ability to service customers in all segments, regardless of the macroeconomic outlook. Manon and I are very encouraged by this opportunity and see tremendous value in the customer base Eduardo and his team have cultivated under the TracFone umbrella. The migration of TracFone subscribers from other networks continues according to plan. In addition to the result in 5G mobility, nationwide broadband, MEC and business-to-business and the value segment, we also see ongoing momentum in the fifth vector, network monetization, with growth in volumes driving incremental revenues. Of course, all of this opportunity is built on top of the best network in the industry and the deployment of our 5G ultra wideband technology. Kyle and team now have more than 35,000 millimeter wave sites on air and approximately 130 million pops covered at quarter end with C-band. As deployment continues and device penetration ramps, traffic on the ultra-wideband is increasing rapidly. At the end of the first quarter, 14% of all traffic in urban areas was on 5G Ultra, the result of our combined millimeter wave and mid-band spectrum. We saw a 35% increase in millimeter wave traffic between Q4 2021 and Q1 2022. CBAN traffic grew 155% from the end of February to the end of March. Where CBAN is deployed, 30% of our wireless traffic uses that spectrum. We have achieved this network evolution in the face of ongoing supply chain disruption. As I mentioned in previous quarters, our supply chain management is world class. And we have planned and executed extremely well to anticipate and meet the needs of our customers. We continue to work with our partners with a focus on our deployment targets. We remain diligent in managing a complex global supply chain and count on our expertise to help us to deal with the unexpected. As you come to expect from our technology team, progress is being made throughout our network. In March, we announced a major milestone in the advancement of our 5G network as we worked with two satellite companies to secure early clearing of an additional 100 MHz of C-band spectrum in 30 additional markets. Rolling out our C-band service on this spectrum will expand our 5G market by 40 million potential customers, a full year ahead of schedule. We expect to reach at least 175 million POPs by the end of 2022 on C-band. Early spectrum clearance gives us the speed to market and accelerates the return on capital for our network investments. Having early access to these 30 major markets will support our entire business. It adds consumers and business to our addressable market, and we know from experience that we seek customer interest for fixed wireless access as soon as it is available. Our network expansion also supports our mission of digital inclusion, which is key to how we serve our four stakeholders and execute our strategy according to responsible business practices. Let me spend a minute on our progress in this area. Today, we released our detailed environmental, social, and governance report for 2021, and we are proud of our progress. The report covers our ESG strategy in detail and reflects how responsible business practices drive our business. During the first quarter, we completed allocating proceeds from our third green bond offering and issued our fourth $1 billion green bond, which is expected to be allocated towards renewable energy. We also continue to pursue our long-term carbon footprint goals, as described in previous quarters and in our ESG report. Third parties have taken notice. We continue to be recognized for our sustainability efforts. During the quarter, MSCI raised our ESG rating to AA, our highest rating to date. And Sustainalytics ranked us strong in ESG risk management and low in overall ESG risk, putting us above our U.S. telecom competitors. As always, what it means to be a responsible business depends on global conditions. I'm proud of Verizon's relief efforts to support Ukraine, including extending free calling to and from Ukraine since the start of the war. Taken together, Verizon remains well positioned to compete this year. Our first quarter performance puts it on track for this pivotal investment year, and we remain well positioned to achieve our long-term growth targets. Now, I will hand the call over to Matt to address our results in detail, as well as some updates on the 2022 guidance.