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G500-2023-Verizon

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F500 2023-Verizon Communications

Verizon can boast of being the U.S. cell phone carrier with the most subscribers, with about 144 million consumer and business subscribers as of year-end 2022. But revenue grew only slowly last year. 
<ul> 
 	<li>The company reported total wireless service revenue of more than $74 billion for 2022.</li> 
 	<li>In April 2023, Verizon reported broadband net additions of 437,000 in the first quarter of 2023–the largest quarterly gain in more than a decade. That helped offset a steady decline in customers for its Fios TV products, as more customers defected from traditional cable television.</li> 
</ul>

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F500-2020-020-Verizon

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Verizon Communications is a telecommunications conglomerate providing telephone and internet services to consumers and businesses, along with wire-line internet in the Northeast through its fiber-optic network, Verizon Fios. Originating as Bell Atlantic Corp. in 1984, it merged with GTE Corp. in 2000 to become Verizon Communications. Its stock is a component of the Dow Jones industrial average.

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Verizon Communications (VZ): Company Profile, Stock Price, News, Rankings

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Verizon Communications

verizon communications

Good morning, and welcome to Verizon's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants have been placed in a listen only mode and the call will be opened for questions following the presentation. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our second quarter twenty twenty five earnings call. I'm Brady Connor, and on the call with me this morning are Hans Vetzberg, Vesberg, our Chairman and Chief Executive Officer and Tony Schiadis, our Chief Financial Officer. Before we begin, I'd like to draw your attention to our Safe Harbor statement, which can be found at the start of the investor presentation posted on our Investor Relations website. Information in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.

Discussions of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our Investor Relations 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. Earlier this morning, information on our second quarter results and supplemental materials relating to today's call were posted to our Investor Relations website. With that, I'll turn it over to Hans.

Good morning, everyone, and welcome to our earnings call of the second quarter twenty twenty five. Our performance in the first half of the year highlighted by a strong second quarter demonstrates that our strategy is working. We remain committed to disciplined execution and customer centric innovation. We're growing profitable connections and the value of our customer relationships. While we always see opportunities to improve, I'm confident in the future of our business.

Our financial performance was strong this quarter with a market leading wireless service revenue of $20,900,000,000 up 2.2 from last year. We delivered adjusted EBITDA of $12,800,000,000 up 4.1% year over year, setting another record for the best reported quarter and the second consecutive quarter with growth exceeding our guided range for the year. Strong profitability drove free cash flow of $5,200,000,000 for the quarter. This brings our year to date free cash flow to $8,800,000,000 an increase of over $300,000,000 compared to the first half of twenty twenty four. Our cash flow from operation underscores the strength of our business and provide us flexibility to execute on our capital allocation priorities, which remain unchanged.

As a result, we continue to lead the industry with a nation's best network. Our segmented market strategy, which is diverse portfolio of offerings, is resonating with our customers. Our customer first offerings such as My Plan, My Home and the new My Biz Plan, along with our best value guarantee, drove significant sales momentum. We're also deploying AI powered innovations to enhance customer experience on the nation's best network. On the infrastructure front, our execution is outpacing our targets.

C band deployment is ahead of schedule. Our fixed wireless base has surpassed 5,000,000,000 subscribers, and our fiber build is tracking ahead of its plan. This demonstrates disciplined execution across our entire portfolio. Given our financial performance and the momentum in the first half of the year, we are raising our full year guidance for adjusted EBITA and adjusted EPS. We're also raising our guidance for free cash flow for the year, driven by our strong cash flow from operations and further supported by the positive impact from the tax reform.

Tony will provide you with more details shortly. Now let's turn to our operational performance. In the second quarter, we delivered over 300,000 net additions across our Mobility and Broadband platforms. In mobility, we delivered year over year improvements in the combined postpaid and core prepaid phone net adds, including the fourth consecutive quarter of subscriber growth in core prepaid. The wireless market remains competitive, and we continue to take a strategic and segmented approach, maintaining our financial discipline.

As expected, postpaid phone churn remained elevated this quarter, reflecting the lingering effects of our pricing actions and ongoing pressure from federal government accounts. We're actively focused on improving retention by strengthening our value propositions and leveraging our AI powered customer experience innovations. On upgrades, after being down year over year for eight out of the last nine quarters, we saw an uptick in the second quarter driven by our best value guarantee. We continue to expect mid single digit growth in upgrade activity for the full year. Our dual fixed wireless access and fiber broadband strategy continues to drive market share gains.

A key highlight is fixed wireless access, which surpassed the 5,000,000 subscribers milestone, keeping us firmly on the track to achieve our goal of 8,000,000 to 9,000,000 subscribers by 2028. We achieved robust broadband growth even as our C band build out expands into less dense markets and despite the softer move environment in our Fios footprint. We continue to scale our private network business, winning a landmark deal to deploy multiple private fiber networks across the Thames Freeport. This network will serve as a technology foundation for one of UK's busiest commercial corridors, fueling a multibillion dollar regeneration project with advanced capabilities like AI and real time logistics. Our AI Connect offerings are also generating strong interest.

Our sales funnel has nearly doubled to $2,000,000,000 since launch earlier this year. While these are often complex deals with longer sales cycles, we're actively engaged in several sizable opportunities. This growth highlights a surging demand for high bandwidth fiber capacity and diverse routes, both lit and dark fiber, to serve different customer needs. As AI transitions from centralized training to widespread real time application, compute power at the network edge becomes essential. Our existing infrastructure is uniquely positioned to support this evolution.

Our network is our key differentiator, consistently delivering top performance. This quarter, JD Power once again recognized Verizon for the best network quality and RootMetrix first half year twenty twenty five awards named as the nation's best, fastest and most reliable five gs network. We're building on this advantage every day. Our C band deployment is ahead of schedule and on track to cover 80% to 90 of planned sites by year end, with nearly all sites now standalone capable. Our fiber build is tracking ahead of plan, and we're positioned to deliver 650,000 incremental passings this year.

Meanwhile, the regulatory approval process for our pending acquisition of Frontier is progressing as planned. We're encouraged by Frontier's performance and look forward to closing the transaction to further accelerate our fiber expansion. As we near the closing of Frontier acquisition, we will provide a comprehensive update on our strategy, broadband expansion and capital allocation considering all stakeholders. We look forward to providing an update in the next few months. With that, I'll turn it over to Tony to go into the financials in more detail.

Thanks, Hans, and good morning. The first half of the year reaffirms the strength of our business, highlighting the effective execution of our disciplined strategy and significant progress towards achieving our financial goals. As a leading provider of essential connectivity across The U. S, we are committed to offering the best value and delivering the best service and customer experience within the industry. We are focused on driving wireless service revenue and adjusted EBITDA growth and robust free cash flow.

The second quarter demonstrated our ability to deliver strong financial results even in the period of elevated promotional activity and broad economic uncertainty. We remain focused on high quality profitable growth, recognizing that volume growth is only valuable when aligned with our disciplined financial framework. Our goal is to improve volumes year over year, though we will not do this at the expense of delivering on our three key financial priorities. This past quarter, we achieved strong sales focusing on high quality customers without overspending for growth. Even with public sector challenges and ongoing consumer postpaid phone churn pressure, we maintained our financial discipline.

Within Consumer, second quarter postpaid phone gross additions were up sequentially and year over year. Our sales execution remains strong, leveraging our attractive value proposition, including the recent launch of the best value guarantee. As expected, we saw the residual effects of our first quarter pricing actions impact our second quarter consumer postpaid phone churn. Additionally, we continue to see elevated competitor promotional activity. As a result, second quarter consumer postpaid phone churn remained consistent with the first quarter at 0.9%.

We have taken a series of actions to address our elevated churn. On June 24, we launched initiatives designed to improve the customer experience, including leveraging AI for more personalized support. In addition, we continue to enhance our value proposition and build customer loyalty through the best value guarantee. We provide exclusive access to the best events and experiences and our refresh app helps customers maximize the value of their plans. Mobility phone net adds, which includes both consumer and business retail postpaid as well as core prepaid were $16,000 for the second quarter.

This represents an improvement of $25,000 from the prior year period. Consumer postpaid phone net losses totaled $51,000 for the second quarter compared to $109,000 net losses in the prior year period as we benefited from strong gross adds. Verizon business delivered 42,000 phone net adds in the second quarter compared with 135,000 net adds in the prior year period. A significant majority of the year over year decline was driven by business. Though we anticipate public sector pressures to persist in the second half of the year, we expect the impact to subside towards the end of the year.

Consistent with our wireline approach, we continue to remain disciplined and not pursue low margin wireless business or overpay for volumes. We remain confident that the team has the tools to execute effectively in the current environment and deliver healthy volumes for the full year 2025. Core prepaid net additions were $50,000 for the quarter, an improvement of 62,000 from the prior year period. This marks four consecutive quarters of positive core prepaid net adds, reflecting the strong execution of the team. The Visible, Total Wireless and Straight Talk brands continue to perform well and are progressively building a high quality business.

Overall, core prepaid ARPU rose above $32 and we have now reached an inflection point where after four quarters of volume growth, we expect prepaid to positively contribute to wireless service revenue growth for the remainder of the year. Turning to total wireless postpaid upgrades, we saw a 14% increase in the first half of the year as compared to the same period of 2024. This result was driven by a healthy initial uptake of our best value guarantee program, which is an investment in our high quality customer base. As Hans said earlier, we continue to expect upgrade activity to increase by a mid single digit percentage in 2025 as compared to 2024. Moving on to broadband, we delivered 293,000 net additions in the quarter.

We are taking broadband share and see strong demand for both our fiber and fixed wireless access offerings even with seasonal impacts and a softer move environment as compared to prior years. In fixed wireless access, we delivered 278,000 net adds for the quarter, growing the base to more than 5,100,000 subscribers. FWA demand remains strong and we are on track to deliver our goal of 8,000,000 to 9,000,000 FWA subscribers by 2028. Fios Internet net adds for the second quarter were 32,000 versus 28,000 in the prior year period. Fios provides customers with industry leading connectivity and delivers high customer satisfaction reflected in both robust ARPU and consistently low churn rates.

We are expanding our Fios footprint and remain on track to deliver 650,000 new passings in 2025. As we talk about Fiverr, let me provide a brief update on the pending Frontier transaction. The team is working through the necessary steps to complete the acquisition and we remain on track for an early twenty twenty six close. We have received regulatory approvals from eight states as well as the FCC and DOJ and are productively engaged with the remaining state regulatory agencies. Based on Frontier's publicly reported results, the company continues to perform extremely well and remains on track with their fiber expansion goals.

Our integration planning efforts are well underway and we anticipate a smooth transition upon the deal closing. We are looking forward to having Frontier's assets serve as an important catalyst for our fiber expansion and broadband growth acceleration. Turning to our financial results, we delivered another strong quarter. Second quarter consolidated revenue reached $34,500,000,000 up 5.2% year over year. This result was driven by solid wireless service revenue and a more than 25% increase in wireless equipment revenue.

Service and other revenue rose 1.6%. Total wireless service revenue reached $20,900,000,000 in the second quarter, a 2.2% increase year over year. Growth was driven by consumer ARPA, which rose 2.3% year over year. We realized benefits from recent pricing actions, expansion in fixed wireless access and increased revenue from perks and other adjacent services. Our robust perk offerings continue to grow at a steady pace, keeping us on track to achieve our goal of 15,000,000 parks by year end and providing a healthy contribution to service revenue.

In addition, prepaid revenue has reached a turning point and was flat in the second quarter compared to the prior year period. We expect prepaid to positively contribute to wireless service revenue growth in the second half of the year. Overall, we are well positioned for continued service revenue growth with healthy underlying customer economics. Consolidated adjusted EBITDA in the quarter was $12,800,000,000 which is the highest we have ever reported and an increase of 4.1% compared to the prior year period. Wireless service revenue growth coupled with the benefits from cost savings initiatives more than offset the impact from the elevated upgrade activity.

Through the first half of twenty twenty five, both wireless service revenue and adjusted EBITDA are up nearly $1,000,000,000 from the prior year, reflecting strong operating leverage. Within that result, the business segment EBITDA has now grown for three consecutive quarters on a year over year basis. From a cost perspective, our voluntary separation program is now complete, generating substantial savings. In addition, we're actively pursuing opportunities within our legacy businesses. These include copper decommissioning and savings from the managed services initiative within our business segment, among other cost efficiency programs.

Adjusted EPS was $1.22 in the quarter, up 6.1 year over year, primarily due to the strength in adjusted EBITDA. Turning to our cash flow summary. Cash flow from operating activities for the first half of the year was $16,800,000,000 up more than 1% compared with the same period a year ago. CapEx for the 2025 came in at $8,000,000,000 compared to $8,100,000,000 in the prior year period. We continue to realize efficiencies in our C band deployment and Fios expansion, enabling us to effectively meet or exceed our network goals well within our capital budget.

For the first half of the year, the net effect of cash flow from operations and CapEx resulted in free cash flow of $8,800,000,000 an increase of 3.6% compared to the same period a year ago. Net unsecured debt at the end of the quarter was $116,000,000,000 a $6,900,000,000 improvement year over year. In the first half of the year, our debt reduction was offset by non cash mark to market adjustments. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.3 times at the end of the quarter, a 0.2 times improvement year over year and in line with the prior quarter. We continue to make progress towards our long term leverage target ahead of the closing of the Frontier transaction.

Our balance sheet remains a significant strength of our organization. Notably, we have under $700,000,000 in unsecured debt maturities remaining in 2025. We will continue to focus on reducing debt ahead of completing the Frontier transaction. As Hans mentioned earlier, our capital allocation framework remains unchanged. We will continue to strategically invest in the business, enhancing our mobile and broadband networks, support a healthy and growing dividend and paying down debt towards our long term leverage target.

As we've mentioned previously, we'll consider buybacks once we reach our leverage target. Our strong operational execution in the first half of the year coupled with favorable tax reform gives us the confidence to increase our guidance for the full year. Given the strong adjusted EBITDA performance in the first half of the year, we are increasing our full year guidance to 2.5% to 3.5 growth, an increase of approximately $125,000,000 at the midpoint. We are increasing our guidance for adjusted EPS growth to a range of 1% to 3% to reflect the new adjusted EBITDA outlook. We are raising our $20.25 free cash flow guidance to a range of $19,500,000,000 to $20,500,000,000 The increase is driven by an estimated benefit of $1,500,000,000 to $2,000,000,000 from the recently enacted tax legislation as well as the disciplined operational execution that drove our strong adjusted EBITDA and free cash flow performance in the first half of the year.

Our Wireless service revenue and CapEx guidance remains unchanged. As we get closer to the closing of the Frontier transaction, we expect to provide an update on our broadband plans as well as our capital allocation strategy. In summary, we have a resilient business model with high quality customer base and continue to execute well in both mobility and broadband. Our second quarter financial performance reflects our disciplined approach to growth and we are well positioned to deliver on our improved outlook in the second half of the year. With that, I will turn the call back over to Hans.

Thank you, Tony. Our strong first half results reaffirm our confidence in Verizon's strategy. Our strategic execution and the ongoing momentum across our business underpin our decision to raise full year guidance. Our focus remains clear. We are committed to growing wireless service revenue, expanding adjusted EBITDA and generating strong free cash flow.

We will achieve this through three key priorities. First, building on the network leadership to create compelling customer offerings that accelerate growth in our mobility and broadband businesses. Secondly, maintaining operational excellence and financial discipline across the organization. Thirdly, scaling our next generation platforms from capturing new enterprise opportunities with private networks to enabling AI at scale and unlocking new revenue streams from our existing assets. The opportunities ahead are significant, and a pending frontier acquisition will accelerate our fiber strategy.

Verizon's unique market position and the essential nature of our services are fundamental to empowering individuals, businesses and society. Verizon has the assets, the strategy, and most importantly, the team to deliver sustainable long term growth. We're excited about the opportunities ahead. With that, Brady, it's time for Q and A.

Thanks, Hans. Brad, we're ready for questions.

Thank you. We will now begin the question and answer If you would like to ask a question, please press star one on your touch tone phone. Please unmute your phone and record your name clearly when prompted. Your name is required to introduce your question. If at any point your question has been answered or you would like to withdraw your request, you may remove yourself by pressing star two.

One moment for the first question. The first question will come from Ben Swinburne of Morgan Stanley. Please go ahead, sir.

Thank you. Good morning. I want to ask about free cash flow kind of capital allocation and then also the outlook for Consumer Wireless. Hans and Tony, you guys have meaningfully more cash flow to play with now. I know you said 1,000,000,000 point dollars to 2,000,000,000 this year.

I think these tax benefits continue beyond 25,000,000,000 What's the best use of incremental capital at Verizon from your perspective? I know you laid out your priorities, but can you help us think about your ambition to get to buy back sooner, build more fiber faster, etcetera, etcetera? And then on the consumer wireless front, should we still expect consumer net add improvement postpaid net add improvement in 2025 versus 2024? I don't think that was reiterated on the prepared remarks. And maybe you could talk a little bit about the churn outlook in the second half where you'll be moving beyond the price increases and so whether we should still be expecting kind of churn normalization? Thanks so much.

Thank you. Let me start with the capital allocation. I think your comments and question there is more than valid. As you saw, we raised our guidance for free cash flow partly because of our cash flow from operation is improving, but also the tax reform that we indicated how much it is. As I said before, I mean, capital allocation priorities are unchanged.

I mean, it's first of all in our business and we have increased the CapEx this year compared to 2024. Dividend, of course, eighteen years of increase. We want to put the Board in a position to continue to grow. We paid down our debt. We paid down our debt again with almost $3,000,000,000 in the first half, and then it will be buybacks.

Now we are in a situation where we are just about or in the couple of months from now in the beginning of next year closing Frontier. So what I said in my prepared remarks is, I want to get a holistic view on all the capital allocation. I mean, how we're going to invest in fiber, what synergies we see, how we're going to do the capital allocation priorities. But clearly, the tax reform is helping us to get faster to the priorities we have. So we feel good about that.

But let me come back to that, so I think we can give you a holistic view on capital allocation. But clearly, we are very excited about Frontier. The performance is great. The synergies are great. And of course, the convergence and the fiber opportunities are also great.

So very excited for that. And so far, Frontier has performed really good. On the wireless consumer, I think that our ambition, as was outlined by Samper in the beginning of the year, doing better this year is still valid. I mean, there's no difference on that. However, we're going to continue to be very financially disciplined.

For us, we will not sacrifice our financials, but you're still getting a net adds if it doesn't make sense, if it's too expensive. You saw us in the fourth quarter last year being aggressive because we saw the opportunities of creating and gaining a lot of high quality customers. You saw our gross adds in the second quarter. So it all depends where the market is and where we go. But ultimately, our goal is to increase our service revenue and then expand our EBITDA and cash flow.

That's our main KPIs. And then on churn, Tony will probably chime in on all of this. But on churn, expected in the second quarter was elevated coming from the price ups, but also from the competitive environment. I think the whole industry is up. Sampad put in a lot of very important churn measurements, 06/24 that now is twiddling going through our system, all our AI empowered customer service impacting.

So very encouraged about what the team is doing and how they are working on the loyalty and retention of our customers. So that's all a little bit. Tony will chime in on all three, I guess.

Yes. Thanks Hans. Good morning, Ben. So a couple of things on churn. Obviously, we're focused on reducing churn in a financially disciplined manner.

And as Hans mentioned, we have a great value proposition with the Verizon value guarantee and also MyBiz on the business side. We have further deployment of C band. We said we're going get to 80% to 90% of C band this year deployed and we see lower churn where C band is deployed. And then the work that Hans mentioned on customer experience, we did a CX launch on June 24 and that work is also augmented by AI and we expect to see improvements there. And then obviously convergence will also reduce mobility churn.

And the team has the retention tools to get there and they're focused on it. And then one other comment just on tax reform as your question around looking ahead, we're not going to guide on 2026, but the extensions of bonus and R and E are permanent. So while we won't guide on '26, I would expect that the impacts in 2026 would be significant.

Yeah, thanks, Ben. Brad, we're ready for the next question.

The next question comes from John Hodulik of UBS. Your line is open, sir.

Great, thanks. Good morning, guys. Two if I can. First, looks like you saw further deceleration in postpaid ARPA growth. Can you just talk a little bit about the drivers that are causing that deceleration?

And then a follow-up on one of the comments, upgrade rates in the teens in the first half and you expect mid single digits for the year. What's the driver of the what would suggest to be pretty rapid deceleration in the upgrades? Thanks.

Thank you. On the postpaid ARPA, I think, again, I mean, we have been growing our ARPA for a long time and we continue to do. We have many levers in there all the way from our broadband, my step ups, only 50% of our customers on my plan. We have the adjacent services. You heard when we had our prepared remarks on our perks basically doubling this year up to 15,000,000 perks.

So we have a lot of drivers for it. So we still believe that we have a good run rate on that. On the upgrades, as you articulated, we have been down eight quarters of the last nine when it comes to upgrades for many reasons. This quarter, we put in, first of all, a couple of incentives for customers to upgrade. So that was so that's why we saw it a bit higher.

But remember, when we talk about the mid single digits, that's both business and consumer. That's the total investments we're having in growth in upgrades. Yes.

And then just a couple of other points on the upgrades. I mean, we absorbed the higher upgrades. The upgrades were up 30% year over year and we still produced strong EBITDA and cash flow in the quarter. So we had good operating leverage across the board there.

Okay, yeah, thanks. Thanks, John. Brad, we're ready for the next question.

The next question comes from Sebastiano Petty of JPMorgan. Your line is open, sir.

Hi, thanks for the question. Just a follow-up on Ben and John's theme there for a second. As we think about the consumer net add results in the quarter, any way to unpack maybe free line contribution intra quarter? I know that was a below the line offer that was in market as well as anything to quantify or read through from the deceleration in core prepaid down pretty materially sequentially. Is there any migration activity within the quarter there?

And then lastly, on the Frontier deal close, you said early twenty twenty six. Is that implying a later than expected close versus 1Q twenty twenty six was the previous guidance given maybe some utility commission reviews that are ongoing out there? Thank you.

No, we can start with the Frontier. No, nothing has changed. It's on the plan we said actually since we announced the acquisition. So it's the first quarter of twenty twenty six, so nothing has changed on that. And then on any particular things on our net adds.

First of all, we had a great gross adds. I mean the team did a great job. Our sales channels were working. Our product is resonating with the market. The free lines was insignificant.

It was part of the 06/24 launch and it just was on for a very short time period and it's off right now. So that had nothing to do with it. It was a really good execution by the team.

And then on prepaid, as you can see, the segmentation strategy is working and the operation rigor now that we have is paying dividends and we have four straight quarters of growth in our prepaid business. And we're seeing good results across all of our main brands whether it's Straight Talk, Visible or Total Wireless and we continue to scale the distribution there. And the other thing I want to point out on prepaid is now that we have four straight quarters of volume growth, we've reached an inflection point and we now expect prepaid will be a contributor to service revenue growth in the second half of twenty twenty five. So we feel good about the progress and the momentum we have in the prepaid business.

Just a quick follow-up there. Within prepaid to postpaid migrations, the 1919% increase in gross additions in the quarter, would that reflect any migrations across the base?

Thank you. Okay, yeah. Thanks Sebastiano. Brad, ready for the next question.

The next question comes from Jim Schneider of Goldman Sachs. Please go ahead, sir.

Good morning. Thanks for taking my question. I was wondering if you could maybe broadly comment on the broadband market trends that you're seeing right now. I think you talked about a softer move environment. But what are you seeing in terms of the gross add environment more broadly across both fixed wireless and Fios heading into the back half of this year, any change in competitive dynamics that would make you feel more or less confident about your ability to sustain better gross add better net additions in the back half?

And specifically, can you maybe comment on your expectation for fixed wireless adds and whether they can improve and recover heading into year end? Thank you.

Thank you, Jim. When it comes to broadband in the first half year, I mean, Fios has been fairly consistent. But of course, what we saw here in the third in the second quarter was a way lower mover market. I mean, still the product is the best product out there. The churn is very low, performing really well.

On the fixed wireless access, it's the same phenomena we talked before. As we go suburban and rural to the 80%, 90% of C band, that's where we create the opportunities for fixed wireless access as is a secondary business case on our build. And that means that we have less passing, so whatever we call it in fixed wireless access world, we have less open for sale. So that's very natural. If I look into the second quarter, I'm pretty certain we will do better on broadband in second half this year than we did in the first.

And maybe could you just comment on the status of your MDU rollout? I know it's in trial phases right now, but would you expect that to be a significant contributor as we head into 2026?

So the MDU solution, which is the world's first, again, Verizon is leading with a solution that nobody else has done. That is more than trials right now, even though it's a smaller scale, where in many states, we start rolling it out. So we want to have a short time period between we have the product and we talk to the landlords. It's going to start scaling even more in the second half. I think it will be a bigger contributor in 2026 than in 2025.

But it's a great product that can get very, very good broadband services all the way up to one gig, which is something extraordinary that the guys have been doing. But we will scale to see that we have the highest quality that Verizon is known for and is our trademark. Thank you.

Yeah. Thanks, Jim. Brad, we're ready for the next question.

The next question comes from Mike Rollins of Citigroup. Please go ahead.

Thanks and good morning. Two topics, convergence and then EBITDA. So first on convergence, curious if you could share an update on how Verizon is progressing with the uptake of these converged bundles within the base. And if you can share how Verizon is looking to differentiate your converged offers versus the competition. And then on EBITDA, you referenced that it was up 4% in the second quarter, first half and that's better than the guidance range of 2.5% to 3.5 So can you unpack within the full year guidance, like what you're anticipating for the rest of the year? And what are the factors that would put you at the high end versus the low end of that range?

I can start and then I'm going to hand it over to Tony. But on the convergence, I think that, of course, our main key differentiator is that we have owners economics on mobility and broadband. We have the biggest mobility base and we're now adding our fiber base with Frontier. So we're to have an unparalleled opportunity for convergence that our customers have a chance to work on both. And as I said before, we have a very high degree on our broadband net adds per quarter that are already converged.

So it's more about when we're going to scale that opportunity, we have even more chances. And if you think about coming into the Frontier footprint when that's approved, we have a huge opportunity as for convergence. So we're excited over that and that's our offering. And on EBITDA, first, before Tony say something, I think you see right now our leverage, the cost takes out we've done, the growth we're doing and it's falling straight down to bottom line. And we will continue to focus on that.

As I said so many times before, the whole executive management and the whole company had three KPIs. It's the service revenue growth and then it's EBITDA and cash flow generation. So very, very, very good start of the year.

Thanks, Hans. Hey, Mike. So on the EBITDA, we were up over $500,000,000 in the quarter and about $1,000,000,000 of EBITDA growth year to date, and that's also in light of having a pretty significant upgrade activity mostly driven by the launch of our value guarantee. And we stayed very disciplined in the quarter.

We didn't chase volumes and they gave us the confidence, the resiliency in the business gave us the confidence to raise the guide. And it starts with the top line revenue and service revenue is up 2.4% year to date. So we're seeing great operating leverage as Hans mentioned. And there's a lot of work going on, on the cost side of the house to continue to make the business a lot more efficient and serving customers day in and day out. If you think about the customer care and the work we launched on June 24 that includes having AI enabled customer care, managed services, we're seeing great progress now with the managed services work that Kyle and the team are doing and we're seeing good savings here ramping up in 2025.

The network team continues to take out cost and legacy network elements and that includes copper decommissioning and that work is ongoing. And then even in business wireline, we continue to deemphasize low margin deals and stay very disciplined there. And then from a headcount standpoint, the voluntary separation program is now behind us and we're seeing a full run rate benefit for the balance of the year. There's really no assumption changes in upgrades as you asked before. We said mid single digits for the full year that still stays intact.

And what we've said is volumes are important, but we're going to stay disciplined in our approach and in support of the three measures that Hans mentioned service revenue, EBITDA and free cash flow. And we'll pulse in, pulse out where it makes sense, but we're not going to chase some profitable growth for the sake of net adds. So but very pleased with the progress on EBITDA in the first half of the year and very comfortable raising the guidance for the back half.

Yes. Thanks, Mike. Brad, we're ready for next question.

The next question comes from Cutt Gundamarao of Evercore ISI. Please go ahead.

Good morning and thanks for taking the question. I want to ask about your wireless go to market strategy. I know you pulse in and out of the market, Tony, just like you said. But looking through some of your postpaid offers in the second quarter, at times there seemed to have been a bit more promotional activity on the device side targeting the value end. Over the last few years, you've expanded your portfolio into segments that you target with TracFone and fixed wireless, for example.

But the value end had historically been perhaps less of a focus on the postpaid side. So I was curious if this was more of an opportunistic tilt that was specific to the quarter or if it's part of a more strategic shift in the way that you expect to go to market moving forward? Thank you.

Thank you. First of all, Sampart and the team together with our CMO, Leslie, have been working really hard to segment up our market. And because as we see the market having less and less new customers coming into the market, the segmented approach becomes important. We are running now I think eight or nine different brands. All of them have different brand attributes and appealing to different segmentations.

So this is sort of a segmented growth strategy we have in wireless for consumer. And that will continue and just refine it and see that we have the right offerings in all the different type of brands we have. I would say some of the brands are doing extraordinary well. I mean total wireless, visible, very good, very targeted. Some of them have some sort of promotions, some of them are just having a service fee.

Verizon Communications (VZ) Q2 2025 Earnings Call Transcript

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