Q4 2013 Earnings Call Transcript

Transcript Call Date 01/21/2014

In terms of Wireline profitability, we got it to a flat EBITDA margin and that is what we produced at 22.2%. In the area of capital spending we met our revised guidance of $16.6 billion, which was up 2.7% over 2012.

Even with that increased spending level we improved our overall CapEx to revenue ratio as we said we would.

2013 was a great year of significant earnings and free cash flow growth. Adjusted earnings per share increased to $2.84 up over 26% for the year. Our free cash flow growth was also very significant increasing by $6.9 billion to $22.2 billion, an increase of 45% from 2012.

In terms of shareholder value, we generated a total return of 18.6% in 2013 through a combination of stock price appreciation and dividends. For the seventh consecutive year, our Board of Directors approved a dividend increase indicating their confidence in our future cash flows and earnings growth.

From my perspective, 2013 was a great year of execution, resulting in impressive customer growth and significant improvements in profitability and cash flows.

Now let's look at our fourth quarter and full-year performance in more detail, starting with consolidated results on Slide 6. Total operating revenue grew 3.4% in the fourth quarter, continuing our consistent top line growth trend. For the year, we added $4.7 billion to consolidated revenue, an increase of 4.1%. On a full year basis, the increase in consolidated revenues along with effective cost management resulted in more than 21% growth in adjusted operating income.

On the same adjusted basis, consolidated EBITDA increased $4.6 billion, up 12.3% for the year. Our adjusted EBITDA margin expanded 260 basis points to 34.9%, the highest consolidated margin in eight years.

As we highlighted earlier, adjusted earnings per share in the fourth quarter of $0.66 was significantly higher than a year ago. Our earnings performance has been very strong and very consistent, with double-digit year-over-year growth throughout 2013.

Now let's move into our review of the statements starting with Wireless on Slide 7. Our consistent investment in Wireless is the foundation of our success and drives our leadership in network quality, reliability and the overall customer experience. We will continue to build on our network advantage in 4G LTE by deploying capital through increased capacity and density to our network.

Our fourth quarter and full year Wireless results were excellent. We continue the strong momentum built during the year and finished very strong. Total Wireless revenues grew by $5.2 billion in 2013 and totaled $81 billion, representing two-thirds of Verizon's consolidated revenue. We sustained our strong service revenue performance with 8% growth in the fourth quarter making this our fifth consecutive quarter of at least 8% growth.

For the year, service revenue grew 8.3%. We generated $8.3 billion of EBITDA in the fourth quarter, up 22.6% from the same quarter last year. Our service EBITDA margin in the quarter was 47% compared with 41.4% in the fourth quarter of 2012.

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