Verizon Q1 Sales Down 1.6% on COVID-19 Store Closures, Media Division Hurt by Ad Rates

Verizon Store

Verizon posted first-quarter 2020 revenue of $31.6 billion, down 1.6%, citing the impact of the coronavirus pandemic for missing Wall Street expectations.

The top-line decline primarily resulted from “sharp reductions” in wireless equipment revenue, after social distancing measures were adopted in March — prompting Verizon to close 70% of its retail stores.

Verizon estimated COVID-19 reduced Q1 earnings by 4 cents per share, primarily as the result of customers not paying their bills. In the quarter, Verizon said “bad debt” expenses increased by $228 million based on the expected number of customers who will seek payment relief under the FCC-led Keep Americans Connected pledge. And Verizon expects bad-debt costs to be higher in the second quarter of 2020.

Q1 revenue for Verizon Media, the division whose brands include Yahoo, AOL, HuffPost, TechCrunch, and Engadget, came in at $1.7 billion, down 4%, which the company said was “driven almost entirely by COVID-19 impacts.”

“Verizon Media has seen increased levels of customer engagement on its platforms, but advertising rates have declined in the current environment,” the company said.

Verizon’s closure of retail locations and reduced in-store service hours for remaining stores “resulted in a significant drop in customer activity and device volumes for the quarter. The consumer division had 525,000 wireless retail postpaid net losses in Q1, including postpaid smartphone net losses of 167,000. Overall, Verizon Wireless dropped 68,000 postpaid phone connections in the quarter (versus a net loss of 44,000 in the year-ago period). AT&T reported 163,000 postpaid phone net adds for Q1 2020.

The telco’s Fios Internet business added 59,000 customers — with Verizon citing work-from-home and in-home schooling among factors for the gain — while the Fios TV service shed 84,000 subs “reflecting the ongoing shift from traditional linear video to over-the-top offerings,” the company said.

Chairman and CEO Hans Vestberg, in announcing the results, said “We will emerge from this crisis stronger, knowing we provided critical connectivity to our customers, and especially our first responders, while maintaining our commitment to investing in our 5G and Fiber strategies. We are particularly proud of our employees who continue to deliver essential services to our customers and those on the front lines so they can serve others.”

Verizon posted net income of $4.29 billion, down 17% year over year, which included a $1.2 billion charge related to the FCC’s recently completed spectrum action. On an adjusted basis first-quarter 2020 earnings per share was $1.26, slightly higher than analyst consensus EPS estimates of $1.22.

While rival AT&T withdrew all 2020 financial guidance, Verizon provided an outlook for earnings but did not forecast revenue. Verizon said it expects adjusted EPS to be -2% to +2% versus the prior year, down from previous guidance of 2%-4%.

The company had $7 billion cash on hand at the end of Q1 — thanks to a $3.5 billion debt offering completed last month — up from about $4.5 billion at the end of 2019. “Carrying a higher cash balance is part of the company’s liquidity planning strategy,” Verizon said.