VERIZON COMMUNICATIONS INC 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Verizon Communications Inc. is a holding company that, acting through its subsidiaries, is one of the world’s leading providers of communications, technology, information and entertainment products and services to consumers, businesses and government entities. With a presence around the world, we offer data, video and voice services and solutions on our networks and platforms that are designed to meet customers’ demand for mobility, reliable network connectivity and security. To compete effectively in today’s dynamic marketplace, we are focused on the capabilities of our high-performing networks to drive growth based on delivering what customers want and need in the digital world. We are consistently deploying new network architecture and technologies to secure our leadership in both 4G and 5G wireless networks. Our network quality is the hallmark of our brand and the foundation for the connectivity, platforms and solutions upon which we build our competitive advantage. In 2023, we continued deploying our C-Band spectrum, enhancing and driving the monetization of our networks, platforms and solutions, while focusing on improving our financial and operating performance. Our strategy requires significant capital investments primarily to acquire wireless spectrum, put the spectrum into service, provide additional capacity for growth in our networks, invest in the fiber that supports our businesses, evolve and maintain our networks and develop and maintain significant advanced information technology systems and data system capabilities. We believe that our C-Band spectrum, together with our industry leading millimeter wave spectrum holdings and our 4G LTE network and fiber infrastructure, will drive innovative products and services and fuel our growth. Highlights of Our 2023 Financial Results (dollars in millions) Business Overview We have two reportable segments that we operate and manage as strategic business units - Verizon Consumer Group (Consumer) and Verizon Business Group (Business). 22 Table of Contents Revenue by Segment ——— Note: Excludes eliminations. Verizon Consumer Group Our Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios. Our Consumer segment's wireless and wireline products and services are available to our retail customers, as well as resellers that purchase wireless network access from us on a wholesale basis. Customers can obtain our wireless services on a postpaid or prepaid basis. Our postpaid service is generally billed one month in advance for a monthly access charge in return for access to and usage of network services. Our prepaid service is offered only to Consumer customers and enables individuals to obtain wireless services without credit verification by paying for all services in advance. The Consumer segment also offers several categories of wireless equipment to customers, including a variety of smartphones and other handsets, wireless-enabled internet devices, such as tablets, and other wireless-enabled connected devices, such as smart watches. In addition to the wireless services and equipment discussed above, the Consumer segment sells residential fixed connectivity solutions, including internet, video and voice services, and wireless network access to resellers on a wholesale basis. The Consumer segment's operating revenues for the year ended December 31, 2023 totaled $101.6 billion, a decrease of $1.9 billion, or 1.8%, compared to the year ended December 31, 2022. See "Segment Results of Operations" for additional information regarding our Consumer segment’s operating performance and selected operating statistics. Verizon Business Group Our Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products, including solutions that support mobile resource management. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world. The Business segment's operating revenues for the year ended December 31, 2023 totaled $30.1 billion, a decrease of $950 million, or 3.1%, compared to the year ended December 31, 2022. See "Segment Results of Operations" for additional information regarding our Business segment’s operating performance and selected operating statistics. Corporate and Other Corporate and other primarily includes device insurance programs, investments in unconsolidated businesses and development stage businesses that support our strategic initiatives, as well as unallocated corporate expenses, certain pension and other employee benefit related costs and interest and financing expenses. Corporate and other also includes the historical results of divested businesses and other adjustments and gains and losses that are not allocated or used in assessing segment performance due to their nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses from these transactions that are not individually significant are included in segment results and therefore included in the chief operating decision maker’s assessment of segment performance. See "Consolidated Results of Operations" for additional information regarding Corporate and other results. 23 Table of Contents Capital Expenditures and Investments We continue to invest in our wireless networks, high-speed fiber and other advanced technologies to position ourselves at the center of growth trends for the future. During the year ended December 31, 2023, these investments included $18.8 billion for capital expenditures . See "Cash Flows Used in Investing Activities" and "Liquidity and Capital Resources" for additional information. In the second quarter of 2023, we completed our accelerated $10 billion capital program related to C-Band spectrum deployment. Our ongoing C-Band spectrum deployment is funded through our general capital expenditure program. Global Network and Technology Over the past several years, we have been leading the development of 5G wireless technology industry standards and the ecosystems for fixed and mobile 5G wireless services. 5G technology enables higher throughput and lower latency than 4G LTE technology and allows our networks to handle more traffic as the number of internet-connected devices grows. We are focusing our capital investment on building our next generation 5G network, while also adding capacity and density to our 4G LTE network. We are densifying our networks by utilizing macro and small cell technology, in-building solutions and distributed antenna systems. Network densification enables us to add capacity to address increasing mobile video consumption and the growing demand for IoT products and services on our 5G and 4G LTE networks. In January 2022, we began rapidly deploying our C-Band spectrum, which, as of December 31, 2023, covers approximately 242 million people in the U.S. We obtained full access to our C-Band spectrum in August 2023 and will continue deploying this spectrum across the continental U.S. To compensate for the shrinking market for traditional copper-based products, we continue to build fiber-based networks supporting data, video and advanced business services - areas where demand for reliable high-speed connections is growing. In addition, we leverage our 5G and 4G LTE networks for our FWA broadband service. Consolidated Results of Operations In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment Results of Operations," we review the performance of our two reportable segments in more detail. During the first quarter of 2023, Verizon reorganized the customer groups within its Business segment. Previously, this segment was comprised of four customer groups: Small and Medium Business, Global Enterprise, Public Sector and Other, and Wholesale. Following the reorganization, there are now three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale. Enterprise and Public Sector combines the customers previously included in Global Enterprise and Public Sector and Other (excluding BlueJeans and Connect customers) as well as the commercial wireline customers previously included in Small and Medium Business. Business Markets and Other combines the customers previously included in Small and Medium Business (excluding commercial wireline customers), the BlueJeans customers previously included in Global Enterprise and Public Sector and Other, and the Connect customers previously included in Public Sector and Other. The Wholesale customer group remained unchanged. Prior period operating revenue results within the Business segment have been recast for these reorganized customer groups. There was no change to the composition of our reportable segments and total segment results, nor the determination of segment profit. A discussion of the Business segment's 2021 operating revenue results reflecting the current customer groups and year-over-year comparisons between 2022 and 2021 have been included in "Segment Results of Operations" below. A discussion of the 2021 items and year-over-year comparisons between 2022 and 2021 for all other items that are not included in this Form 10-K can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022. Consolidated Operating Revenues (dollars in millions) Decrease Years Ended December 31, 2023 2022 2023 vs. 2022 Consumer $ 101,626 $ 103,506 $ (1,880) (1.8) % Business 30,122 31,072 (950) (3.1) Corporate and other 2,479 2,510 (31) (1.2) Eliminations (253) (253) — — Consolidated Operating Revenues $ 133,974 $ 136,835 $ (2,861) (2.1) Consolidated operating revenues decreased during 2023 compared to 2022 primarily due to decreases in Wireless equipment revenues. Revenues for our segments are discussed separately below under the heading "Segment Results of Operations." 24 Table of Contents Consolidated Operating Expenses (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Cost of services $ 28,100 $ 28,637 $ (537) (1.9) % Cost of wireless equipment 26,787 30,496 (3,709) (12.2) Selling, general and administrative expense 32,745 30,136 2,609 8.7 Depreciation and amortization expense 17,624 17,099 525 3.1 Verizon Business Group goodwill impairment 5,841 — 5,841 nm Consolidated Operating Expenses $ 111,097 $ 106,368 $ 4,729 4.4 nm - not meaningful Operating expenses for our segments are discussed separately below under the heading "Segment Results of Operations." Cost of Services Cost of services includes the following costs directly attributable to a service: salaries and wages, benefits, materials and supplies, content costs, contracted services, network access and transport costs, customer provisioning costs, computer systems support and costs to support our outsourcing contracts and technical facilities. Aggregate customer service costs, which include billing and service provisioning, are allocated between Cost of services and Selling, general and administrative expense. Cost of services decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $658 million in access costs primarily as a result of pricing changes and usage declines largely related to the shutdown of our competitors' third-generation (3G) networks in 2022 and ongoing efforts to migrate off network prepaid subscribers to the Verizon network; • a decrease of $156 million in direct costs primarily related to certain professional services that did not reoccur in 2023; • an increase of $204 million in regulatory costs primarily related to a higher net Federal Universal Service Fund (FUSF) rate; and • an increase of $149 million in rent and lease expense primarily driven by new leases and lease modifications related to the deployment of the C-Band spectrum. Cost of Wireless Equipment Cost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $4.7 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 24% in upgrades; and • an increase of $953 million due to a shift to higher priced equipment in the mix of wireless devices sold. Selling, General and Administrative Expense Selling, general and administrative expense includes salaries and wages and benefits not directly attributable to a service or product, the provision for credit losses, taxes other than income taxes, advertising and sales commission costs, call center and information technology costs, regulatory fees, professional service fees and rent and utilities for administrative space. Also included is a portion of the aggregate customer care costs as discussed above in "Cost of Services." Selling, general and administrative expense increased during 2023 compared to 2022 primarily due to: • an increase of $603 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions; • an increase of $533 million in personnel costs from severance charges; • an increase of $458 million primarily related to asset rationalization charges; • an increase of $393 million primarily related to higher costs for device insurance programs due to an increase in claims; • an increase of $299 million in advertising costs driven by costs associated with the myPlan launch in the second quarter of 2023 and the scaling of our Total by Verizon prepaid brand; • an increase of $161 million related to business transformation costs; • an increase of $113 million in connection with the non-strategic business shutdown of our BlueJeans business offering; and • an increase of $100 million related to a legal settlement. See "Special Items" for additional information on the severance charges, asset rationalization charges, business transformation costs, the non-strategic business shutdown and the legal settlement. Depreciation and Amortization Expense Depreciation and amortization expense increased during 2023 compared to 2022, primarily due to the change in the mix of net depreciable and amortizable assets, including acquisition-related intangible assets, and the continued deployment of C-Band network assets. 25 Table of Contents Verizon Business Group Goodwill Impairment During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information. Other Consolidated Results Other Income (Expense), Net Additional information relating to Other income (expense), net is as follows: (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Interest income $ 354 $ 146 $ 208 nm Other components of net periodic benefit income (cost) (938) 2,386 (3,324) nm Net debt extinguishment gains (losses) 308 (1,077) 1,385 nm Other, net (37) (82) 45 54.9 % Other Income (Expense), Net $ (313) $ 1,373 $ (1,686) nm nm - not meaningful Other income (expense), net reflects certain items not directly related to our core operations, including interest income, debt extinguishment costs, components of net periodic pension and postretirement benefit cost and income and certain foreign exchange gains and losses. Other income (expense), net decreased during 2023 compared to 2022 primarily due to: • a net pension and postretirement benefits remeasurement loss of $992 million recorded during 2023, compared with a gain of $1.7 billion recorded during 2022, as well as an increase in interest costs in 2023 of $421 million primarily due to an increase in discount rates; • net debt extinguishment gains of $308 million related to open market repurchases of various Company notes and tender offers in 2023, compared with losses of $1.1 billion primarily related to tender offers in 2022; and • an increase in interest income due to higher interest rates. Interest Expense (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Total interest costs on debt balances $ 7,342 $ 5,643 $ 1,699 30.1 % Less capitalized interest costs 1,818 2,030 (212) (10.4) Interest Expense $ 5,524 $ 3,613 $ 1,911 52.9 Average debt outstanding (1)(3) $ 151,062 $ 151,226 Effective interest rate (2)(3) 4.9 % 3.7 % (1) The average debt outstanding is a financial measure and is calculated by applying a simple average of prior thirteen-month end balances of total short-term and long-term debt, net of discounts, premiums and unamortized debt issuance costs. (2) The effective interest rate is the rate of actual interest incurred on debt. It is calculated by dividing the total interest costs on debt balances by the average debt outstanding. (3) We believe that this measure is useful to management, investors and other users of our financial information in evaluating our debt financing cost and trends in our debt leverage management. Total interest expense increased during 2023 compared to 2022 primarily as a result of an increase in interest costs due to a higher average interest rate and a decrease in capitalized interest costs due to the early clearance and deployment of C-Band spectrum in the current period, which were partially offset by lower average debt balances. Provision for Income Taxes (dollars in millions) Decrease Years Ended December 31, 2023 2022 2023 vs. 2022 Provision for income taxes $ 4,892 $ 6,523 $ (1,631) (25.0) % Effective income tax rate 28.8 % 23.1 % 26 Table of Contents The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The increase in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion that substantially decreased income before income taxes and is not deductible. The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes in the current period. A reconciliation of the statutory federal income tax rate to the effective income tax rate for each period is included in Note 12 to the consolidated financial statements. Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA Consolidated earnings before interest, taxes, depreciation and amortization expense (Consolidated EBITDA) and Consolidated Adjusted EBITDA, which are presented below, are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as they exclude the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to Verizon’s competitors. Consolidated EBITDA is calculated by adding back interest, taxes, depreciation and amortization expense to net income. Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of certain special items. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. We believe that Consolidated Adjusted EBITDA is widely used by investors to compare a company’s operating performance to its competitors by minimizing impacts caused by differences in capital structure, taxes, and depreciation and amortization policies. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See "Special Items" for additional information. It is management’s intent to provide non-GAAP financial information to enhance the understanding of Verizon’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies. (dollars in millions) Years Ended December 31, 2023 2022 Consolidated Net Income $ 12,095 $ 21,748 Add: Provision for income taxes 4,892 6,523 Interest expense 5,524 3,613 Depreciation and amortization expense (1) 17,624 17,099 Consolidated EBITDA $ 40,135 $ 48,983 Add (Less): Other (income) expense, net (2)(3) $ 313 $ (1,373) Equity in (earnings) losses of unconsolidated businesses 53 (44) Severance charges 533 304 Verizon Business Group goodwill impairment 5,841 — Asset rationalization 480 — Legal settlement 100 — Business transformation costs 176 — Non-strategic business shutdown 158 — Consolidated Adjusted EBITDA $ 47,789 $ 47,870 (1) Includes Amortization of acquisition-related intangible assets, which were $865 million and $826 million during the years ended December 31, 2023 and 2022, respectively. The result for the year ended December 31, 2023 also includes a portion of the Non-strategic business shutdown. See "Special Items" for additional information. (2) Includes Pension and benefits remeasurement charges of $992 million during the year ended December 31, 2023 and credits of $1.7 billion during the year ended December 31, 2022. See "Special Items" and "Other Income (Expense), Net" for additional information. (3) Includes Early debt redemption costs, which were $1.2 billion during the year ended December 31, 2022. See "Special Items" and "Other Income (Expense), Net" for additional information. 27 Table of Contents The changes in Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during 2023 compared to 2022 were primarily a result of the factors described above in connection with operating revenues and operating expenses. Segment Results of Operations We have two reportable segments that we operate and manage as strategic business units - Consumer and Business. We measure and evaluate our segments based on segment operating income. The use of segment operating income is consistent with the chief operating decision maker’s assessment of segment performance. To aid in the understanding of segment performance as it relates to segment operating income, management uses the following operating statistics to evaluate the overall effectiveness of our segments. We believe these operating statistics are useful to investors and other users of our financial information because they provide additional insight into drivers of our segments’ operating results, key trends and performance relative to our peers. These operating statistics may be determined or calculated differently by other companies and may not be directly comparable to those statistics of other companies. Wireless retail connections are retail customer device postpaid and prepaid connections as of the end of the period. Retail connections under an account may include those from smartphones and basic phones (collectively, phones), postpaid and prepaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail connections are calculated by adding total retail postpaid and prepaid new connections in the period to prior period retail connections, and subtracting total retail postpaid and prepaid disconnects in the period. Wireless retail postpaid connections are retail postpaid customer device connections as of the end of the period. Retail postpaid connections under an account may include those from phones, postpaid FWA, as well as tablets and other internet devices, wearables and retail IoT devices. Wireless retail postpaid connections are calculated by adding retail postpaid new connections in the period to prior period retail postpaid connections, and subtracting retail postpaid disconnects in the period. Wireless retail prepaid connections are retail prepaid customer device connections as of the end of the period. Retail prepaid connections may include those from phones, prepaid FWA, as well as tablets and other internet devices, and wearables. Wireless retail prepaid connections are calculated by adding retail prepaid new connections in the period to prior period retail prepaid connections, and subtracting retail prepaid disconnects in the period. Fios internet connections are the total number of connections to the internet using Fios internet services as of the end of the period. Fios internet connections are calculated by adding Fios internet new connections in the period to prior period Fios internet connections, and subtracting Fios internet disconnects in the period. Fios video connections are the total number of connections to traditional linear video programming using Fios video services as of the end of the period. Fios video connections are calculated by adding Fios video net additions in the period to prior period Fios video connections. Fios video net additions are calculated by subtracting the Fios video disconnects from the Fios video new connections. Total broadband connections are the total number of connections to the internet using Fios internet services, Digital Subscriber Line (DSL), and postpaid, prepaid and IoT FWA as of the end of the period. Total broadband connections are calculated by adding total broadband connections, net additions in the period to prior period total broadband connections. Wireless retail connections, net addition s are the total number of additional retail customer device postpaid and prepaid connections, less the number of device disconnects in the period. Wireless retail connections, net additions in each period presented are calculated by subtracting the total retail postpaid and prepaid disconnects, net of certain adjustments, from the total retail postpaid and prepaid new connections in the period. Wireless retail postpaid connections, net additions are the total number of additional retail customer device postpaid connections, less the number of device disconnects in the period. Wireless retail postpaid connections, net additions in each period presented are calculated by subtracting the retail postpaid disconnects, net of certain adjustments, from the retail postpaid new connections in the period. Wireless retail prepaid connections, net additions are the total number of additional retail customer device prepaid connections, less the number of device disconnects in the period. Wireless retail prepaid connections, net additions in each period presented are calculated by subtracting the retail prepaid disconnects, net of certain adjustments, from the retail prepaid new connections in the period. Wireless retail postpaid phone connections, net additions are the total number of additional retail customer postpaid phone connections, less the number of phone disconnects in the period. Wireless retail postpaid phone connections, net additions in each period presented are calculated by subtracting the retail postpaid phone disconnects, net of certain adjustments, from the retail postpaid phone new connections in the period. 28 Table of Contents Total broadband connections, net additions are the total number of additional total broadband connections, less the number of total broadband disconnects in the period. Total broadband connections, net additions in each period presented are calculated by subtracting the total broadband disconnects, net of certain adjustments, from the total broadband new connections in the period. Wireless churn is the rate at which service to retail, retail postpaid, or retail postpaid phone connections is terminated on average in the period. The churn rate in each period presented is calculated by dividing retail disconnects, retail postpaid disconnects, or retail postpaid phone disconnects by the average retail connections, average retail postpaid connections, or average retail postpaid phone connections, respectively, in the period. Wireless retail postpaid ARPA is the calculated average retail postpaid service revenue per account (ARPA) from retail postpaid accounts in the period. Wireless retail postpaid service revenue does not include recurring device payment plan billings related to the Verizon device payment program, plan billings related to device warranty and insurance or regulatory fees. Wireless retail postpaid ARPA in each period presented is calculated by dividing retail postpaid service revenue by the average retail postpaid accounts in the period. Wireless retail postpaid accounts are wireless retail customers that are directly served and managed under the Verizon brand and use its services as of the end of the period. Accounts include unlimited plans, shared data plans and corporate accounts, as well as legacy single connection plans and multi-connection family plans. A single account may include monthly wireless services for a variety of connected devices. Wireless retail postpaid accounts are calculated by adding retail postpaid new accounts to the prior period retail postpaid accounts. Wireless retail postpaid connections per account is the calculated average number of retail postpaid connections per retail postpaid account as of the end of the period. Wireless retail postpaid connections per account is calculated by dividing the total number of retail postpaid connections by the number of retail postpaid accounts as of the end of the period. Segment operating income margin reflects the profitability of the segment as a percentage of revenue. Segment operating income margin is calculated by dividing total segment operating income by total segment operating revenues. Segment earnings before interest, taxes, depreciation and amortization (Segment EBITDA) , which is presented below, is a non-GAAP measure and does not purport to be an alternative to operating income (loss) as a measure of operating performance. We believe this measure is useful to management, investors and other users of our financial information in evaluating operating profitability on a more variable cost basis as it excludes the depreciation and amortization expense related primarily to capital expenditures and acquisitions that occurred in prior years, as well as in evaluating operating performance in relation to our competitors. Segment EBITDA is calculated by adding back depreciation and amortization expense to segment operating income (loss). Segment EBITDA margin is calculated by dividing Segment EBITDA by total segment operating revenues. See Note 13 to the consolidated financial statements for additional information. Verizon Consumer Group Our Consumer segment provides consumer-focused wireless and wireline communications services and products. Our wireless services are provided across one of the most extensive wireless networks in the U.S. under the Verizon family of brands and through wholesale and other arrangements. We also provide FWA broadband through our 5G or 4G LTE networks as an alternative to traditional landline internet access. Our wireline services are provided in nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over our 100% fiber-optic network through our Verizon Fios product portfolio and over a traditional copper-based network to customers who are not served by Fios. 29 Table of Contents Operating Revenues and Selected Operating Statistics (dollars in millions, except ARPA) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Service (1) $ 74,874 $ 73,139 $ 1,735 2.4 % Wireless equipment 20,645 23,168 (2,523) (10.9) Other 6,107 7,199 (1,092) (15.2) Total Operating Revenues $ 101,626 $ 103,506 $ (1,880) (1.8) Connections (‘000): (2) Wireless retail postpaid 93,850 91,856 1,994 2.2 Wireless retail prepaid 21,122 22,664 (1,542) (6.8) Total wireless retail 114,972 114,520 452 0.4 Fios internet 6,976 6,740 236 3.5 Fios video 2,951 3,234 (283) (8.8) Total broadband 9,056 7,900 1,156 14.6 Net Additions in Period (‘000): Wireless retail postpaid 2,044 965 1,079 nm Wireless retail prepaid (1,151) (445) (706) nm Total wireless retail 893 520 373 71.7 Wireless retail postpaid phones (132) (655) 523 79.8 Total broadband 1,163 904 259 28.7 Churn Rate: Wireless retail 1.67 % 1.63 % Wireless retail postpaid 1.03 % 1.01 % Wireless retail postpaid phones 0.83 % 0.81 % Account Statistics: Wireless retail postpaid ARPA $ 132.36 $ 125.97 $ 6.39 5.1 Wireless retail postpaid accounts (‘000) (2) 32,990 33,183 (193) (0.6) Wireless retail postpaid connections per account (2) 2.84 2.77 0.07 2.5 (1) Wireless service revenues included in our Consumer segment were approximately $63.4 billion and $61.5 billion for the years ended December 31, 2023 and 2022, respectively. (2) As of end of period Where applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures. nm - not meaningful Consumer's total operating revenues decreased during 2023 compared to 2022 as a result of decreases in Wireless equipment revenue and Other revenue, partially offset by an increase in Service revenue. Service Revenue Service revenue increased during 2023 compared to 2022 primarily driven by an increase in Wireless service revenue. Wireless service revenue increased $1.8 billion during 2023 compared to 2022 primarily as a result of: • an increase of $1.7 billion in access revenues related to our postpaid plans primarily driven by pricing actions implemented in recent periods; a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue; an increase in our FWA subscriber base; and an increase in device protection revenue primarily due to an increase in the price of the bundled offering. These increases were partially offset by the amortization of wireless equipment sales promotions; • an increase of $405 million related to growth in non-retail service revenue; • an increase of $287 million in TravelPass revenue related to increased customer international travel; and • a decrease of $500 million in prepaid revenue primarily due to a decrease in the prepaid subscriber base. 30 Table of Contents For the year ended December 31, 2023, Fios service revenue totaled $10.9 billion and remained relatively flat compared to the similar period in 2022. Wireless Equipment Revenue Wireless equipment revenue decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $3.9 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 26% in upgrades; and • an increase of $1.4 billion related to a shift to higher priced equipment in the mix of wireless devices sold. Other Revenue Other revenue includes fees that partially recover the direct and indirect costs of complying with regulatory and industry obligations and programs, revenues associated with certain products included in our device protection offerings, leasing and interest recognized when equipment is sold to the customer by an authorized agent under a device payment plan agreement. Other revenue decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $1.2 billion in revenue primarily related to a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue; and • an increase of $109 million in revenue from regulatory surcharges, primarily related to FUSF surcharges driven by a higher net rate, partially offset by a decrease related to other regulatory surcharges. Operating Expenses (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Cost of services $ 17,580 $ 17,746 $ (166) (0.9) % Cost of wireless equipment 21,827 25,134 (3,307) (13.2) Selling, general and administrative expense 20,131 19,064 1,067 5.6 Depreciation and amortization expense 13,077 12,716 361 2.8 Total Operating Expenses $ 72,615 $ 74,660 $ (2,045) (2.7) Cost of Services Cost of services decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $566 million in access costs primarily as a result of pricing changes, the shutdown of our competitors' 3G networks in 2022 and ongoing efforts to migrate off network prepaid subscribers to the Verizon network; • an increase of $177 million in personnel costs mainly driven by a decrease in capitalized labor in connection with the completion of our incremental C-Band capital spending program, and valuation assumption changes in connection with certain post-employment benefits; • an increase of $154 million in regulatory costs primarily related to a higher net FUSF rate; and • an increase of $92 million in rent and lease expense primarily driven by new leases and lease modifications related to the deployment of the C-Band spectrum. Cost of Wireless Equipment Cost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $4.1 billion driven by a lower volume of wireless devices sold primarily related to a decrease of 26% in upgrades; and • an increase of $858 million related to a shift to higher priced equipment in the mix of wireless devices sold. Selling, General and Administrative Expense Selling, general and administrative expense increased during 2023 compared to 2022 primarily due to: • an increase of $458 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions; • an increase of $352 million in advertising costs driven by costs associated with the myPlan launch in the second quarter of 2023 and the scaling of our Total by Verizon prepaid brand; and • an increase of $237 million in personnel costs mainly driven by an increase in commission expense due to the amortization of deferred contract costs, along with an increase in costs associated with third-party contracted resources. Depreciation and Amortization Expense Depreciation and amortization expense increased during 2023 compared to 2022 driven by the change in the mix of total Verizon depreciable and amortizable assets and Consumer's usage of those assets. 31 Table of Contents Segment Operating Income and EBITDA (dollars in millions) Increase Years Ended December 31, 2023 2022 2023 vs. 2022 Segment Operating Income $ 29,011 $ 28,846 $ 165 0.6 % Add Depreciation and amortization expense 13,077 12,716 361 2.8 Segment EBITDA $ 42,088 $ 41,562 $ 526 1.3 Segment operating income margin 28.5 % 27.9 % Segment EBITDA margin 41.4 % 40.2 % The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Consumer operating revenues and operating expenses. Verizon Business Group Our Business segment provides wireless and wireline communications services and products, including FWA broadband, data, video and conferencing services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various IoT services and products. We provide these products and services to businesses, government customers and wireless and wireline carriers across the U.S. and a subset of these products and services to customers around the world. The Business segment is organized in three customer groups: Enterprise and Public Sector, Business Markets and Other, and Wholesale. Operating Revenues and Selected Operating Statistics (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Enterprise and Public Sector $ 15,076 $ 15,693 $ 16,393 $ (617) (3.9) % $ (700) (4.3) % Business Markets and Other 12,715 12,772 11,929 (57) (0.4) 843 7.1 Wholesale 2,331 2,607 2,720 (276) (10.6) (113) (4.2) Total Operating Revenues (1)(2) $ 30,122 $ 31,072 $ 31,042 $ (950) (3.1) $ 30 0.1 Connections (‘000): (3) Wireless retail postpaid 29,779 28,733 27,411 1,046 3.6 1,322 4.8 Fios internet 385 373 356 12 3.2 17 4.8 Fios video 61 67 71 (6) (9.0) (4) (5.6) Total broadband 1,661 1,036 599 625 60.3 437 73.0 Net Additions in Period ('000): Wireless retail postpaid 1,242 1,640 1,001 (398) (24.3) 639 63.8 Wireless retail postpaid phones 562 856 509 (294) (34.3) 347 68.2 Total broadband 539 386 81 153 39.6 305 nm Churn Rate: Wireless retail postpaid 1.48 % 1.38 % 1.27 % Wireless retail postpaid phones 1.13 % 1.07 % 1.03 % (1) Service and other revenues included in our Business segment were approximately $26.4 billion, $27.0 billion and $27.7 billion for the years ended December 31, 2023, 2022 and 2021, respectively. Wireless equipment revenues included in our Business segment were approximately $3.7 billion, $4.0 billion and $3.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively. (2) Wireless service revenues of our Business segment, which are included in Service and other revenues in our consolidated statements of income, were approximately $13.4 billion, $12.8 billion and $12.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively. (3) As of end of period Where applicable, the operating results reflect certain adjustments, including those related to the 3G network shutdowns, migration activity among different types of devices and plans, customer profile changes, and adjustments in connection with mergers, acquisitions and divestitures. nm - not meaningful 32 Table of Contents Business's total operating revenues decreased during 2023 compared to 2022 as a result of decreases in revenue from each of the three Business customer groups. Business's total operating revenues increased during 2022 compared to 2021 as a result of an increase in Business Markets and Other revenue, partially offset by decreases in Enterprise and Public Sector and Wholesale revenues. Enterprise and Public Sector Enterprise and Public Sector offers wireless products and services as well as wireline connectivity and managed solutions to our large business and government customers. Large businesses are identified based on their size and volume of business with Verizon. Public sector offers these services with features and pricing designed to address the needs of U.S. federal, state and local governments and educational institutions. Enterprise and Public Sector revenues decreased during 2023 compared to 2022 primarily due to: • a decrease of $530 million in wireline networking revenue and traditional data and voice communication services along with related professional services, driven by secular pressures in the marketplace; and • a decrease of $98 million in Wireless equipment revenue driven by a lower volume of devices sold primarily related to fewer phone activations , partially offset by a shift to higher priced equipment in the mix of devices sold. Enterprise and Public Sector revenues decreased during 2022 compared to 2021 primarily as a result of: • a decrease of $763 million in wireline networking revenue and traditional data and voice communication services along with related professional services, driven by secular pressures in the marketplace; • a decrease of $181 million due to lower FUSF volume and rate along with resulting surcharges; • an increase of $152 million in Wireless equipment revenue driven by a shift to higher priced equipment in the mix of devices sold and a higher volume of devices sold, partially offset by the impact of related promotions; • an increase of $84 million in Wireless service revenue primarily driven by an increase in wireless retail postpaid connections as well as the economic adjustment charge that took effect late in the second quarter of 2022; and • an increase of $37 million in customer premise equipment primarily due to higher volumes. Business Markets and Other Business Markets and Other offers wireless services and equipment, conferencing services, tailored voice and networking products, Fios services, advanced voice solutions and security services to businesses that ordinarily do not meet the requirements to be categorized as Enterprise and Public Sector, as described above. Business Markets and Other also includes solutions that support mobile resource management. Business Markets and Other revenue decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $267 million in Wireless equipment revenue primarily driven by a lower volume of devices sold primarily related to fewer phone upgrades ; • a decrease of $155 million in Other revenue primarily related to a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue; • a decrease of $77 million related to a decrease in wireline voice and DSL service connections; and • an increase of $496 million in Wireless service revenue primarily driven by the economic adjustment charge that took effect late in the second quarter of 2022; an increase in our wireless retail postpaid connections, including our FWA subscriber base; and a larger allocation of administrative and telco recovery charges, which partly recover network operating costs, to Wireless service revenue from Other revenue. Business Markets and Other revenue increased during 2022 compared to 2021 primarily as a result of: • an increase of $507 million in Wireless equipment revenue driven by a higher volume of devices sold and a shift to higher priced equipment in the mix of devices sold, partially offset by an increase in promotions; • an increase of $395 million in Wireless service revenue primarily driven by an increase in our wireless retail postpaid connections as well as the economic adjustment charge that took effect late in the second quarter of 2022; and • a decrease of $72 million related to a decrease in wireline voice and DSL service connections. For the years ended December 31, 2023, 2022 and 2021, Fios revenues totaled $923 million, $927 million and $905 million, respectively. Wholesale Wholesale offers wireline communications services including data, voice, local dial tone and broadband services primarily to local, long distance, and wireless carriers that use our facilities to provide services to their customers. Wholesale revenues decreased during 2023 compared to 2022 primarily due to a decrease of $276 million related to declines in traditional voice communication and network connectivity as a result of technology substitution, certain fiber transactions completed in 2022 that did not reoccur, as well as a decrease in core data. 33 Table of Contents Wholesale revenues decreased during 2022 compared to 2021 primarily due to a decrease of $113 million related to declines in traditional voice communication and network connectivity as a result of technology substitution and rationalization of international traffic, as well as a decrease in core data. Operating Expenses (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Cost of services $ 10,180 $ 10,483 $ (303) (2.9) % Cost of wireless equipment 4,959 5,362 (403) (7.5) Selling, general and administrative expense 8,429 8,284 145 1.8 Depreciation and amortization expense 4,488 4,312 176 4.1 Total Operating Expenses $ 28,056 $ 28,441 $ (385) (1.4) Cost of Services Cost of services decreased during 2023 compared to 2022 primarily due to: • a decrease of $142 million in direct costs primarily related to certain professional services that did not reoccur in 2023; • a decrease of $114 million in personnel costs related to the impact of workforce changes; and • a decrease of $95 million in access costs related to changes in usage and circuit access prices. Cost of Wireless Equipment Cost of wireless equipment decreased during 2023 compared to 2022 primarily as a result of: • a decrease of $577 million driven by a lower volume of wireless devices sold primarily related to a decrease of 11% in upgrades ; and • an increase of $174 million related to a shift to higher priced equipment in the mix of wireless devices sold. Selling, General and Administrative Expense Selling, general and administrative expense increased during 2023 compared to 2022 primarily due to an increase of $148 million in the provision for credit losses resulting from additional bad debt reserves as collections return to pre-pandemic levels, coupled with an increase in wireless retail postpaid gross additions. Depreciation and Amortization Expense Depreciation and amortization expense increased during 2023 compared to 2022 driven by the change in the mix of total Verizon depreciable and amortizable assets and Business's usage of those assets. Segment Operating Income and EBITDA (dollars in millions) Increase/(Decrease) Years Ended December 31, 2023 2022 2023 vs. 2022 Segment Operating Income $ 2,066 $ 2,631 $ (565) (21.5) % Add Depreciation and amortization expense 4,488 4,312 176 4.1 Segment EBITDA $ 6,554 $ 6,943 $ (389) (5.6) Segment operating income margin 6.9 % 8.5 % Segment EBITDA margin 21.8 % 22.3 % The changes in the table above during the periods presented were primarily a result of the factors described above in connection with Business operating revenues and operating expenses. 34 Table of Contents Special Items Special items included in Income Before Provision For Income Taxes were as follows: (dollars in millions) Years Ended December 31, 2023 2022 Amortization of acquisition-related intangible assets (1) Depreciation and amortization expense $ 865 $ 826 Severance, pension and benefits charges (credits) Selling, general and administrative expense 533 304 Other (income) expense, net 992 (1,675) Verizon Business Group goodwill impairment Verizon Business Group goodwill impairment 5,841 — Asset rationalization Cost of services 22 — Selling, general and administrative expense 458 — Legal settlement Selling, general and administrative expense 100 — Business transformation costs Cost of services 15 — Selling, general and administrative expense 161 — Non-strategic business shutdown Depreciation and amortization expense 21 — Cost of services 45 — Selling, general and administrative expense 113 — Early debt redemption costs Other (income) expense, net — 1,241 Total $ 9,166 $ 696 (1) Amounts are included in segment results of operations. Consolidated Adjusted EBITDA, a non-GAAP measure discussed in the section titled "Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA" as part of Consolidated Results of Operations, excludes all of the amounts included above. The income and expenses related to special items included in our consolidated results of operations were as follows: (dollars in millions) Years Ended December 31, 2023 2022 Within Total Operating Expenses $ 8,174 $ 1,130 Within Other (income) expense, net 992 (434) Total $ 9,166 $ 696 Amortization of Acquisition-Related Intangible Assets During 2023 and 2022, we recorded pre-tax amortization expense of $865 million and $826 million, respectively, related to acquired intangible assets. Severance, Pension and Benefits Charges (Credits) During 2023, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits charges of $992 million in our pension and postretirement benefit plans. The charges were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by: • a charge of $534 million due to an increase in our healthcare cost trend rate assumption used to determine the current year liabilities of our postretirement benefit plans from a weighted-average of 6.6% at December 31, 2022 to a weighted-average of 7.3% at December 31, 2023; • a charge of $503 million ($288 million for pension plans and $215 million for postretirement benefit plans) due to a decrease in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 5.2% at December 31, 2022 to a weighted-average of 5.0% at December 31, 2023; • a net credit of $45 million primarily due to other actuarial assumption adjustments, which includes the difference between our estimated and our actual return on plan assets. During 2023, we also recorded net pre-tax severance charges of $533 million, primarily related to involuntary separations under our existing plans, in Selling, general and administrative expense in our consolidated statement of income. 35 Table of Contents During 2022, in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur, we recorded net pre-tax pension and benefits credits of $1.7 billion in our pension and postretirement benefit plans. The credits were recorded in Other income (expense), net in our consolidated statement of income and were primarily driven by: • a credit of $7.0 billion ($4.1 billion for pension plans and $2.9 billion for postretirement benefit plans) due to an increase in our discount rate assumption used to determine the current year liabilities of our plans from a weighted-average of 2.9% at December 31, 2021 to a weighted-average of 5.2% at December 31, 2022; • a charge of $5.5 billion due to the difference between our estimated and actual return on assets; and • a credit of $206 million due to other actuarial assumption adjustments. During 2022, we also recorded net pre-tax severance charges of $304 million, related to involuntary separations under our existing plans, in Selling, general and administrative expense in our consolidated statement of income. Due to the presentation of the other components of net periodic benefit cost, we recognize a portion of the pension and benefits charges (credits) in Other income (expense), net in our consolidated statements of income. See Note 11 to the consolidated financial statements for additional information related to severance, pension and benefits charges (credits). Verizon Business Group Goodwill Impairment During 2023, we recorded a pre-tax charge of $5.8 billion as a result of the annual goodwill impairment test performed in the fourth quarter. See "Critical Accounting Estimates" for additional information. Asset Rationalization During 2023, we recorded pre-tax asset rationalization charges of $480 million. Asset rationalization charges of $155 million recorded during the second quarter of 2023 related to certain real estate and non-strategic assets that we made a decision to cease use of as part of our transformation initiatives. Asset rationalization charges of $325 million recorded during the fourth quarter of 2023 primarily related to Business network assets that we made a decision to cease use of as part of our continued transformation initiatives. Legal Settlement During 2023, we recorded a pre-tax charge of $100 million related to the settlement of a litigation matter regarding certain administrative fees. Business Transformation Costs During 2023, we recorded pre-tax charges of $176 million primarily related to costs incurred in connection with strategic partnership initiatives in our managed network support services for certain Business customers. Non-Strategic Business Shutdown During 2023, we recorded pre-tax charges of $179 million related to the shutdown of our BlueJeans business offering. Early Debt Redemption Costs During 2022, we recorded pre-tax early debt redemption costs of $1.2 billion primarily in connection with tender offers. See Note 7 to the consolidated financial statements for additional information related to our early debt redemptions. Operating Environment and Trends The telecommunications industry is highly competitive. The rapid development of new technologies, services and products has eliminated many of the distinctions among wireless, cable, internet and traditional telephone services and brought new competitors to our markets. We expect competition to remain intense as traditional and non-traditional participants seek increased market share. We believe that our high-quality networks and customer base differentiate us from our competitors and give us the ability to plan and manage through changing economic and competitive conditions. We remain focused on executing on the fundamentals of the business: enhancing our networks, maintaining a high-quality customer base, and delivering strong financial and operating results. We also continue to focus on cost efficiencies in order to have flexibility to adjust to changes in the competitive and economic environments and increase shareholder value. The U.S. wireless market has achieved a high penetration of smartphones, which reduces the opportunity for new phone connection growth for the industry. We expect the wireless industry's customer growth rate to moderate over time in comparison to historical growth rates, furthering competition for customers. Future revenue growth in the industry is expected to be driven by expanding existing customer relationships, increasing the number of ways customers can connect with wireless networks and 36 Table of Contents services and increasing the penetration of FWA and connected devices including wearables, tablets and IoT devices. Although certain use cases for 5G technologies and related ecosystems are in early development stages, we expect that this technology will provide a significant opportunity for growth in the coming years. We expect future service revenue growth opportunities to arise from increased access revenue as customer demand for mobile and FWA 5G connectivity continues to expand and customers shift to higher access plans, driven in part by access to our high quality network. Additionally, we expect service revenue to benefit from targeted pricing actions and increased connections per account. Future service revenue growth opportunities will be dependent on expanding the penetration of our services, increasing the number of ways that our customers can connect with our networks and services and the development of new ecosystems. With respect to wireless services and equipment, pricing plays an increasingly important role in the wireless competitive landscape. As the demand for wireless services continues to grow, wireless service providers are offering a range of service plans at competitive prices. In addition, aggressive device promotions have become more common in recent years in an effort to encourage customers to switch carriers, as well as retain existing customers. We compete in this area by offering our customers services and devices that we believe provide significant value for the price. We and other wireless service providers, as well as equipment manufacturers, offer device payment options, which provide customers with the ability to pay for their device over a period of time, and some providers offer device leasing arrangements. For further details on competitive environment and trends, refer to "Business — Competition and Related Trends" in Part I, Item 1 and "Risk Factors — Economic and Strategic Risks — We face significant competition that may reduce our profits" in Part I, Item 1A of this Annual Report on Form 10-K. Connection Trends In our Consumer segment, we are focused on attracting new customers and maintaining our high-quality retail postpaid customer base by capitalizing on demand for reliable high-speed connectivity. We believe the combination of our wireless network quality and service and product offerings represents an attractive value proposition and provides a compelling customer experience, supporting increased penetration of data services. While our Consumer segment experienced diminished connection growth in recent years, we expect that future connection growth opportunities will be driven by the comparative value we provide to our customers, as well as our FWA broadband service. In our prepaid business, we expect to continue to operate in a highly competitive environment while making improvements to achieve long-term growth. We expect to continue to grow our Fios internet connections as we seek to increase our penetration rates within our Fios service areas, further supported by the demand for higher speed internet connections. At the same time, we expect continued growth of FWA connections to complement strong Fios results as demand for broadband services continues to grow. In Fios video, the business continues to face ongoing pressure as observed throughout the linear television market. We have experienced continuing access line and DSL losses as customers have switched to alternative technologies such as wireless, VoIP, and cable for voice and data services, and we expect this trend to continue. In our Business segment, we offer wireless products and services to business and government customers across the U.S. We continue to grow our connections while operating in a highly competitive environment. We expect that this connection growth, combined with our industry-leading network assets, will provide additional opportunities to sell solutions, such as those around security, private networking and other network connectivity services, advanced communications and professional services. In addition, in both our Consumer and our Business segments, we expect to support connection growth in part by adding capacity and further expanding our wireless coverage, and by continuing the build-out of our 5G network. Service Revenue Trends In our Consumer segment, we expect continued growth in our wireless service revenue, driven by targeted pricing actions, migrations to higher priced plans, and increases in FWA connections. We expect Fios revenue to benefit in 2024 as growth in our broadband customer base and an increased demand for higher speed internet connections offset the impact of the shift from bundled wireline services to standalone internet service. In our Business segment, we expect wireless service revenue to expand, driven by growth from an increase in wireless volumes and FWA contributions. We expect that Fios, through increased penetration, will also contribute to revenue growth and that legacy traditional wireline services will continue to face secular pressures. Cash Flow Trends We are focused on achieving profitable growth as we continue to deliver strong revenues and undertake initiatives to reduce our overall cost structure. We expect that our ability to generate cash flows will benefit from our expected service revenue growth and our anticipated reduction in capital expenditures. See "Liquidity and Capital Resources" for additional information on our capital program. 37 Table of Contents Liquidity and Capital Resources We use the net cash generated from our operations to fund expansion and modernization of our networks, service and repay external financing, pay dividends, invest in new businesses and spectrum and, when appropriate, buy back shares of our outstanding common stock. Our sources of funds, primarily from operations and, to the extent necessary, from external financing arrangements, are sufficient to meet ongoing operating and investing requirements over the next 12 months and beyond. Our cash and cash equivalents balance is $2.1 billion as of December 31, 2023. Our cash and cash equivalents are held both domestically and internationally, and are invested to maintain principal and provide liquidity. See "Market Risk" for additional information regarding our foreign currency risk management strategies. We expect that our capital spending requirements will continue to be financed primarily through internally generated funds. Debt or equity financing may be needed to fund additional investments or development activities, or to maintain an appropriate capital structure to ensure our financial flexibility. Our external financing arrangements include credit facilities and other bank lines of credit, an active commercial paper program, vendor financing arrangements, issuances of registered debt or equity securities, U.S. retail medium-term notes and other securities that are privately-placed or offered overseas. In addition, we monetize certain receivables through asset-backed debt transactions. Capital Expenditures Our 2024 capital program includes capital to fund advanced networks and services, including expanding and adding capacity and density to our core networks, deploying C-Band spectrum, and advancing our network architecture. We anticipate cash requirements for our 2024 capital program to be between $17.0 billion and $17.5 billion. Contractual Obligations and Commitments We have various contractual obligations and commitments. The following represent our anticipated material cash requirements from known contractual and other obligations as of December 31, 2023: • Long-term debt, including current maturities, commitments of $149.2 billion, of which $12.3 billion (including $3.6 billion of unsecured debt) are expected to be due within the next twelve months. Related interest payments are $68.6 billion, of which $5.9 billion, are expected to be due within the next twelve months. Items included in long-term debt with variable coupon rates exclude unamortized debt issuance costs, and are described in Note 7 to the consolidated financial statements. • Operating lease obligations of $28.4 billion and Finance lease obligations of $2.3 billion, of which $4.8 billion and $793 million, respectively, are expected to be due within the next twelve months. In addition, Verizon has an obligation of $378 million representing future minimum payments under the sublease arrangement for our cell towers, of which $302 million is expected to be due within the next twelve months. See Note 6 to the consolidated financial statements for additional information. • Unconditional purchase obligations, with terms in excess of one year, amount to $21.7 billion, of which $8.9 billion is expected to be due within the next twelve months. Items included in unconditional purchase obligations are primarily commitments to purchase network equipment, software and services, content, marketing services and other items which will be used or sold in the ordinary course of business. These amounts do not represent our entire anticipated purchases in the future, but represent only those items that are the subject of contractual obligations. We also purchase products and services as needed with no firm commitment. See Note 16 to the consolidated financial statements for additional information. • Estimated commitments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with C-Band wireless spectrum acquired under Auction 107. The remaining commitment is estimated to be approximately $400 million, all of which is expected to be due within the next twelve months. • Other long-term liabilities, including current maturities, of $4.0 billion, of which approximately $770 million is expected to be due within the next twelve months. Other long-term liabilities represent estimated postretirement benefit and qualified pension plan contributions. Qualified pension plan contributions include estimated minimum funding contributions. We expect that there will be no required pension funding through the end of 2024, subject to changes in market conditions. Postretirement benefit payments include future postretirement benefit payments. These estimated amounts: (1) are subject to change based on changes to assumptions and future plan performance, which could impact the timing and/or amounts of these payments; and (2) exclude expectations beyond 5 years due to uncertainty of the timing and amounts. • We are not able to make a reasonable estimate of when the unrecognized tax benefits balance of $2.7 billion and related interest and penalties will be settled with the respective taxing authorities until the related tax audits are further developed or resolved. See Note 12 to the consolidated financial statements for additional information. 38 Table of Contents Consolidated Financial Condition (dollars in millions) Years Ended December 31, 2023 2022 Cash Flows Provided By (Used In) Operating activities $ 37,475 $ 37,141 Investing activities (23,432) (28,662) Financing activities (14,657) (8,529) Decrease in cash, cash equivalents and restricted cash $ (614) $ (50) Cash Flows Provided By Operating Activities Our primary source of funds continues to be cash generated from operations. Net cash provided by operating activities increased $334 million during 2023 compared to 2022 primarily due to an improvement in working capital. The improvement in working capital was primarily driven by changes in accounts payable as a result of timing, changes in inventory levels and fewer phone upgrades compared to the prior year. This increase in net cash provided by operating activities was partially offset by higher cash interest payments and a decrease in earnings. During 2023, we made a discretionary contribution of $200 million to one of our qualified pension plans. Additionally, we expect that there will be no required pension funding through the end of 2024, subject to changes in market conditions. Cash Flows Used In Investing Activities Capital Expenditures Capital expenditures continue to relate primarily to the use of capital resources to enhance the operating efficiency and productivity of our networks, maintain our existing infrastructure, facilitate the introduction of new products and services and enhance responsiveness to competitive challenges. Capital expenditures, including capitalized software, were $18.8 billion and $23.1 billion for 2023 and 2022, respectively. Capital expenditures decreased approximately $4.3 billion during 2023, compared to 2022, primarily due to the completion of our accelerated $10 billion C-Band deployment program in the first half of 2023. See "Global Network and Technology" for more details. Acquisitions of Wireless Licenses During 2023 and 2022, we made payments of $4.3 billion and $1.6 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives associated with Auction 107 . During 2023 and 2022, we recorded capitalized interest related to wireless licenses of $1.4 billion and $1.7 billion, respectively. In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected timeframe. During 2022, Verizon made payments of approximately $310 million associated with these agreements. Collateral Receipts (Payments) Related to Derivative Contracts, Net During 2023, we received return of collateral posted of $880 million related to derivative contracts, net of payments. During 2022, we made collateral payments of $2.3 billion related to derivative contracts, net of receipts. See Note 9 to the consolidated financial statements for additional information. Cash Received Related to Acquisitions of Businesses, Net On November 23, 2021 (the Acquisition Date), we completed the acquisition of TracFone Wireless, Inc. (TracFone). During 2022, Verizon received net cash proceeds of $248 million for the final settlement of working capital, which was included in our consideration as of the Acquisition Date. See Note 3 to the consolidated financial statements for additional information. Cash Flows Used In Financing Activities We seek to maintain a mix of fixed and variable rate debt to lower borrowing costs within reasonable risk parameters and to protect against earnings and cash flow volatility resulting from changes in market conditions. During 2023 and 2022, net cash used in financing activities was $14.7 billion and $8.5 billion, respectively. 2023 During 2023, our net cash used in financing activities of $14.7 billion was primarily driven by $11.0 billion used for dividend payments, $10.6 billion used for repayments and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations and $1.5 billion used for other financing activities. These cash flows used in financing activities were 39 Table of Contents partially offset by $8.6 billion provided by proceeds from long-term borrowings, which included $6.6 billion of proceeds from our asset-backed debt transactions. Proceeds from and Repayments and Repurchases of Long-Term Borrowings At December 31, 2023, our total debt increased to $150.7 billion compared to $150.6 billion at December 31, 2022. Our effective interest rate was 4.9% and 3.7% during the years ended December 31, 2023 and 2022, respectively. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See also "Market Risk" and Note 7 to the consolidated financial statements for additional information. At December 31, 2023, approximately $33.7 billion, or 21.7%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on our foreign denominated debt in order to fix our future interest and principal payments in U.S. dollars and mitigate the impact of foreign currency transaction gains or losses. See "Market Risk" for additional information. Verizon may acquire debt securities issued by Verizon and its affiliates through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers, or otherwise, upon such terms and at such prices as Verizon may from time to time determine, for cash or other consideration. Other, Net Other, net financing activities during 2023 includes $302 million in payments made under the sublease arrangement for our cell towers, $257 million in payments for TracFone contingent consideration and $252 million in payments related to vendor financing arrangements. See Note 3 to the consolidated financial statements for additional information on the TracFone contingent considerations. Dividends The Board of Directors of the Company assesses the level of our dividend payments on a periodic basis taking into account such factors as long-term growth opportunities, internal cash requirements and the expectations of our shareholders. During the third quarter of 2023, our Board of Directors increased our quarterly dividend payment by 1.9% to $0.6650 from $0.6525 per share in the preceding quarter. This is the seventeenth consecutive year that Company’s Board of Directors has approved a quarterly dividend increase. As in prior periods, dividend payments were a significant use of capital resources. During 2023, we paid $11.0 billion in dividends. 2022 During 2022, our net cash used in financing activities of $8.5 billion was primarily driven by $13.6 billion used for repayments, redemptions and repurchases of long-term borrowings (secured and unsecured) as well as finance lease obligations, $10.8 billion used for dividend payments and $2.1 billion used for other financing activities. These cash flows used in financing activities were partially offset by $17.8 billion provided by proceeds from long-term borrowings, which included $10.7 billion of proceeds from our asset-backed debt transactions. Proceeds from and Repayments, Redemptions, and Repurchases of Long-Term Borrowings At December 31, 2022, our total debt was $150.6 billion. During the year ended December 31, 2022, our effective interest rate was 3.7%. We have entered into interest rate swaps to achieve a targeted mix of fixed and variable rate debt, managing our exposure to changes in interest rates. See "Market Risk" and Note 7 to the consolidated financial statements for additional information. At December 31, 2022, approximately $34.0 billion, or 22.5%, of the aggregate principal amount of our total debt portfolio consisted of foreign denominated debt, primarily Euro and British Pound Sterling. We have entered into cross currency swaps on our foreign denominated debt in order to fix our future interest and principal payments in U.S. dollars and mitigate the impact of foreign currency transaction gains or losses. See "Market Risk" for additional information. Other, Net Other, net financing activities during 2022 includes the cash consideration payments to acquire additional interests in certain controlled wireless partnerships and early debt redemption costs. See Note 15 to the consolidated financial statements for additional information on the early debt redemption costs. Dividends During the third quarter of 2022, our Board of Directors increased our quarterly dividend payment by 2.0% to $0.6525 per share. During 2022, we paid $10.8 billion in dividends. 40 Table of Contents Asset-Backed Debt As of December 31, 2023, the carrying value of our asset-backed debt was $22.2 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity, or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco), a wholly-owned subsidiary of the Company, and certain other Company affiliates (collectively, the Originators) transfer device payment plan agreement receivables and certain other receivables (collectively referred to as certain receivables) or a participation interest in certain other receivables to one of the ABS Entities, which in turn transfers such receivables and participation interest to another ABS Entity that issues the debt. Verizon entities retain the equity interests and residual interests, as applicable, in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses. Our asset-backed debt is secured by the transferred receivables and participation interest, and future collections on such receivables and underlying receivables related to such participation interest. These receivables and participation interest transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of certain receivables and participation interest, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, the Company has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities. Cash collections on the receivables and on the underlying receivables related to the participation interest collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our consolidated balance sheets. Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our consolidated statements of cash flows. The asset-backed debt issued is included in Debt maturing within one year and Long-term debt in our consolidated balance sheets. See Note 7 to the consolidated financial statements for additional information. Long-Term Credit Facilities At December 31, 2023 (dollars in millions) Maturities Facility Capacity Unused Capacity Principal Amount Outstanding Verizon revolving credit facility (1) 2026 $ 9,500 $ 9,457 $ — Various export credit facilities (2) 2024 - 2031 11,000 — 6,618 Total $ 20,500 $ 9,457 $ 6,618 (1) The revolving credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. The revolving credit facility provides for the issuance of letters of credit. As of December 31, 2023, there have been no drawings against the $9.5 billion revolving credit facility since its inception. (2) During 2023 and 2022, we drew down $1.0 billion and $3.0 billion, respectively, from these facilities. Borrowings under certain of these facilities are amortized semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed. Common Stock Common stock has been used from time to time to satisfy some of the funding requirements of employee and shareholder plans. During the years ended December 31, 2023 and 2022, we issued 4.4 million and 2.1 million shares of common stock from treasury stock, which had aggregate values of $192 million and $91 million, respectively. In February 2020, the Board of Directors of the Company authorized a share buyback program to repurchase up to 100 million shares of our common stock. The program will terminate when the aggregate number of shares purchased reaches 100 million, or a new share repurchase plan superseding the current plan is authorized, whichever is sooner. The program permits Verizon to 41 Table of Contents repurchase shares over time, with the amount and timing of repurchases depending on market conditions and corporate needs. There were no repurchases of common stock during 2023 and 2022 under our authorized share buyback program. Credit Ratings Verizon’s credit ratings did not change in 2023 or 2022. Securities ratings assigned by rating organizations are expressions of opinion and are not recommendations to buy, sell or hold securities. A securities rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. Covenants Our credit agreements contain covenants that are typical for large, investment grade companies. These covenants include requirements to pay interest and principal in a timely fashion, pay taxes, maintain insurance with responsible and reputable insurance companies, preserve our corporate existence, keep appropriate books and records of financial transactions, maintain our properties, provide financial and other reports to our lenders, limit pledging and disposition of assets and mergers and consolidations, and other similar covenants. We and our consolidated subsidiaries are in compliance with all of our restrictive covenants in our debt agreements. Change In Cash, Cash Equivalents and Restricted Cash Our Cash and cash equivalents at December 31, 2023 totaled $2.1 billion, a $540 million decrease compared to December 31, 2022, primarily as a result of the factors discussed above. Restricted cash at December 31, 2023 totaled $1.4 billion, a $74 million decrease compared to restricted cash at December 31, 2022, primarily related to cash collections on certain receivables and on the underlying receivables related to the participation interest that are required at certain specified times to be placed into segregated accounts. Free Cash Flow Free cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. Free cash flow is calculated by subtracting capital expenditures (including capitalized software) from net cash provided by operating activities. We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made on finance lease obligations or cash payments for business acquisitions or wireless licenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. The following table reconciles net cash provided by operating activities to free cash flow: (dollars in millions) Years Ended December 31, 2023 2022 Net cash provided by operating activities $ 37,475 $ 37,141 Less Capital expenditures (including capitalized software) 18,767 23,087 Free cash flow $ 18,708 $ 14,054 The increase in free cash flow during 2023 is a reflection of the increase in operating cash flows, as well as the decrease in capital expenditures, both of which are discussed above. Employee Benefit Plans Funded Status and Contributions Employer Contributions We operate numerous qualified and nonqualified pension plans and other postretirement benefit plans. These plans primarily relate to our domestic business units. During 2023, we made a discretionary contribution of $200 million to one of our qualified pension plans. We made no discretionary contributions to our qualified pension plans in 2022. During 2023 and 2022, we made contributions of $52 million and $53 million to our nonqualified pension plans, respectively. Our overall investment strategy is to achieve a mix of assets that allows us to meet projected benefit payments while taking into consideration risk and return. In an effort to reduce the risk of our portfolio strategy and better align assets with liabilities, we have adopted a liability driven pension strategy that seeks to better match the interest rate sensitivity of the liability hedging assets with the interest rate sensitivity of the liability. We expect that the strategy will reduce the likelihood that assets will decline at a time when liabilities increase (referred to as liability hedging), with the goal to reduce the risk of underfunding to the plan and its participants and beneficiaries. Over time, as the asset allocation shifts to more liability hedging assets, this strategy will 42 Table of Contents generally result in lower expected asset returns. For 2024, we expect no required qualified pension plan contributions and insignificant nonqualified pension plan contributions. Contributions to our other postretirement benefit plans generally relate to payments for benefits on an as-incurred basis since these other postretirement benefit plans do not have funding requirements similar to the pension plans. We contributed $936 million and $692 million to our other postretirement benefit plans in 2023 and 2022, respectively. Contributions to our other postretirement benefit plans are estimated to be approximately $770 million in 2024. Leasing Arrangements See Note 6 to the consolidated financial statements for additional information related to leasing arrangements. Guarantees We guarantee the debentures of our operating telephone company subsidiaries. See Note 7 to the consolidated financial statements for additional information. In connection with the execution of agreements for the sale of businesses and investments, Verizon ordinarily provides representations and warranties to the purchasers pertaining to a variety of nonfinancial matters, such as ownership of the securities being sold, as well as financial losses. See Note 16 to the consolidated financial statements for additional information. As of December 31, 2023, letters of credit totaling approximately $803 million, which were executed in the normal course of business and support several financing arrangements and payment obligations to third parties, were outstanding. See Note 16 to the consolidated financial statements for additional information. Other Future Obligations As of December 31, 2023, Verizon had 26 renewable energy purchase agreements (REPAs) with third parties. See Note 16 to the consolidated financial statements for additional information. Under the REPAs, we plan to purchase up to an aggregate of approximately 3.5 gigawatts of capacity across multiple states. Critical Accounting Estimates Critical Accounting Estimates A summary of the critical accounting estimates used in preparing our financial statements are as follows: Wireless Licenses and Goodwill Wireless licenses and goodwill are a significant component of our consolidated assets. Both our wireless licenses and goodwill are treated as indefinite-lived intangible assets and, therefore are not amortized, but rather are tested for impairment annually in the fourth fiscal quarter, unless there are events requiring an earlier assessment or changes in circumstances during an interim period suggesting impairment indicators are present. We believe our estimates and assumptions are reasonable and represent appropriate marketplace considerations as of the valuation date. Although we use consistent methodologies in developing the assumptions and estimates underlying the fair value calculations used in our impairment tests, these estimates and assumptions are uncertain by nature, may change over time and can vary from actual results. It is possible that in the future there may be changes in our estimates and assumptions, including the timing and amount of future cash flows, margins, growth rates, market participant assumptions, comparable benchmark companies and related multiples and discount rates, which could result in different fair value estimates. Significant and adverse changes to any one or more of the above-noted estimates and assumptions could result in an impairment to our wireless licenses and goodwill impairment for one or more of our reporting units. Wireless Licenses The carrying value of our wireless licenses was approximately $155.7 billion as of December 31, 2023. We aggregate our wireless licenses into one single unit of accounting, as we utilize our wireless licenses on an integrated basis as part of our nationwide wireless network. Our wireless licenses provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of our wireless licenses. We test our wireless licenses for potential impairment annually or more frequently if impairment indicators are present. We have the option to first perform a qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. However, we may elect to bypass the qualitative assessment in any period and proceed directly to performing the quantitative impairment test. It is our policy to perform quantitative impairment assessment at least every three years. During the fourth quarter of 2023 and 2022, we performed a qualitative impairment assessment as our annual impairment test to determine whether it is more likely than not that the fair value of our wireless licenses was less than the carrying amount. As part of our qualitative assessment we considered several factors including the business enterprise value of our combined wireless 43 Table of Contents business, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of our combined wireless business as a whole, as well as other factors including the result of our last quantitative assessment. Our annual impairment tests in 2023 and 2022 indicated that it is more likely than not that the fair value of our wireless licenses remained above their carrying value and, therefore, did not result in an impairment. Goodwill At December 31, 2023, the balance of our goodwill was approximately $22.8 billion, of which $21.2 billion was in our Consumer reporting unit and $1.7 billion was in our Business reporting unit. To determine if goodwill is potentially impaired, we have the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we elect not to conduct the qualitative assessment or if indications of a potential impairment exist, the determination of whether an impairment has occurred requires the fair value of each reporting unit to be assessed. It is our policy to perform quantitative impairment assessments at least every three years. Under the qualitative assessment, we consider several factors, including the business enterprise value of the reporting unit from the last quantitative test and the excess of fair value over carrying value from this test, macroeconomic conditions (including changes in interest rates and discount rates), industry and market considerations (including industry revenue and EBITDA margin results, projections and recent merger and acquisition activity), the recent and projected financial performance of the reporting unit, as well as other factors. Under the quantitative assessment, the fair value of the reporting unit is calculated using a market approach and a discounted cash flow method, as a form of the income approach. The market approach includes the use of comparative multiples to complement discounted cash flow results. The discounted cash flow method is based on the present value of two components-projected cash flows and a terminal value. The terminal value represents the expected normalized future cash flows of the reporting unit beyond the cash flows from the discrete projection period. The fair value of the reporting unit is calculated based on the sum of the present value of the cash flows from the discrete period and the present value of the terminal value. The discount rate represents our estimate of the weighted-average cost of capital, or expected return, that a marketplace participant would have required as of the valuation date. The application of our goodwill impairment test requires key assumptions underlying our valuation model. The discounted cash flow analysis factors in assumptions on discount rates and terminal growth rates to reflect risk profiles of key strategic revenue and cost initiatives, as well as revenue and EBITDA growth relative to history and market trends and expectations. The market multiples approach reflects significant judgment involved in the selection of comparable public company multiples and benchmarks. The selection of companies and multiples is influenced by differences in growth and profitability, and volatility in market prices of peer companies. These valuation inputs are inherently judgmental, and an adverse change in one or a combination of these inputs could result in a goodwill impairment loss. During the fourth quarter of 2023, we performed a qualitative impairment assessment for our Consumer reporting unit. Our qualitative assessment indicated that it was more likely than not that the fair value of our Consumer reporting unit exceeded its carrying value and, therefore, did not result in an impairment. During the fourth quarter of 2023, we performed a quantitative impairment assessment for our Business reporting unit given the low excess of fair value over carrying value identified in our prior annual impairment assessment and increased competitive and market pressures experienced throughout 2023. These pressures have resulted in lower projected cash flows primarily driven by secular declines in wireline services and products across our Business customer groups. In connection with Verizon’s annual budget process in the fourth quarter of 2023, leadership completed a comprehensive five-year strategic planning review of our Business reporting unit resulting in declines in financial projections driven by market dynamics as compared to the prior year five-year strategic planning cycle. The revised projections were used as a key input into the Business reporting unit’s annual goodwill impairment test performed in the fourth quarter. In addition, changes in the macroeconomic environment, including interest rate and inflationary pressures have also impacted the fair value of the reporting unit. We applied a combination of a market approach and a discounted cash flow method reflecting current assumptions and inputs, including our revised projections, discount rate and expected growth rates, which resulted in the determination that the fair value of our Business reporting unit was less than its carrying amount. As a result, in the fourth quarter of 2023 we recorded a non-cash goodwill impairment charge of approximately $5.8 billion ($5.8 billion after-tax) in our consolidated statement of income. The goodwill balance of the Business reporting unit was approximately $7.5 billion prior to the occurrence of this impairment charge. In our Business reporting unit, if all other assumptions were to remain unchanged, we expect the impairment charge would increase by approximately $1.0 billion if the terminal value growth rate declined by 50 basis points, or $1.3 billion if the discount rate increased by 50 basis points, or $1.1 billion if the EBITDA margin decreased by 100 basis points. See Note 4 to the consolidated financial statements for additional information. At December 31, 2023, the balance of goodwill in our Business reporting unit, after the goodwill impairment charge, was $1.7 billion. Though we have determined that no further impairment exists for our Business reporting unit as of December 31, 2023, a future projected sustained decline in the reporting unit's revenues and earnings could have a significant negative impact on its fair value and could result in future impairment charges. Such a decline could be driven by, among other things: (1) 44 Table of Contents decreases in sales volumes or long-term growth rate as a result of competitive pressures or other factors; or (2) the inability to achieve or delays in achieving the goals in our strategic initiatives. Adverse changes to macroeconomic factors, such as increases in long-term interest rates, would also negatively impact the fair value of the reporting unit. At December 31, 2022, the balance of our goodwill was approximately $28.7 billion, of which $21.1 billion was in our Consumer reporting unit and $7.5 billion was in our Business reporting unit. During the fourth quarter of 2022, we performed a qualitative impairment assessment for our Consumer reporting unit. Our qualitative assessment indicated that it was more likely than not that the fair value of our Consumer reporting unit exceeded its carrying value and, therefore, did not result in an impairment. During the fourth quarter of 2022, we performed a quantitative impairment assessment for our Business reporting unit. At the goodwill impairment measurement date of October 31, 2022, our quantitative assessment indicated that the fair value for our Business reporting unit exceeded its carrying amount by approximately 8% and, therefore, did not result in an impairment. Pension and Other Postretirement Benefit Plans We maintain benefit plans for most of our employees, including, for certain employees, pension and other postretirement benefit plans. Benefit plan assumptions, including the discount rate used, the long-term rate of return on plan assets, the determination of the substantive plan and health care trend rates are periodically updated and impact the amount of benefit plan income, expense, assets and obligations. Changes to one or more of these assumptions could significantly impact our accounting for pension and other postretirement benefits. In determining pension and other postretirement obligations, the weighted-average discount rate was selected to approximate the composite interest rates available on a selection of high-quality bonds available in the market at December 31, 2023. The bonds selected had maturities that coincided with the time periods during which benefit payments are expected to occur, were non-callable (or callable with certain selection criteria met) and available in sufficient quantities to ensure marketability (at least $300 million par outstanding). Bond yields are subject to uncertainty for a number of reasons including corporate performance, credit rating downgrades and upgrades, government fiscal policy decisions, and general market volatility. The expected long-term rates of return on plan assets used in determining Verizon’s pension and other postretirement obligations are based on expectations for future investment returns for the plans’ asset allocation. The rates are subject to uncertainty for a number of reasons including corporate performance, credit ratings, monetary policy, inflation, exchange rates, investor behavior and general market volatility. A sensitivity analysis of the impact of changes in the discount rate and the long-term rate of return on plan assets on the benefit obligations and expense (income) recorded, as well as an increase or a decrease in the actual versus expected return on plan assets as of December 31, 2023 and for the year then ended pertaining to Verizon’s pension and postretirement benefit plans, is provided in the table below. The amounts in the table below related to discount rate changes are gross impacts on benefit obligations and expense, and do not reflect changes in asset values as a result of interest rate changes, for which our pension plan is highly hedged. (dollars in millions) Percentage point change Increase/(decrease) at December 31, 2023 Pension plans discount rate +0.50 $ (691) -0.50 757 Rate of return on pension plan assets +1.00 (131) -1.00 131 Postretirement plans discount rate +0.50 (520) -0.50 564 Rate of return on postretirement plan assets +1.00 (4) -1.00 4 In addition to our liability hedging assets, we also employ an interest rate hedging strategy to further minimize the impact of discount rate changes on the funded ratio of the pension plan. While the target hedge ratio varies depending on the funded status of the plan and the level of interest rates, the target hedge ratio was 80% at December 31, 2023, significantly limiting volatility. The annual measurement date for both our pension and other postretirement benefits is December 31. We use the full yield curve approach to estimate the interest cost component of net periodic benefit cost for pension and other postretirement benefits. The full yield curve approach refines our estimate of interest cost by applying the individual spot rates from a yield curve composed of the rates of return on several hundred high-quality fixed income corporate bonds available at the measurement date. These individual spot rates align with the timing of each future cash outflow for benefit payments and therefore provide a more precise estimate of interest cost. See Note 11 to the consolidated financial statements for additional information. 45 Table of Contents Income Taxes Our current and deferred income taxes and associated valuation allowances are impacted by events and transactions arising in the normal course of business as well as in connection with the adoption of new accounting standards, changes in tax laws and rates, acquisitions and dispositions of businesses and non-recurring items. As a global commercial enterprise, our income tax rate and the classification of income taxes can be affected by many factors, including estimates of the timing and realization of deferred income tax assets and the timing and amount of income tax payments. We account for tax benefits taken or expected to be taken in our tax returns in accordance with the accounting standard relating to the uncertainty in income taxes, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. We review and adjust our liability for unrecognized tax benefits based on our best judgment given the facts, circumstances and information available at each reporting date. To the extent that the final outcome of these tax positions is different than the amounts recorded, such differences may impact income tax expense and actual tax payments. We recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. Actual tax payments may materially differ from estimated liabilities as a result of changes in tax laws as well as unanticipated transactions impacting related income tax balances. See Note 12 to the consolidated financial statements for additional information. Property, Plant and Equipment Our Property, plant and equipment balance represents a significant component of our consolidated assets. We record property, plant and equipment at cost. We depreciate property, plant and equipment on a straight-line basis over the estimated useful life of the assets. The estimated useful life is subject to change due to a variety of factors such as change in asset capacity or performance, technical obsolescence, market expectations and competition impacts. In connection with our ongoing review of the estimated useful lives of property, plant and equipment during 2023, we determined that the estimated useful life of our property, plant and equipment would remain unchanged. We expect that a one year increase in estimated useful lives of our property, plant and equipment would result in a decrease to our 2023 depreciation expense of $2.3 billion and that a one year decrease would result in an increase of approximately $3.6 billion in our 2023 depreciation expense. Accounts Receivable Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The gross amount of accounts receivable and corresponding allowance for credit losses are presented separately in the consolidated balance sheets. We maintain allowances for credit losses resulting from the expected failure or inability of our customers to make required payments. We recognize the allowance for credit losses at inception and reassess quarterly based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future, as applicable. The impact of these factors on the allowance involves significant level of estimation and is subject to uncertainty. Our allowance for credit losses is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. We record an allowance to reduce the receivables to the amount that is expected to be collectible. For device payment plan agreement receivables, we record bad debt expense based on a default and loss calculation using our proprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the custom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for determining the allowance balance. The weighted-average expected loss rate increased 1.36% at December 31, 2023 as compared to at December 31, 2022. We expect that an increase or decrease of 0.25% in the weighted-average loss rate would result in a change of $111 million in bad debt expense. We monitor the collectability of our wireless service receivables as one overall pool. Wireline service receivables are disaggregated and pooled by the following customer groups: consumer, small and medium business, enterprise, public sector and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life-cycle of an account from billing to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For enterprise, public sector and wholesale wireline receivables, the allowance for credit losses is based on historical write-off experience and individual customer credit risk, as applicable. We consider multiple factors in determining the allowance as discussed above. If there is a deterioration of our customers’ financial condition or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust our allowance for credit losses, which would affect earnings in the period the adjustments are made. See Note 8 to the consolidated financial statements for additional information. 46 Table of Contents Acquisitions and Divestitures Spectrum License Transactions From time to time we enter into agreements to buy, sell or exchange spectrum licenses. We believe these spectrum license transactions have allowed us to continue to enhance the reliability of our wireless network while also resulting in a more efficient use of spectrum. In February 2021, the Federal Communications Commission (FCC) concluded Auction 107 for C-Band wireless spectrum. Verizon paid $45.5 billion for the licenses it won, of which $44.6 billion was paid in the first quarter of 2021. In accordance with the rules applicable to the auction, Verizon is required to make payments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which are estimated to be $7.6 billion. During 2023 and 2022, we made payments of $4.3 billion and $1.6 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives. During 2021, we made payments of $1.3 billion primarily related to certain obligations for projected clearing costs. We expect to continue to make payments of approximately $400 million for the remaining obligations through 2024. The final timing and amounts of these payments could differ based on the actual amount of incumbent holders’ reimbursement claims and the speed with which those claims are approved and processed. The carrying value of the wireless spectrum won in Auction 107 consists of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we are obligated to pay in order to acquire the licenses, as well as capitalized interest to the extent qualifying activities have occurred. In March 2022, Verizon signed agreements with satellite operators in which operators agreed to clear C-Band spectrum in certain markets and frequencies ahead of the previously expected timeframe. During 2022, Verizon incurred costs associated with these agreements of approximately $340 million, of which $310 million was paid as of December 31, 2022 and the remainder was paid in 2023. This early clearance accelerated Verizon's access to more spectrum in a number of key markets to support its 5G network initiatives. See Note 3 to the consolidated financial statements for additional information regarding our spectrum license transactions. TracFone Wireless, Inc. In November 2021, we completed the acquisition of TracFone. Verizon acquired all of TracFone's outstanding stock in exchange for approximately $3.5 billion in cash, net of cash acquired and working capital and other adjustments, 57,596,544 shares of common stock of the Company valued at approximately $3.0 billion, and up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and other commercial arrangements. The fair value of the common stock was determined on the basis of its closing market price on the Acquisition Date. The estimated fair value of the contingent consideration as of the Acquisition Date was approximately $560 million and represents a Level 3 measurement. The contingent consideration payable is based on the achievement of certain revenue and operational targets, measured over a two year earn out period. During 2023 and 2022, Verizon made payments of $257 million and $188 million, respectively, related to the contingent consideration, which is reflected in Cash flows from financing activities in our consolidated statements of cash flows. See Note 3 and Note 9 to the consolidated financial statements for additional information. Verizon Media Divestiture On September 1, 2021, we completed the sale of Verizon Media Group. As of the close of the transaction, cash proceeds, the fair value of the non-convertible preferred limited partnership units of an affiliate of Apollo Global Management Inc. (the Apollo Affiliate) and the fair value of 10% of the fully-diluted common limited partnership units of the Apollo Affiliate were $4.3 billion, $496 million, and $124 million, respectively. We recorded a pre-tax gain on sale of approximately $1.0 billion (after-tax $1.0 billion) in Selling general and administrative expense in our consolidated statement of income for the year ended December 31, 2021. In addition, we incurred $346 million of various costs associated with this disposition which are primarily recorded in Selling general and administrative expense in our consolidated statement of income for the year ended December 31, 2021. See Note 3 to the consolidated financial statements for additional information.