VERIZON COMMUNICATIONS INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Verizon Communications Inc. (the Company) is a holding company that, acting through its subsidiaries (together with the Company, collectively, Verizon), 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 fourth-generation (4G) and fifth-generation (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 2024, we are focused on enhancing and driving the monetization of our networks, platforms and solutions, retaining and growing our high-quality customer base and further 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 Long-Term Evolution (LTE) network and fiber infrastructure, will drive innovative products and services and fuel our growth. Highlights of Our Financial Results for the Three Months Ended March 31, 2024 and 2023 (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). 30 Table of Contents Revenue by Segment for the Three Months Ended March 31, 2024 and 2023 ——— 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 United States (U.S.) under the Verizon family of brands and through wholesale and other arrangements. We also provide fixed wireless access (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 three months ended March 31, 2024 totaled $25.1 billion, representing an increase of 0.8% compared to the similar period in 2023. 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 Internet of Things (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 three months ended March 31, 2024 totaled $7.4 billion, representing a decrease of 1.6% compared to the similar period in 2023. 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 31 Table of Contents 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 are 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. 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 three months ended March 31, 2024, these investments included $4.4 billion for capital expenditures. See "Cash Flows Used in Investing Activities" for additional information. Capital expenditures for 2024 are expected to be in the range of $17.0 billion to $17.5 billion. 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. We obtained full access to our C-Band spectrum in August 2023, and will continue deploying this spectrum across the continental U.S. 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, some of which are not included in our segment results. In "Segment Results of Operations" we review the performance of our two reportable segments in more detail. Consolidated Operating Revenues Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Consumer $ 25,057 $ 24,857 $ 200 0.8 % Business 7,376 7,494 (118) (1.6) Corporate and other 611 617 (6) (1.0) Eliminations (63) (56) (7) 12.5 Consolidated Operating Revenues $ 32,981 $ 32,912 $ 69 0.2 Consolidated operating revenues increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to revenue increases in our Consumer segment, partially offset by revenue decreases in our Business segment. Revenues for our segments are discussed separately below under the heading "Segment Results of Operations." Consolidated Operating Expenses Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Cost of services $ 6,967 $ 7,078 $ (111) (1.6) % Cost of wireless equipment 5,905 6,426 (521) (8.1) Selling, general and administrative expense 8,143 7,506 637 8.5 Depreciation and amortization expense 4,445 4,318 127 2.9 Consolidated Operating Expenses $ 25,460 $ 25,328 $ 132 0.5 Operating expenses for our segments are discussed separately below under the heading "Segment Results of Operations." 32 Table of Contents 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 the three months ended March 31, 2024 compared to the similar period in 2023 primarily as result of: • a decrease of $130 million in access costs primarily as a result of decreases in prepaid subscribers, circuit disconnections and pricing changes; • a decrease of $102 million in personnel costs primarily related to the impact of workforce changes; • an increase of $49 million in direct costs driven by vendor and service provider promotions and discounts received in 2023 that did not reoccur in 2024; and • an increase of $48 million in rent and lease expense primarily driven by new leases and lease modifications related to the continued deployment of the C-Band spectrum. Cost of Wireless Equipment Cost of wireless equipment decreased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • a decrease of $852 million driven by a lower volume of wireless devices sold primarily related to a decrease of 19% in upgrades; and • an increase of $331 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 the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to: • an increase of $312 million in personnel costs primarily related to an increase in costs associated with the transition to third-party contracted resources along with the impacts of a prior year compensation plan assumption change that did not reoccur and increased sales commission expense; • an increase of $136 million related to higher costs for device insurance programs due to an increase in claims ; and • an increase of $106 million related to a legacy legal matter. See "Special Items" for additional information on the legacy legal matter. Depreciation and Amortization Expense Depreciation and amortization expense increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to the change in the mix of net depreciable and amortizable assets, including the amortization period of certain acquisition-related intangible assets, and the continued deployment of C-Band network assets. Other Consolidated Results Other Income, Net Additional information relating to Other income, net is as follows: Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Interest income $ 78 $ 75 $ 3 4.0 % Other components of net periodic benefit income — 13 (13) nm Net debt extinguishment gains 110 70 40 57.1 Other, net 10 (44) 54 nm Other Income, Net $ 198 $ 114 $ 84 73.7 nm - not meaningful Other income, 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. 33 Table of Contents Other income, net increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to: • an increase of $54 million primarily related to the remeasurement of our foreign currency denominated assets and liabilities resulting in a foreign currency adjustment gain in 2024 compared with a loss in 2023; and • net debt extinguishment gains of $110 million related to tender offers and open market repurchases of various Company notes in 2024, compared with gains of $70 million related to open market repurchases of various Company notes in 2023. Interest Expense Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Total interest costs on debt balances $ 1,909 $ 1,748 $ 161 9.2 % Less capitalized interest costs 274 541 (267) (49.4) Interest Expense $ 1,635 $ 1,207 $ 428 35.5 Average debt outstanding (1)(3) $ 152,754 $ 151,493 Effective interest rate (2)(3) 5.0 % 4.6 % (1) The average debt outstanding is a financial measure and is calculated by applying a simple average of prior months 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 the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of a decrease in capitalized interest costs due to additional C-Band spectrum licenses being placed into service, an increase in interest costs due to a higher average interest rate and higher average debt balances. Provision for Income Taxes Three Months Ended March 31, (dollars in millions) 2024 2023 Decrease Provision for income taxes $ 1,353 $ 1,482 $ (129) (8.7) % Effective income tax rate 22.3 % 22.8 % The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. During the three months ended March 31, 2024, both the provision for income taxes and the effective income tax rate decreased compared to the similar period in 2023 due to lower income before taxes in the current period. Unrecognized Tax Benefits Unrecognized tax benefits were $2.7 billion at both March 31, 2024 and December 31, 2023. Interest and penalties related to unrecognized tax benefits were $650 million (after-tax) and $630 million (after-tax) at March 31, 2024 and December 31, 2023, respectively. Verizon and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. As a large taxpayer, we are under audit by the Internal Revenue Service and multiple state and foreign jurisdictions for various open tax years. It is reasonably possible that the amount of the liability for unrecognized tax benefits could change by a significant amount in the next twelve months. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved. 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. 34 Table of Contents 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. 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. Three Months Ended March 31, (dollars in millions) 2024 2023 Consolidated Net Income $ 4,722 $ 5,018 Add: Provision for income taxes 1,353 1,482 Interest expense 1,635 1,207 Depreciation and amortization expense (1) 4,445 4,318 Consolidated EBITDA $ 12,155 $ 12,025 Add (Less): Other income, net $ (198) $ (114) Equity in (earnings) losses of unconsolidated businesses 9 (9) Legacy legal matter 106 — Consolidated Adjusted EBITDA $ 12,072 $ 11,902 (1) Includes Amortization of acquisition-related intangible assets, which were $221 million and $208 million during the three months ended March 31, 2024 and 2023, respectively. See "Special Items" for additional information. The changes in Consolidated Net Income, Consolidated EBITDA and Consolidated Adjusted EBITDA in the table above during the three months ended March 31, 2024 compared to the similar period in 2023 were primarily a result of the factors described in connection with consolidated operating revenues and consolidated 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. 35 Table of Contents 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. 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. 36 Table of Contents 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 10 to the condensed 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. 37 Table of Contents Operating Revenues and Selected Operating Statistics Three Months Ended March 31, Increase/ (dollars in millions, except ARPA) 2024 2023 (Decrease) Service $ 18,998 $ 18,456 $ 542 2.9% Wireless equipment 4,490 4,878 (388) (8.0) Other 1,569 1,523 46 3.0 Total Operating Revenues $ 25,057 $ 24,857 $ 200 0.8 Revenue Statistics: Wireless service revenue $ 16,134 $ 15,599 $ 535 3.4 Fios revenue $ 2,896 $ 2,889 $ 7 0.2 Connections (‘000): (1) Wireless retail postpaid 93,905 92,192 1,713 1.9 Wireless retail prepaid 20,904 22,331 (1,427) (6.4) Total wireless retail 114,809 114,523 286 0.2 Fios internet 7,025 6,803 222 3.3 Fios video 2,883 3,160 (277) (8.8) Total broadband 9,297 8,202 1,095 13.4 Net Additions in Period (‘000): Wireless retail postpaid 75 321 (246) (76.6) Wireless retail prepaid (216) (351) 135 38.5 Total wireless retail (141) (30) (111) nm Wireless retail postpaid phone (158) (263) 105 39.9 Total broadband 239 302 (63) (20.9) Churn Rate: Wireless retail 1.62 % 1.69 % Wireless retail postpaid 1.03 % 1.05 % Wireless retail postpaid phone 0.83 % 0.84 % Account Statistics: Wireless retail postpaid ARPA $ 135.75 $ 130.06 $ 5.69 4.4 Wireless retail postpaid accounts (‘000) (1) 32,876 33,034 (158) (0.5) Wireless retail postpaid connections per account (1) 2.86 2.79 0.07 2.5 (1) 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 increased during the three months ended March 31, 2024 compared to the similar period in 2023 as a result of increases in Service and Other revenues, partially offset by a decrease in Wireless equipment revenue. Service Revenue Service revenue increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily driven by an increase in Wireless service revenue. Wireless service revenue increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • an increase of $409 million in access revenues related to our postpaid plans primarily due to pricing actions; an increase in our FWA subscriber base; and an increase in subscriptions through MyPlan offerings. These increases were partially offset by the amortization of wireless equipment sales promotions; • an increase of $149 million related to growth in non-retail service revenue; • an increase of $64 million in TravelPass revenue through increased customer international travel; and 38 Table of Contents • a decrease of $106 million in prepaid revenue primarily due to a decrease in the prepaid subscriber base. Wireless Equipment Revenue Wireless equipment revenue decreased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • a decrease of $722 million driven by a lower volume of wireless devices sold primarily related to a decrease of 21% in upgrades; and • an increase of $365 million 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 remained relatively flat for the three months ended March 31, 2024 compared to the similar period in 2023. Operating Expenses Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Cost of services $ 4,537 $ 4,432 $ 105 2.4 % Cost of wireless equipment 4,750 5,191 (441) (8.5) Selling, general and administrative expense 5,089 4,921 168 3.4 Depreciation and amortization expense 3,309 3,214 95 3.0 Total Operating Expenses $ 17,685 $ 17,758 $ (73) (0.4) Cost of Services Cost of services increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • an increase of $59 million in rent and lease expense primarily driven by new leases and lease modifications related to the continued deployment of the C-Band spectrum; • an increase of $42 million in personnel costs mainly driven by certain other post-employment benefit credits in 2023 that did not reoccur in 2024; • an increase of $40 million in direct costs driven by vendor and service provider promotions and discounts received in 2023 that did not reoccur in 2024; • an increase of $29 million in digital content costs primarily associated with an increase in subscriptions through MyPlan offerings, partially offset by a decrease in traditional linear content costs due to a decline in Fios video subscribers; and • a decrease of $84 million in access costs primarily as a result of decreases in prepaid subscribers, circuit disconnections and pricing changes. Cost of Wireless Equipment Cost of wireless equipment decreased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • a decrease of $719 million driven by a lower volume of wireless devices sold primarily related to a decrease of 21% in upgrades; and • an increase of $278 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 the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to: • an increase of $80 million in personnel costs mainly driven by the impacts of a prior year compensation plan assumption change that did not reoccur and increased sales commission expense; and • an increase of $50 million in regulatory fees mainly driven by an increase in rates. Depreciation and Amortization Expense Depreciation and amortization expense increased during the three months ended March 31, 2024 compared to the similar period in 2023 driven by the change in the mix of total Verizon depreciable and amortizable assets and Consumer's usage of those assets. 39 Table of Contents Segment Operating Income and EBITDA Three Months Ended March 31, (dollars in millions) 2024 2023 Increase Segment Operating Income $ 7,372 $ 7,099 $ 273 3.8 % Add Depreciation and amortization expense 3,309 3,214 95 3.0 Segment EBITDA $ 10,681 $ 10,313 $ 368 3.6 Segment operating income margin 29.4 % 28.6 % Segment EBITDA margin 42.6 % 41.5 % The changes in the table above during the three months ended March 31, 2024 compared to the similar period in 2023 were primarily a result of the factors described 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 Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Enterprise and Public Sector $ 3,587 $ 3,787 $ (200) (5.3) % Business Markets and Other 3,195 3,104 91 2.9 Wholesale 594 603 (9) (1.5) Total Operating Revenues (1) $ 7,376 $ 7,494 $ (118) (1.6) Revenue Statistics: Wireless service revenue $ 3,379 $ 3,290 $ 89 2.7 Fios revenue $ 311 $ 307 $ 4 1.3 Connections (‘000): (2) Wireless retail postpaid 29,947 28,820 1,127 3.9 Fios internet 389 377 12 3.2 Fios video 59 65 (6) (9.2) Total broadband 1,816 1,192 624 52.3 Net Additions in Period (‘000): Wireless retail postpaid 178 312 (134) (42.9) Wireless retail postpaid phone 90 136 (46) (33.8) Total broadband 150 135 15 11.1 Churn Rate: Wireless retail postpaid 1.51% 1.50 % Wireless retail postpaid phone 1.13% 1.16 % (1) Service and other revenues included in our Business segment were approximately $6.5 billion and $6.6 billion for the three months ended March 31, 2024 and 2023, respectively. Wireless equipment revenues included in our Business segment were $871 million and $882 million for the three months ended March 31, 2024 and 2023, 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. 40 Table of Contents Business’s total operating revenues decreased during the three months ended March 31, 2024 compared to the similar period in 2023 as a result of decreases in Enterprise and Public Sector and Wholesale revenues, partially offset by an increase in Business Markets and Other revenue. 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 the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to: • a decrease of $150 million in wireline revenue primarily driven by decreases in networking, traditional data and voice communication services due to secular market pressure, coupled with lower customer premise equipment sales volumes; and • a decrease of $20 million in Wireless equipment revenue driven by a decrease in the number of wireless devices sold primarily due to fewer upgrades, partially offset by a shift to higher priced equipment in the mix of devices sold. 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 our business customers 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 increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to an increase of $114 million in Wireless service revenue driven mainly by an increase in our FWA subscriber base and our pricing actions. Fios revenues remained flat for the three months ended March 31, 2024 compared to the similar period in 2023. 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 revenue remained relatively flat for the three months ended March 31, 2024 compared to the similar period in 2023. Operating Expenses Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Cost of services $ 2,432 $ 2,582 $ (150) (5.8) % Cost of wireless equipment 1,155 1,234 (79) (6.4) Selling, general and administrative expense 2,262 2,033 229 11.3 Depreciation and amortization expense 1,128 1,094 34 3.1 Total Operating Expenses $ 6,977 $ 6,943 $ 34 0.5 Cost of Services Cost of services decreased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to: • a decrease of $77 million in personnel costs related to the impact of workforce changes, partially offset by certain other post-employment benefit credits in 2023 that did not reoccur in 2024; • a decrease of $46 million in access costs related to changes in usage, partially offset by changes in circuit access prices; and • a decrease of $29 million in customer premise equipment costs due to lower volumes sold. Cost of Wireless Equipment Cost of wireless equipment decreased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily as a result of: • a decrease of $132 million driven by a lower volume of wireless devices sold; and • an increase of $53 million related to a shift to higher priced equipment in the mix of wireless devices sold. 41 Table of Contents Selling, General and Administrative Expense Selling, general and administrative expense increased during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to an increase of $209 million in personnel costs primarily related to an increase in costs associated with the transition to third-party contracted resources along with the impacts of a prior year compensation plan assumption change that did not reoccur and increased sales commission expense. Depreciation and Amortization Expense Depreciation and amortization expense increased during the three months ended March 31, 2024 compared to the similar period in 2023 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 Three Months Ended March 31, Increase/ (dollars in millions) 2024 2023 (Decrease) Segment Operating Income $ 399 $ 551 $ (152) (27.6) % Add Depreciation and amortization expense 1,128 1,094 34 3.1 Segment EBITDA $ 1,527 $ 1,645 $ (118) (7.2) Segment operating income margin 5.4 % 7.4 % Segment EBITDA margin 20.7 % 22.0 % The changes in the table above during the three months ended March 31, 2024 compared to the similar period in 2023 were primarily a result of the factors described in connection with Business operating revenues and operating expenses. Special Items Special items included in Income Before Provision For Income Taxes were as follows: Three Months Ended March 31, (dollars in millions) 2024 2023 Amortization of acquisition-related intangible assets (1) Depreciation and amortization expense $ 221 $ 208 Legacy legal matter Selling, general and administrative expense 106 — Total $ 327 $ 208 (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 condensed consolidated results of operations were as follows: Three Months Ended March 31, (dollars in millions) 2024 2023 Within Total Operating Expenses $ 327 $ 208 Total $ 327 $ 208 Amortization of Acquisition-Related Intangible Assets During the three months ended March 31, 2024 and 2023, we recorded pre-tax amortization expense of $221 million and $208 million, respectively, related to acquired intangible assets. Legacy Legal Matter During the three months ended March 31, 2024, we recorded a pre-tax charge of $106 million associated with a litigation matter related to a legacy contract for the production of telephone directories in Costa Rica by a subsidiary of the Company. 42 Table of Contents Consolidated Financial Condition Three Months Ended March 31, (dollars in millions) 2024 2023 Change Cash Flows Provided By (Used In) Operating activities $ 7,084 $ 8,289 $ (1,205) Investing activities (5,245) (6,110) 865 Financing activities (1,428) (2,383) 955 Increase (decrease) in cash, cash equivalents and restricted cash $ 411 $ (204) $ 615 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 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. Cash Flows Provided By Operating Activities Our primary source of funds continues to be cash generated from operations. Net cash provided by operating activities decreased $1.2 billion during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to higher interest expense due to higher average interest rates, a discretionary pension plan contribution of $365 million and changes in working capital related to timing. As a result of the prior year discretionary contribution to one of our qualified pension plans and the additional $365 million contribution made in 2024, 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, for the three months ended March 31, 2024 and 2023 were $4.4 billion and $6.0 billion, respectively. Capital expenditures decreased approximately $1.6 billion during the three months ended March 31, 2024 compared to the similar period in 2023 primarily due to the completion of our accelerated $10 billion capital program related to our C-Band deployment in the first half of 2023. Acquisitions of Wireless Licenses During the three months ended March 31, 2024 and 2023, we made payments of $269 million and $114 million, respectively, for obligations related to clearing costs and accelerated clearing incentives associated with Auction 107. During the three months ended March 31, 2024 and 2023, we recorded capitalized interest related to wireless licenses of $180 million and $449 million, respectively. Collateral Receipts (Payments) Related to Derivative Contracts, Net During the three months ended March 31, 2024, we made collateral payments of $432 million related to derivative contracts, net of receipts. During the three months ended March 31, 2023, we received return of collateral posted of $367 million related to derivative contracts, net of payments. See Note 7 to the condensed 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 the three months ended 43 Table of Contents March 31, 2024, net cash used in financing activities was $1.4 billion. During the three months ended March 31, 2023, net cash used in financing activities was $2.4 billion. During the three months ended March 31, 2024, our net cash used in financing activities was primarily driven by repayments and repurchases of long-term borrowings and finance lease obligations of $4.5 billion, cash dividends paid of $2.8 billion, and repayments of asset-backed long-term borrowings of $1.4 billion. These payments were partially offset by proceeds from long-term borrowings of $3.1 billion, proceeds from asset-backed long-term borrowings of $2.5 billion and net proceeds of short-term commercial paper of $2.3 billion. At March 31, 2024, our total debt of $151.7 billion included unsecured debt of $128.4 billion and secured debt of $23.3 billion. At December 31, 2023, our total debt of $150.7 billion included unsecured debt of $128.5 billion and secured debt of $22.2 billion. During the three months ended March 31, 2024 and 2023, our effective interest rate was 5.0% and 4.6%, respectively. See Note 5 to the condensed consolidated financial statements for additional information regarding our debt activity, which excludes the impact from mark-to-market adjustments on foreign currency denominated debt. 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. Asset-Backed Debt 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 condensed consolidated balance sheets. Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued is included in Debt maturing within one year and Long-term debt in our condensed consolidated balance sheets. See Note 5 to the condensed consolidated financial statements for additional information. Long-Term Credit Facilities At March 31, 2024 (dollars in millions) Maturities Facility Capacity Unused Capacity Principal Amount Outstanding Verizon revolving credit facility (1) 2028 $ 12,000 $ 11,956 $ — Various export credit facilities (2) 2024 - 2031 11,000 — 6,294 Total $ 23,000 $ 11,956 $ 6,294 (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 March 31, 2024 , there have been no drawings against the revolving credit facility since its inception. (2) During the three months ended March 31, 2024, there were no drawings from these facilities. During the three months ended March 31, 2023, we drew down $515 million from these facilities. Borrowings under certain of these facilities are repaid 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. In March 2024, we amended our $9.5 billion revolving credit facility to increase the capacity to $12.0 billion and extended its maturity to 2028. Other, Net Other, net financing activities during the three months ended March 31, 2024 includes $216 million in payments for settlement of cross currency swaps, $117 million in payments made under tax withholding of employee share based arrangements and $98 million in cash consideration payment to acquire additional interest in a certain controlled wireless partnership. Dividends As in prior periods, dividend payments were a significant use of capital resources. We paid $2.8 billion and $2.7 billion in cash dividends during the three months ended March 31, 2024 and 2023, respectively. 44 Table of Contents 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 March 31, 2024 totaled $2.4 billion, a $300 million increase compared to December 31, 2023, primarily as a result of the factors discussed above. Restricted cash totaled $1.5 billion and $1.4 billion as of March 31, 2024 and December 31, 2023, respectively, 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 condensed consolidated statements of cash flows. The following table reconciles net cash provided by operating activities to free cash flow: Three Months Ended March 31, (dollars in millions) 2024 2023 Change Net cash provided by operating activities $ 7,084 $ 8,289 $ (1,205) Less Capital expenditures (including capitalized software) 4,376 5,958 (1,582) Free cash flow $ 2,708 $ 2,331 $ 377 The increase in free cash flow during the three months ended March 31, 2024 compared to the similar period in 2023 is a reflection of the decrease in capital expenditures, partially offset by the decrease in operating cash flows, both of which are discussed above. Other Future Obligations As of March 31, 2024, Verizon had 27 renewable energy purchase agreements (REPAs) with third parties. See Note 12 to the condensed consolidated financial statements for additional information. Under the REPAs, we plan to purchase up to an aggregate of approximately 3.6 gigawatts of capacity across multiple states. Market Risk We are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes, foreign currency exchange rate fluctuations, changes in investment, equity and commodity prices and changes in corporate tax rates. We employ risk management strategies, which may include the use of a variety of derivatives including cross currency swaps, forward starting interest rate swaps, interest rate swaps, interest rate caps, treasury rate locks and foreign exchange forwards. We do not hold derivatives for trading purposes. It is our general policy to enter into interest rate, foreign currency and other derivative transactions only to the extent necessary to achieve our desired objectives in optimizing exposure to various market risks. Our objectives include maintaining 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. We do not hedge our market risk exposure in a manner that would completely eliminate the effect of changes in interest rates and foreign exchange rates on our earnings. Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives agreements (ISDA master agreements) and credit support annex (CSA) agreements which provide rules for collateral exchange. The CSA agreements contain fixed cap amounts or rating based thresholds such that we or our counterparties may be required to hold or 45 Table of Contents post collateral based upon changes in outstanding positions as compared to established thresholds or caps and changes in credit ratings. We do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments recognized at fair value. At March 31, 2024, we did not hold any collateral. At March 31, 2024, we posted $1.8 billion of collateral related to derivative contracts under collateral exchange agreements, which was recorded as Prepaid expenses and other in our condensed consolidated balance sheet. At December 31, 2023, we did not hold any collateral. At December 31, 2023, we posted $1.4 billion of collateral related to derivative contracts under collateral exchange arrangements, which was recorded as Prepaid expenses and other in our condensed consolidated balance sheet. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect that any such nonperformance would result in a significant effect on our results of operations or financial condition due to our diversified pool of counterparties. See Note 7 to the condensed consolidated financial statements for additional information regarding the derivative portfolio. Interest Rate Risk We are exposed to changes in interest rates, primarily on our short-term debt and the portion of long-term debt that carries floating interest rates. As of March 31, 2024, approximately 75% of the aggregate principal amount of our total debt portfolio consisted of fixed-rate indebtedness, including the effect of interest rate swap agreements designated as hedges. The impact of a 100-basis-point change in interest rates affecting our floating rate debt would result in a change in annual interest expense, including our interest rate swap agreements that are designated as hedges, of approximately $399 million. The interest rates on our existing long-term debt obligations are unaffected by changes to our credit ratings. Interest Rate Swaps We enter into interest rate swaps to achieve a targeted mix of fixed and variable rate debt. We principally receive fixed rates and pay variable rates, resulting in a net increase or decrease to Interest expense. These swaps are designated as fair value hedges and hedge against interest rate risk exposure of designated debt issuances. At March 31, 2024, the fair value of the liability of these contracts was $5.1 billion. At December 31, 2023, the fair value of the liability of these contracts was $4.5 billion. At both March 31, 2024 and December 31, 2023, the total notional amount of the interest rate swaps was $26.1 billion. Foreign Currency Risk The functional currency for our foreign operations is primarily the local currency. The translation of income statement and balance sheet amounts of our foreign operations into U.S. dollars is recorded as cumulative translation adjustments, which are included in Accumulated other comprehensive loss in our condensed consolidated balance sheets. Gains and losses on foreign currency transactions are recorded in the condensed consolidated statements of income. At March 31, 2024, our primary translation exposure was to the British Pound Sterling, Euro, Australian Dollar and Swedish Krona. Cross Currency Swaps We have entered into cross currency swaps to exchange our British Pound Sterling, Euro, Swiss Franc, Canadian Dollar and Australian Dollar-denominated cash flows into U.S. dollars and to fix our cash payments in U.S. dollars, as well as to mitigate the impact of foreign currency transaction gains or losses. The fair value of the asset of these contracts was $600 million and $762 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023, the fair value of the liability of these contracts was $2.2 billion and $2.1 billion, respectively. At March 31, 2024 and December 31, 2023, the total notional amount of the cross currency swaps was $32.6 billion and $33.5 billion, respectively. Foreign Exchange Forwards We also have foreign exchange forwards which we use as an economic hedge but for which we have elected not to apply hedge accounting. We enter into British Pound Sterling and Euro foreign exchange forwards to mitigate our foreign exchange rate risk related to non-functional currency denominated monetary assets and liabilities of international subsidiaries. At both March 31, 2024 and December 31, 2023, the fair value of the asset and liability of these contracts was insignificant. At both March 31, 2024 and December 31, 2023, the total notional amount of the foreign exchange forwards was $1.1 billion. 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. 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 the three months ended March 31, 2024 and March 31, 2023, we made payments of $269 million and $114 million, respectively, for obligations related to clearing costs and accelerated clearing incentives. We expect to continue to make payments of approximately $100 million for the remaining obligations in 2024. The final timing and 46 Table of Contents 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. See Note 3 to the condensed consolidated financial statements for additional information regarding our spectrum license transactions. TracFone Wireless, Inc. In November 2021, we completed the acquisition of TracFone Wireless, Inc. (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 represented a Level 3 measurement. The contingent consideration payable was based on the achievement of certain revenue and operational targets, measured over a two-year earn out period. Contingent consideration payments were completed in January of 2024. During the three months ended March 31, 2024 and March 31, 2023, Verizon made payments of $52 million and $102 million, respectively, related to the contingent consideration, which is reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. See Note 3 and Note 7 to the condensed consolidated financial statements for additional information. Cautionary Statement Concerning Forward-Looking Statements In this report we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates," "assumes," "believes," "estimates," "expects," "forecasts," "hopes," "intends," "plans," "targets" or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The following important factors, along with those discussed elsewhere in this report and in other filings with the Securities and Exchange Commission (SEC), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: • the effects of competition in the markets in which we operate, including the inability to successfully respond to competitive factors such as prices, promotional incentives and evolving consumer preferences; • failure to take advantage of, or respond to competitors' use of, developments in technology and address changes in consumer demand; • performance issues or delays in the deployment of our 5G network resulting in significant costs or a reduction in the anticipated benefits of the enhancement to our networks; • the inability to implement our business strategy; • adverse conditions in the U.S. and international economies, including inflation and changing interest rates in the markets in which we operate; • cyber attacks impacting our networks or systems and any resulting financial or reputational impact; • damage to our infrastructure or disruption of our operations from natural disasters, extreme weather conditions, acts of war, terrorist attacks or other hostile acts and any resulting financial or reputational impact; • disruption of our key suppliers’ or vendors' provisioning of products or services, including as a result of geopolitical factors or the potential impacts of global climate change; • material adverse changes in labor matters and any resulting financial or operational impact; • damage to our reputation or brands; 47 Table of Contents • the impact of public health crises on our operations, our employees and the ways in which our customers use our networks and other products and services; • changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks or businesses; • allegations regarding the release of hazardous materials or pollutants into the environment from our, or our predecessors', network assets and any related government investigations, regulatory developments, litigation, penalties and other liability, remediation and compliance costs, operational impacts or reputational damage; • our high level of indebtedness; • significant litigation and any resulting material expenses incurred in defending against lawsuits or paying awards or settlements; • an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; • significant increases in benefit plan costs or lower investment returns on plan assets; • changes in tax laws or regulations, or in their interpretation; or challenges to our tax positions, resulting in additional tax expense or liabilities; and • changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings. Item 3. Quantitative and Qualitative Disclosures About Market Risk Information relating to market risk is included in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption "Market Risk."