10-QPeriod: Q1 FY2015

VERIZON COMMUNICATIONS INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 28, 2015For Securities:VZ

Summary

Verizon Communications Inc. (VZ) reported its first-quarter 2015 financial results, showing a year-over-year increase in operating revenues to $31.98 billion, driven by strong performance in its Wireless segment. While overall net income decreased compared to the prior year, this was largely due to a significant gain recognized in Q1 2014 from the sale of its interest in Vodafone Omnitel. The company continues to invest heavily in its network infrastructure, including a substantial acquisition of wireless spectrum. Key strategic initiatives are underway, including the pending sale of its wireline assets in California, Florida, and Texas to Frontier Communications, expected to close in the first half of 2016. Verizon also completed a tower monetization transaction, generating significant cash proceeds. The company's focus remains on higher-margin, growth areas like wireless and wireline data, and strategic services. Dividends were paid, and an accelerated share repurchase program was initiated, signaling a commitment to returning value to shareholders.

Financial Highlights

51 data points
Beta

Revenue

$31.98B

62.2% Gross Margin

Net Income

$4.22B

13.2% Net Margin

EPS (Diluted)

$1.02

Total Assets

$235.79B

Cash & Equivalents

$4.39B

Free Cash Flow

$10.17B

Financial Statements
Beta
Revenue$31.98B
Cost of Revenue$12.10B
Gross Profit$19.89B
SG&A Expenses$7.94B
Operating Expenses$24.02B
Operating Income$7.96B
Interest Expense$1.33B
Net Income$4.22B
EPS (Basic)$1.03
EPS (Diluted)$1.02
Shares Outstanding (Basic)4.12B
Shares Outstanding (Diluted)4.12B

Key Highlights

  • 1Operating Revenues increased by 3.8% to $31.98 billion compared to Q1 2014, primarily driven by the Wireless segment.
  • 2Wireless segment revenues grew 6.9% to $22.33 billion, with equipment revenue significantly increasing due to the adoption of the Verizon Edge installment plan.
  • 3The company acquired $10.4 billion in AWS-3 spectrum licenses in an FCC auction.
  • 4Verizon announced the sale of its wireline operations in California, Florida, and Texas to Frontier Communications for approximately $10.5 billion, expected to close in the first half of 2016.
  • 5A tower monetization transaction with American Tower generated $5.0 billion in upfront payments.
  • 6Net Income decreased to $4.34 billion from $5.99 billion in Q1 2014, largely due to a significant gain recognized in the prior year's quarter related to the Vodafone Omnitel sale.
  • 7Capital expenditures were $3.67 billion, down from $4.15 billion in Q1 2014, reflecting shifts in investment timing.

Frequently Asked Questions

The primary driver of revenue growth was Verizon's Wireless segment, which saw a 6.9% increase in total operating revenues to $22.33 billion. This growth was largely fueled by a significant surge in equipment revenue, up 52.6%, attributed to the increased adoption of the Verizon Edge equipment installment plan.

Verizon announced the sale of its wireline business in California, Florida, and Texas to Frontier Communications for approximately $10.5 billion, with an expected closing in the first half of 2016. Additionally, the company acquired $10.4 billion in AWS-3 spectrum licenses in an FCC auction and completed a tower monetization transaction with American Tower for $5.0 billion.

Capital expenditures decreased to $3.67 billion from $4.15 billion in the prior year's quarter. Financing activities saw a net use of cash of $3.2 billion, a significant decrease from $53.2 billion in Q1 2014, primarily due to the completion of the Vodafone acquisition in the prior year. During the quarter, Verizon borrowed $6.5 billion under a term loan and prepaid $5.0 billion. Dividends paid totaled $2.2 billion, and the company initiated a $5.0 billion accelerated share repurchase program.

The increased adoption of the Verizon Edge installment plan has led to a shift of revenue recognition from service revenue to equipment revenue. This change affects the timing of revenue recognition, with more revenue now being recognized upfront with equipment sales rather than spread over the service period.