10-QPeriod: Q3 FY2017

VERIZON COMMUNICATIONS INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 26, 2017For Securities:VZ

Summary

Verizon Communications Inc. reported solid financial results for the nine months ending September 30, 2017. Total operating revenues were $92.1 billion, a slight decrease from $93.6 billion in the prior year period, primarily due to a decline in the Wireless segment. However, net income attributable to Verizon increased significantly to $11.4 billion from $8.6 billion in the same period last year, bolstered by a substantial net gain on the sale of divested businesses, notably the data center sale, which contributed $1.8 billion. The company continued its strategic investments in network infrastructure, particularly in 5G technology deployment and fiber optic expansion, with capital expenditures totaling $11.3 billion for the nine-month period. Significant acquisitions were also completed, including XO Holdings' wireline business and Yahoo's operating business, which contributed to an increase in goodwill and intangible assets. Financially, Verizon demonstrated effective debt management by executing various debt exchange and tender offers, reducing overall interest expense and extending debt maturities. Free cash flow remained robust at $5.9 billion for the nine months, supporting dividend payments and strategic initiatives. Investors should note the ongoing strategic shifts, including the integration of Oath (formerly Yahoo's business) and continued focus on network leadership.

Financial Highlights

50 data points
Beta

Revenue

$31.72B

84.3% Gross Margin

Net Income

$3.62B

11.4% Net Margin

EPS (Diluted)

$0.89

Total Assets

$254.68B

Cash & Equivalents

$4.49B

Free Cash Flow

$7.17B

Financial Statements
Beta
Revenue$31.72B
Cost of Revenue$4.96B
Gross Profit$26.75B
SG&A Expenses$7.48B
Operating Expenses$24.73B
Operating Income$6.99B
Interest Expense$1.16B
Net Income$3.62B
EPS (Basic)$0.89
EPS (Diluted)$0.89
Shares Outstanding (Basic)4.08B
Shares Outstanding (Diluted)4.09B

Key Highlights

  • 1Total operating revenues for the nine months ended September 30, 2017, were $92.1 billion, a decrease of 1.7% year-over-year.
  • 2Net income attributable to Verizon for the nine months increased significantly to $11.4 billion, up from $8.6 billion in the prior year, largely due to gains from divestitures.
  • 3Capital expenditures for the nine months totaled $11.3 billion, reflecting ongoing investments in network infrastructure and 5G deployment.
  • 4The company completed the acquisition of Yahoo's operating business in June 2017, integrating it into its Oath media and technology brand.
  • 5Verizon completed the acquisition of XO Holdings' wireline business in February 2017, enhancing its fiber-optic network capabilities.
  • 6Debt management was active, with significant debt exchange and tender offers conducted throughout the period.
  • 7Free cash flow for the nine months was $5.9 billion, demonstrating strong operational cash generation.

Frequently Asked Questions

Total operating revenues decreased slightly by 1.7% year-over-year for the first nine months of 2017, primarily driven by a decline in the Wireless segment's service revenues. This was partially offset by revenue growth in the Corporate and other segment, largely due to the acquisition of Yahoo's operating business and increased telematics revenue.

The acquisition of XO Holdings' wireline business and Yahoo's operating business contributed to strategic growth and expanded network capabilities. While these acquisitions increased goodwill and intangible assets, they also contributed to overall revenue and are expected to drive future synergies. The Yahoo acquisition, in particular, significantly boosted the 'Corporate and other' revenue segment.

Verizon actively managed its debt through various exchange and tender offers, resulting in an increase in total debt to $117.5 billion but also extending maturities. The company maintained a strong liquidity position, with free cash flow of $5.9 billion for the nine months ended September 30, 2017, which was sufficient to cover capital expenditures, dividend payments, and other financing activities.

Verizon's primary focus remains on leveraging its network leadership, particularly in 4G LTE and 5G technology. Significant capital expenditures are directed towards network expansion, densification, and the deployment of new technologies like 5G fixed wireless broadband. The company is also enhancing its media and telematics businesses through strategic acquisitions and integration efforts.