Summary
Verizon Communications Inc. reported strong financial results for the first quarter of 2018, driven by robust growth in its Wireless segment. Total operating revenues increased by 6.6% year-over-year to $31.8 billion, with the Wireless segment revenues climbing 4.9% to $21.9 billion, largely due to a significant increase in equipment revenue. Net income surged by 31.3% to $4.7 billion, translating to a diluted EPS of $1.11, up from $0.84 in the prior year's quarter. This performance reflects the company's strategic focus on network expansion and service innovation, including advancements in 5G technology deployment.
Financial Highlights
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Financial Statements
Beta
| Revenue | $31.77B |
| Cost of Revenue | $5.31B |
| Gross Profit | $26.46B |
| SG&A Expenses | $6.84B |
| Operating Expenses | $24.42B |
| Operating Income | $7.35B |
| Interest Expense | $1.20B |
| Net Income | $4.54B |
| EPS (Basic) | $1.11 |
| EPS (Diluted) | $1.11 |
| Shares Outstanding (Basic) | 4.10B |
| Shares Outstanding (Diluted) | 4.11B |
Key Highlights
- 1Total operating revenues increased 6.6% to $31.8 billion, driven by a 4.9% increase in Wireless segment revenue.
- 2Net income attributable to Verizon grew significantly by 31.3% to $4.5 billion, resulting in diluted EPS of $1.11, up from $0.84 in Q1 2017.
- 3The adoption of new revenue recognition standard (Topic 606) led to a significant shift in revenue recognition, recognizing more revenue from wireless equipment sales upfront and less from service revenue over time.
- 4Capital expenditures increased by 48.7% to $4.6 billion, primarily for network expansion and modernization, including investments in 5G technology.
- 5Cash flow from operating activities saw a substantial increase of $5.3 billion to $6.6 billion, benefiting from improved working capital and higher earnings.
- 6The company completed the acquisition of Straight Path Communications Inc. in February 2018, adding valuable spectrum for 5G deployment.
- 7Effective income tax rate decreased from 31.4% to 22.9% due to the Tax Cuts and Jobs Act, positively impacting net income.
Frequently Asked Questions
The adoption of Topic 606, effective January 1, 2018, resulted in a shift in revenue recognition. More revenue is now recognized upfront for wireless equipment sales, while less service revenue is recognized over the contract term. This led to a reported increase in wireless equipment revenue and a decrease in service revenue for the period. The company recorded a cumulative pre-tax adjustment of $3.9 billion to retained earnings upon adoption.
Verizon is actively investing in 5G technology, having acquired spectrum through acquisitions like Straight Path Communications Inc. The company is focused on deploying 5G wireless residential broadband services in several markets in 2018 and sees 5G as a key component of its future growth strategy, alongside network densification and expansion of its fiber-optic network.
The TCJA, which reduced the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, significantly lowered Verizon's effective income tax rate from 31.4% in Q1 2017 to 22.9% in Q1 2018. This reduction, along with other adjustments, contributed to the substantial increase in net income for the quarter.
Capital expenditures increased by nearly 49% to $4.6 billion in the quarter. This significant investment is primarily directed towards enhancing Verizon's wireless network capacity and density (4G LTE and future 5G), expanding its fiber-optic infrastructure, and acquiring necessary spectrum licenses. These investments are crucial for maintaining network leadership and supporting future growth in data services and new technologies.