10-QPeriod: Q2 FY2020

VERIZON COMMUNICATIONS INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 28, 2020For Securities:VZ

Summary

Verizon Communications Inc. reported its financial results for the quarter ended June 30, 2020, a period significantly influenced by the ongoing COVID-19 pandemic. Total operating revenues saw a decrease of 5.1% year-over-year for the quarter, reflecting impacts across both the Consumer and Business segments. Despite revenue pressures, the company maintained a strong operational focus, adapting to evolving market conditions and prioritizing employee and customer safety. The company also made strategic investments in its network infrastructure, particularly in 5G technology. Net income attributable to Verizon increased to $4.7 billion from $3.9 billion in the prior year's second quarter, translating to a diluted EPS of $1.13, up from $0.95. This improvement was partly due to lower interest expenses and a favorable tax rate. The company also maintained a robust cash flow from operations, providing resources for ongoing investments and dividend payments. Management highlighted the company's resilience and ability to adapt to the challenges posed by the pandemic, while continuing to invest in future growth opportunities.

Financial Highlights

48 data points
Beta

Revenue

$30.45B

Net Income

$4.70B

15.4% Net Margin

EPS (Diluted)

$1.13

Total Assets

$293.26B

Cash & Equivalents

$7.88B

Free Cash Flow

$14.73B

Financial Statements
Beta
Revenue$30.45B
SG&A Expenses$7.16B
Operating Expenses$23.09B
Operating Income$7.36B
Interest Expense$1.09B
Net Income$4.70B
EPS (Basic)$1.14
EPS (Diluted)$1.13
Shares Outstanding (Basic)4.14B
Shares Outstanding (Diluted)4.14B

Key Highlights

  • 1Total operating revenues decreased by 5.1% to $30.45 billion for the three months ended June 30, 2020, compared to $32.07 billion in the prior year period, reflecting impacts from COVID-19.
  • 2Net income attributable to Verizon increased to $4.70 billion ($1.13 per diluted share) for the three months ended June 30, 2020, up from $3.94 billion ($0.95 per diluted share) in the same period last year.
  • 3Cash flow from operations for the six months ended June 30, 2020, increased significantly to $23.55 billion from $15.84 billion in the prior year, aided by working capital improvements and timing of tax payments.
  • 4The company acquired BlueJeans Network, Inc. in May 2020 for approximately $396 million to expand its enterprise video conferencing capabilities.
  • 5Verizon participated in an FCC spectrum auction in March 2020, winning licenses valued at $3.4 billion, with $1.6 billion settled in cash.
  • 6The company maintained strong liquidity, with cash and cash equivalents totaling $7.9 billion as of June 30, 2020.
  • 7Operating expenses decreased by 4.7% to $23.09 billion for the three months ended June 30, 2020, compared to $24.22 billion in the prior year period, partly due to lower cost of wireless equipment.

Frequently Asked Questions

COVID-19 significantly impacted Verizon's financial performance, leading to a 5.1% decrease in total operating revenues for the three months ended June 30, 2020, compared to the prior year. This was driven by reduced service revenues, lower wireless equipment sales due to an elongated upgrade cycle and store closures, and decreased advertising revenue at Verizon Media. The company also incurred higher costs related to the allowance for credit losses and implemented measures to keep customers connected.

Verizon is heavily investing in its 5G network deployment, viewing it as a key driver for future growth. The company is focusing on adding capacity and density to its 4G LTE network while simultaneously building out its 5G infrastructure. This includes the launch of 5G Home services in select markets and its 5G Ultra Wideband network in numerous U.S. cities. Verizon expects 5G technology to offer higher throughput and lower latency, enabling new opportunities and supporting increased data traffic.

Verizon maintained a strong liquidity position, with cash and cash equivalents increasing to $7.9 billion as of June 30, 2020. The company reduced its unsecured debt maturing in the near term and had significant unused capacity on its revolving credit facility. While the company's total debt remains substantial, its cash flow from operations and access to capital markets are considered sufficient to meet its ongoing obligations and investment requirements.

In March 2020, Verizon participated in an FCC incentive auction for spectrum licenses, winning licenses valued at $3.4 billion. While $1.8 billion was settled with existing licenses, the remaining $1.6 billion was settled in cash. In connection with this transaction, Verizon recorded a pre-tax net loss of $1.2 billion ($914 million after-tax) in Selling, General, and Administrative expense for the six months ended June 30, 2020, due to the exchange of previously held licenses for new ones which had commercial substance.