10-QPeriod: Q3 FY2020

VERIZON COMMUNICATIONS INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 27, 2020For Securities:VZ

Summary

Verizon Communications Inc. reported its third-quarter 2020 results, showing a slight decrease in total operating revenues to $31.54 billion compared to $32.89 billion in the same period of 2019. This decline was primarily attributed to lower wireless equipment revenues and, to a lesser extent, service revenues, impacted by customer behavior changes and strategic decisions related to the COVID-19 pandemic, such as waiving late fees and offering expanded data. Despite revenue pressures, the company maintained a strong operating income of $7.68 billion. Net income attributable to Verizon for the quarter was $4.36 billion, resulting in diluted earnings per share of $1.05. The company also highlighted robust operating cash flow generation, with $32.47 billion for the nine months ended September 30, 2020, contributing to significant free cash flow. Verizon continued its strategic investments in network expansion, particularly in 5G, while managing its debt levels and returning capital to shareholders through dividends.

Financial Highlights

48 data points
Beta

Revenue

$31.54B

Net Income

$4.36B

13.8% Net Margin

EPS (Diluted)

$1.05

Total Assets

$296.99B

Cash & Equivalents

$8.98B

Free Cash Flow

$8.92B

Financial Statements
Beta
Revenue$31.54B
SG&A Expenses$7.34B
Operating Expenses$23.86B
Operating Income$7.68B
Interest Expense$1.04B
Net Income$4.36B
EPS (Basic)$1.05
EPS (Diluted)$1.05
Shares Outstanding (Basic)4.14B
Shares Outstanding (Diluted)4.14B

Key Highlights

  • 1Total operating revenues for the third quarter of 2020 decreased by 4.1% to $31.54 billion compared to $32.89 billion in Q3 2019.
  • 2Net income attributable to Verizon was $4.36 billion ($1.05 per diluted share) for the third quarter of 2020, down from $5.19 billion ($1.25 per diluted share) in the prior year period.
  • 3Operating income for the quarter was $7.68 billion, a slight decrease from $8.18 billion in Q3 2019.
  • 4The company generated $32.47 billion in cash from operating activities for the nine months ended September 30, 2020, an increase from $26.75 billion in the same period of 2019.
  • 5Free cash flow for the nine months ended September 30, 2020, was $18.3 billion, up from $14.4 billion in the prior year.
  • 6Verizon announced a pending acquisition of TracFone Wireless, Inc. for approximately $6.2 billion in cash and stock, subject to regulatory approvals.
  • 7Capital expenditures for the nine months ended September 30, 2020, were $14.2 billion, an increase from $12.3 billion in the comparable period of 2019, reflecting ongoing investments in 5G and fiber networks.

Frequently Asked Questions

COVID-19 led to decreased wireless equipment revenue due to an elongation of the upgrade cycle and lower activation/upgrade volumes. Service revenues were also impacted by waived late fees, expanded data allowances, and reduced roaming revenues due to decreased travel. The company estimate the net impact of COVID-19 on its third-quarter results was a reduction of approximately $0.05 in earnings per share.

Verizon is focused on leveraging its network leadership (especially in 5G), retaining and growing its customer base, enhancing ecosystems in growth businesses, and driving monetization of its networks and solutions. Significant capital investment is directed towards network expansion, including 5G deployment and fiber infrastructure.

In September 2020, Verizon entered into a purchase agreement to acquire TracFone Wireless, Inc. for approximately $3.1 billion in cash and $3.1 billion in Verizon common stock, subject to customary adjustments and regulatory approvals. The transaction is expected to close in the second half of 2021.

Verizon ended Q3 2020 with a strong cash position of $9.0 billion. The company has a $9.5 billion revolving credit facility, largely undrawn, providing significant liquidity. While debt levels remain substantial, the company has been actively managing its debt through issuances, repayments, and exchange offers, and has extended its revolving credit facility maturity. Operating cash flow and free cash flow generation provide strong support for its liquidity needs.