Verizon 2nd quarter earnings: 1.4 million net adds
Not only are wireless customers and revenues up, but wireline operations posted growth too, in legacy as well as FiOS customer growth with over 200,000 net additions.
Wireless as expected posted the most impressive numbers however. Big Red capped its sixth consecutive quarter of good news with 1.4 million net added retail connections, and an admirably low postpaid churn of just 0.94%.
The mobile additions breakdown as 304,000 postpaid net adds, and 1.15 million tablets. 75% of phone sales are smartphones. That fueled growth of average revenue per account to increase 4.7% to approximately $160 per-month. Those gains have an air of modesty to them, but still commendable given the saturation of the market, and the competition being put up by the likes of T-Mobile and AT&T.
Verizon now boasts a customer base of 104.6 million subscribers, of which, 98.6 million are postpaid. Couple that with the news that Verizon also has the highest number of customers paying over $100 per month for service, roughly 51%, and it becomes easier to add up the wireless revenues which reached about $18.1 billion for the quarter, up 6% compared to the same period last year.
Verizon maintained its guidance for the remainder of the year.
2Q 2014 HIGHLIGHTS
- $1.01 in earnings per share (EPS), compared with 78 cents per share in 2Q 2013.
- 91 cents in adjusted EPS (non-GAAP), compared with 73 cents in adjusted EPS in 2Q 2013, excluding non-operational gains in both periods.
- Added 1.4 million net retail connections; low retail postpaid churn of 0.94 percent; 104.6 million total retail connections; 98.6 million total retail postpaid connections.
- 5.9 percent year-over-year increase in service revenues; 5.3 percent year-over-year increase in retail service revenues; 32.5 percent operating income margin; 50.3 percent segment EBITDA margin on service revenues (non-GAAP).
- 5.3 percent year-over-year increase in consumer revenues, the eighth consecutive quarter of more than 4 percent growth; consumer ARPU (average revenue per user) up 11.0 percent.
- 14.4 percent year-over-year increase in FiOS revenues; 139,000 FiOS Internet and 100,000 FiOS Video net additions.
NEW YORK - Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported its sixth consecutive quarter of double-digit percentage growth in operating income and earnings per share. In second-quarter 2014, the company delivered consolidated top-line growth, driven by strong wireless and FiOS revenues, and continued margin expansion.
Chairman and CEO Lowell McAdam said: “Verizon’s second-quarter results continue to demonstrate our ability to deliver strong customer growth, with equally strong financial performance, in a dynamic and competitive environment. We have great momentum heading into the second half of the year. We remain focused on profitable growth and on meaningful network investments that provide our customers with the best, and with a continuously improving, overall experience.”
Verizon has posted double-digit year-over-year percentage growth in reported and adjusted EPS in nine of the last 10 quarters.
Verizon reported $1.01 in EPS in second-quarter 2014, compared with 78 cents per share in second-quarter 2013. Second-quarter 2014 results included an after-tax gain of $434 million (10 cents per share) related to the sale of 700 MHz A Block spectrum licenses.
On an adjusted basis (non-GAAP), Verizon posted EPS of 91 cents in second-quarter 2014, a 24.7 percent increase compared with 73 cents per share in second-quarter 2013.
- Verizon recorded its highest quarterly revenue growth rate in the past six quarters. Total operating revenues in second-quarter 2014 were $31.5 billion, a 5.7 percent increase compared with second-quarter 2013.
- Continued effective cost management drove second-quarter 2014 operating income to $7.7 billion, a 17.2 percent increase compared with second-quarter 2013.
- Consolidated operating income margin was 24.4 percent for second-quarter 2014, compared with 22.0 percent for second-quarter 2013.
- Consolidated EBITDA margin (non-GAAP, based on earnings before interest, taxes, depreciation and amortization) was 37.6 percent for second-quarter 2014, compared with 35.9 percent for second-quarter 2013.
Verizon Wireless Delivers Strong Customer Additions, Revenue Growth and Profitability
In second-quarter 2014, Verizon Wireless delivered strong growth in retail postpaid net connections and revenues, company-record tablet additions, an increase in smartphone penetration, and continued high segment EBITDA margin on service revenues (non-GAAP).
Wireless Financial Highlights
- Total revenues were $21.5 billion in second-quarter 2014, up 7.5 percent year over year. Service revenues in the quarter totaled $18.1 billion, up 5.9 percent year over year. Retail service revenues grew 5.3 percent year over year, to $17.3 billion.
- Retail postpaid ARPA (average revenue per account) increased 4.7 percent over second-quarter 2013, to $159.73 per month.
- In second-quarter 2014, wireless operating income margin was 32.5 percent and segment EBITDA margin on service revenues was 50.3 percent. This compares with 32.4 percent and 49.8 percent, respectively, in second-quarter 2013.
Wireless Operational Highlights
- Verizon Wireless added 1.4 million retail net connections, all of which were postpaid, in the second quarter. These additions exclude acquisitions and adjustments.
- At the end of the second quarter, the company had 104.6 million retail connections. This includes 98.6 million retail postpaid connections, a 4.6 percent increase year over year.
- Verizon Wireless had 35.2 million retail postpaid accounts at the end of the second quarter, up 0.7 percent over second-quarter 2013, and 2.80 connections per account, up 3.7 percent year over year.
- During second-quarter 2014, the company added 304,000 postpaid phone net additions and 1.15 million postpaid tablets. At the end of the quarter, smartphones accounted for nearly 75 percent of the Verizon Wireless retail postpaid customer phone base, up from 72 percent in first-quarter 2014. This was also the third straight quarter of company-record net additions for tablets.
- Retail postpaid churn was 0.94 percent in the second quarter, down 13 basis points sequentially and up 1 basis point year over year. Retail churn was 1.25 percent in the second quarter, down 12 basis points sequentially and up 2 basis points year over year.
- The company continued to enhance its 4G LTE smartphone lineup. In the second quarter, Verizon Wireless launched the Samsung Galaxy S 5 and ATIV SE, the Lucid 3 by LG and the HTC One (M8). The company also launched the Samsung Galaxy Tab 4 8.0 tablet and announced the Samsung Galaxy Tab 4 10.1 and Galaxy Tab S. Earlier this month, Verizon Wireless launched the Sony Xperia Z2 tablet and the LG G3 smartphone.
- During the second quarter, Verizon Wireless continued to add capacity to its 4G LTE network, the largest in the United States, using AWS spectrum. The additional bandwidth, called XLTE, is now available in more than 350 markets across the country.
Wireline Consumer Revenue Growth Remains Strong
Verizon’s wireline segment reported continued strong results for consumer services, where year-over-year quarterly revenues now have grown by more than 4 percent for eight consecutive quarters.
Wireline Financial Highlights
- Total revenues were $9.8 billion in second-quarter 2014, up 0.3 percent year over year. This is the first quarterly year-over-year increase in total wireline revenues in more than seven years.
- In second-quarter 2014, consumer revenues were $3.9 billion, up 5.3 percent compared with second-quarter 2013, with FiOS revenues representing 75 percent of the total. Consumer ARPU for wireline services increased to $122.57 in second-quarter 2014, up 11.0 percent compared with second-quarter 2013.
- Total FiOS revenues grew 14.4 percent, to $3.1 billion, comparing second-quarter 2014 with second-quarter 2013.
- Wireline operating income margin was 2.7 percent in second-quarter 2014, up from 0.8 percent in second-quarter 2013. Segment EBITDA margin (non-GAAP) was 23.2 percent in second-quarter 2014, compared with 22.2 percent in second-quarter 2013.
- Sales of strategic services to enterprise customers increased 3.0 percent compared with second-quarter 2013. Strategic services include private IP, Ethernet, data center, cloud, security and managed services.
Wireline Operational Highlights
- In second-quarter 2014, Verizon added 139,000 net new FiOS Internet connections and 100,000 net new FiOS Video connections. Verizon had totals of 6.3 million FiOS Internet and 5.4 million FiOS Video connections at the end of the second quarter, representing year-over-year increases of 9.3 percent and 7.6 percent, respectively.
- FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 40.1 percent at the end of second-quarter 2014, compared with 38.6 percent at the end of second-quarter 2013. In the same periods, FiOS Video penetration was 35.3 percent, compared with 34.5 percent. The FiOS network passed 19.3 million premises by the end of second-quarter 2014.
- By the end of second-quarter 2014, 55 percent of consumer FiOS Internet customers subscribed to FiOS Quantum, which provides speeds ranging from 50 to 500 megabits per second, up from 51 percent at the end of first-quarter 2014.
- Beginning this week, existing and new FiOS customers are receiving upload speeds that mirror download speeds. Verizon is the first provider to offer symmetrical broadband speeds at no additional charge, enhancing the ability of FiOS customers to upload to the cloud, share videos and photos, and video chat.
- Broadband connections totaled 9.1 million at the end of second-quarter 2014, a 1.5 percent year-over-year increase. Net broadband connections increased by 46,000 in second-quarter 2014, as FiOS Internet net additions more than offset declines in DSL-based High Speed Internet connections.
- Verizon has been replacing high-maintenance portions of its residential copper network with fiber optics to provide customers with more resilient infrastructure and reduce repairs, which improves customer satisfaction and reduces costs. In second-quarter 2014, Verizon migrated an additional 70,000 customers to fiber.
- In the second quarter, Verizon Enterprise Solutions began deploying innovative cloud, security, M2M (machine-to-machine), networking and other technology solutions for a variety of clients around the globe, including healthcare clients Avera, Cardinal Health, Cerner, iCare and Molina Healthcare; as well as 1-800-Flowers, Anadarko Petroleum Corporation, Commonwealth Bank of Australia, Ferrellgas, Johnson Controls, KG Inicis, Northgate Information Solutions, Peninsula Light Corporation and the state of Colorado’s Statewide Internet Portal Authority.
Verizon continues to target 2014 investments in the range of $16.5 billion to $17 billion, with a decrease in capital spending as a percentage of total revenues for the full year.
Verizon continues to target consolidated top-line growth of 4 percent and adjusted consolidated EBITDA margin expansion in 2014, with positive contributions to profitable growth from both wireless and wireline.
1. Droid_X_Doug (Posts: 5922; Member since: 22 Dec 2010)
I wonder how many of those adds came from Sprint?
3. Slammer (Posts: 1120; Member since: 03 Jun 2010)
I for one, have elected to stay put. After 7 years with Sprint, the network has been showing a huge improvement. In all honesty, the transition from the old network to the new was rough. Experienced a lot of dropped calls and poor data connectivity. Since the transition, I have never had better network performance and the network isn't even completed yet.
I would've fell into the logs of complaints if I hadn't been previously instructed by Sprint that I would experience issues during upgrades. Sprint has been upfront and it is delivering a very viable network.
2. Slammer (Posts: 1120; Member since: 03 Jun 2010)
This is more proof that Tmobile's "Uncarrier" branding is not hurting AT&T or Verizon. I have said it a million times before, propping up Tmobile as a force, is only producing a limited effect. You can't fight higher paying customers with least profitable ones. Verizon and AT&T have never been harmed by trinkets and fake chandeliers. The only way to fight these two behemoths now, is to create a third power.
4. zinger69 (Posts: 46; Member since: 13 Feb 2014)
I think that's the argument Masayoshi Son is trying to make to justify Softbank buying T-Mo.
5. corporateJP (Posts: 1762; Member since: 28 Nov 2009)
When you have a million plus tablets, that really isn't saying much, especially when those tablet adds are usually only $10 monthly revenue streams.
Like how they're steroiding themselves up for the earnings report...
6. dwillopp (Posts: 18; Member since: 08 Jul 2010)
More tablets = more data being used on these tablets = bumps in Gigabyte allocation = more than just $10 ;)
9. droidlife (Posts: 4; Member since: 01 Feb 2013)
That is like saying back in the day that $10 share lines didn't matter. I see it as a positive sign they are keeping pace and changing with the times.
7. xtroid2k (Posts: 432; Member since: 11 Jan 2010)
In the end it doesn't matter how the money comes in, so long as the share holders are happy those tablets will matter and mean something. And whether someone spends $5 or $500 they are still a customer.
8. hkendrick3 (Posts: 6; Member since: 13 Dec 2012)
Of course look how they are bending there customers over as long as you like that take it Verizon will always be No #1