Verizon Communications Inc. (NYSE:VZ) today (July 30) reported strong second-quarter 2007 financial and operational results, as the company expanded margins while continuing revenue growth momentum in its key strategic markets -- wireless, broadband, data, video and global IP.
Verizon reported second-quarter 2007 earnings of $1.7 billion, or 58 cents in fully diluted earnings per share (EPS). This compares with reported EPS in the second quarter 2006 of 43 cents before discontinued operations. Including results from discontinued operations, which Verizon has since divested, second-quarter 2006 reported earnings were 55 cents per share.
On an adjusted basis (non-GAAP), Verizon's second-quarter 2007 earnings totaled $1.7 billion, or 58 cents in EPS. This is an increase of 11.5 percent compared with 52 cents per share before discontinued operations in the second quarter 2006.
Adjustments for special items in the second quarter 2007 included less than a penny per share in merger integration costs. Adjusted earnings in the second quarter 2006 reflected 9 cents per share in special items, consisting of severance and related pension and benefits charges, merger integration and Verizon Center relocation costs.
Organic Growth Strategy Gains Momentum
"Verizon's strategy of focusing on organic revenue growth and improving margins continues to gain momentum," said Chairman and CEO Ivan Seidenberg. "Results show that we are producing accelerating -- and sustainable -- top-line growth across all key markets.
"Verizon is also generating strong operating cash flows, which we expect to improve throughout the year. With our strong balance sheet and investment in advanced network platforms, we can continue to drive future earnings growth and return value to shareholders. We are confident we have the products and services, distribution infrastructure and customer service capabilities to continue to capture share from the competition in strategic markets."
Continued Profitable Revenue Growth
Verizon's total operating revenues grew 6.3 percent to $23.3 billion, compared with the second quarter of 2006. Year-over-year operating revenues grew 6.5 percent on an adjusted basis (non-GAAP).
Verizon's total operating expenses increased to $19.1 billion, or 2.4 percent year over year. On an adjusted basis (non-GAAP), operating expenses increased 4.8 percent to $19.1 billion over the same period.
On a reported basis, Verizon's operating income grew 29.0 percent year over year to $4.1 billion and, on an adjusted basis, by 14.9 percent to $4.2 billion. Operating income margin rose to 17.8 percent, compared with 14.7 percent in the second quarter 2006. On an adjusted basis, Verizon's operating income margin rose to 17.9 percent, compared with 16.6 percent in the second quarter 2006 and 17.3 percent in the first quarter 2007.
Strong Cash Flows; Capital Investments on Target
Margin expansion and revenue growth contributed to $11.6 billion in operating cash flows from continuing operations in the first half of 2007. This represents an increase of more than $800 million, or 7.5 percent, compared with the first half of 2006.
Capital expenditures totaled $4.4 billion in the second quarter 2007, in line with the company's guidance for full-year expenditures.
Total debt at the end of the second quarter was $32.5 billion, down from $34.7 billion at the end of the first quarter 2007.
Wireless Leads Industry in Financial, Operational Performance
Verizon Wireless continued its record of strong, industry-leading retail net customer additions, revenue growth, low churn and profitability.
Verizon Wireless remains the largest U.S. wireless company in terms of total revenues and data revenues. In addition, it has 60.1 million retail customers -- the most customers of any wireless brand. In the second quarter:
Nearly all of the 1.6 million retail net customer additions (including acquisitions and adjustments) were post-paid customers.
Total customers (retail and wholesale) were 62.1 million. The company added 1.3 million net customers after about 300,000 net reductions to the company's wholesale base -- primarily due to the bankruptcy of a reseller.
Verizon Wireless continued its industry-leading low churn, with retail churn at 1.08 percent, indicating a continuing high degree of customer loyalty. Churn among retail post-paid customers was even lower, a company-record 0.85 percent.
Revenues totaled $10.8 billion, up 17.1 percent. Service revenues were $9.4 billion, up 17.0 percent, driven by customer growth and demand for data services.
Retail service ARPU (average monthly revenue per customer) was $51.84, up 3.0 percent year over year.
Wireless operating income margin was 27.8 percent, the highest ever for the company. EBITDA margin of 45.8 percent was the second-highest ever. (EBITDA -- earnings before interest, taxes, depreciation and amortization -- is non-GAAP, and wireless EBITDA margin is EBITDA divided by wireless service revenues.)
Wireline Reports Accelerating Growth in FiOS, Strategic Services
Verizon's Wireline business -- which includes Verizon Telecom, serving domestic residential and small-business customers, and Verizon Business, serving large-business and government customers globally -- reported accelerating growth in sales of FiOS fiber-optic services and sales of strategic services to enterprise customers. In the second quarter 2007:
Data revenues across all market segments increased 11.6 percent, to $4.4 billion. This reflects increasing revenues from consumer broadband -- such as FiOS services and Verizon High Speed Internet (DSL) -- as well as from wholesale data transport and sales of Verizon Business data services.
Verizon added 288,000 net new broadband connections, a measure that combines the number of Verizon High Speed Internet and FiOS Internet connections.
Wireline broadband connections totaled 7.7 million, an increase of 1.6 million, or 25.5 percent, compared with the second quarter 2006. This total includes 1.1 million FiOS Internet connections, an increase of 203,000 from the first quarter 2007.
Verizon Telecom Reports Video, Consumer Revenue Growth
Sales of FiOS TV continued to accelerate as Verizon Telecom added a net of 167,000 new FiOS TV customers in the second quarter 2007. Net customer additions averaged about 2,600 per business day in the quarter. The company had a total of 515,000 FiOS TV customers as of the end of the second quarter 2007 -- an addition of 460,000 FiOS TV customers since the end of the second quarter 2006.
Complementing the FiOS TV rollout, the company added 125,000 satellite TV customers in partnership with DIRECTV in the second quarter 2007. At the end of the quarter, Verizon had a total of nearly 1.3 million video customers.
Second-quarter revenues in Verizon Telecom's consumer market decreased by 2.1 percent, to $4.2 billion, compared with the second quarter 2006. In legacy Verizon markets, year-over-year consumer revenues grew 3.4 percent, to $3.8 billion, in the second quarter 2007, more than doubling the year-over-year growth rate reported in the first quarter 2007. ("Legacy Verizon" excludes former MCI consumer markets, where Verizon's strategic focus has led to expected declines.) ARPU in these markets increased 10.9 percent, to $57.47, comparing second quarter 2007 with second quarter 2006, as customers purchased value-added broadband services.
Verizon Business Posts Third Consecutive Quarter of Revenue Growth
Verizon Business reported second-quarter 2007 revenues of $5.3 billion, or growth of 2.4 percent compared with the second quarter 2006 on an adjusted basis (non-GAAP). This is the third consecutive quarter of accelerating year-over-year pro-forma revenue growth (non-GAAP, calculated as if Verizon and MCI had merged on Jan. 1, 2006).
Overall revenue growth at Verizon Business was driven by the continued momentum of strong sales of key strategic services, such as IP (Internet protocol) and managed services as well as Ethernet and optical ring services. In the second quarter 2007, strategic services generated $1.3 billion in revenue, up 25.5 percent from the second quarter 2006.
Growth in revenues from strategic services also continued to exceed declines in revenues from core services, such as traditional voice and data services. Strategic services revenues were also up sequentially, increasing 9.3 percent from the first quarter 2007.
Verizon Business rolled out significant enhancements to its global networking and managed services offerings during the quarter. On July 1, Verizon Business became the leading provider of managed security services to business and government customers worldwide with the completion of its previously announced acquisition of Cybertrust. -Verizon
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
