Verizon Communications Inc.VZ reported mixed financial numbers in the first quarter of 2015. Earnings came in above the Zacks Consensus Estimate wherein revenues missed the same. Verizon currently carries a Zacks Rank #3 (Hold).
Verizon reported earnings per share of $1.02, beating the Zacks Consensus Estimate of $0.95. Quarterly net income came in at $4,338 million compared with a net income of $5,986 million in the year-ago quarter. However, quarterly net income decreased 27.5% year over year.
Quarterly total revenue increased 3.8% year over year to $31,984 million but missed the Zacks Consensus Estimate of $32,284 million.
Total operating expenses in the reported quarter was $24,024 million, up 1.5% year over year. Operating income stood at $7,960 million compared with $7,160 million in the year-ago quarter. Quarterly adjusted EBITDA margin in the reported quarter was 37.4% in comparison with 36.7% in the first quarter of 2014.
Cash Flow & Liquidity
During the first quarter of 2015, Verizon generated $10,169 million of cash from operations compared with $7,139 million in the first quarter of 2014. Free cash flow at the end of the first quarter was $6,504 million compared with $2,989 million a year ago.
At the end of first-quarter 2015, Verizon had $4,933 million of cash and short-term investments and $108,949 million of long-term debt compared with $11,153 million of cash and short-term investments and $110,536 million of debt outstanding at the end of 2013. The debt-to-capitalization ratio was 0.91 at the end of the first quarter of 2015 against 0.89 at the end of 2014.
Total revenue at the segment was $22,328 million, up 6.9% year over year. Retail Service revenues were down 2.6% to $17,143 million. Other Service revenues were $771 million, up 4.0%. Equipment revenues increased 80.4% to $3,373 million and Other revenues were up 1.9% to $1,041 million.
Operating expenses increased 7.1% to $14,518 million. Operating income improved 7.1% to $7,810 million. Quarterly operating margin came in at 35%, flat year over year. Segment EBITDA increased 6.6% to $10,000 million. EBITDA margin was 44.8% compared with 44.9% in the prior-year quarter.
At the end of the first quarter, Verizon had 108.582 million retail subscribers, up 5.1% year over year. Out of the total, retail postpaid subscriber count stood at 102.637 million, up 5.5% and Retail prepaid subscriber count was 5.945 million, down 1.8%. During the reported quarter, the company added 565,000 postpaid customers (up 4.8% year over year) while prepaid customers decreased by 0.188 million.
Quarterly retail postpaid churn rate was 1.03% compared with 1.07% in the year-ago quarter whereas total retail churn rate was 1.33% against 1.37% in the year-ago quarter. Retail postpaid average revenue per account (ARPA) dropped 2.2% to $156.14
In the reported quarter, 91.4% of the total numbers of activated phones were smartphones compared with 90.1% in the prior-year quarter. Strong sale of Apple Inc.'s AAPL iPAD and increased adoption of Google Inc.'s GOOG Android-based smartphones and Microsoft Corp. MSFT developed Windows smartphones also drove subscriber numbers.
Total revenue at the segment was $9,469 million, down 2% year over year. Consumer retail revenues were up 4% to $3,992 million. Small business revenues were $600 million, down 3.8%. Strategic services revenues declined 1.1% to $2,048 million. Core revenues were down 13% to $1,215 million. Global wholesale revenues decreased 3.7% to $1,524 million and Other revenues declined 37.5% to $90 million.
Operating expenses decreased 4.8% to $9,064 millionMeanwhile, operating income jumped a whopping 187.2% to $405 million. Quarterly operating margin came in at 4.3% against 1.5% in the year-ago quarter. Segment EBITDA decreased by 1.1% to $2,151 million. EBITDA margin stood at 22.7% compared with 22.5% in the year-ago quarter.
At the end of the first quarter, FiOS video subscriber base was 5.739 million (up 7.9% year over year), FiOS Internet subscriber count stood at 6.749 million (up 9.4%) and FiOS digital video residence connections were 4.661 million (up 7.1%). In the reported quarter, Verizon added a net 90,000 FiOS video subscribers, 133,000 FiOS Internet subscribers and 59,000 FiOS digital video residence connections.
High-speed Internet connection dropped 12.7% to 2.497 million, total broadband connections grew 2.4% to 9.246 million, Primary residence switched access connections decreased 13.3% to 5.397 million and Primary residence connections fell 4.9% to 10.058 million. Total retail residence voice connections dropped 5.3% to 10.457 million and total voice connections decreased 6.1% to 19.475 million.
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