Verizon profit climbs to $1.95 billion in Q1 on solid subscriber growth

Verizon Communications posted its first-quarter earnings results on Thursday, showing solid income and revenue growth. The nation’s No.1 carrier reported EPS growth of 15.3% in the first quarter as Verizon earned $0.68 per share, or $1.95 billion, compared to $0.59 in the same quarter last year. Sales also climbed 4% to $29.4 billion, narrowly missing the Street’s $29.54 billion consensus. Smartphones accounted for 61% of Verizon’s postpaid customer base which grew by a net 677,000 subscribers in the first quarter. The carrier also said it activated 4 million iPhones during Q1 2013, beating Wall Street’s 3.5 million-unit consensus. Verizon shares climbed 1.94% during Thursday’s pre-market session. The carrier’s full press release follows below.

Verizon Wireless Expands Margins; Continued Strong Customer and Revenue Gains Reported for Wireless, FiOS and Global Enterprise Strategic Services

1Q 2013 HIGHLIGHTSConsolidated

• 68 cents in earnings per share (EPS), a 15.3 percent increase compared with 59 cents per share in 1Q 2012.
• 4.2 percent year-over-year increase in total operating revenues; cash flow from operating activities up $1.6 billion, or 26.4 percent, from 1Q 2012.

Wireless

• 8.6 percent year-over-year increase in both service revenues and retail service revenues in 1Q 2013; 32.9 percent operating income margin and 50.4 percent segment EBITDA margin on service revenues (non-GAAP), both record highs.
• 677,000 retail postpaid net additions, up 35 percent year over year; low retail postpaid churn of 1.01 percent; 98.9 million total retail connections, 93.2 million total retail postpaid connections.
• 4G LTE service now available to 287 million people in 491 markets across the U.S.

Wireline

• 188,000 FiOS Internet and 169,000 FiOS Video net additions, with continued increased sales penetration for both services; FiOS revenues up 15.1 percent year over year, to $2.6 billion.
• 4.3 percent year-over-year increase in consumer revenues; consumer ARPU up 9.5 percent year over year, to $107.15.
• 6.0 percent year-over-year increase in revenues for global enterprise strategic services.

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today reported strong first-quarter 2013 earnings growth, driven by record margins at Verizon Wireless and continued strong cash flow and year-over-year revenue increases for wireless, FiOS and strategic enterprise services.

Verizon reported 68 cents in EPS in first-quarter 2013, a 15.3 percent increase compared with first-quarter 2012 earnings of 59 cents per share. There were no adjustments in either quarter.

“Verizon is off to an excellent start in 2013,” said Lowell McAdam, Verizon chairman and CEO. “Our strategic investments in wireless, wireline and global networks have given us the platforms to sustain momentum and take advantage of growth opportunities in key markets for broadband, video and cloud services. With ongoing improvements in operating efficiency, we expect continued growth in free cash flow and earnings as we move through the year.”

Strong Cash Flow and Consolidated Revenue Growth

In first-quarter 2013, Verizon’s consolidated results were highlighted by continued strong cash flow and revenue growth.

Consolidated Highlights

• Total operating revenues in first-quarter 2013 were $29.4 billion, a 4.2 percent increase compared with first-quarter 2012.
• Operating income grew 19.8 percent, to $6.2 billion in first-quarter 2013, compared with $5.2 billion in first-quarter 2012. Operating income margin was 21.1 percent in first-quarter 2013, compared with 18.4 percent in first-quarter 2012.
• Consolidated EBITDA (non-GAAP, earnings before interest, taxes, depreciation and amortization) grew 12.1 percent year over year, totaling $10.3 billion in first-quarter 2013. EBITDA margin (non-GAAP) expanded to 35.1 percent in first-quarter 2013, up 240 basis points year over year.
• Cash flow from operating activities grew $1.6 billion, or 26.4 percent, compared with first-quarter 2012. Capital expenditures in first-quarter 2013 were $3.6 billion, flat year over year. Free cash flow (non-GAAP, cash flow from operations less capex) in first-quarter 2013 increased $1.5 billion, or 64.3 percent, compared with first-quarter 2012.

Verizon Wireless Delivers Record Profitability, Strong Customer and Revenue Growth

In first-quarter 2013, Verizon Wireless delivered strong growth in retail postpaid net additions and revenues; an increase in smartphone penetration; and the highest segment EBITDA margin on service revenues (non-GAAP) in the company’s history — surpassing the previous high in third-quarter 2012.

Wireless Financial Highlights

• Total revenues were $19.5 billion in first-quarter 2013, up 6.8 percent year over year. Service revenues in the quarter totaled $16.7 billion, up 8.6 percent year over year. Retail service revenues also grew 8.6 percent year over year, to $16.2 billion.
• Retail postpaid ARPA (average revenue per account) increased 6.9 percent over first-quarter 2012, to $150.27 per month. As customers continue to add multiple devices to accounts following the introduction of the Share Everything Plan last June, Verizon Wireless has been reporting ARPA instead of ARPU (average revenue per user) on a postpaid basis since customers can share data among multiple devices.
• In first-quarter 2013, wireless operating income margin was 32.9 percent and segment EBITDA margin on service revenues was 50.4 percent, setting record-highs.

Wireless Operational Highlights

• Verizon Wireless added 677,000 retail postpaid net connections, out of a total 720,000 net retail connections, in the first quarter. These additions exclude acquisitions and adjustments. Last year, net additions for retail postpaid connections increased sequentially each quarter, and Verizon expects a similar pattern of accelerating customer growth in 2013.
• At the end of the first quarter, the company had 98.9 million retail connections, a 6.4 percent increase year over year — including 93.2 million retail postpaid connections.
• Verizon Wireless had 34.9 million retail postpaid accounts at the end of the first quarter, a 1.1 percent increase over first-quarter 2012, and an average of 2.7 connections per account, up 5.1 percent year over year.
• At the end of the first quarter, smartphones accounted for more than 61 percent of the Verizon Wireless retail postpaid customer phone base, up from 58 percent at the end of fourth-quarter 2012.
• Retail postpaid churn was 1.01 percent in the first quarter, up 5 basis points year over year. Retail churn was 1.30 percent in the first quarter, up 6 basis points year over year.
• Verizon Wireless continued to roll out its 4G LTE mobile broadband network, the largest 4G LTE network in the U.S. As of today (April 18), Verizon Wireless 4G LTE service is available to 287 million people in 491 markets across the U.S., covering more than 95 percent of Verizon’s current 3G network footprint.
• The company continued to enhance its 4G LTE device lineup with smartphones, tablets and other devices. In the first quarter, Verizon Wireless launched the Samsung ATIV Odyssey, the BlackBerry Z10, the Samsung Galaxy Note 10.1 tablet, the Verizon 4G LTE USB Modem UML295 by Pantech, and the Verizon Jetpack 4G LTE Mobile Hotspot MiFi 5510L by Novatel Wireless. Earlier this month, the company launched the Lucid 2 by LG and the Verizon 4G LTE Router, an Internet solution that connects both wired and Wi-Fi-enabled devices.

Wireline Reports Continued Strong FiOS Customer and Revenue Growth

Verizon’s Wireline segment reported continued strong FiOS customer, market share and revenue growth in first-quarter 2013, leading to overall growth in consumer revenues. In enterprise and wholesale, increased sales of global enterprise strategic services continued to help mitigate lower revenues resulting from secular and global economic impacts.

Wireline Financial Highlights

• Consumer revenues were $3.6 billion, an increase of 4.3 percent compared with first-quarter 2012. Consumer ARPU for wireline services increased to $107.15 in first-quarter 2013, up 9.5 percent compared with first-quarter 2012.
• FiOS revenues grew 15.1 percent, to $2.6 billion in first-quarter 2013 compared with $2.3 billion in first-quarter 2012. ARPU for FiOS customers continued to be more than $150 in first-quarter 2013.
• Sales of strategic services to global enterprise customers increased 6.0 percent compared with first-quarter 2012 and represented 55.6 percent of total enterprise revenues. Strategic services include Verizon Terremark cloud and data center services, security and IT solutions, advanced communications, and strategic networking.

Wireline Operational Highlights

• Verizon added 188,000 net new FiOS Internet connections in first-quarter 2013, marking the third consecutive quarter of sequential growth in net customer additions. The company also added 169,000 net new FiOS Video connections in the quarter. Verizon had a total of 5.6 million FiOS Internet and 4.9 million FiOS Video connections at the end of the quarter, representing year-over-year increases of 12.0 percent and 12.5 percent, respectively.

• FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase. FiOS Internet penetration was 38.2 percent at the end of first-quarter 2013, compared with 36.4 percent at the end of first-quarter 2012. In the same periods, FiOS Video penetration was 34.1 percent, compared with 32.3 percent. The FiOS network passed 17.8 million premises by the end of first-quarter 2013.

• Broadband connections totaled 8.9 million at the end of first-quarter 2013, a 1.4 percent year-over-year increase. Overall, net broadband customers increased 99,000 in the first quarter, as FiOS Internet net customer additions more than offset fewer subscribers for DSL-based High Speed Internet services.

• Verizon has been replacing high-maintenance portions of its residential copper network with fiber optics to provide enhanced services and to reduce ongoing repair costs. In first-quarter 2013, Verizon migrated 83,000 homes to fiber, toward a target of 300,000 migrations within FiOS markets in 2013.

• Verizon Enterprise Solutions completed agreements with and began deploying innovative business technology solutions for a variety of corporations and organizations in the quarter, including the Commonwealth of Pennsylvania, Ocean Exploration Trust, Quest Diagnostics and Synchronoss Technologies (Nasdaq: SNCR).