Verizon Communications Inc Net Income dropped on 48.4% and EBITDA Margin decreased on 4.9 pp from 35.2% to 30.3%
29 Jan 2019 • About Verizon Communications Inc (
$VZC) • By InTwits
Verizon Communications Inc reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Verizon Communications Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.4%. At the same time it's a lot of higher than industry average of 8.0%.
- CAPEX is quite volatile: ₹6,512m in FY2018, ₹4,489m in FY2017, ₹2,619m in FY2016, ₹2,509m in FY2015, ₹4,081m in FY2014
- The company has business model with average profitability: ROIC is 11.3%
- It operates with high leverage: Net Debt/EBITDA is 2.8x while industry average is 1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 3.8%. During 2014-2018 Revenue growth bottomed in 2016 at -4.3% and was accelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 4.9 pp from 35.2% to 30.3% in 2018.
Gross Margin decreased slightly on 1.5 pp from 59.1% to 57.6% in 2018. Gross Margin followed a declining trend at -0.72 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in 2018.
Net Income margin dropped on 12.0 pp from 23.9% to 11.9% in 2018. The efficient tax rate was 18.8% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 12.7% in 2018. CAPEX/Revenue decreased slightly on 0.78 pp from 13.5% in 2015 to 12.7% in 2018. Average CAPEX/Revenue for the last three years was 13.3%.
Verizon Communications Inc has spent
$230m on M&A in 2018 which accounts for 0.18% of revenue.
Return on investment
The company operates at good ROE (32.3%) while ROIC is low (11.3%). ROIC decreased on 3.5 pp from 14.8% to 11.3% in 2018. ROE dropped on 59.5 pp from 91.7% to 32.3% in 2018. During 2014-2018 ROIC topped in 2015 at 19.3% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.8x and Debt / EBITDA is 2.8x. Net Debt / EBITDA surged on 0.2x from 2.6x to 2.8x in 2018. Debt decreased on 3.4% while cash surged on 32.0%. During the last 5 years Net Debt/EBITDA bottomed in 2015 at 2.1x and was growing since that time.
Verizon Communications Inc has good short term financial stability: Interest coverage ratio (ICR) is 4.6x. Verizon Communications Inc has short term refinancing risk: cash is only 38.2% of short term debt.
Average interest expence charged on company's debt was 4.3% in 2018.
The company paid 62.9% of Net Income as dividends in 2018.
Management team
Verizon Communications Inc's CEO Hans E Vestberg has spent 1 year with the company. CEO total compensation was
$40,843,953 in 2018 which included
$2,896,923 salary and
$1,000,000 annual bonus. Verizon Communications Inc's CFO Matthew D Ellis "Matt" has spent 3 years with the company.
The company has 0.019% shares owned by insiders.
At the end of financial year the company had 144,500 employees. Average revenue per employee in 2018 was
$905,626.
Financial and operational results
FY ended 31 Dec 2018
Verizon Communications Inc ($VZC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 127,079 | 131,620 | 125,980 | 126,034 | 130,863 | 3.8% |
| Gross Profit | 77,148 | 79,063 | 74,556 | 74,478 | 75,355 | 1.2% |
| SG&A | 41,016 | 29,986 | 31,569 | 30,110 | 31,083 | 3.2% |
| EBITDA | 36,132 | 49,077 | 42,987 | 44,368 | 39,681 | -10.6% |
| EBIT | | | | | 22,278 | |
| Interest expence | | | | | 4,833 | |
| Tax | | | | | 3,584 | |
| Net Income | 9,625 | 17,879 | 13,127 | 30,101 | 15,528 | -48.4% |
Balance Sheet
|
|---|
| Cash | 10,598 | 4,470 | 2,880 | 2,079 | 2,745 | 32.0% |
| Accounts Receivable | | | | | 25,102 | |
| Inventory | | | | | 1,336 | |
| Short Term Debt | 2,735 | 6,489 | 2,645 | 3,453 | 7,190 | 108.2% |
| Long Term Debt | 110,536 | 103,240 | 105,433 | 113,642 | 105,873 | -6.8% |
Cash flow
|
|---|
| Capex | 17,191 | 17,775 | 17,059 | 17,247 | 16,658 | -3.4% |
| Dividends | | | | | 9,772 | |
| Acquisitions | | | | | 230 | |
Ratios
|
|---|
| Revenue growth | 5.4% | 3.6% | -4.3% | 0.0% | 3.8% | |
| EBITDA growth | -25.6% | 35.8% | -12.4% | 3.2% | -10.6% | |
|
|---|
| Gross Margin | 60.7% | 60.1% | 59.2% | 59.1% | 57.6% | -1.5% |
| EBITDA Margin | 28.4% | 37.3% | 34.1% | 35.2% | 30.3% | -4.9% |
| EBIT Margin | | | | | 17.0% |
| SG&A, % of revenue | 32.3% | 22.8% | 25.1% | 23.9% | 23.8% | -0.1% |
| Net Income Margin | 7.6% | 13.6% | 10.4% | 23.9% | 11.9% | -12.0% |
| CAPEX, % of revenue | 13.5% | 13.5% | 13.5% | 13.7% | 12.7% | -1.0% |
|
|---|
| ROIC | 10.1% | 19.3% | 15.4% | 14.8% | 11.3% | -3.5% |
| ROE | 37.6% | 124.5% | 67.4% | 91.7% | 32.3% | -59.5% |
| Net Debt/EBITDA | 2.8x | 2.1x | 2.4x | 2.6x | 2.8x | 0.2x |
| Interest coverage ratio (ICR) | | | | | 4.6x |
| Interest expence / Average debt | | | | | 4.3% | |
People
|
|---|
| Insider ownership | | | | | 0.0% | |
| Employees | | | | | 144,500 | |
| Revenue/Employee, th. $ | | | | | 906 | |
Peers in Fixed Line Telecommunications
Below you can find Verizon Communications Inc benchmarking vs. other companies in Fixed Line Telecommunications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telecom Egypt ($TEEG) | | 0.2% | 14.5% | 33.1% | |
| BT Group ($BT.A) | | -1.7% | 5.7% | 26.6% | -1.4% |
| Adept Telecom ($ADT) | | 5.8% | 30.9% | 19.2% | 34.8% |
| Kt Corp ($KTCD) | -1.6% | -4.9% | 2.1% | 2.8% | |
| Rostelekom ($RKMD) | | -0.5% | 0.0% | 2.7% | |
| |
|---|
| Median (11 companies) | -1.6% | -0.5% | 0.5% | 0.7% | 0.9% |
|---|
| Verizon Communications Inc ($VZC) | | 3.6% | -4.3% | 0.0% | 3.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Kt Corp ($KTCD) | 77.9% | 77.9% | 78.5% | 83.5% | |
| Koninklijke Kpn Nv ($0O8F) | | | 68.7% | 70.4% | |
| O2 Czech Republic As ($O2CZ) | | | 48.5% | 48.7% | 49.9% |
| Adept Telecom ($ADT) | 36.4% | 37.6% | 40.3% | 42.3% | 49.4% |
| Telecom Egypt ($TEEG) | 44.2% | 41.6% | 43.2% | 39.6% | |
| |
|---|
| Median (5 companies) | 43.6% | 41.3% | 45.9% | 48.7% | 49.6% |
|---|
| Verizon Communications Inc ($VZC) | 60.7% | 60.1% | 59.2% | 59.1% | 57.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ooredoo Qsc ($ORDS) | 37.6% | 39.2% | 39.2% | 40.5% | |
| Koninklijke Kpn Nv ($0O8F) | 39.1% | 33.2% | 35.7% | 35.5% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 35.4% | 31.3% | 32.4% | 32.2% | |
| Telefonica Sa ($TDE) | 31.7% | 24.1% | 29.1% | 31.1% | |
| Rostelekom ($RKMD) | 33.0% | 33.4% | 32.1% | 31.0% | |
| |
|---|
| Median (11 companies) | 31.9% | 29.1% | 28.2% | 28.0% | 28.0% |
|---|
| Verizon Communications Inc ($VZC) | 28.4% | 37.3% | 34.1% | 35.2% | 30.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telecom Egypt ($TEEG) | 13.0% | 21.4% | 23.7% | 32.8% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 15.4% | 16.9% | 16.7% | 23.8% | |
| Rostelekom ($RKMD) | 19.3% | 21.1% | 20.8% | 19.9% | |
| Telefonica Sa ($TDE) | 19.1% | 18.7% | 17.7% | 17.3% | |
| Orange Polska Sa ($OPLD) | 17.6% | 16.9% | 44.8% | 17.0% | |
| |
|---|
| Median (11 companies) | 12.9% | 14.4% | 15.1% | 13.1% | 3.9% |
|---|
| Verizon Communications Inc ($VZC) | 13.5% | 13.5% | 13.5% | 13.7% | 12.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| O2 Czech Republic As ($O2CZ) | 7.2% | 14.5% | 26.8% | 25.8% | 24.3% |
| Adept Telecom ($ADT) | 13.2% | 14.3% | 16.5% | 14.2% | 14.1% |
| BT Group ($BT.A) | 34.7% | 37.5% | 20.7% | 13.9% | 15.4% |
| Telefonica Sa ($TDE) | 7.7% | 4.4% | 7.0% | 8.8% | |
| Koninklijke Kpn Nv ($0O8F) | 7.6% | 5.1% | 7.1% | 8.3% | |
| |
|---|
| Median (11 companies) | 7.7% | 7.1% | 7.1% | 7.9% | 15.4% |
|---|
| Verizon Communications Inc ($VZC) | 10.1% | 19.3% | 15.4% | 14.8% | 11.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telefonica Sa ($TDE) | 3.6x | 4.2x | 3.6x | 3.0x | |
| Koninklijke Kpn Nv ($0O8F) | 3.0x | 3.6x | 3.1x | 2.9x | |
| Orange Polska Sa ($OPLD) | 1.0x | 1.2x | 5.1x | 2.3x | |
| Adept Telecom ($ADT) | 0.7x | 0.3x | 1.0x | 2.2x | 2.3x |
| Rostelekom ($RKMD) | 1.8x | 1.8x | 1.9x | 2.0x | |
| |
|---|
| Median (11 companies) | 1.4x | 1.2x | 1.5x | 1.8x | 2.0x |
|---|
| Verizon Communications Inc ($VZC) | 2.8x | 2.1x | 2.4x | 2.6x | 2.8x |
