Verizon Communications Inc Net Income jumped on 24.1% and Revenue increased slightly on 0.77%
30 Jan 2020 • About Verizon Communications Inc (
$VZC) • By InTwits
Verizon Communications Inc reported FY2019 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 8.9%.
- CAPEX is quite volatile: £39m in FY2019, £28m in FY2018, £22m in FY2017, £28m in FY2016, £8m in FY2015
- The company has highly profitable business model: ROIC is 15.3%
- It operates with high leverage: Net Debt/EBITDA is 2.8x while industry average is 1.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Verizon Communications Inc's Revenue increased slightly on 0.77%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.5 pp from 6.4% to 4.9% in FY2019.
Gross Margin increased slightly on 0.92 pp from 57.6% to 58.5% in FY2019. During the last 5 years Gross Margin bottomed in FY2018 at 57.6%. SG&A as a % of Revenue decreased slightly on 1.1 pp from 23.8% to 22.7% in FY2019. During FY2015-FY2019 SG&A as a % of Revenue topped in FY2016 at 25.1% and was declining since that time.
Net Income margin increased on 2.7 pp from 11.9% to 14.6% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 13.6%. Verizon Communications Inc showed almost no change in CAPEX/Revenue from FY2016 to FY2019. It's average CAPEX/Revenue for the last three years was 13.3%.
Return on investment
The company operates at high and attractive ROE (33.6%) while ROIC is a bit lower (15.3%). ROIC increased on 4.0 pp from 11.3% to 15.3% in FY2019. ROE increased slightly on 1.4 pp from 32.3% to 33.6% in FY2019. During the last 5 years ROIC bottomed in FY2018 at 11.3%. ROE stuck to a declining trend at -21.7 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.8x and Debt / EBITDA is 2.8x. Net Debt / EBITDA decreased slightly on 0.0060x from 2.8x to 2.8x in FY2019. Debt surged on 17.8% while cash decreased on 5.5%. Net Debt/EBITDA stuck to a growing trend at 0.2x per annum in the last 5 years.
Verizon Communications Inc has short term refinancing risk: cash is only 18.5% of short term debt.
Management team
Hans E Vestberg is a Verizon Communications Inc's CEO. Hans E Vestberg is a founder and has spent 1 year with the company. Matthew D Ellis "Matt" is a the company's CFO. Matthew D Ellis "Matt" has spent 3 years at the company.
Financial and operational results
FY ended 30 Nov -0001
Verizon Communications Inc ($VZC) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 131,620 | 125,980 | 126,034 | 130,863 | 131,868 | 0.8% |
| Gross Profit | 79,063 | 74,556 | 74,478 | 75,355 | 77,142 | 2.4% |
| SG&A | 29,986 | 31,569 | 30,110 | 31,083 | 29,896 | -3.8% |
| EBITDA | 49,077 | 42,987 | 44,368 | 39,681 | 47,060 | 18.6% |
| EBIT | | | | 22,278 | | |
| Interest expence | | | | 4,833 | | |
| Tax | | | | 3,584 | | |
| Net Income | 17,879 | 13,127 | 30,101 | 15,528 | 19,265 | 24.1% |
Balance Sheet
|
|---|
| Cash | 4,470 | 2,880 | 2,079 | 2,745 | 2,594 | -5.5% |
| Accounts Receivable | | | | 25,102 | | |
| Inventory | | | | 1,336 | | |
| Short Term Debt | 6,489 | 2,645 | 3,453 | 7,190 | 14,038 | 95.2% |
| Long Term Debt | 103,240 | 105,433 | 113,642 | 105,873 | 119,105 | 12.5% |
Cash flow
|
|---|
| Capex | 17,775 | 17,059 | 17,247 | 16,658 | 17,939 | 7.7% |
| Dividends | | | | 9,772 | | |
| Acquisitions | | | | 230 | | |
Ratios
|
|---|
| Revenue growth | 3.6% | -4.3% | 0.0% | 3.8% | 0.8% | |
| EBITDA growth | 35.8% | -12.4% | 3.2% | -10.6% | 18.6% | |
|
|---|
| Gross Margin | 60.1% | 59.2% | 59.1% | 57.6% | 58.5% | 0.9% |
| EBITDA Margin | 37.3% | 34.1% | 35.2% | 30.3% | 35.7% | 5.4% |
| EBIT Margin | | | | 17.0% | |
| SG&A, % of revenue | 22.8% | 25.1% | 23.9% | 23.8% | 22.7% | -1.1% |
| Net Income Margin | 13.6% | 10.4% | 23.9% | 11.9% | 14.6% | 2.7% |
| CAPEX, % of revenue | 13.5% | 13.5% | 13.7% | 12.7% | 13.6% | 0.9% |
|
|---|
| ROIC | 19.3% | 15.4% | 14.8% | 11.3% | 15.3% | 4.0% |
| ROE | 124.5% | 67.4% | 91.7% | 32.3% | 33.6% | 1.4% |
| Net Debt/EBITDA | 2.1x | 2.4x | 2.6x | 2.8x | 2.8x | -0.0x |
| Interest coverage ratio (ICR) | | | | 4.6x | |
| Interest expence / Average debt | | | | 4.2% | | |
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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Adept Telecom ($ADT) | 5.8% | 30.9% | 19.2% | 34.8% | |
| O2 Czech Republic As ($O2CZ) | | 0.9% | 0.3% | 0.9% | 1.7% |
| Kt Corp ($KTCD) | -4.9% | 2.1% | 2.8% | 0.3% | |
| BT Group ($BT.A) | -1.7% | 5.7% | 26.6% | -1.4% | |
| Orange Polska Sa ($OPLD) | -3.0% | -2.6% | -1.4% | -2.5% | |
| |
|---|
| Median (6 companies) | -0.5% | 0.5% | 0.7% | -0.5% | 1.7% |
|---|
| Verizon Communications Inc ($VZC) | | -4.3% | 0.0% | 3.8% | 0.8% |
Top companies by Gross margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Kt Corp ($KTCD) | 77.9% | 78.5% | 83.5% | 83.0% | |
| O2 Czech Republic As ($O2CZ) | | 48.5% | 48.7% | 49.9% | 51.3% |
| Adept Telecom ($ADT) | 37.6% | 40.3% | 42.3% | 49.4% | |
| |
|---|
| Median (3 companies) | 41.3% | 45.9% | 48.7% | 49.9% | 51.3% |
|---|
| Verizon Communications Inc ($VZC) | 60.1% | 59.2% | 59.1% | 57.6% | 58.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Ooredoo Qsc ($ORDS) | 39.2% | 39.2% | 40.5% | 36.9% | |
| BT Group ($BT.A) | 33.5% | 32.8% | 28.0% | 29.1% | |
| O2 Czech Republic As ($O2CZ) | 29.9% | 27.3% | 27.8% | 28.0% | 29.1% |
| Orange Polska Sa ($OPLD) | 29.1% | 11.9% | 24.6% | 26.0% | |
| Adept Telecom ($ADT) | 20.8% | 20.0% | 20.6% | 22.0% | |
| |
|---|
| Median (6 companies) | 29.1% | 28.2% | 28.0% | 27.0% | 29.1% |
|---|
| Verizon Communications Inc ($VZC) | 37.3% | 34.1% | 35.2% | 30.3% | 35.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Orange Polska Sa ($OPLD) | 16.9% | 44.8% | 17.0% | 20.6% | |
| Ooredoo Qsc ($ORDS) | 26.5% | 17.6% | 11.6% | 15.6% | |
| BT Group ($BT.A) | 13.4% | 12.8% | 13.1% | 14.2% | |
| Kt Corp ($KTCD) | 14.0% | 12.2% | 10.4% | 9.6% | |
| O2 Czech Republic As ($O2CZ) | 4.5% | 4.0% | 5.1% | 3.9% | 4.1% |
| |
|---|
| Median (6 companies) | 14.4% | 15.1% | 13.1% | 11.9% | 4.1% |
|---|
| Verizon Communications Inc ($VZC) | 13.5% | 13.5% | 13.7% | 12.7% | 13.6% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| O2 Czech Republic As ($O2CZ) | 14.5% | 26.8% | 25.8% | 24.3% | 23.2% |
| BT Group ($BT.A) | 37.5% | 20.7% | 13.9% | 15.4% | |
| Adept Telecom ($ADT) | 14.3% | 16.5% | 14.2% | 14.1% | |
| Kt Corp ($KTCD) | 5.7% | 6.9% | 6.7% | 6.0% | |
| Ooredoo Qsc ($ORDS) | 6.4% | 6.1% | 6.9% | 4.4% | |
| |
|---|
| Median (11 companies) | 7.1% | 7.1% | 7.9% | 10.1% | 23.2% |
|---|
| Verizon Communications Inc ($VZC) | 19.3% | 15.4% | 14.8% | 11.3% | 15.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Orange Polska Sa ($OPLD) | 1.2x | 5.1x | 2.3x | 2.4x | |
| Adept Telecom ($ADT) | 0.3x | 1.0x | 2.2x | 2.3x | |
| BT Group ($BT.A) | 1.6x | 2.2x | 1.8x | 2.0x | |
| Ooredoo Qsc ($ORDS) | 2.0x | 2.0x | 1.6x | 1.8x | |
| Kt Corp ($KTCD) | 1.3x | 1.1x | 1.0x | 0.9x | |
| |
|---|
| Median (6 companies) | 1.2x | 1.5x | 1.8x | 1.9x | 1.1x |
|---|
| Verizon Communications Inc ($VZC) | 2.1x | 2.4x | 2.6x | 2.8x | 2.8x |
