Verizon Q2 meets on $0.96 EPS, sales down 2% YOY, plans $1B in ‘synergies’ in Oath

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Verizon Communications has been investing in building out new areas of business like media and wireless services to offset declines in legacy products like fixed telephony, and today it released Q2 results that underscored that strategy. Verizon reported adjusted earnings per share of $0.96 (with GAAP EPS of $1.07), and revenues of $30.5 billion, citing growth in wireless customers (which now total 114.5 million users) and its recent acquisition of Yahoo for $4.5 billion as two important milestones.

The first figure met analysts’ estimates, while the second beat, respectively at $0.96 and $29.91 billion. But that is not the whole story. Sales were down two percent compared to a year ago (which were $30.53 billion), and that EPS figure was also down two cents year-on-year. Those are signs that while Verizon continues to rebuild, it may still take time to translate to overall revenue growth. In particular, wireless revenues of $21.3 billion were down 1.9 percent compared with Q2 2016.

(As a point of comparison, Verizon’s legacy business generated only $7.8 billion in revenues in the quarter, essentially flat on last year.)

That doesn’t appear to be an issue so much for the market so far, though. The company’s stock is up 1.3 percent in pre-market trading.

“Verizon reignited its growth engine in the quarter, both adding and retaining wireless customers while scaling our media business and continuing to invest in our superior networks,” said Chairman and CEO Lowell McAdam in a statement. “With record customer loyalty and a clean sweep of third-party network quality results, we’re leading the way to provide customers with next-generation broadband, smart cities, telematics, media and Internet of Things services.”

Here are some breakout notes:

One of the most notable things to happen at Verizon in the last quarter was that the company completed its acquisition of Yahoo for $4.5 billion and subsequently combined the company with Aol (of which TechCrunch is a part) in a new business unit branded Oath. Verizon today said covers some 1 billion unique monthly users and is projected to bring in $7 billion of revenue annually.

We’ve already seen some significant job cuts as part of that merger, and it looks like there will be a lot more to come over the next couple of years.

“Oath expects to realize more than $1 billion in cumulative operating expense synergies through 2020,” the company noted today.

Verizon’s wireless business saw overall growth of 1.2 percent to 114.5 million users. The carrier said that it saw net adds of 614,000 in the more lucrative postpaid market in part because of its Verizon Unlimited launch.

Interestingly, it looks like Verizon is well and truly past the hump of crippling subscriber acquisition costs related to phone and service subsidies. Once a key part of how carriers were able to grab and hold on to customers, today Verizon said that unsubsidized services account for 75 percent of its postpaid base. “As the company adds new accounts and customers step up to unlimited plans, mitigating lost overage revenues, Verizon believes its service-revenue trend has flattened and expects an improving trend in the second half,” it said.

IoT and telematics are two other areas where Verizon has hoped to develop new business. This makes sense: since both run on Verizon’s existing wireless network, it potentially gives Verizon another two revenue streams using the same asset. So far, the business remains very small, however.

Total telematics revenues were around $220 million in second-quarter 2017, Verizon said, and overall, IoT revenues (non-GAAP), which include telematics, were up 20 percent year over year.

We’ll listen into the earnings call and add other details as they come up.

Updated with clarification of GAAP versus adjusted EPS.