Lumen Technologies reports third quarter 2023 results

¹ Adjusted EBITDA and Adjusted EBITDA excluding Special Items for the third quarter of 2022 includes $332 million of Adjusted EBITDA from our businesses divested in the second half of 2022, which will not recur in periods following the completion of these divestitures. The Company believes that these figures will allow analysts and investors to understand the amounts associated with these transactions to understand the impact they had on the Company's past, but not current or future, financial performance. Therefore, these amounts will impact the Company's ability to match its past performance in current and future periods. The post-closing financial impacts of actual amounts received or paid by the Company under its post-closing agreements with the purchasers of the divested businesses was a net reduction of $(40) million of Adjusted EBITDA for the third quarter 2023. The Company believes that this provides useful information to investors to understand the impact that the post-closing agreements have had on the Company's activities and its current financial performance.

Metric, as reported

Third Quarter

($ in millions, except per share data)

2023

2022

Large Enterprise

$      1,182

1,286

Mid-Market Enterprise

498

555

Public Sector

444

457

Enterprise Channels

2,124

2,298

Wholesale

770

920

Business Segment Revenue

2,894

3,218

Mass Markets Segment Revenue

747

1,172

Total Revenue⁽¹⁾⁽²⁾

$      3,641

4,390

Cost of Services and Products

1,850

1,999

Selling, General and Administrative Expenses

791

792

Gain on Sale of Business

?

(593)

Loss on Disposal Group Held for Sale

22

?

Stock-based Compensation Expense

16

23

Net (Loss) Income

(78)

578

Net (Loss) Income, Excluding Special Items⁽³⁾⁽⁴⁾

(85)

146

Adjusted EBITDA^(3)(5)(6)

994

2,215

Adjusted EBITDA, Excluding Special Items^(3)(5)(6)(7)

1,049

1,688

Net (Loss) Income Margin

(2.1) %

13.2 %

Net (Loss) Income Margin, Excluding Special Items⁽³⁾⁽⁴⁾

(2.3) %

3.3 %

Adjusted EBITDA Margin⁽³⁾

27.3 %

50.5 %

Adjusted EBITDA Margin, Excluding Special Items⁽³⁾⁽⁷⁾

28.8 %

38.5 %

Net Cash Provided by Operating Activities

881

1,123

Capital Expenditures⁽⁸⁾

843

845

Unlevered Cash Flow⁽³⁾

358

665

Unlevered Cash Flow, Excluding Cash Special Items⁽³⁾⁽⁹⁾

363

1,007

Free Cash Flow⁽³⁾

38

278

Free Cash Flow, Excluding Cash Special Items⁽³⁾⁽⁹⁾

43

620

Net (Loss) Income per Common Share - Diluted

(0.08)

0.57

Net (Loss) Income per Common Share - Diluted, Excluding Special Items⁽³⁾⁽⁴⁾

(0.09)

0.14

Weighted Average Shares Outstanding (in millions) - Diluted

983.6

1,017.0

⁽¹⁾ Revenue for the third quarter of 2022 includes $571 million of revenue from the Latin American business divested Aug. 1, 2022 and the 20-state ILEC business divested Oct. 3, 2022 (the "divestitures"), which will not recur in periods following the completion of these divestitures. The Company believes that these figures will allow analysts and investors to understand the amounts associated with these transactions to understand the impact they had on the Company's past, but not current or future, financial performance. Therefore, these amounts will impact the Company's ability to match its past performance in current and future periods.

⁽²⁾ The post-closing revenue impact of actual amounts received by the Company under the post-closing agreements with the purchasers of the divested businesses was $23 million for the third quarter of 2023. The Company believes that this provides useful information to investors to understand the impact that the post-closing agreements have had on the Company's activities and its current financial performance.

⁽³⁾ See the attached schedules for definitions of non-GAAP metrics and reconciliations to GAAP figures.

⁽⁴⁾ Excludes Special Items (net of the income tax effect thereof), which negatively impacts this metric by (i) $(7) million for the third quarter of 2023 and (ii) $(432) million for the third quarter of 2022.

⁽⁵⁾ Adjusted EBITDA and Adjusted EBITDA excluding Special Items for the third quarter of 2022 includes $332 million of Adjusted EBITDA from the divestitures, which will not recur in periods following the completion of these divestitures. The Company believes that these figures will allow analysts and investors to understand the amounts associated with these transactions to understand the impact they had on the Company's past, but not current or future, financial performance. Therefore, these amounts will impact the Company's ability to match its past performance in current and future periods.

⁽⁶⁾ The post-closing net financial impacts of actual amounts received or paid by the Company under its post-closing agreements with the purchasers of the divested businesses was a net reduction of $(40) million for the third quarter of 2023. The Company believes that this provides useful information to investors to understand the impact that the post-closing agreements have had on the Company's current financial performance.

⁽⁷⁾ Excludes Special Items in the amounts of (i) $55 million for the third quarter of 2023 and (ii) $(527) million for the third quarter of 2022.

⁽⁸⁾ Capital expenditures for the third quarter of 2022 includes $81 million of capital expenditures relating to the divested businesses, which will not recur in periods following the completion of these divestitures. The Company believes that these figures will allow analysts and investors to understand the amounts associated with these transactions and programs to understand the impact they had on the Company's past, but not current or future, capital expenditures. Therefore, these amounts will impact the Company's ability to match its past capital expenditure activities in current and future periods.

⁽⁹⁾ Excludes cash paid for Special Items of (i) $5 million for the third quarter of 2023 and (ii) $342 million for the third quarter of 2022.

Metrics⁽¹⁾

Third Quarter

Second Quarter

QoQ Percent

Third Quarter

YoY Percent

($ in millions)

2023

2023

Change

2022

Change

Revenue By Sales Channel

Large Enterprise

$  1,182

1,179

? %

1,286

(8) %

Mid-Market Enterprise

498

507

(2) %

555

(10) %

Public Sector

444

414

7 %

457

(3) %

Enterprise Channels

2,124

2,100

1 %

2,298

(8) %

Wholesale

770

797

(3) %

920

(16) %

Business Segment Revenue

2,894

2,897

? %

3,218

(10) %

Mass Markets Segment Revenue

747

764

(2) %

1,172

(36) %

Total Revenue⁽²⁾

$  3,641

3,661

(1) %

4,390

(17) %

Business Segment Revenue by Product Category

Grow

$  1,125

1,138

(1) %

1,116

1 %

Nurture

865

869

? %

1,006

(14) %

Harvest

690

717

(4) %

897

(23) %

Subtotal

2,680

2,724

(2) %

3,019

(11) %

Other

214

173

24 %

199

8 %

Business Segment Revenue

$  2,894

2,897

? %

3,218

(10) %

Net (Loss) Income

$     (78)

(8,736)

nm

578

nm

Net (Loss) Income Margin

(2.1) %

(238.6) %

nm

13.2 %

nm

Net (Loss) Income, Excluding Special Items

$     (85)

98

nm

146

nm

Net (Loss) Income Margin, Excluding Special Items

(2.3) %

2.7 %

nm

3.3 %

nm

Adjusted EBITDA, Excluding Special Items⁽³⁾

$  1,049

1,229

(15) %

1,688

(38) %

Adjusted EBITDA Margin, Excluding Special Items

28.8 %

33.6 %

(14) %

38.5 %

(25) %

Capital Expenditures⁽⁴⁾

$    843

796

6 %

845

? %

⁽¹⁾ See the notes to our immediately preceding chart for information about our use of non-GAAP metrics, Special Items, and reconciliations to GAAP.

⁽²⁾ Revenue for the third quarter of 2022 includes amounts from the Latin American business divested on Aug. 1, 2022 and the 20-state ILEC business divested on Oct. 3, 2022. Revenue for the third quarter of 2023 and the first quarter of 2023 includes amounts related to the post-closing commercial agreements with the purchasers of the divested businesses. Refer to footnote 1 and 2 on the preceding table for details.

⁽³⁾ Adjusted EBITDA excluding Special Items for the third quarter of 2022 includes the financial impacts of the Latin American business divested on Aug. 1, 2022 and the 20-state ILEC business divested on Oct. 3, 2022. Adjusted EBITDA excluding Special Items for the third quarter of 2023 and the first quarter of 2023 includes the financial impacts from the post-closing commercial agreements with the purchasers of the divested businesses. Refer to footnote 5 and 6 on the preceding table for details.

⁽⁴⁾ Capital expenditures for the third quarter of 2022 includes the impacts of capital expenditures related to our divested businesses, which will not recur in periods following the completion of these divestitures. Refer to footnote 8 on the preceding table for details.

nm - Percentages greater than 200% and comparisons between positive and negative values are considered not meaningful.

Metric ⁽¹⁾⁽²⁾

Outlook⁽³⁾

Adjusted EBITDA

$4.6 to $4.8 billion

Free Cash Flow⁽⁴⁾⁽⁵⁾

$0 to $200 million

Net Cash Interest

$1.1 to $1.2 billion

GAAP Interest Expense

$1.200 billion

Capital Expenditures

$2.9 to $3.1 billion

Depreciation and Amortization

$2.9 to $3.1 billion

Stock-based Compensation Expense

~$65 million

Cash Income Taxes⁽⁵⁾

~$300 to $400 million

Full Year Effective Income Tax Rate

~26%

⁽¹⁾  For definitions of non-GAAP metrics and reconciliations to GAAP figures, see the attached schedules and our Investor Relations website.

⁽²⁾  Outlook measures in this chart and the accompanying schedules (i) exclude the effects of Special Items, goodwill impairments, future changes in our operating or capital allocation plans, unforeseen changes in regulation, laws or litigation, and other unforeseen events or circumstances impacting our financial performance and (ii) speak only as of Oct. 31, 2023. See "Forward-Looking Statements."

⁽³⁾  Includes accounting impacts of assets and liabilities held for sale and assumes the proposed sale of Lumen's EMEA business is completed Nov. 1, 2023.

⁽⁴⁾  Assumes no discretionary pension plan contributions during 2023.

⁽⁵⁾  Excludes approximately $1 billion impact of taxes related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

Lumen Technologies, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(UNAUDITED)

($ in millions, except per share amounts; shares in thousands)

Three months ended

September 30,

(Decrease)

 / Increase

Nine months ended

September 30,

(Decrease)

 / Increase

2023

2022

2023

2022

OPERATING REVENUE

$            3,641

4,390

(17) %

11,040

13,678

(19) %

OPERATING EXPENSES

Cost of services and products (exclusive

of depreciation and amortization)

1,850

1,999

(7) %

5,407

6,042

(11) %

Selling, general and administrative

791

792

? %

2,302

2,407

(4) %

Gain on sale of business

?

(593)

nm

?

(593)

nm

Loss on disposal group held for sale

22

?

nm

112

?

nm

Depreciation and amortization

755

808

(7) %

2,234

2,443

(9) %

Goodwill impairment

?

?

nm

8,793

?

nm

Total operating expenses

3,418

3,006

14 %

18,848

10,299

83 %

OPERATING INCOME (LOSS)

223

1,384

(84) %

(7,808)

3,379

nm

OTHER (EXPENSE) INCOME

Interest expense

(295)

(363)

(19) %

(868)

(1,052)

(17) %

Net gain on early debt retirement

?

9

nm

618

9

nm

Other expense, net

(13)

(93)

(86) %

(37)

(145)

(74) %

Income tax benefit (expense)

7

(359)

(102) %

(208)

(670)

(69) %

NET (LOSS) INCOME

$               (78)

578

nm

(8,303)

1,521

nm

BASIC (LOSS) EARNINGS PER SHARE

$            (0.08)

0.57

nm

(8.45)

1.50

nm

DILUTED (LOSS) EARNINGS PER SHARE

$            (0.08)

0.57

nm

(8.45)

1.50

nm

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

983,550

1,013,124

(3) %

982,853

1,011,498

(3) %

Diluted

983,550

1,017,013

(3) %

982,853

1,016,281

(3) %

DIVIDENDS PER COMMON SHARE

?

0.25

(100) %

?

0.75

(100) %

Exclude: Special Items⁽¹⁾

$                 (7)

(432)

(98) %

8,413

(382)

nm

NET (LOSS) INCOME EXCLUDING

SPECIAL ITEMS

$               (85)

146

nm

110

1,139

(90) %

DILUTED (LOSS) EARNINGS PER

SHARE EXCLUDING SPECIAL ITEMS

$            (0.09)

0.14

nm

0.11

1.12

(90) %

⁽¹⁾ Excludes the Special Items described in the accompanying Non-GAAP Special Items table, net of the income tax effect thereof.

nm - Percentages greater than 200% and comparisons between positive and negative values are considered not meaningful.

Lumen Technologies, Inc.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(UNAUDITED)

($ in millions)

September 30, 2023

December 31, 2022

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$                        311

1,251

Accounts receivable, less allowance of $82 and $85

1,411

1,477

Assets held for sale

1,942

1,889

Other

982

803

   Total current assets

4,646

5,420

Property, plant and equipment, net of accumulated depreciation of $20,976

and $19,886

19,606

19,166

GOODWILL AND OTHER ASSETS

Goodwill

3,864

12,657

Other intangible assets, net

5,744

6,166

Other, net

2,061

2,172

    Total goodwill and other assets

11,669

20,995

TOTAL ASSETS

$                   35,921

45,581

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current maturities of long-term debt

$                        155

154

Accounts payable

1,015

950

Accrued expenses and other liabilities

Salaries and benefits

733

692

Income and other taxes

287

1,158

Current operating lease liabilities

296

344

Interest

139

181

Other

174

277

Liabilities held for sale

478

451

Current portion of deferred revenue

643

596

    Total current liabilities

3,920

4,803

LONG-TERM DEBT

19,740

20,418

DEFERRED CREDITS AND OTHER LIABILITIES

Deferred income taxes, net

3,192

3,163

Benefit plan obligations, net

2,322

2,391

Deferred revenue

1,902

1,758

Other

2,626

2,611

Total deferred credits and other liabilities

10,042

9,923

STOCKHOLDERS' EQUITY

Common stock

1,008

1,002

Additional paid-in capital

18,117

18,080

Accumulated other comprehensive loss

(1,057)

(1,099)

Accumulated deficit

(15,849)

(7,546)

Total stockholders' equity

2,219

10,437

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$                   35,921

45,581

Lumen Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(UNAUDITED)

($ in millions)

Nine months ended September 30,

OPERATING ACTIVITIES

Net (loss) income

$    (8,303)

1,521

Adjustments to reconcile net (loss) income to net cash provided by

 operating activities:

Depreciation and amortization

2,234

2,443

Goodwill impairment

8,793

?

Loss on disposal group held for sale

112

?

Gain on sale of business

?

(593)

Deferred income taxes

38

618

Provision for uncollectible accounts

77

99

Net gain on early retirement of debt

(618)

(9)

Unrealized loss on investments

96

197

Stock-based compensation

39

71

Changes in current assets and liabilities, net

(1,336)

(280)

Retirement benefits

(9)

(440)

Changes in other noncurrent assets and liabilities, net

194

141

Other, net

59

126

Net cash provided by operating activities

1,376

3,894

INVESTING ACTIVITIES

Capital expenditures

(2,279)

(2,183)

Proceeds from sale of business

3

2,707

Proceeds from sale of property, plant and equipment and other assets

35

67

Other, net

9

3

Net cash (used in) provided by investing activities

(2,232)

594

FINANCING ACTIVITIES

Payments of long-term debt

(145)

(3,899)

Net proceeds from revolving line of credit

75

80

Dividends paid

(10)

(780)

Other, net

(21)

(33)

Net cash used in financing activities

(101)

(4,632)

Net (decrease) increase in cash, cash equivalents and restricted cash

(957)

(144)

Cash, cash equivalents and restricted cash at beginning of period

1,307

409

Cash, cash equivalents and restricted cash at end of period

$       350

265

Cash, cash equivalents and restricted cash:

Cash and cash equivalents

$       311

252

Cash and cash equivalents and restricted cash included in assets held

for sale

28

?

Restricted cash

11

13

Total

$       350

265

Lumen Technologies, Inc.

OPERATING METRICS

(UNAUDITED)

Operating Metrics

3Q23

2Q23

3Q22⁽¹⁾

Mass Markets broadband subscribers

(in thousands)

Fiber broadband subscribers

896

877

813

Other broadband subscribers⁽²⁾

1,940

2,032

2,294

Mass Markets total broadband subscribers⁽³⁾

2,836

2,909

3,107

Mass Markets broadband enabled units⁽⁴⁾

(in millions)

Fiber broadband enabled units

3.5

3.4

3.0

Other broadband enabled units

18.2

18.4

18.8

Mass Markets total broadband enabled units

21.7

21.8

21.8

⁽¹⁾ These amounts have been adjusted to remove the impacts of the 20-state ILEC business divestiture completed Oct. 3, 2022, which included (i) fiber broadband subscribers of 76 thousand, in Q3 2022, (ii) other broadband subscribers of 1,073 thousand in Q3, 2022, (iii) fiber broadband enabled units of 0.3 million in Q3 2022 and (iv) other broadband enabled units of 7.2 million in Q3 2022. The Company believes that this information will allow analysts and investors to understand the operating metrics associated with the divestiture of the 20-state ILEC business to understand the impact they had on the Company's past, but not current or future, financial performance.

⁽²⁾ Other broadband subscribers are customers that primarily subscribe to lower speed copper-based broadband services marketed under the CenturyLink brand.

⁽³⁾ Mass Markets broadband subscribers are customers that purchase broadband connection service through their existing telephone lines, stand-alone telephone lines, or fiber-optic cables. Our methodology for counting our Mass Markets broadband subscribers includes only those lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone Mass Markets broadband subscribers. We count lines when we install the service. Other companies may use different methodologies.    

⁽⁴⁾ Represents the total number of units capable of receiving our broadband services at period end. Other companies may use different methodologies to count their broadband enabled units.

Lumen Technologies, Inc.

Non-GAAP Special Items

(UNAUDITED)

($ in millions)

Actual QTD

Actual YTD

Special Items Impacting Adjusted EBITDA

3Q23

3Q22

3Q23

3Q22

Severance

$                     8

?

21

2

Consumer and other litigation

(3)

?

(4)

(3)

Gain on sale of business⁽¹⁾

?

(593)

?

(593)

Loss on disposal groups held for sale

22

?

112

?

Transaction and separation costs⁽²⁾

28

66

67

166

Real estate transactions⁽³⁾

?

?

75

?

Total Special Items impacting Adjusted EBITDA

$                   55

(527)

271

(428)

Actual QTD

Actual YTD

Special Items Impacting Net (Loss) Income

3Q23

3Q22

3Q23

3Q22

Loss on disposal group held for sale

$                   22

?

112

?

Gain on sale of business⁽¹⁾

?

(593)

?

(593)

Goodwill impairment

?

?

8,793

?

Gain on early retirement of debt⁽⁴⁾

?

(9)

(618)

(9)

Severance

8

?

21

2

Consumer and other litigation

(3)

?

(4)

(3)

Transaction and separation costs⁽²⁾

28

66

67

166

Real estate transactions⁽³⁾

?

?

75

?

Income from transition and separation services⁽⁵⁾

(64)

(37)

(150)

(70)

Total Special Items impacting Net (Loss) Income

(9)

(573)

8,296

(507)

Income tax effect of Special Items⁽⁶⁾

2

141

117

125

Total Special Items impacting Net (Loss) Income, net of tax

$                    (7)

(432)

8,413

(382)

Actual QTD

Actual YTD

Special Items Impacting Cash Flows

3Q23

3Q22

3Q23

3Q22

Severance

$                7

7

19

30

Consumer and other litigation

(3)

?

(3)

?

Pension contribution⁽⁷⁾

?

319

?

319

Transaction and separation costs⁽²⁾

28

60

77

140

Income from transition and separation services⁽⁵⁾

(27)

(44)

(118)

(66)

Total Special Items impacting Cash Flows

$                     5

342

(25)

423

⁽¹⁾ Reflects the pre-tax gain recorded in operating income as a result of completing the sale of our Latin American business for net cash proceeds of $2.7 billion, subject to certain post-closing adjustments on Aug. 1, 2022.

⁽²⁾ Transaction and separation costs associated with (i) the sale of our Latin American business on Aug. 1, 2022, (ii) the sale of our 20-state ILEC business on Oct. 3, 2022, (iii) the agreement to divest Lumen's operations in Europe, the Middle East and Africa (the "EMEA business") initially announced on Nov. 2, 2022 and (iv) our evaluation of other potential transactions.

⁽³⁾ Real estate transactions include the Q2 2023 loss on donation of real estate and acceleration of costs associated with our real estate rationalization program.

⁽⁴⁾ Reflects a gain as a result of (i) $19 million of debt exchanges in Q2 2023, (ii) $1.5 billion of debt exchanges in Q1 2023, (iii) $4.4 billion in early debt retirement in Q4 2022 and (iv) $2.3 billion in early debt retirement in Q3 2022. There were no comparable gains or losses during Q3 2023, Q2 2022 or Q1 2022.

⁽⁵⁾ Income from transition and separation services includes charges we billed for transition services and IT professional services provided to the purchasers in connection with our 2022 divestitures.

⁽⁶⁾ Tax effect calculated using the annualized effective statutory tax rate, excluding any non-recurring discrete items, which was 23.5% for the three quarters of 2023 and 24.6% for all quarters of 2022.

⁽⁷⁾ Cash pension contribution following a revaluation of the pension obligation and pension assets for the Lumen Pension Plan, in connection with the closing of the sale of the 20-state ILEC business on Oct. 3, 2022.

Lumen Technologies, Inc.

Non-GAAP Cash Flow Reconciliation

(UNAUDITED)

($ in millions)

Actual QTD

Actual YTD

3Q23

3Q22

3Q23

3Q22

Net cash provided by operating activities⁽¹⁾

$                 881

1,123

1,376

3,894

Capital expenditures

(843)

(845)

(2,279)

(2,183)

Free Cash Flow⁽¹⁾

38

278

(903)

1,711

Cash interest paid

325

393

886

1,092

Interest income

(5)

(6)

(21)

(8)

Unlevered Cash Flow⁽¹⁾

$                 358

665

(38)

2,795

Free Cash Flow⁽¹⁾

$                   38

278

(903)

1,711

Add back: Severance⁽²⁾

7

7

19

30

Remove: Consumer and other litigation⁽²⁾

(3)

?

(3)

?

Add back: Pension contribution⁽²⁾

?

319

?

319

Add back: Transaction and separation costs⁽²⁾

28

60

77

140

Remove: Income from transition and separation services⁽²⁾

(27)

(44)

(118)

(66)

Free Cash Flow excluding cash Special Items⁽¹⁾

$                   43

620

(928)

2,134

Unlevered Cash Flow⁽¹⁾

$                 358

665

(38)

2,795

Add back: Severance⁽²⁾

7

7

19

30

Remove: Consumer and other litigation⁽²⁾

(3)

?

(3)

?

Add back: Pension contribution⁽²⁾

?

319

?

319

Add back: Transaction and separation costs⁽²⁾

28

60

77

140

Remove: Income from transition and separation services⁽²⁾

(27)

(44)

(118)

(66)

Unlevered Cash Flow excluding cash Special Items⁽¹⁾

$                 363

1,007

(63)

3,218

⁽¹⁾ Includes the impact of (i) $938 million in cash tax payments in Q2 2023,and (ii) $90 million in cash tax payments in Q1 2023 related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

⁽²⁾ Refer to Non-GAAP Special Items table for details of the Special Items impacting cash included above.

Lumen Technologies, Inc.

Adjusted EBITDA Non-GAAP Reconciliation

(UNAUDITED)

($ in millions)

Actual QTD

Actual YTD

3Q23

3Q22

3Q23

3Q22

Net (loss) income

$              (78)

578

(8,303)

1,521

Income tax (benefit) expense

(7)

359

208

670

Total other expense (income), net

308

447

287

1,188

Depreciation and amortization expense

755

808

2,234

2,443

Stock-based compensation expense

16

23

39

71

Goodwill impairment

?

?

8,793

?

Adjusted EBITDA⁽¹⁾

$              994

2,215

3,258

5,893

Add back: Severance⁽²⁾

8

?

21

2

Add back: Consumer and other litigation⁽²⁾

(3)

?

(4)

(3)

Remove: Gain on sale of business⁽²⁾

?

(593)

?

(593)

Add back: Loss on disposal groups held for sale⁽²⁾

22

?

112

?

Add back: Transaction and separation costs⁽²⁾

28

66

67

166

Add back: Real estate transaction costs⁽²⁾

?

?

75

?

Adjusted EBITDA excluding Special Items⁽¹⁾

$          1,049

1,688

3,529

5,465

Net income excluding Special Items⁽²⁾

$              (85)

146

110

1,139

Total revenue

$          3,641

4,390

$        11,040

13,678

Net (Loss) Income Margin

(2.1) %

13.2 %

(75.2) %

11.1 %

Net (Loss) Income Margin, excluding Special Items

(2.3) %

3.3 %

1.0 %

8.3 %

Adjusted EBITDA Margin

27.3 %

50.5 %

29.5 %

43.1 %

Adjusted EBITDA Margin excluding Special Items

28.8 %

38.5 %

32.0 %

40.0 %

⁽¹⁾ Adjusted EBITDA and Adjusted EBITDA excluding Special Items for the first and second quarter of 2022 include the financial impacts of (i) the Latin American business divested on Aug. 1, 2022 and the 20-state ILEC business divested on Oct. 3, 2022 and (ii) the CAF Phase II program, which lapsed on Dec. 31, 2021. Adjusted EBITDA excluding Special Items for the first and second quarter of 2023 include the financial impacts from the post-closing commercial agreements with the purchasers of the divested businesses. Refer to footnote 1 on the first page of this release for details.

⁽²⁾ Refer to Non-GAAP Special Items table for details of the Special Items included above.

Lumen Technologies, Inc.

2023 OUTLOOK ^{(1) (2) (3) (4) (5) (6)}

(UNAUDITED)

($ in millions)

Adjusted EBITDA Outlook

Twelve Months Ended December 31, 2023

Range

Low

High

Net income

$                     145

625

Income tax expense

65

235

Total other expense, net

1,200

1,000

Depreciation and amortization expense

3,100

2,900

Stock-based compensation expense

90

40

Adjusted EBITDA

$                  4,600

4,800

Free Cash Flow Outlook

Twelve Months Ended December 31, 2023

Range

Low

High

Net cash provided by operating activities

$                  2,900

3,300

Capital expenditures

(2,900)

(3,100)

Free Cash Flow

$                       ?

200

⁽¹⁾ For definitions of non-GAAP metrics and reconciliation to GAAP figures, see the above schedules and our Investor Relations website.

⁽²⁾ Outlook measures in this chart (i) exclude the effects of Special Items, goodwill impairments, future changes in our operating or capital allocation plans, unforeseen changes in regulation, laws or litigation, and other unforeseen events or circumstances impacting our financial performance and (ii) speak only as of Oct. 31, 2023. See "Forward-Looking Statements."

⁽³⁾ Includes accounting impacts of assets and liabilities held for sale and assumes the proposed sale of Lumen's EMEA business is completed Nov. 1, 2023.

⁽⁴⁾ Assumes no discretionary pension plan contributions during 2023.

⁽⁵⁾ Excludes approximately $1 billion impact of taxes related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

⁽⁶⁾ Excludes one-time, unique or non-recurring impacts to net income such as goodwill impairment and gain or loss on early retirement of debt.