Tag: reports

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¹ Modified amounts include adjustments to reflect (i) removal of the financial impacts related to the Latin American business divestiture completed Aug. 1, 2022 and the 20-state ILEC business divestiture completed Oct. 3, 2022, (ii) estimates of revenue that Lumen would have received under the post-closing agreements with the purchasers of the divested businesses, and (iii) removal of the financial impacts of the Federal Communications Commission’s Connect America Fund (“CAF”) Phase II program, which lapsed on Dec. 31, 2021, each excluding the effects of special items. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are provided in the Financial Trending Schedule available on Lumen’s website at ir.lumen.com, along with additional modified information reported on this basis.

_______________________________________________

¹ Modified amounts include adjustments to reflect (i) removal of the financial impacts related to the Latin American business divestiture completed Aug. 1, 2022 and the 20-state ILEC business divestiture completed Oct. 3, 2022, (ii) estimates of revenue that Lumen would have received under the post-closing agreements with the purchasers of the divested businesses, and (iii) removal of the financial impacts of the Federal Communications Commission’s Connect America Fund (“CAF”) Phase II program, which lapsed on Dec. 31, 2021, each excluding the effects of special items. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are provided in the Financial Trending Schedule available on Lumen’s website at ir.lumen.com, along with additional modified information reported on this basis.

² For the 20-state ILEC business divestiture, we received $7.5 billion of consideration, which was reduced by approximately $0.4 billion of closing adjustments and partially paid through purchaser’s assumption of approximately $1.5 billion of our long-term consolidated indebtedness, resulting in pre-tax cash proceeds of approximately $5.6 billion. For the Latin American business divestiture, we received pre-tax cash proceeds of approximately $2.7 billion.

³ During the first half of 2023, we expect to pay approximately $900 million to $1 billion of cash taxes related to the 2022 divestitures of our Latin American and 20-state ILEC businesses. To provide comparability to prior periods, Estimated Net Debt reflects the payment of those cash taxes as though it had occurred on or prior to Dec. 31, 2022.

Metric, as reported

Fourth Quarter

Full Year

($ in millions, except per share data)

2022

2021

2022

2021

International and Global Accounts

$    797

1,025

$  3,645

4,083

Large Enterprise

804

931

3,409

3,771

Mid-Market Enterprise

585

647

2,465

2,649

Enterprise Channels

2,186

2,603

9,519

10,503

Wholesale

819

891

3,520

3,616

Business Segment Revenue

3,005

3,494

13,039

14,119

Mass Markets Segment Revenue

795

1,353

4,439

5,568

Total Revenue

$  3,800

4,847

$ 17,478

19,687

Cost of Services and Products

1,826

2,086

7,868

8,488

Selling, General and Administrative Expenses

671

723

3,078

2,895

Gain on Sale of Businesses⁽¹⁾

(180)

—

(773)

—

Loss on disposal groups held for sale

700

—

700

—

Stock-based Compensation Expense

27

31

98

120

Adjusted EBITDA⁽²⁾

810

2,069

6,703

8,424

Adjusted EBITDA, Excluding Special Items⁽²⁾⁽³⁾

1,393

2,088

6,858

8,440

Adjusted EBITDA Margin⁽²⁾

21.3 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.7 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

38.4 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.8 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Adjusted EBITDA Margin, Excluding Special Items⁽²⁾⁽³⁾

36.7 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

43.1 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

39.2 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.9 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Net Cash Provided by Operating Activities

841

1,607

4,735

6,501

Capital Expenditures

833

848

3,016

2,900

Unlevered Cash Flow⁽²⁾

264

1,100

3,059

5,086

Unlevered Cash Flow, Excluding Cash Special Items⁽²⁾⁽⁴⁾

382

1,117

3,600

5,227

Free Cash Flow⁽²⁾

8

759

1,719

3,601

Free Cash Flow, Excluding Cash Special Items⁽²⁾⁽⁴⁾

126

776

2,260

3,742

Net (Loss) Income

(3,069)

508

(1,548)

2,033

Net Income, Excluding Special Items⁽²⁾⁽⁵⁾

425

522

1,564

2,039

Net Income per Common Share – Diluted

(3.08)

0.50

(1.54)

1.91

Net Income per Common Share – Diluted, Excluding Special Items⁽²⁾⁽⁵⁾

0.43

0.51

1.55

1.91

Weighted Average Shares Outstanding (in millions) – Diluted

995.6

1,015.5

1,007.5

1,066.8

⁽¹⁾ Reflects (i) the pre-tax gain of $597 million recorded in operating income as a result of our Latin American business divestiture completed Aug. 1, 2022 and (ii) the pre-tax gain of $176 million recorded in operating income as a result of our 20-state ILEC business divestiture completed Oct. 3, 2022, subject to certain post-closing adjustments.

⁽²⁾ See the attached schedules for definitions of non-GAAP metrics and reconciliations to GAAP figures.

⁽³⁾ Excludes Special Items in the amounts of (i) $583 million for the fourth quarter of 2022, (ii) $19 million for the fourth quarter of 2021, (iii) $155 million for the full year 2022 and (iv) $16 million for the full year 2021.

⁽⁴⁾ Excludes cash paid for Special Items of (i) $118 million for the fourth quarter of 2022, (ii) $17 million for the fourth quarter of 2021, (iii) $541 million for the full year 2022 and (iv) $141 million for the full year 2021.

⁽⁵⁾ Excludes Special Items (net of the income tax effect thereof) in the amounts of (i) $3.5 billion for the fourth quarter of 2022, (ii) $14 million for the fourth quarter of 2021, (iii) $3.1 billion for the full year 2022 and (iv) $6 million for the full year 2021.

Modified⁽¹⁾ Metrics

Fourth Quarter

YoY
Percent

Full Year

YoY
Percent

($ in millions)

2022

2021

Change

2022

2021

Change

Revenue By Sales Channel

Large Enterprise

$  1,217

1,272

(4) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

$  4,894

5,106

(4) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Mid-Market Enterprise

522

559

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

2,144

2,297

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Public Sector

431

500

(14) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

1,788

1,997

(10) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Enterprise Channels

2,170

2,331

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

8,826

9,400

(6) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Wholesale

835

831

— {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

3,360

3,385

(1) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Business Segment Revenue

3,005

3,162

(5) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

12,186

12,785

(5) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Mass Markets Segment Revenue

795

860

(8) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

3,302

3,554

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Total Revenue

$  3,800

4,022

(6) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

$ 15,488

16,339

(5) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Adjusted EBITDA, Excluding Special Items

$  1,393

1,496

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

$  5,540

6,092

(9) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Adjusted EBITDA Margin, Excluding Special Items

36.7 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

37.2 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

(1) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

35.8 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

37.3 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

(4) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Capital Expenditures

$    833

681

22 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

$  2,691

2,325

16 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

⁽¹⁾ Modified amounts include adjustments to reflect (i) removal of the financial impacts related to the Latin American business divestiture completed Aug. 1, 2022 and the 20-state ILEC business divestiture completed Oct. 3, 2022, (ii) estimates of revenue that Lumen would have received under the post-closing agreements with the purchasers of the divested businesses, and (iii) removal of the financial impacts of the Federal Communications Commission’s Connect America Fund (“CAF”) Phase II program, which lapsed on Dec. 31, 2021, each excluding the effects of special items. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are provided in the Financial Trending Schedule available on Lumen’s website at ir.lumen.com, along with additional modified information reported on this basis.

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

~$125 million

Cash Income Taxes⁽⁵⁾

~$200 to $300 million

Full Year Effective Income Tax Rate

~26{515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

⁽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, 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 Feb. 7, 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 not completed during 2023.

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

⁽⁵⁾  Excludes the estimated $900 million to $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

THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2022 AND 2021

(UNAUDITED)

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

Three months ended
December 31,

(Decrease)
/ Increase

Twelve months ended
December 31,

(Decrease)
/ Increase

2022

2021

2022

2021

OPERATING REVENUE

$        3,800

4,847

(22) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

17,478

19,687

(11) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

OPERATING EXPENSES

Cost of services and products (exclusive of depreciation and amortization)

1,826

2,086

(12) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

7,868

8,488

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Selling, general and administrative

671

723

(7) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

3,078

2,895

6 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Gain on sale of businesses

(180)

—

nm

(773)

—

nm

Loss on disposal groups held for sale

700

—

nm

700

—

nm

Depreciation and amortization

796

877

(9) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

3,239

4,019

(19) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Goodwill impairment

3,271

—

nm

3,271

—

nm

Total operating expenses

7,084

3,686

92 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

17,383

15,402

13 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

OPERATING (LOSS) INCOME

(3,284)

1,161

nm

95

4,285

(98) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

OTHER (EXPENSE) INCOME

Interest expense

(280)

(372)

(25) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

(1,332)

(1,522)

(12) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Other income (expense), net

382

(110)

nm

246

(62)

nm

Income tax benefit (expense)

113

(171)

(166) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

(557)

(668)

(17) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

NET (LOSS) INCOME

$      (3,069)

508

nm

$       (1,548)

2,033

(176) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

BASIC (LOSS) EARNINGS PER SHARE

$        (3.08)

0.50

nm

(1.54)

1.92

(180) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

DILUTED (LOSS) EARNINGS PER SHARE

$        (3.08)

0.50

nm

(1.54)

1.91

(181) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

995,573

1,006,846

(1) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

1,007,517

1,059,541

(5) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Diluted

995,573

1,015,472

(2) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

1,007,517

1,066,778

(6) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

DIVIDENDS PER COMMON SHARE

$              —

0.25

(100) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

0.75

1.00

(25) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Exclude: Special Items⁽¹⁾

$        3,494

14

nm

3,112

6

nm

NET INCOME EXCLUDING SPECIAL ITEMS

$           425

522

(19) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

1,564

2,039

(23) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

DILUTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS

$          0.43

0.51

(16) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

1.55

1.91

(19) {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

⁽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{515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502} and comparisons between positive and negative values are considered not meaningful.

Lumen Technologies, Inc.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2022 AND DECEMBER 31, 2021

(UNAUDITED)

($ in millions)

December 31, 2022

December 31, 2021

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$                     1,251

354

Accounts receivable, less allowance of $85 and $114

1,477

1,544

Assets held for sale

1,889

8,809

Other

803

829

   Total current assets

5,420

11,536

Property, plant and equipment, net of accumulated depreciation of $19,886 and $19,271

19,166

20,895

GOODWILL AND OTHER ASSETS

Goodwill

12,657

15,986

Other intangible assets, net

6,166

6,970

Other, net

2,172

2,606

    Total goodwill and other assets

20,995

25,562

TOTAL ASSETS

$                   45,581

57,993

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Current maturities of long-term debt

$                        154

1,554

Accounts payable

950

758

Accrued expenses and other liabilities

Salaries and benefits

692

860

Income and other taxes

1,158

228

Current operating lease liabilities

344

385

Interest

181

278

Other

277

232

Liabilities held for sale

451

2,257

Current portion of deferred revenue

596

617

    Total current liabilities

4,803

7,169

LONG-TERM DEBT

20,418

27,428

DEFERRED CREDITS AND OTHER LIABILITIES

Deferred income taxes, net

3,163

4,049

Benefit plan obligations, net

2,391

3,710

Other

4,369

3,797

Total deferred credits and other liabilities

9,923

11,556

STOCKHOLDERS’ EQUITY

Common stock

1,002

1,024

Additional paid-in capital

18,080

18,972

Accumulated other comprehensive loss

(1,099)

(2,158)

Accumulated deficit

(7,546)

(5,998)

Total stockholders’ equity

10,437

11,840

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$                   45,581

57,993

Lumen Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

TWELVE MONTHS ENDED DECEMBER 31, 2022 AND 2021

(UNAUDITED)

($ in millions)

Twelve months ended

December 31, 2022

December 31, 2021

OPERATING ACTIVITIES

Net (Loss) Income

$                             (1,548)

2,033

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

3,239

4,019

Goodwill impairment

3,271

—

Gain on sale of businesses

(773)

—

Loss on disposal groups held for sale

700

—

Deferred income taxes

(1,230)

598

Provision for uncollectible accounts

133

105

Net gain on early retirement of debt

(214)

(8)

Unrealized loss on investments

191

(138)

Stock-based compensation

98

120

Changes in current assets and liabilities, net

540

(691)

Retirement benefits

46

163

Changes in other noncurrent assets and liabilities, net

258

283

Other, net

24

17

Net cash provided by operating activities

4,735

6,501

INVESTING ACTIVITIES

Capital expenditures

(3,016)

(2,900)

Proceeds from sale of businesses

8,369

—

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

120

135

Other, net

3

53

Net cash used in investing activities

5,476

(2,712)

FINANCING ACTIVITIES

Net proceeds from issuance of long-term debt

—

1,881

Payments of long-term debt

(8,093)

(3,598)

Net (payments on) proceeds from revolving line of credit

(200)

50

Dividends paid

(780)

(1,087)

Repurchases of common stock

(200)

(1,000)

Other, net

(40)

(53)

Net cash used in financing activities

(9,313)

(3,807)

Net increase in cash, cash equivalents and restricted cash

898

(18)

Cash, cash equivalents and restricted cash at beginning of period

409

427

Cash, cash equivalents and restricted cash at end of period

$                               1,307

409

Cash, cash equivalents and restricted cash:

Cash and cash equivalents

$                               1,251

354

Cash and cash equivalents and restricted cash included in assets held for sale

44

40

Restricted cash

12

15

Total

$                               1,307

409

Lumen Technologies, Inc.

MODIFIED⁽¹⁾ OPERATING METRICS

(UNAUDITED)

Operating Metrics

4Q22

3Q22

4Q21

Mass Markets broadband subscribers

(in thousands)

Fiber broadband subscribers

832

813

735

Other broadband subscribers⁽²⁾

2,205

2,294

2,555

Mass Markets total broadband subscribers⁽³⁾

3,037

3,107

3,290

Mass Markets broadband enabled units⁽⁴⁾

(in millions)

Fiber broadband enabled units

3.1

3.0

2.5

Other broadband enabled units

18.7

18.8

18.8

Mass Markets total broadband enabled units

21.8

21.8

21.3

⁽¹⁾ Modified to remove the impacts of the 20-state ILEC business divestiture completed Oct. 3, 2022.

⁽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

4Q22

4Q21

4Q22

4Q21

Consumer and other litigation

$         —

(3)

$         (3)

16

Severance

10

3

12

3

Gain on sale of businesses⁽¹⁾

(180)

—

(773)

—

Loss on disposal groups held for sale

700

—

700

—

Transaction and separation costs⁽²⁾

53

19

219

37

Real estate transactions⁽³⁾

—

—

—

(40)

Total Special Items impacting Adjusted EBITDA

$      583

19

$      155

16

Actual QTD

Actual YTD

Special Items Impacting Net (Loss) Income

4Q22

4Q21

4Q22

4Q21

Consumer and other litigation

$         —

(3)

$         (3)

16

Impairment of goodwill

3,271

—

3,271

—

Gain on sale of businesses⁽¹⁾

(180)

—

(773)

—

Loss on disposal groups held for sale

700

—

700

—

Gain on early retirement of debt⁽⁴⁾

(205)

—

(214)

(8)

Severance

10

3

12

3

Transaction and separation costs⁽²⁾

53

19

219

37

Real estate transactions⁽³⁾

—

—

—

(40)

Income from transition and separation services⁽⁵⁾

(82)

—

(152)

—

Total Special Items impacting Net (Loss) Income

3,567

19

3,060

8

Income tax effect of Special Items⁽⁶⁾

(73)

(5)

52

(2)

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

$   3,494

14

$   3,112

6

⁽¹⁾ Reflects (i) the pre-tax gain of $597 million recorded in operating income as a result of our Latin American business divestiture completed August 1, 2022 and (ii) the pre-tax gain of $176 million recorded in operating income as a result of our 20-state ILEC business divestiture completed October 3, 2022, subject to certain post-closing adjustments.

⁽²⁾ Transaction and separation costs associated with (i) the sale of our Latin American business on August 1, 2022, (ii) the sale of our 20-state ILEC business on October 3, 2022, (iii) the exclusive arrangement to divest Lumen’s operations in Europe, the Middle East and Africa (the “EMEA business”) announced on November 2, 2022 and (iv) our evaluation of other potential transactions.

⁽³⁾ Real estate transactions include the Q3 2021 (gain) on sale of real estate, net of impairment charges or acceleration of costs associated with our real estate rationalization program.

⁽⁴⁾ Reflects a gain as a result of (i) $4.4 billion in early debt retirement in Q4 2022, (ii) $2.3 billion in early debt retirement in Q3 2022 and (iii) $1.1 billion in early debt retirement in Q1 2021. There were no comparable gains or losses during Q2 2022, Q1 2022, Q4 2021, Q3 2021, or Q2 2021.

⁽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 divestitures.

⁽⁶⁾ Tax effect calculated using the annualized effective statutory tax rate, excluding any non-recurring discrete items, which was 24.6{515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502} for all quarters of 2022 and 24.5{515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502} for all quarters of 2021.

Lumen Technologies, Inc.

Non-GAAP Cash Flow Reconciliation

(UNAUDITED)

($ in millions)

Actual QTD

Actual YTD

4Q22

4Q21

4Q22

4Q21

Net cash provided by operating activities

$           841

1,607

$       4,735

6,501

Capital expenditures

(833)

(848)

(3,016)

(2,900)

Free Cash Flow

8

759

1,719

3,601

Cash interest paid

273

343

1,365

1,487

Interest income

(17)

(2)

(25)

(2)

Unlevered Cash Flow

$           264

$       1,100

$       3,059

$       5,086

Free Cash Flow

$               8

$           759

$       1,719

$       3,601

Add back: Severance⁽¹⁾

7

6

37

70

Add back: Consumer and other litigation⁽¹⁾

—

(3)

—

47

Add back: Pension contributions⁽¹⁾

—

—

319

—

Add back: Transaction and separation costs⁽¹⁾

142

11

282

20

Add back: Real estate transactions⁽¹⁾

—

3

—

4

Remove: Income from transition and separation services⁽¹⁾

(31)

—

(97)

—

Free Cash Flow excluding cash Special Items

$           126

$           776

$       2,260

$       3,742

Unlevered Cash Flow

$           264

$       1,100

$       3,059

$       5,086

Add back: Severance⁽¹⁾

7

6

37

70

Add back: Consumer and other litigation⁽¹⁾

—

(3)

—

47

Add back: Pension contributions⁽¹⁾

—

—

319

—

Add back: Transaction and separation costs⁽¹⁾

142

11

282

20

Add back: Real estate transactions⁽¹⁾

—

3

—

4

Remove: Income from transition and separation services⁽¹⁾

(31)

—

(97)

—

Unlevered Cash Flow excluding cash Special Items

$           382

$       1,117

$       3,600

$       5,227

⁽¹⁾ 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

4Q22

4Q21

4Q22

4Q21

Net (loss) income

$  (3,069)

508

$  (1,548)

2,033

Income tax (benefit) expense

(113)

171

557

668

Total other expense, net

(102)

482

1,086

1,584

Depreciation and amortization expense

796

877

3,239

4,019

Stock-based compensation expense

27

31

98

120

Goodwill impairment

3,271

—

3,271

—

Adjusted EBITDA

$       810

2,069

$    6,703

8,424

Add back: Severance⁽¹⁾

$         10

3

$         12

3

Add back: Consumer and other litigation⁽¹⁾

—

(3)

(3)

16

Remove: Gain on sale of businesses⁽¹⁾

(180)

—

(773)

—

Add back: Loss on disposal groups held for sale

700

—

700

—

Add back: Transaction and separation costs⁽¹⁾

53

19

219

37

Add back: Real estate transactions⁽¹⁾

—

—

—

(40)

Adjusted EBITDA excluding Special Items

$    1,393

2,088

$    6,858

8,440

Total revenue

$    3,800

4,847

$ 17,478

19,687

Adjusted EBITDA margin

21.3 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.7 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

38.4 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.8 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

Adjusted EBITDA margin excluding Special Items

36.7 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

43.1 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

39.2 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

42.9 {515baef3fee8ea94d67a98a2b336e0215adf67d225b0e21a4f5c9b13e8fbd502}

⁽¹⁾ 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)}

(UNAUDITED)

($ in millions)

Adjusted EBITDA Outlook

Twelve Months Ended December 31, 2023

Range

Low

High

Net income

$                     185

670

Income tax expense

65

235

Total other expense

1,100

900

Depreciation and amortization expense

3,100

2,900

Stock-based compensation expense

150

95

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, 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 Feb. 7, 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 not completed during 2023.

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

⁽⁵⁾ Excludes the estimated $900 million to $1 billion impact of taxes related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.