Lumen Technologies reports second quarter 2023 results

________________________________

¹ Adjusted EBITDA and Adjusted EBITDA excluding Special Items for the second quarter of 2022 includes $398 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 $(51) million of Adjusted EBITDA for the second 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.

² Includes the impact of $938 million in cash tax payments related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

Financial Results

Metric, as reported

Second Quarter

($ in millions, except per share data)

2023

2022

Large Enterprise

$      1,179

1,432

Mid-Market Enterprise

507

562

Public Sector

414

494

Enterprise Channels

2,100

2,488

Wholesale

797

929

Business Segment Revenue

2,897

3,417

Mass Markets Segment Revenue

764

1,195

Total Revenue⁽¹⁾⁽²⁾

$      3,661

4,612

Cost of Services and Products

1,740

2,058

Selling, General and Administrative Expenses

790

815

Loss on disposal group held for sale

13

—

Stock-based Compensation Expense

9

25

Net (Loss) Income

(8,736)

344

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

98

357

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

1,127

1,764

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

1,229

1,811

Net (Loss) Income Margin

(238.6) %

7.5 %

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

2.7 %

7.7 %

Adjusted EBITDA Margin⁽³⁾

30.8 %

38.2 %

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

33.6 %

39.3 %

Net Cash (Used In) Provided by Operating Activities

(100)

1,396

Capital Expenditures⁽⁸⁾

796

761

Unlevered Cash Flow^(3)(10)

(701)

947

Unlevered Cash Flow, Excluding Cash Special Items^(3)(9)(10)

(701)

980

Free Cash Flow^(3)(10)

(896)

635

Free Cash Flow, Excluding Cash Special Items^(3)(9)(10)

(896)

668

Net (Loss) Income per Common Share – Diluted

(8.88)

0.34

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

0.10

0.35

Weighted Average Shares Outstanding (in millions) – Diluted

983.5

1,016.6

⁽¹⁾ Revenue for the second quarter of 2022 includes $707 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 $27 million for the second 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 positively impacts this metric by (i) $8.8 billion for the second quarter of 2023 and (ii) $13 million for the second quarter of 2022.

⁽⁵⁾ Adjusted EBITDA and Adjusted EBITDA excluding Special Items for the second quarter of 2022 includes $398 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 $(51) million for the second 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.

⁽⁷⁾ Excludes Special Items in the amounts of (i) $102 million for the second quarter of 2023 and (ii) $47 million for the second quarter of 2022.

⁽⁸⁾ Capital expenditures for the second quarter of 2022 includes (i) $131 million of capital expenditures relating to the divested businesses, which will not recur in periods following the completion of these divestitures, and (ii) $12 million of capital expenditures related to the CAF Phase II program, which lapsed on Dec. 31, 2021. 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) net zero for the second quarter of 2023 and (ii) $33 million for the second quarter of 2022.

⁽¹⁰⁾ Includes the impact of $938 million in cash tax payments related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

Metrics⁽¹⁾

Second
Quarter

First
Quarter

QoQ
Percent

Second
Quarter

YoY
Percent

($ in millions)

2023

2023

Change

2022

Change

Revenue By Sales Channel

Large Enterprise

$  1,179

1,194

(1) %

1,432

(18) %

Mid-Market Enterprise

507

515

(2) %

562

(10) %

Public Sector

414

430

(4) %

494

(16) %

Enterprise Channels

2,100

2,139

(2) %

2,488

(16) %

Wholesale

797

817

(2) %

929

(14) %

Business Segment Revenue

2,897

2,956

(2) %

3,417

(15) %

Mass Markets Segment Revenue

764

782

(2) %

1,195

(36) %

Total Revenue⁽²⁾

$  3,661

3,738

(2) %

4,612

(21) %

Business Segment Revenue by Product Category

Grow

$  1,138

1,128

1 %

1,202

(5) %

Nurture

869

905

(4) %

1,061

(18) %

Harvest

717

739

(3) %

936

(23) %

Subtotal

2,724

2,772

(2) %

3,199

(15) %

Other

173

184

(6) %

218

(21) %

Business Segment Revenue

$  2,897

2,956

(2) %

3,417

(15) %

Net (Loss) Income

$  (8,736)

511

nm

344

nm

Net (Loss) Income Margin

(238.6) %

13.7 %

nm

7.5 %

nm

Net Income, Excluding Special Items

$      98

97

1 %

357

(73) %

Net Income Margin, Excluding Special Items

2.7 %

2.6 %

4 %

7.7 %

(65) %

Adjusted EBITDA, Excluding Special Items⁽³⁾

$  1,229

1,251

(2) %

1,811

(32) %

Adjusted EBITDA Margin, Excluding Special Items

33.6 %

33.5 %

— %

39.3 %

(15) %

Capital Expenditures⁽⁴⁾

$    796

640

24 %

761

5 %

⁽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 second 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 second 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 second quarter of 2022 include 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 second quarter of 2023 and the first quarter of 2023 include the financial impacts from the post-closing commercial agreements with the purchasers of the divested businesses. Refer to footnote 3 and 4 on the preceding table for details.

⁽⁴⁾ Capital expenditures for the second quarter of 2022 includes the impacts of (i) capital expenditures related to our divested businesses, which will not recur in periods following the completion of these divestitures, and (ii) capital expenditures related to the CAF Phase II program, which lapsed on Dec. 31, 2021. Refer to footnote 7 on the preceding table for details.

¹ Includes the impact of $938 million in cash tax payments related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022.

Metric ⁽¹⁾⁽²⁾

Current Outlook⁽³⁾

Previous Outlook⁽³⁾

Adjusted EBITDA

$4.6 to $4.8 billion

$4.6 to $4.8 billion

Free Cash Flow⁽⁴⁾⁽⁵⁾

$0 to $200 million

$0 to $200 million

Net Cash Interest

$1.1 to $1.2 billion

$1.1 to $1.2 billion

GAAP Interest Expense

$1.200 billion

$1.200 billion

Capital Expenditures

$2.9 to $3.1 billion

$2.9 to $3.1 billion

Depreciation and Amortization

$2.9 to $3.1 billion

$2.9 to $3.1 billion

Stock-based Compensation Expense

~$65 million

~$125 million

Cash Income Taxes⁽⁵⁾

~$300 to $400 million

~$300 to $400 million

Full Year Effective Income Tax Rate

~26%

~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 Aug. 1, 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 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

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

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

Three months ended June 30,

(Decrease)
/ Increase

Six months ended June 30,

(Decrease)
/ Increase

2023

2022

2023

2022

OPERATING REVENUE

$            3,661

4,612

(21) %

7,399

9,288

(20) %

OPERATING EXPENSES

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

1,740

2,058

(15) %

3,557

4,043

(12) %

Selling, general and administrative

790

815

(3) %

1,511

1,615

(6) %

Loss on disposal group held for sale

13

—

nm

90

—

nm

Depreciation and amortization

746

827

(10) %

1,479

1,635

(10) %

Goodwill impairment

8,793

—

nm

8,793

—

nm

Total operating expenses

12,082

3,700

nm

15,430

7,293

112 %

OPERATING (LOSS) INCOME

(8,421)

912

nm

(8,031)

1,995

nm

OTHER (EXPENSE) INCOME

Interest expense

(294)

(337)

(13) %

(573)

(689)

(17) %

Net gain on early debt retirement

9

—

nm

618

—

nm

Other income (expense), net

16

(122)

nm

(24)

(52)

nm

Income tax expense

(46)

(109)

(58) %

(215)

(311)

(31) %

NET (LOSS) INCOME

$          (8,736)

344

nm

(8,225)

943

nm

BASIC (LOSS) EARNINGS PER SHARE

$            (8.88)

0.34

nm

(8.37)

0.93

nm

DILUTED (LOSS) EARNINGS PER SHARE

$            (8.88)

0.34

nm

(8.37)

0.93

nm

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

983,453

1,012,943

(3) %

982,505

1,010,686

(3) %

Diluted

983,453

1,016,620

(3) %

982,505

1,015,917

(3) %

DIVIDENDS PER COMMON SHARE

—

0.25

(100) %

—

0.50

(100) %

Exclude: Special Items⁽¹⁾

$            8,834

13

nm

8,420

50

nm

NET INCOME EXCLUDING SPECIAL ITEMS

$                 98

357

(73) %

195

993

(80) %

DILUTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS

$              0.10

0.35

(71) %

0.20

0.98

(80) %

⁽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 JUNE 30, 2023 AND DECEMBER 31, 2022

(UNAUDITED)

($ in millions)

June 30, 2023

December 31, 2022

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$                        411

1,251

Accounts receivable, less allowance of $78 and $85

1,473

1,477

Assets held for sale

2,005

1,889

Other

984

803

   Total current assets

4,873

5,420

Property, plant and equipment, net of accumulated depreciation of $20,529 and $19,886

19,432

19,166

GOODWILL AND OTHER ASSETS

Goodwill

3,864

12,657

Other intangible assets, net

5,899

6,166

Other, net

2,100

2,172

    Total goodwill and other assets

11,863

20,995

TOTAL ASSETS

$                   36,168

45,581

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Current maturities of long-term debt

$                        154

154

Accounts payable

1,171

950

Accrued expenses and other liabilities

Salaries and benefits

605

692

Income and other taxes

234

1,158

Current operating lease liabilities

323

344

Interest

176

181

Other

177

277

Liabilities held for sale

496

451

Current portion of deferred revenue

627

596

    Total current liabilities

3,963

4,803

LONG-TERM DEBT

19,899

20,418

DEFERRED CREDITS AND OTHER LIABILITIES

Deferred income taxes, net

3,204

3,163

Benefit plan obligations, net

2,335

2,391

Deferred revenue

1,850

1,758

Other

2,633

2,611

Total deferred credits and other liabilities

10,022

9,923

STOCKHOLDERS’ EQUITY

Common stock

1,008

1,002

Additional paid-in capital

18,100

18,080

Accumulated other comprehensive loss

(1,053)

(1,099)

Accumulated deficit

(15,771)

(7,546)

Total stockholders’ equity

2,284

10,437

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$                   36,168

45,581

Lumen Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

($ in millions)

Six months ended June 30,

OPERATING ACTIVITIES

Net (loss) income

$     (8,225)

943

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

Depreciation and amortization

1,479

1,635

Goodwill impairment

8,793

—

Loss on disposal group held for sale

90

—

Deferred income taxes

46

249

Provision for uncollectible accounts

47

56

Net gain on early retirement of debt

(618)

—

Unrealized loss on investments

81

71

Stock-based compensation

23

48

Changes in current assets and liabilities, net

(1,388)

(306)

Retirement benefits

(16)

(86)

Changes in other noncurrent assets and liabilities, net

132

65

Other, net

51

96

Net cash provided by operating activities

495

2,771

INVESTING ACTIVITIES

Capital expenditures

(1,436)

(1,338)

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

26

65

Other, net

5

3

Net cash used in investing activities

(1,405)

(1,270)

FINANCING ACTIVITIES

Payments of long-term debt

(100)

(1,532)

Net proceeds from revolving line of credit

200

600

Dividends paid

(9)

(525)

Other, net

(19)

(32)

Net cash provided by (used in) financing activities

72

(1,489)

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

(838)

12

Cash, cash equivalents and restricted cash at beginning of period

1,307

409

Cash, cash equivalents and restricted cash at end of period

$       469

421

Cash, cash equivalents and restricted cash:

Cash and cash equivalents

$       411

360

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

47

48

Restricted cash

11

13

Total

$       469

421

Lumen Technologies, Inc.

OPERATING METRICS

(UNAUDITED)

Operating Metrics

2Q23

1Q23

2Q22⁽¹⁾

Mass Markets broadband subscribers

   (in thousands)

   Fiber broadband subscribers

877

856

786

   Other broadband subscribers⁽²⁾

2,032

2,125

2,406

Mass Markets total broadband subscribers⁽³⁾

2,909

2,981

3,192

Mass Markets broadband enabled units⁽⁴⁾

   (in millions)

   Fiber broadband enabled units

3.4

3.3

2.9

   Other broadband enabled units

18.4

18.5

18.9

Mass Markets total broadband enabled units

21.8

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 72 thousand, (ii) other broadband subscribers of 1,113 thousand, (iii) fiber broadband enabled units of 0.3 million and (iv) other broadband enabled units of 7.2 million. 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

2Q23

2Q22

2Q23

2Q22

Severance

$          5

—

13

2

Consumer and other litigation

(1)

(3)

(1)

(3)

Loss on disposal group held for sale

13

—

90

—

Transaction and separation costs⁽¹⁾

10

50

39

100

Real estate transactions⁽²⁾

75

—

75

—

Total Special Items impacting Adjusted EBITDA

$      102

47

216

99

Actual QTD

Actual YTD

Special Items Impacting Net (Loss) Income

2Q23

2Q22

2Q23

2Q22

Loss on disposal group held for sale

$         13

—

90

—

Goodwill impairment

8,793

—

8,793

—

Gain on early retirement of debt⁽³⁾

(9)

—

(618)

—

Severance

5

—

13

2

Consumer and other litigation

(1)

(3)

(1)

(3)

Transaction and separation costs⁽¹⁾

10

50

39

100

Real estate transactions⁽²⁾

75

—

75

—

Income from transition and separation services⁽⁴⁾

(40)

(30)

(86)

(33)

Total Special Items impacting Net (Loss) Income

8,846

17

8,305

66

Income tax effect of Special Items⁽⁵⁾

(12)

(4)

115

(16)

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

$    8,834

13

8,420

50

Actual QTD

Actual YTD

Special Items Impacting Cash Flows

2Q23

2Q22

2Q23

2Q22

Severance

$           7

7

12

23

Transaction and separation costs⁽¹⁾

25

48

49

80

Income from transition and separation services⁽⁴⁾

(32)

(22)

(91)

(22)

Total Special Items impacting Cash Flows

$          —

33

(30)

81

⁽¹⁾ 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.

⁽²⁾ Real estate transactions include the Q2 2023 loss on donation of real estate and acceleration of costs associated with our real estate rationalization program.

⁽³⁾ Reflects a gain as a result of (i) $19 million of debt exchanges in Q2 2023 and (ii) $1.5 billion of debt exchanges in Q1 2023. There were no comparable gains or losses during Q1 2022 or Q2 2022.

⁽⁴⁾ 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.

⁽⁵⁾ Tax effect calculated using the annualized effective statutory tax rate, excluding any non-recurring discrete items, which was 23.5% for both quarters of 2023 and 24.6% for all quarters of 2022.

Lumen Technologies, Inc.

Non-GAAP Cash Flow Reconciliation

(UNAUDITED)

($ in millions)

Actual QTD

Actual YTD

2Q23

2Q22

2Q23

2Q22

Net cash (used in) provided by operating activities⁽¹⁾

$       (100)

1,396

495

2,771

Capital expenditures

(796)

(761)

(1,436)

(1,338)

Free Cash Flow⁽¹⁾

(896)

635

(941)

1,433

Cash interest paid

198

313

561

699

Interest income

(3)

(1)

(16)

(2)

Unlevered Cash Flow⁽¹⁾

$       (701)

947

(396)

2,130

Free Cash Flow⁽¹⁾

$       (896)

635

(941)

1,433

Add back: Severance⁽²⁾

7

7

12

23

Add back: Transaction and separation costs⁽²⁾

25

48

49

80

Remove: Income from transition and separation services⁽²⁾

(32)

(22)

(91)

(22)

Free Cash Flow excluding cash Special Items⁽¹⁾

$        (896)

668

(971)

1,514

Unlevered Cash Flow⁽¹⁾

$        (701)

947

(396)

2,130

Add back: Severance⁽²⁾

7

7

12

23

Add back: Transaction and separation costs⁽²⁾

25

48

49

80

Remove: Income from transition and separation services⁽²⁾

(32)

(22)

(91)

(22)

Unlevered Cash Flow excluding cash Special Items⁽¹⁾

$        (701)

980

(426)

2,211

⁽¹⁾ Includes the impact of $938 million in cash tax payments in Q2 2023 and $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

2Q23

2Q22

2Q23

2Q22

Net (loss) income

$        (8,736)

344

(8,225)

943

Income tax expense

46

109

215

311

Total other expense (income), net

269

459

(21)

741

Depreciation and amortization expense

746

827

1,479

1,635

Stock-based compensation expense

9

25

23

48

Goodwill impairment

8,793

—

8,793

—

Adjusted EBITDA⁽¹⁾

$         1,127

1,764

2,264

3,678

Add back: Severance⁽²⁾

$                5

—

13

2

Add back: Consumer and other litigation⁽²⁾

(1)

(3)

(1)

(3)

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

13

—

90

—

Add back: Transaction and separation costs⁽²⁾

10

50

39

100

Add back: Real estate transaction costs⁽²⁾

75

—

75

—

Adjusted EBITDA excluding Special Items⁽¹⁾

$         1,229

1,811

2,480

3,777

Net income excluding Special Items⁽²⁾

$              98

357

195

993

Total revenue

$         3,661

4,612

$          7,399

9,288

Net (Loss) Income Margin

(238.6) %

7.5 %

(111.2) %

10.2 %

Net Income Margin, excluding Special Items

2.7 %

7.7 %

2.6 %

10.7 %

Adjusted EBITDA Margin

30.8 %

38.2 %

30.6 %

39.6 %

Adjusted EBITDA Margin excluding Special Items

33.6 %

39.3 %

33.5 %

40.7 %

⁽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)}

(UNAUDITED)

($ in millions)

Adjusted EBITDA Outlook

Twelve Months Ended December 31, 2023

Range

Low

High

Net income

$       245

725

Income tax expense

65

235

Total other expense, net

1,100

900

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