Louisiana | 001-7784 | 72-0651161 | ||||||||||||||||||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
100 CenturyLink Drive | |||||||||||
Monroe, | Louisiana | 71203 | |||||||||
(Address of principal executive offices) | (Zip Code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
Common Stock, par value $1.00 per share | LUMN | New York Stock Exchange | ||||||||||||
Preferred Stock Purchase Rights | N/A | New York Stock Exchange |
Emerging growth company |
☐ |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
Exhibit No. | Description | |||||||
Exhibit 99.1 | ||||||||
Exhibit 104 | Cover page formatted as Inline XBRL and contained in Exhibit 101. |
LUMEN TECHNOLOGIES, INC. | ||||||||
Date: October 31, 2023 |
By: | /s/ Andrea Genschaw | ||||||
Andrea Genschaw | ||||||||
Senior Vice President, Controller | ||||||||
NEWS RELEASE | ![]() |
Metric, as reported | Third Quarter | |||||||
($ 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 $1 billion impact of taxes related to our divestitures completed on Aug. 1, 2022 and Oct. 3, 2022. |
Media Relations Contact: | Investor Relations Contact: | |||||||
Esmeralda Cameron |
Mike McCormack, CFA | |||||||
esmeralda.cameron@lumen.com |
mike.mccormack@lumen.com | |||||||
+1 201-839-0712 | +1 720-888-3514 |
Lumen Technologies, Inc. | |||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 | |||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||
($ 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, | |||||||||||
2023 | 2022 | ||||||||||
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 |