Second Quarter 2022 Highlights
- Reported Net Income of $344
million for the second quarter 2022, compared to reported
Net Income of $506 million for the
second quarter 2021
- Diluted EPS of $0.34 for the
second quarter 2022, compared to $0.46 per share for the second quarter 2021.
Excluding Special Items, Diluted EPS of $0.35 per share for the second quarter 2022,
compared to $0.48 per share for the
second quarter 2021
- Generated Adjusted EBITDA of $1.811 billion for the second quarter 2022,
compared to $2.109
billion1 for the second quarter 2021, excluding
Special Items of $47 million and
$20 million, respectively
- Reported Net Cash Provided by Operating Activities of
$1.396 billion for the second quarter
2022
- Generated Free Cash Flow of $668
million for the second quarter 2022, compared to
$1.044 billion for the second quarter
2021, excluding cash paid for Special Items of $33 million and $51
million, respectively
- Reiterated full-year 2022 financial outlook measures
- Completed the $2.7 billion
divestiture of its Latin American business to Stonepeak on
August 1
DENVER, Aug. 3, 2022
/PRNewswire/ -- Lumen Technologies, Inc. (NYSE: LUMN) reported
results for the second quarter ended June
30, 2022.
"We improved our revenue trajectory and accelerated the number
of Quantum Fiber locations enabled in the second quarter. In
addition, we closed the divestiture of our Latin America business on August 1 and expect to close the divestiture of
our 20-state ILEC business early in the fourth quarter of this
year," said Jeff Storey, president
and CEO of Lumen. "We announced our new Business segment product
categories, which further sharpens our focus as we position Lumen
to generate profitable revenue growth."
Total Revenue was $4.612
billion for the second quarter 2022, compared to $4.924 billion1 for the second quarter
2021.
1
|
Second quarter 2021
Total Revenue and Adjusted EBITDA, Excluding Special Items each
included $122 million of payments from the Federal Communication
Commission's Connect America Fund ("CAF") Phase II program, which
lapsed on December 31, 2021.
|
Financial Results
Metric
|
Second
Quarter
|
Second
Quarter
|
($ in millions,
except per share data)
|
2022
|
2021
|
International and
Global Accounts
|
$
996
|
1,011
|
Large
Enterprise
|
884
|
945
|
Mid-Market
Enterprise
|
626
|
661
|
Wholesale
|
910
|
905
|
Business Segment
Revenue
|
3,416
|
3,522
|
Mass Markets Segment
Revenue(1)
|
1,196
|
1,402
|
Total
Revenue(1)
|
$
4,612
|
4,924
|
Cost of Services and
Products
|
2,058
|
2,115
|
Selling, General and
Administrative Expenses
|
815
|
762
|
Stock-based
Compensation Expense
|
25
|
42
|
Adjusted
EBITDA(1)(2)
|
1,764
|
2,089
|
Adjusted EBITDA,
Excluding Special Items(1)(2)(3)
|
1,811
|
2,109
|
Adjusted EBITDA
Margin(2)
|
38.2 %
|
42.4 %
|
Adjusted EBITDA Margin,
Excluding Special Items(2)(3)
|
39.3 %
|
42.8 %
|
Net Cash Provided by
Operating Activities
|
1,396
|
1,639
|
Capital
Expenditures
|
761
|
646
|
Unlevered Cash
Flow(2)
|
947
|
1,350
|
Unlevered Cash Flow,
Excluding Cash Special Items(2)(4)
|
980
|
1,401
|
Free Cash
Flow(2)
|
635
|
993
|
Free Cash Flow,
Excluding Cash Special Items(2)(4)
|
668
|
1,044
|
Net
Income(5)
|
344
|
506
|
Net Income, Excluding
Special Items(2)(5)(6)
|
357
|
521
|
Net Income per Common
Share - Diluted
|
0.34
|
0.46
|
Net Income per Common
Share - Diluted, Excluding Special
Items(2)(5)(6)
|
0.35
|
0.48
|
Weighted Average Shares
Outstanding (in millions) - Diluted
|
1,016.6
|
1,093.4
|
(1) Second quarter 2021 Total Revenue
and Adjusted EBITDA, Excluding Special Items each included $122
million of payments from the Federal Communication Commission's
Connect America Fund ("CAF") Phase II program, which lapsed on
December 31, 2021.
|
(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) $47 million for the second quarter of 2022 and (ii)
$20 million for the second quarter of 2021.
|
(4) Excludes cash paid for Special
Items of (i) $33 million for the second quarter of 2022 and (ii)
$51 million for the second quarter of 2021.
|
(5) Since designating our Latin American
business and our 20-state ILEC business as held for sale on July
25, 2021 and August 3, 2021, respectively, we have ceased recording
depreciation of property, plant and equipment and amortization of
finite-lived intangible assets and right-of-use assets with respect
to these assets. We estimate that we would have recorded an
additional $163 million of depreciation, intangible
amortization, and amortization of right-of use assets for the
quarter ended June 30, 2022 if our Latin American and 20-state ILEC
businesses had not been designated as held for sale.
|
(6) Excludes Special Items (net of
the income tax effect thereof) in the amounts of (i) $13 million
for the second quarter of 2022 and (ii) $15 million for the second
quarter of 2021.
|
Revenue
|
Second
Quarter
|
First
Quarter
|
QoQ
Percent
|
Second
Quarter
|
YoY
Percent
|
($ in
millions)
|
2022
|
2022
|
Change
|
2021
|
Change
|
By Business Sales
Channel
|
|
|
|
|
|
International and
Global Accounts
|
$ 996
|
999
|
— %
|
1,011
|
(1) %
|
Large
Enterprise
|
884
|
877
|
1 %
|
945
|
(6) %
|
Mid-Market
Enterprise
|
626
|
636
|
(2) %
|
661
|
(5) %
|
Enterprise
Channels
|
2,506
|
2,512
|
— %
|
2,617
|
(4) %
|
Wholesale
|
910
|
889
|
2 %
|
905
|
1 %
|
Business Segment
Revenue
|
3,416
|
3,401
|
— %
|
3,522
|
(3) %
|
Mass Markets Segment
Revenue
|
1,196
|
1,275
|
(6) %
|
1,402
|
(15) %
|
Total
Revenue
|
$
4,612
|
4,676
|
(1) %
|
4,924
|
(6) %
|
Cash Flow
Free Cash Flow, excluding Special Items, was $668 million in the second quarter 2022,
compared to $1.044 billion in
the second quarter 2021.
As of June 30, 2022, Lumen had
cash and cash equivalents of $360
million. On August 1, 2022, we
received approximately $2.7 billion
of cash upon selling our Latin American business and on
August 3, 2022 repaid approximately
$700 million on our consolidated term
loan indebtedness.
2022 Financial Outlook
The company reiterated its full-year 2022 financial outlook
measures detailed below:
Metric
(1)(2)
|
Outlook(3)
|
Adjusted
EBITDA
|
$6.9 to $7.1
billion
|
Free Cash
Flow(4)
|
$2.0 to $2.2
billion
|
Net Cash
Interest
|
$1.3 to $1.4
billion
|
GAAP Interest
Expense
|
$1.350
billion
|
Dividends(5)
|
$1.00 per
share
|
Capital
Expenditures
|
$3.2 to $3.4
billion
|
Depreciation and
Amortization
|
$3.2 to $3.4
billion
|
Stock-based
Compensation Expense
|
~$150
million
|
Cash Income
Taxes
|
~$100
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, 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 August 3, 2022. See
"Forward-Looking Statements."
|
(3) Outlook measures include
accounting impacts of assets and liabilities held for sale and
assume the pending sale of Lumen's 20-state ILEC business would be
completed in the fourth quarter of 2022, resulting in 2022
financial contributions of three quarters for that
business.
|
(4) Assumes no discretionary
pension plan contributions during 2022 and excludes any
contributions related to the 20-state ILEC business
transaction.
|
(5) This implies cash dividends of
approximately $1.040 billion, based on common stock outstanding as
of Dec. 31. 2021 and projected accrued dividends.
|
Investor Call
Lumen's management team will host a conference call at
5:00 p.m. ET today, August 3,
2022. The conference call will be streamed live over the Lumen
website at ir.lumen.com. Additional information regarding second
quarter 2022 results, including the presentation materials
management will review during the conference call, will be
available on the Investor Relations website prior to the call. If
you are unable to join the call via the web, the call can be
accessed live at +1 877-283-5145 (U.S. Domestic) or +1 312-281-1201
(International).
A telephone replay of the call will be available beginning at
8:00 p.m. ET on August 3, 2022,
and ending November 1, 2022, at
8:00 p.m. ET. The replay can be
accessed by dialing +1 800-633-8284 (U.S. Domestic) or +1
402-977-9140 (International), reservation code 22019603. A webcast
replay of the call will also be available on our website beginning
at 7:00 p.m. ET on August 3,
2022, and ending November 1, 2022, at
6:00 p.m. ET.
About Lumen Technologies and the People of Lumen:
Lumen Technologies Inc. (NYSE: LUMN) is guided by our belief
that humanity is at its best when technology advances the way we
live and work. With approximately 450,000 route fiber miles and
serving customers in more than 60 countries, we deliver the
fastest, most secure platform for applications and data to help
businesses, government and communities deliver amazing
experiences.
Learn more about the Lumen network, edge cloud, security,
communication and collaboration solutions and our purpose to
further human progress through technology at news.lumen.com,
LinkedIn: /lumentechnologies, Twitter: @lumentechco, Facebook:
/lumentechnologies, Instagram: @lumentechnologies and YouTube:
/lumentechnologies. Lumen and Lumen Technologies are registered
trademarks of Lumen Technologies LLC in the United States. Lumen Technologies LLC is a
wholly-owned affiliate of Lumen Technologies, Inc.
Forward-Looking Statements
Except for historical and factual information, the matters set
forth in this release and other of our oral or written statements
identified by words such as "estimates," "expects," "anticipates,"
"believes," "plans," "intends," "will," and similar expressions are
forward-looking statements as defined by the federal securities
laws, and are subject to the "safe harbor" protections thereunder.
These forward-looking statements are not guarantees of future
results and are based on current expectations only, are inherently
speculative, and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond our control. Actual events
and results may differ materially from those anticipated,
estimated, projected or implied by us in those statements if one or
more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect. Factors that could affect actual
results include but are not limited to: the effects of competition
from a wide variety of competitive providers, including decreased
demand for our more mature service offerings and increased pricing
pressures; the effects of new, emerging or competing technologies,
including those that could make our products less desirable or
obsolete; our ability to successfully and timely attain our key
operating imperatives, including simplifying and consolidating our
network, simplifying and automating our service support systems,
attaining our Quantum Fiber buildout plans, strengthening our
relationships with customers and attaining projected cost savings;
our ability to safeguard our network, and to avoid the adverse
impact of possible cyber-attacks, security breaches, service
outages, system failures, or similar events impacting our network
or the availability and quality of our services; the effects of
ongoing changes in the regulation of the communications industry,
including the outcome of legislative, regulatory or judicial
proceedings relating to content liability standards, intercarrier
compensation, universal service, service standards, broadband
deployment, data protection, privacy and net neutrality; our
ability to effectively retain and hire key personnel and to
successfully negotiate collective bargaining agreements on
reasonable terms without work stoppages; changes in customer demand
for our products and services, including increased demand for
high-speed data transmission services; our ability to successfully
maintain the quality and profitability of our existing product and
service offerings and to introduce profitable new offerings on a
timely and cost-effective basis; our ability to generate cash flows
sufficient to fund our financial commitments and objectives,
including our capital expenditures, operating costs, debt
repayments, dividends, pension contributions and other benefits
payments; our ability to successfully and timely implement our
corporate strategies, including our deleveraging strategy; our
ability to successfully and timely consummate the pending
divestiture of a portion of our incumbent local exchange business
on the terms proposed, to realize the anticipated benefits
therefrom, and to operate our retained business successfully
thereafter; changes in our operating plans, corporate strategies,
dividend payment plans or other capital allocation plans, whether
based upon changes in our cash flows, cash requirements, financial
performance, financial position, market or regulatory conditions,
or otherwise; the impact of any future material acquisitions or
divestitures that we may transact; the negative impact of increases
in the costs of our pension, health, post-employment or other
benefits, including those caused by changes in markets, interest
rates, mortality rates, demographics or regulations; the potential
negative impact of customer complaints, government investigations,
security breaches or service outages impacting us or our industry;
adverse changes in our access to credit markets on favorable terms,
whether caused by changes in our financial position, lower credit
ratings, unstable markets or otherwise; our ability to meet the
terms and conditions of our debt obligations and covenants,
including our ability to make transfers of cash in compliance
therewith; our ability to maintain favorable relations with our
securityholders, key business partners, suppliers, vendors,
landlords and financial institutions; our ability to meet evolving
environmental, social and governance ("ESG") expectations and
benchmarks, and effectively communicate and implement our ESG
strategies; our ability to collect our receivables from, or
continue to do business with, financially-troubled customers; our
ability to use our net operating loss carryforwards in the amounts
projected; our ability to continue to use or renew intellectual
property used to conduct our operations; any adverse developments
in legal or regulatory proceedings involving us; changes in tax,
pension, healthcare or other laws or regulations, in governmental
support programs, or in general government funding levels,
including those arising from recently-enacted federal legislation
promoting broadband spending; the effects of changes in accounting
policies, practices or assumptions, including changes that could
potentially require additional future impairment charges;
continuing uncertainties regarding the impact that COVID-19
disruptions could have on our business, operations, cash flows and
corporate initiatives; the effects of adverse weather, terrorism,
epidemics, pandemics, rioting, societal unrest, or other natural or
man-made disasters or disturbances; the potential adverse effects
if our internal controls over financial reporting have weaknesses
or deficiencies, or otherwise fail to operate as intended; the
effects of changes in interest rates and inflation; the effects of
more general factors such as changes in exchange rates, in
operating costs, in public policy, in the views of financial
analysts, or in general market, labor, economic or geo-political
conditions; and other risks referenced from time to time in our
filings with the U.S. Securities and Exchange Commission. You are
cautioned not to unduly rely upon our forward-looking statements,
which speak only as of the date made. We undertake no obligation to
publicly update or revise any forward-looking statements for any
reason, whether as a result of new information, future events or
developments, changed circumstances, or otherwise. Furthermore, any
information about our intentions contained in any of our
forward-looking statements reflects our intentions as of the date
of such forward-looking statement, and is based upon, among other
things, regulatory, technological, industry, competitive, economic
and market conditions, and our related assumptions, as of such
date. We may change our intentions, strategies or plans without
notice at any time and for any reason.
Reconciliation to GAAP
This release includes certain historical and forward-looking
non-GAAP financial measures, including but not limited to Adjusted
EBITDA, Free Cash Flow, Unlevered Cash Flow, and adjustments to
GAAP and non-GAAP measures to exclude the effect of Special Items.
In addition to providing key metrics for management to evaluate the
company's performance, we believe these measurements assist
investors in their understanding of period-to-period operating
performance and in identifying historical and prospective
trends.
Reconciliations of non-GAAP financial measures to the most
comparable GAAP measures are included in the attached financial
schedules. Reconciliation of additional non-GAAP historical
financial measures that may be discussed during the call described
above, along with further descriptions of non-GAAP financial
measures, will be available in the Investor Relations portion of
the company's website at http://ir.lumen.com. Non-GAAP measures are
not presented to be replacements or alternatives to the GAAP
measures, and investors are urged to consider these non-GAAP
measures in addition to, and not in substitution for, measures
prepared in accordance with GAAP. Lumen may present or calculate
its non-GAAP measures differently from other companies.
Lumen Technologies,
Inc.
|
CONSOLIDATED STATEMENTS
OF OPERATIONS
|
THREE AND SIX MONTHS
ENDED JUNE 30, 2022 AND 2021
|
(UNAUDITED)
|
($ in millions,
except per share amounts; shares in thousands)
|
|
|
Three months
ended
June 30,
|
|
(Decrease) /
Increase
|
|
Six months ended
June 30,
|
|
(Decrease) /
Increase
|
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
OPERATING
REVENUE
|
|
$
4,612
|
|
4,924
|
|
(6) %
|
|
9,288
|
|
9,953
|
|
(7) %
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and
products (exclusive of depreciation and amortization)
|
|
2,058
|
|
2,115
|
|
(3) %
|
|
4,043
|
|
4,251
|
|
(5) %
|
Selling, general and
administrative
|
|
815
|
|
762
|
|
7 %
|
|
1,615
|
|
1,518
|
|
6 %
|
Depreciation and
amortization
|
|
827
|
|
1,041
|
|
(21) %
|
|
1,635
|
|
2,191
|
|
(25) %
|
Total operating
expenses
|
|
3,700
|
|
3,918
|
|
(6) %
|
|
7,293
|
|
7,960
|
|
(8) %
|
OPERATING
INCOME
|
|
912
|
|
1,006
|
|
(9) %
|
|
1,995
|
|
1,993
|
|
— %
|
OTHER (EXPENSE)
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(337)
|
|
(384)
|
|
(12) %
|
|
(689)
|
|
(773)
|
|
(11) %
|
Other (expense) income,
net
|
|
(122)
|
|
52
|
|
nm
|
|
(52)
|
|
86
|
|
nm
|
Income tax
expense
|
|
(109)
|
|
(168)
|
|
(35) %
|
|
(311)
|
|
(325)
|
|
(4) %
|
NET INCOME
|
|
$
344
|
|
506
|
|
(32) %
|
|
$
943
|
|
981
|
|
(4) %
|
|
|
|
|
|
|
|
BASIC EARNINGS PER
SHARE
|
|
$
0.34
|
|
0.47
|
|
(28) %
|
|
0.93
|
|
0.90
|
|
3 %
|
DILUTED EARNINGS PER
SHARE
|
|
$
0.34
|
|
0.46
|
|
(26) %
|
|
0.93
|
|
0.90
|
|
3 %
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
1,012,943
|
|
1,086,453
|
|
(7) %
|
|
1,010,686
|
|
1,084,464
|
|
(7) %
|
Diluted
|
|
1,016,620
|
|
1,093,402
|
|
(7) %
|
|
1,015,917
|
|
1,092,494
|
|
(7) %
|
DIVIDENDS PER COMMON
SHARE
|
|
$
0.25
|
|
0.25
|
|
— %
|
|
0.50
|
|
0.50
|
|
— %
|
|
|
|
|
|
|
|
Exclude: Special
Items(1)
|
|
$
13
|
|
15
|
|
(13) %
|
|
50
|
|
15
|
|
233 %
|
NET INCOME EXCLUDING
SPECIAL ITEMS
|
|
$
357
|
|
521
|
|
(31) %
|
|
993
|
|
996
|
|
— %
|
DILUTED EARNINGS PER
SHARE EXCLUDING SPECIAL ITEMS
|
|
$
0.35
|
|
0.48
|
|
(27) %
|
|
0.98
|
|
0.91
|
|
8 %
|
|
|
|
|
|
|
|
(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, 2022
AND DECEMBER 31, 2021
|
(UNAUDITED)
|
($ in millions)
|
|
June 30, 2022
|
|
December 31, 2021
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
360
|
|
354
|
Accounts receivable,
less allowance of $103 and $114
|
1,460
|
|
1,544
|
Assets held for
sale
|
9,089
|
|
8,809
|
Other
|
881
|
|
829
|
Total
current assets
|
11,790
|
|
11,536
|
Property, plant and
equipment, net of accumulated depreciation of $20,020 and
$19,271
|
20,720
|
|
20,895
|
GOODWILL AND OTHER
ASSETS
|
|
|
|
Goodwill
|
15,947
|
|
15,986
|
Other intangible
assets, net
|
6,628
|
|
6,970
|
Other, net
|
2,590
|
|
2,606
|
Total goodwill and other assets
|
25,165
|
|
25,562
|
TOTAL ASSETS
|
$
57,675
|
|
57,993
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Current maturities of
long-term debt
|
$
156
|
|
1,554
|
Accounts
payable
|
1,053
|
|
758
|
Accrued expenses and
other liabilities
|
|
|
|
Salaries and
benefits
|
705
|
|
860
|
Income and other
taxes
|
233
|
|
228
|
Current operating
lease liabilities
|
400
|
|
385
|
Interest
|
253
|
|
278
|
Other
|
107
|
|
232
|
Liabilities held for
sale
|
2,249
|
|
2,257
|
Current portion of
deferred revenue
|
625
|
|
617
|
Total current liabilities
|
5,781
|
|
7,169
|
LONG-TERM
DEBT
|
27,965
|
|
27,428
|
DEFERRED CREDITS AND
OTHER LIABILITIES
|
|
|
|
Deferred income taxes,
net
|
4,254
|
|
4,049
|
Benefit plan
obligations, net
|
3,553
|
|
3,710
|
Other
|
3,903
|
|
3,797
|
Total deferred credits
and other liabilities
|
11,710
|
|
11,556
|
STOCKHOLDERS'
EQUITY
|
|
|
|
Common stock
|
1,032
|
|
1,024
|
Additional paid-in
capital
|
18,459
|
|
18,972
|
Accumulated other
comprehensive loss
|
(2,217)
|
|
(2,158)
|
Accumulated
deficit
|
(5,055)
|
|
(5,998)
|
Total stockholders'
equity
|
12,219
|
|
11,840
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
57,675
|
|
57,993
|
Lumen Technologies, Inc.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
SIX MONTHS ENDED JUNE
30, 2022 AND 2021
|
(UNAUDITED)
|
($ in millions)
|
|
|
|
|
|
Six months ended
|
|
June 30, 2022
|
|
June 30, 2021
|
OPERATING ACTIVITIES
|
|
|
|
Net Income
|
$
943
|
|
981
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
1,635
|
|
2,191
|
Deferred income
taxes
|
249
|
|
279
|
Provision for
uncollectible accounts
|
56
|
|
53
|
Net gain on early
retirement of debt
|
—
|
|
(8)
|
Stock-based
compensation
|
48
|
|
62
|
Changes in current
assets and liabilities, net
|
(306)
|
|
(414)
|
Retirement
benefits
|
(86)
|
|
(131)
|
Changes in other
noncurrent assets and liabilities, net
|
136
|
|
120
|
Other, net
|
96
|
|
31
|
Net cash provided by
operating activities
|
2,771
|
|
3,164
|
INVESTING ACTIVITIES
|
|
|
|
Capital
expenditures
|
(1,338)
|
|
(1,362)
|
Proceeds from sale of
property, plant and equipment and other assets
|
65
|
|
66
|
Other, net
|
3
|
|
1
|
Net cash used in
investing activities
|
(1,270)
|
|
(1,295)
|
FINANCING ACTIVITIES
|
|
|
|
Net proceeds from
issuance of long-term debt
|
—
|
|
1,881
|
Payments of long-term
debt
|
(1,532)
|
|
(2,464)
|
Net proceeds from
(payments on) revolving line of credit
|
600
|
|
(150)
|
Dividends
paid
|
(525)
|
|
(568)
|
Other, net
|
(32)
|
|
(49)
|
Net cash used in
financing activities
|
(1,489)
|
|
(1,350)
|
Net increase in cash,
cash equivalents and restricted cash
|
12
|
|
519
|
Cash, cash equivalents
and restricted cash at beginning of period
|
409
|
|
427
|
Cash, cash equivalents
and restricted cash at end of period
|
$
421
|
|
946
|
|
|
|
|
Cash, cash equivalents
and restricted cash:
|
|
|
|
Cash and cash
equivalents
|
$
360
|
|
935
|
Cash and cash
equivalents included in assets held for sale
|
48
|
|
—
|
Restricted
cash
|
13
|
|
11
|
Total
|
$
421
|
|
946
|
Lumen Technologies, Inc.
|
OPERATING
METRICS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
June 30, 2022
|
|
March 31, 2022
|
|
June 30, 2021
|
|
|
|
|
|
|
|
Operating Metrics
|
|
|
|
|
|
|
Mass Markets broadband
subscribers
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
Fiber broadband
subscribers
|
|
858
|
|
830
|
|
746
|
Other broadband
subscribers(1)
|
|
3,519
|
|
3,637
|
|
3,920
|
Mass Markets total
broadband subscribers(2)
|
|
4,377
|
|
4,467
|
|
4,666
|
|
|
|
|
|
|
|
Mass Markets broadband enabled
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
Fiber broadband
enabled
|
|
3.1
|
|
2.9
|
|
2.6
|
Other broadband
enabled
|
|
26.1
|
|
26.0
|
|
25.9
|
Mass Markets total
broadband enabled
|
|
29.2
|
|
28.9
|
|
28.5
|
|
|
|
|
|
|
|
|
|
|
(1) Other broadband subscribers are
customers that primarily subscribe to lower speed copper-based
broadband services marketed under the CenturyLink brand.
|
(2) 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.
|
Description of Non-GAAP Metrics
Pursuant to Regulation G, the company is hereby providing
definitions of non-GAAP financial metrics and reconciliations to
the most directly comparable GAAP measures.
The following describes and reconciles those financial measures
as reported under accounting principles generally accepted in
the United States (GAAP) with
those financial measures as adjusted by the items detailed below
and presented in the accompanying news release. These calculations
are not prepared in accordance with GAAP and should not be viewed
as alternatives to GAAP. In keeping with its historical financial
reporting practices, the company believes that the supplemental
presentation of these calculations provides meaningful non-GAAP
financial measures to help investors understand and compare
business trends among different reporting periods on a consistent
basis.
We use the term Special Items as a non-GAAP measure to
describe items that impacted a period's statement of operations for
which investors may want to give special consideration due to their
magnitude, nature or both. We do not call these items
non-recurring because, while some are infrequent, others may
recur in future periods.
Adjusted EBITDA ($) is defined as net income (loss) from
the Statements of Operations before income tax (expense) benefit,
total other income (expense), depreciation and amortization,
stock-based compensation expense and impairments.
Adjusted EBITDA Margin (%) is defined as Adjusted EBITDA
divided by total revenue.
Management believes that Adjusted EBITDA and Adjusted EBITDA
Margin are relevant and useful metrics to provide to investors, as
they are an important part of our internal reporting and are key
measures used by management to evaluate profitability and operating
performance of Lumen and to make resource allocation decisions.
Management believes such measures are especially important in a
capital-intensive industry such as telecommunications. Management
also uses Adjusted EBITDA and Adjusted EBITDA Margin (and similarly
uses these terms excluding Special Items) to compare our
performance to that of our competitors and to eliminate certain
non-cash and non-operating items in order to consistently measure
from period to period our ability to fund capital expenditures,
fund growth, service debt and determine bonuses. Adjusted EBITDA
excludes non-cash stock compensation expense and impairments
because of the non-cash nature of these items. Adjusted EBITDA also
excludes interest income, interest expense and income taxes, and in
our view constitutes an accrual-based measure that has the effect
of excluding period-to-period changes in working capital and shows
profitability without regard to the effects of capital or tax
structure. Adjusted EBITDA also excludes depreciation and
amortization expense because these non-cash expenses primarily
reflect the impact of historical capital investments, as opposed to
the cash impacts of capital expenditures made in recent periods,
which may be evaluated through cash flow measures. Adjusted EBITDA
further excludes the gain (or loss) on extinguishment and
modification of debt and other income (expense), net, because these
items are not related to the primary business operations of
Lumen.
There are material limitations to using Adjusted EBITDA as a
financial measure, including the difficulty associated with
comparing companies that use similar performance measures whose
calculations may differ from our calculations. Additionally, by
excluding the above-listed items, Adjusted EBITDA may exclude items
that investors believe are important components of our performance.
Adjusted EBITDA and Adjusted EBITDA Margin (either with or without
Special Items) should not be considered a substitute for other
measures of financial performance reported in accordance with
GAAP.
Unlevered Cash Flow is defined as net cash provided
by (used in) operating activities less capital expenditures, plus
cash interest paid and less interest income, all as disclosed in
the Statements of Cash Flows or the Statements of Operations.
Management believes that Unlevered Cash Flow is a relevant metric
to provide to investors, because it reflects the operational
performance of Lumen and, measured over time, enables management
and investors to monitor the underlying business' growth pattern
and ability to generate cash. Unlevered Cash Flow excludes cash
used for acquisitions and debt service and the impact of exchange
rate changes on cash and cash equivalents balances.
There are material limitations to using Unlevered Cash Flow to
measure our cash performance as it excludes certain material items
that investors may believe are important components of our cash
flows. Comparisons of our Unlevered Cash Flow to that of some of
our competitors may be of limited usefulness since Lumen does not
currently pay a significant amount of income taxes due to net
operating loss carryforwards, and therefore, currently generates
higher cash flow than a comparable business that does pay income
taxes. Additionally, this financial measure is subject to
variability quarter over quarter as a result of the timing of
payments related to accounts receivable, accounts payable, payroll
and capital expenditures. Unlevered Cash Flow should not be used as
a substitute for net change in cash, cash equivalents and
restricted cash in the Consolidated Statements of Cash Flows.
Free Cash Flow is defined as net cash provided by
(used in) operating activities less capital expenditures as
disclosed in the Statements of Cash Flows. Management believes that
Free Cash Flow is a relevant metric to provide to investors, as it
is an indicator of our ability to generate cash to service our
debt. Free Cash Flow excludes cash used for acquisitions, principal
repayments and the impact of exchange rate changes on cash and cash
equivalents balances.
There are material limitations to using Free Cash Flow to
measure our performance as it excludes certain material items that
investors may believe are important components of our cash flows.
Comparisons of our Free Cash Flow to that of some of its
competitors may be of limited usefulness since Lumen does not
currently pay a significant amount of income taxes due to net
operating loss carryforwards, and therefore, generates higher cash
flow than a comparable business that does pay income taxes.
Additionally, this financial measure is subject to variability
quarter over quarter as a result of the timing of payments related
to interest expense, accounts receivable, accounts payable, payroll
and capital expenditures. Free Cash Flow should not be used as a
substitute for net change in cash, cash equivalents and restricted
cash on the Consolidated Statements of Cash Flows.
Lumen Technologies,
Inc.
|
Non-GAAP Special
Items
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Special Items
Impacting Adjusted EBITDA
|
2Q22
|
2Q21
|
|
2Q22
|
2Q21
|
Consumer and other
litigation
|
$
(3)
|
11
|
|
$
(3)
|
19
|
Severance
|
—
|
—
|
|
2
|
—
|
Transaction and
separation costs(1)
|
50
|
9
|
|
100
|
9
|
Total Special Items
impacting Adjusted EBITDA
|
$
47
|
20
|
|
$
99
|
28
|
|
|
|
|
|
|
|
Actual
QTD
|
|
Actual
YTD
|
Special Items
Impacting Net Income
|
2Q22
|
2Q21
|
|
2Q22
|
2Q21
|
Consumer and other
litigation
|
$
(3)
|
11
|
|
$
(3)
|
19
|
Gain on early
retirement of debt (2)
|
—
|
—
|
|
—
|
(8)
|
Severance
|
—
|
—
|
|
2
|
—
|
Transaction and
separation costs(1)
|
50
|
9
|
|
100
|
9
|
Income from transition
and separation services(3)
|
(30)
|
—
|
|
(33)
|
—
|
Total Special Items
impacting Net Income
|
17
|
20
|
|
66
|
20
|
Income tax effect of
Special Items(4)
|
(4)
|
(5)
|
|
(16)
|
(5)
|
Total Special Items
impacting Net Income, net of tax
|
$
13
|
15
|
|
$
50
|
15
|
|
|
|
|
(1)
Transaction and separation costs associated with (i) the recently
completed sale of our Latin American business to Stonepeak for $2.7
billion announced July 26, 2021, (ii) the pending sale of our ILEC
(incumbent local exchange carrier) business in 20 states for $7.5
billion announced August 3, 2021, and (iii) our evaluation of other
potential transactions.
|
(2) Reflects
a gain as a result of $1.1 billion in early debt retirement in Q1
2021. There were no comparable gains or losses during Q2 2021, Q1
2022 or Q2 2022.
|
(3) Income
from transition and separation services includes charges we bill
for transition services and IT professional services provided to
the purchasers in connection with our divestitures.
|
(4) Tax
effect calculated using the annualized effective statutory tax
rate, excluding any non-recurring discrete items, which was 24.6%
for 2022 and 24.5% for 2021.
|
Lumen Technologies, Inc.
|
Non-GAAP Cash Flow
Reconciliation
|
(UNAUDITED)
|
($ in millions)
|
|
Actual QTD
|
|
2Q22
|
2Q21
|
Net cash provided by
operating activities
|
$
1,396
|
1,639
|
Capital
expenditures
|
(761)
|
(646)
|
Free Cash Flow
|
635
|
993
|
Cash interest
paid
|
313
|
357
|
Interest
income
|
(1)
|
—
|
Unlevered Cash Flow
|
$
947
|
$
1,350
|
|
|
|
Free Cash Flow
|
$
635
|
$
993
|
Add back:
Severance
|
7
|
29
|
Add back: Consumer and
other litigation(1)
|
—
|
20
|
Add back: Transaction
and separation costs(1)
|
48
|
2
|
Remove: Income from
transition and separation services(1)
|
(22)
|
—
|
Free Cash Flow excluding cash Special
Items
|
$
668
|
$
1,044
|
|
|
|
Unlevered Cash Flow
|
$
947
|
$
1,350
|
Add back:
Severance
|
7
|
29
|
Add back: Consumer and
other litigation(1)
|
—
|
20
|
Add back: Transaction
and separation costs(1)
|
48
|
2
|
Remove: Income from
transition and separation services(1)
|
(22)
|
—
|
Unlevered Cash Flow excluding cash Special
Items
|
$
980
|
$
1,401
|
|
|
|
(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
|
|
2Q22
|
2Q21
|
Net income
|
$ 344
|
506
|
Income tax
expense
|
109
|
168
|
Total other expense,
net
|
459
|
332
|
Depreciation and
amortization expense
|
827
|
1,041
|
Stock-based
compensation expense
|
25
|
42
|
Adjusted EBITDA
|
$
1,764
|
2,089
|
|
|
|
Add back: Other Special
Items(1)
|
$
(3)
|
11
|
Add back: Transaction
and separation costs(1)
|
50
|
9
|
Adjusted EBITDA excluding Special
Items
|
$
1,811
|
2,109
|
|
|
|
Total revenue
|
$
4,612
|
4,924
|
|
|
|
Adjusted EBITDA margin
|
38.2 %
|
42.4 %
|
Adjusted EBITDA margin excluding Special
Items
|
39.3 %
|
42.8 %
|
|
|
|
(1) Refer to Non-GAAP Special
Items table for details of the Special Items included
above.
|
Outlook
To enhance the information in our outlook with respect to
non-GAAP metrics, we are providing a range for certain GAAP
measures that are components of the reconciliation of the non-GAAP
metrics. The provision of these ranges is in no way meant to
indicate that Lumen is explicitly or implicitly providing an
outlook on those GAAP components of the reconciliation. In order to
reconcile the non-GAAP financial metric to GAAP, Lumen has to use
ranges for the GAAP components that arithmetically add up to the
non-GAAP financial metric. While Lumen believes that it has used
reasonable assumptions in connection with developing the outlook
for its non-GAAP financial metrics, it fully expects that the
ranges used for the GAAP components will vary from actual results.
We will consider our outlook of non-GAAP financial metrics to be
accurate if the specific non-GAAP metric is met or exceeded, even
if the GAAP components of the reconciliation are different from
those provided in an earlier reconciliation.
Lumen Technologies,
Inc.
|
2022 OUTLOOK (1)
(2) (3) (4) (5)
|
(UNAUDITED)
|
($ in
millions)
|
|
|
|
|
Adjusted EBITDA
Outlook
|
|
|
|
Twelve Months Ended
December 31, 2022
|
|
|
|
|
Range
|
|
Low
|
|
High
|
Net
income
|
$
1,385
|
|
1,875
|
Income tax
expense
|
490
|
|
650
|
Total other
expense
|
1,450
|
|
1,250
|
Depreciation and
amortization expense
|
3,400
|
|
3,200
|
Stock-based
compensation expense
|
175
|
|
125
|
Adjusted
EBITDA
|
$
6,900
|
|
$
7,100
|
|
|
|
|
Free Cash Flow
Outlook
|
|
|
|
Twelve Months Ended
December 31, 2022
|
|
|
|
|
Range
|
|
Low
|
|
High
|
Net cash provided by
operating activities
|
$
5,200
|
|
5,600
|
Capital
expenditures
|
(3,200)
|
|
(3,400)
|
Free Cash
Flow
|
$
2,000
|
|
2,200
|
(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 August 3, 2022. See
"Forward-Looking Statements."
|
(3) Outlook
measures include accounting impacts of assets and liabilities held
for sale and assume the pending sale of Lumen's 20-state ILEC
business would be completed in the fourth quarter of 2022,
resulting in 2022 financial contributions of three quarters for
that business.
|
(4) Assumes
no discretionary pension plan contributions during 2022 and
excludes any contributions related to the 20-state ILEC business
transaction.
|
(5) This implies cash dividends of
approximately $1.040 billion, based on common stock outstanding as
of Dec. 31. 2021 and projected accrued dividends.
|
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SOURCE Lumen Technologies