Lumen Technologies, Inc.

Results of Operations

In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment Results" we review the performance of our two reporting segments in more detail.

The following table summarizes the results of our consolidated operations for the three months ended March 31, 2025 and March 31, 2024:

Our over-arching strategic goal is to digitally connect people, data, and applications quickly, securely, and effortlessly. As the trusted network for AI, Lumen uses the scale of our network to help companies realize AI's full potential. To attain these goals, we strive to, among other things:

•deliver best in class infrastructure to meet network, transport, data, and computing needs;

•optimize and innovate the way locations, data centers, and clouds connect;

•limit, detect, and mitigate network and data security vulnerabilities;

•expand our product offerings and strengthen our digital self-service ordering platforms;

•create a more adaptive and integrated network;

•continue to monetize our network-related assets, principally through the sale of Private Connectivity Fabric SM (“PCF”) solutions;

•expand our network capacity through our AI backbone initiative;

•execute on our Quantum Fiber buildout plan;

•manage our non-core business for cash flow; and

•strengthen our financial position and performance through our modernization and simplification initiatives, resulting in lower costs and debt reduction.

Revenue

The following table summarizes our consolidated operating revenue recorded under each of our two segments and in our five revenue sales channels within the Business segment described above:

Our consolidated operating revenue decreased by $108 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. See our segment results below for information on the drivers of our revenue.

Operating Expenses

The following table summarizes our operating expenses for the three months ended March 31, 2025 and 2024:

nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Cost of Services and Products (exclusive of depreciation and amortization)

Cost of services and products (exclusive of depreciation and amortization) increased by $35 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This was primarily due to an increase of approximately $70 million from higher facilities costs, partially offset by a decrease of $39 million in employee-related expense from lower headcount.

Selling, General and Administrative

Selling, general and administrative expenses decreased by $148 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The decrease was primarily due to a decline of (i) $140 million in legal and other professional fees, mainly driven by our debt transaction in the first quarter of 2024 with no comparably-sized transaction in the first quarter of 2025, and (ii) $32 million in employee-related expenses from lower headcount. These decreases were partially offset by an increase of $49 million related to a loss on the sale of operating assets in the first quarter of 2025 and recognition in the first quarter of 2024 of a deferred gain on the sale of select CDN contracts.

Net Loss on Sale of Business

For a discussion of the net loss on sale of business that we recognized for the three months ended March 31, 2024, see Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses to our consolidated financial statements in Item 8 of Part II of our Annual Report Form 10-K for the year ended December 31, 2024.

Depreciation and Amortization

The following table provides detail of our depreciation and amortization expense:

Depreciation expense decreased by $15 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024 primarily due to a decrease of $12 million from accelerated depreciation of CDN assets in 2024 and a decrease of $8 million due to decommissioned assets. These decreases were partially offset by an increase of $3 million associated with the net increase in depreciable assets.

Amortization expense decreased by $20 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This was due to a $13 million decrease associated with net reduction in amortizable assets and a $7 million decrease associated with the accelerated amortization of software assets.

Further analysis of our segment operating expenses by segment is provided below in "Segment Results."

Other Consolidated Results

The following table summarizes our total other (expense) income, net and income tax (benefit) expense:

nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Interest Expense

Interest expense increased by $56 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This increase was due to the increase in the average interest rate from (i) 6.98% to 7.67% for the three months ended March 31, 2024 compared to the three months ended March 31, 2025. This increase was partially offset by a decrease of approximately $2 billion in average outstanding long-term debt for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Net (Loss) Gain on Early Retirement of Debt

For a discussion of certain transactions that resulted in the net (loss) gain on debt we recognized for the three months ended March 31, 2025, see Note 4—Long-Term Debt and Credit Facilities. See Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of our Annual Report Form 10-K for the year ended December 31, 2024 for discussion of the 2024 transactions that resulted in the net gain on debt recognized for the three months ended March 31, 2024.

Other Income, Net

Other income, net reflects certain items not directly related to our core operations, including (i) components of net periodic pension and post-retirement benefit costs, (ii) foreign currency gains and losses, (iii) our share of income from partnerships we do not control, (iv) interest income from cash and cash equivalents, (v) gains and losses from non-operating asset dispositions, (vi) income from transition and separation services provided by us to the purchasers of our divested businesses, and (vii) other non-core items.

Income Tax Expense

For the three months ended March 31, 2025, our effective income tax rate was 18.0%, which was driven by interest on our uncertain tax position reserves. For the three months ended March 31, 2024, our effective income tax rate was 44.1%, including an unfavorable impact of interest on our uncertain tax position reserves.