XML 27 R13.htm IDEA: XBRL DOCUMENT v3.23.1
Revenue Recognition
 3 Months Ended
Mar. 31, 2023
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
Product and Service Categories

We categorize our products and services revenue among the following categories for the Business segment:

•Grow, which includes products and services that we anticipate will grow, including our dark fiber, Edge Cloud services, IP, managed security, software-defined wide area networks ("SD WAN"), secure access service edge ("SASE"), Unified Communications and Collaboration ("UC&C") and wavelengths services;

•Nurture, which includes our more mature offerings, including ethernet and VPN data networks services;

•Harvest, which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services; and

•Other, which includes equipment, IT solutions and other services.

We categorize our products and services revenue among the following categories for the Mass Markets segment:

•Fiber Broadband, under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure;

•Other Broadband, under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; and

•Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, and (ii) federal broadband and state support payments.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following table provides total revenue by segment, sales channel and product category. It also provides the amount of revenue that is not subject to ASC 606, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards. The amounts in the table below include revenue for the Latin American and ILEC businesses prior to their sales on August 1, 2022 and October 3, 2022, respectively. See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on these divestitures.
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
Total Revenue
Adjustments for Non-ASC 606 revenue (1)
Total revenue from Contracts with CustomersTotal Revenue
Adjustments for Non-ASC 606 revenue (1)
Total revenue from Contracts with Customers
(Dollars in millions)
Business Segment by Sales Channel and Product Category
Large Enterprise
Grow$550 (79)471 653 (103)550 
Nurture375 — 375 454 — 454 
Harvest207 — 207 276 — 276 
Other62 (1)61 59 (2)57 
Total Large Enterprise Revenue1,194 (80)1,114 1,442 (105)1,337 
Mid-Market Enterprise
Grow196 (7)189 185 (8)177 
Nurture211 — 211 241 — 241 
Harvest100 (1)99 140 (2)138 
Other8 (2)6 7 — 7 
Total Mid-Market Enterprise Revenue515 (10)505 573 (10)563 
Public Sector
Grow116 (19)97 115 (27)88 
Nurture106 — 106 131 — 131 
Harvest99 — 99 124 (1)123 
Other109 — 109 109 — 109 
Total Public Sector Revenue430 (19)411 479 (28)451 
Wholesale
Grow266 (71)195 233 (67)166 
Nurture213 (6)207 267 (7)260 
Harvest333 (44)289 407 (58)349 
Other5 — 5 — — — 
Total Wholesale Revenue817 (121)696 907 (132)775 
Business Segment by Product Category
Grow1,128 (176)952 1,186 (205)981 
Nurture905 (6)899 1,093 (7)1,086 
Harvest739 (45)694 947 (61)886 
Other184 (3)181 175 (2)173 
Total Business Segment Revenue2,956 (230)2,726 3,401 (275)3,126 
Mass Markets Segment by Product Category
Fiber Broadband152 (4)148 145 (5)140 
Other Broadband369 (33)336 610 (56)554 
Voice and Other261 (9)252 520 (79)441 
Total Mass Markets Revenue782 (46)736 1,275 (140)1,135 
Total Revenue$3,738 (276)3,462 4,676 (415)4,261 
_____________________________________________________________________
(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.
Operating Lease Income

Lumen Technologies leases various dark fiber, office facilities, colocation facilities, switching facilities, other network sites and service equipment to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations.

For the three months ended March 31, 2023 and 2022, our gross rental income was $269 million and $337 million, respectively, which represents approximately 7% of our operating revenue for both the three months ended March 31, 2023 and 2022.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts classified as held for sale, as of March 31, 2023 and December 31, 2022:

March 31, 2023December 31, 2022
 (Dollars in millions)
Customer receivables(1)
$1,374 1,424 
Contract assets(2)
30 34 
Contract liabilities(3)
675 656 
______________________________________________________________________
(1)Reflects gross customer receivables of $1.4 billion and $1.5 billion, net of allowance for credit losses of $72 million and $73 million, at March 31, 2023 and December 31, 2022, respectively. These amounts exclude customer receivables, net, classified as held for sale of $85 million at March 31, 2023 and $76 million at December 31, 2022 related to the EMEA business.
(2)These amounts exclude contract assets classified as held for sale of $13 million at March 31, 2023 and $16 million at December 31, 2022 related to the EMEA business.
(3)These amounts exclude contract liabilities classified as held for sale of $57 million at March 31, 2023 and $59 million at December 31, 2022 related to the EMEA business.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue on our consolidated balance sheets. During the three months ended March 31, 2023, we recognized $305 million of revenue that was included in contract liabilities of $715 million as of January 1, 2023, including contract liabilities that were classified as held for sale. During the three months ended March 31, 2022, we recognized $395 million of revenue that was included in contract liabilities of $841 million as of January 1, 2022, including contract liabilities that were classified as held for sale.

Performance Obligations

As of March 31, 2023, we expect to recognize approximately $7.8 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of March 31, 2023, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2023, 2024 and thereafter was $2.4 billion, $1.9 billion and $3.5 billion, respectively.

These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606, and (iii) the value of unsatisfied performance obligations for contracts which relate to our planned divestiture of the EMEA business.
Contract Costs

The following table provides changes in our contract acquisition costs and fulfillment costs:

Three Months Ended March 31, 2023Three Months Ended March 31, 2022
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)(2)
$202 192 222 186 
Costs incurred36 40 43 40 
Amortization(41)(35)(52)(39)
Change in contract costs held for sale(5)(15)2 — 
End of period balance(3)(4)
$192 182 215 187 
______________________________________________________________________
(1)Beginning of period balance for the three months ended March 31, 2023 excludes $6 million of acquisition costs and no fulfillment costs classified as held for sale related to the EMEA business.
(2)Beginning of period balance for the three months ended March 31, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $34 million and $32 million, respectively (related to both the Latin American business and the ILEC business).
(3)End of period balance for the three months ended March 31, 2023 excludes $11 million of acquisition costs and $15 million fulfillment costs classified as held for sale related to the EMEA business.
(4)End of period balance for the three months ended March 31, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $32 million and $32 million, respectively (related to both the Latin American business and the ILEC business).

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of services to customers, including labor and materials consumed for these activities.

Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average contract life of approximately 36 months for mass markets customers and 33 months for business customers. Amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next 12 months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next twelve months is included in other noncurrent assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis.