Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Segment Information

We report our results within two segments: Business and Mass Markets.

Under our Business segment we provide products and services to meet the needs of our enterprise and wholesale customers under four distinct sales channels: Large Enterprise, Mid-Market Enterprise, Public Sector and Wholesale. For Business segment revenue, we report the following product categories: Grow, Nurture, Harvest and Other, in each case through the sales channels outlined above. The Business segment included the results of our Latin American and ILEC businesses prior to their sales on August 1, 2022 and October 3, 2022, respectively.

Under our Mass Markets Segment, we provide products and services to residential and small business customers. We report the following categories: Fiber Broadband, Other Broadband and Voice and Other. The Mass Markets segment included the results of our ILEC business prior to its sale on October 3, 2022.

See detailed descriptions of these product and service categories in Note 4—Revenue Recognition.

As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and directly associated selling, general and administrative costs (primarily salaries and commissions). Shared costs are managed separately and included in "other unallocated amounts" in the table below. As referenced above, we reclassified certain prior period amounts to conform to the current period presentation. See Note 1— Background for additional detail on these changes.

The following tables summarize our segment results for the three months ended March 31, 2023 and 2022, based on the segment categorization we were operating under at March 31, 2023.

	Three Months Ended March 31, 2023
	Business		Mass Markets
	(Dollars in millions)
Segment revenue	$	2,956	782
Segment expenses:
Cost of services and products	801		25
Selling, general and administrative	290		325
Total segment expense	1,091		350
Total segment adjusted EBITDA	$	1,865	432

	Three Months Ended March 31, 2022
	Business		Mass Markets
	(Dollars in millions)
Segment revenue	$	3,401	1,275
Segment expenses:
Cost of services and products	812		32
Selling, general and administrative	322		395
Total segment expense	1,134		427
Total segment adjusted EBITDA	$	2,267	848

	Three Months Ended March 31,
	2023		2022
	(Dollars in millions)
Business segment adjusted EBITDA	$	1,865	2,267
Mass Markets segment adjusted EBITDA	432		848
Other unallocated amounts	(1,160)		(1,201)
Total Adjusted EBITDA	$	1,137	1,914

Revenue and Expenses

Our segment revenue includes all revenue from our two segments as described in more detail above. Our segment revenue is based upon each customer's classification. We report our segment revenue based upon all services provided to that segment's customers. Our segment expenses include specific cost of service expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are directly associated with specific segment customers or activities. We have not allocated assets or debt to specific segments.

The following items are excluded from our segment results, because they are centrally managed and not monitored by or reported to our chief operating decision maker by segment:

•network expenses not incurred as a direct result of providing services and products to segment customers and centrally managed expenses such as Finance, Human Resources, Legal, Marketing, Product Management and IT, all of which are reported as "other unallocated amounts" in the table above;

•depreciation and amortization expense;

•goodwill or other impairments;

•interest expense;

•stock-based compensation; and

•other income and expense items.

The following table reconciles total adjusted EBITDA to net income for the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31,
	2023		2022
	(Dollars in millions)
Net income	$	511	599
Income tax expense	169		202
Total other (income) expense, net	(290)		282
Depreciation and amortization	733		808
Stock-based compensation	14		23
Total Adjusted EBITDA	$	1,137	1,914