Segment Information

9 Months Ended

Sep. 30, 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 product 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 expense" in the table included below under the heading "—Revenue and Expenses". 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 and nine months ended September 30, 2023 and 2022, based on the segment categorization we were operating under at September 30, 2023.

	Three Months Ended September 30, 2023			Nine Months Ended September 30, 2023
	Business		Mass Markets	Business	Mass Markets
	(Dollars in millions)
Segment revenue	$	2,894	747	8,747	2,293
Segment expenses:
Cost of services and products	796		22	2,343	71
Selling, general and administrative	324		356	916	1,010
Total segment expense	1,120		378	3,259	1,081
Total segment adjusted EBITDA	$	1,774	369	5,488	1,212

	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
	Business		Mass Markets	Business	Mass Markets
	(Dollars in millions)
Segment revenue	$	3,218	1,172	10,036	3,642
Segment expenses:
Cost of services and products	792		25	2,449	90
Selling, general and administrative	293		470	928	1,283
Total segment expense	1,085		495	3,377	1,373
Total segment adjusted EBITDA	$	2,133	677	6,659	2,269

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 expense" in the table below;

•depreciation and amortization expense;

•goodwill or other impairments;

•stock-based compensation;

•interest expense, and

•other income and expense items.

The following table reconciles total segment adjusted EBITDA to net (loss) income for the three and nine months ended September 30, 2023 and 2022:

	Three Months Ended September 30,			Nine Months Ended September 30,
	2023		2022	2023	2022
	(Dollars in millions)
Total segment adjusted EBITDA	$	2,143	2,810	6,700	8,928
Depreciation and amortization	(755)		(808)	(2,234)	(2,443)
Goodwill impairment	—		—	(8,793)	—
Other unallocated expense	(1,149)		(595)	(3,442)	(3,035)
Stock-based compensation	(16)		(23)	(39)	(71)
Operating income (loss)	223		1,384	(7,808)	3,379
Total other expense, net	(308)		(447)	(287)	(1,188)
(Loss) income before income taxes	(85)		937	(8,095)	2,191
Income tax (benefit) expense	(7)		359	208	670
Net (loss) income	$	(78)	578	(8,303)	1,521