Lumen(LUMN) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements Outlines forward-looking statements, subject to safe harbor, and factors that could cause actual results to differ from projections - Forward-looking statements are based on judgment and assumptions, are inherently speculative, and are subject to a number of risks and uncertainties, many of which are beyond the company's control[12] - Factors that could cause actual results to differ materially include intense competition, new/emerging technologies, operational imperatives, asset monetization, cybersecurity, regulatory changes, cash flow generation, and shifts in customer demand, including for AI applications[14] - The company may change its intentions, strategies, or plans, including capital allocation, at any time and without notice[16] Part I - Financial Information Item 1. Financial Statements Presents Lumen's unaudited consolidated financial statements, covering operations, balance sheets, cash flows, and accounting notes Consolidated Statements of Operations (Unaudited) Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Operating Revenue | 3,092 | 3,268 | 6,274 | 6,558 | | Total Operating Expenses | 3,695 | 3,133 | 6,770 | 6,378 | | Operating (Loss) Income | (603) | 135 | (496) | 180 | | Total Other Expense, Net | (546) | (176) | (898) | (119) | | (Loss) Income Before Income Taxes | (1,149) | (41) | (1,394) | 61 | | Income Tax (Benefit) Expense | (234) | 8 | (278) | 53 | | Net (Loss) Income | (915) | (49) | (1,116) | 8 | | Basic (Loss) Earnings Per Common Share | (0.92) | (0.05) | (1.12) | 0.01 | | Diluted (Loss) Earnings Per Common Share | (0.92) | (0.05) | (1.12) | 0.01 | Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Consolidated Statements of Comprehensive (Loss) Income | Metric | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | NET (LOSS) INCOME | (915) | (49) | (1,116) | 8 | | Other Comprehensive Income | 21 | 13 | 44 | 24 | | COMPREHENSIVE (LOSS) INCOME | (894) | (36) | (1,072) | 32 | Consolidated Balance Sheets (Unaudited) Consolidated Balance Sheets | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :---------------------------------- | :------------------------- | :--------------------------- | | ASSETS | | | | Cash and cash equivalents | 1,568 | 1,889 | | Accounts receivable, less allowance | 1,266 | 1,231 | | Assets held for sale | 3,692 | 24 | | Total current assets | 7,737 | 4,394 | | Property, plant and equipment, net | 18,665 | 20,421 | | Goodwill | — | 1,964 | | Other intangible assets, net | 4,525 | 4,806 | | Total assets | 32,976 | 33,496 | | LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | | | | Current maturities of long-term debt | 331 | 412 | | Accounts payable | 831 | 749 | | Liabilities held for sale | 110 | — | | Total current liabilities | 3,632 | 3,639 | | Long-term debt | 17,565 | 17,494 | | Total stockholders' (deficit) equity | (595) | 464 | | Total liabilities and stockholders' (deficit) equity | 32,976 | 33,496 | Consolidated Statements of Cash Flows (Unaudited) Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net (loss) income | (1,116) | 8 | | Net cash provided by operating activities | 1,665 | 1,613 | | Net cash used in investing activities | (1,642) | (1,194) | | Net cash used in financing activities | (344) | (1,160) | | Net decrease in cash, cash equivalents and restricted cash | (321) | (741) | | Cash, cash equivalents and restricted cash at end of period | 1,579 | 1,507 | Consolidated Statements of Stockholders' (Deficit) Equity (Unaudited) Consolidated Statements of Stockholders' (Deficit) Equity | Metric | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | | Balance at beginning of period (Common Stock) | 19,149 | 1,008 | | Net (loss) income | (1,116) | 8 | | Other comprehensive income | 44 | 24 | | Total Stockholders' (Deficit) Equity at end of period | (595) | 466 | Notes to Consolidated Financial Statements (Unaudited) Note 1— Background Lumen Technologies is a digital networking services company focused on enterprise businesses in a multi-cloud, AI-first market - Lumen is a leading digital networking services company, empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace[34] - The company adopted ASU 2023-07, "Segment Reporting," for the year ended December 31, 2024, to improve reportable segment disclosures without changing how operating segments are identified or aggregated[40] - Lumen is evaluating ASU 2024-03, "Disaggregation of Income Statement Expenses," effective fiscal 2027, and does not expect ASU 2024-04, "Induced Conversions of Convertible Debt Instruments," to impact its consolidated financial statements as it has no outstanding convertible debt[41][42] Note 2—Planned Divestiture of the Mass Markets Fiber-to-the-Home Business Lumen agreed to sell its Mass Markets fiber-to-the-home business in 11 states to AT&T for $5.75 billion in cash, expected to close in H1 2026 - Lumen entered into a definitive agreement to sell its Mass Markets fiber-to-the-home business in 11 states to AT&T for a pre-tax total of $5.75 billion in cash[44] - The divestiture is anticipated to close in the first half of 2026 and does not meet the criteria to be classified as a discontinued operation[46] Assets and Liabilities Held for Sale | Category | June 30, 2025 (Millions $) | | :---------------------------------- | :------------------------- | | Assets held for sale | | | Accounts receivable, less allowance | 14 | | Other current assets, net | 15 | | Property, plant and equipment, net | 2,275 | | Goodwill | 1,336 | | Other assets, net | 28 | | Total assets held for sale | 3,668 | | Liabilities held for sale | | | Accounts payable | 75 | | Other current liabilities | 3 | | Current portion of deferred revenue | 31 | | Other non-current liabilities | 1 | | Total liabilities held for sale | 110 | Note 3—Goodwill, Customer Relationships and Other Intangible Assets Goodwill and other intangible assets decreased due to a $628 million impairment charge and reclassification of $1.3 billion as held for sale Goodwill and Other Intangible Assets | Asset Category | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :---------------------------------- | :------------------------- | :--------------------------- | | Goodwill | — | 1,964 | | Other intangible assets, net | 4,525 | 4,806 | - A non-cash, non-tax-deductible goodwill impairment charge of $628 million was recorded for the Mass Markets reporting unit for the three and six months ended June 30, 2025, following a post-classification impairment test triggered by the planned divestiture[55] Goodwill by Segment | Segment | As of December 31, 2024 (Millions $) | Impairment (Millions $) | Reclassified as held for sale (Millions $) | As of June 30, 2025 (Millions $) | | :---------------------------------- | :----------------------------------- | :---------------------- | :--------------------------------------- | :----------------------------- | | Business | — | — | — | — | | Mass Markets | 1,964 | (628) | (1,336) | — | | Total | 1,964 | (628) | (1,336) | — | Note 4—Revenue Recognition Details Lumen's revenue recognition policies, categorizing revenue for Business (Grow, Nurture, Harvest, Other) and Mass Markets (Fiber Broadband, Other Broadband, Voice and Other) segments - Business segment revenue is categorized into Grow (existing and emerging products with significant investment), Nurture (more mature offerings), Harvest (legacy services managed for cash flow), and Other (equipment sales, managed/professional services)[61] - Mass Markets segment revenue is categorized into Fiber Broadband (high-speed fiber services), Other Broadband (lower-speed copper services), and Voice and Other (local/long-distance voice, federal/state support programs)[61] Operating Revenue by Segment and Category | Category | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Business Segment Revenue | | | | | | Grow | 1,127 | 1,063 | 2,263 | 2,122 | | Nurture | 634 | 750 | 1,300 | 1,526 | | Harvest | 554 | 568 | 1,088 | 1,150 | | Other | 175 | 197 | 363 | 371 | | Mass Markets Segment Revenue | | | | | | Fiber Broadband | 217 | 181 | 426 | 351 | | Other Broadband | 245 | 298 | 502 | 613 | | Voice and Other | 140 | 211 | 332 | 425 | | Total Operating Revenue | 3,092 | 3,268 | 6,274 | 6,558 | Note 5—Long-Term Debt and Credit Facilities Lumen's consolidated long-term debt totaled $17.9 billion at June 30, 2025, with significant refinancing activities in 2025, including Level 3 Financing's $2.0 billion First Lien Notes issuance and Term Loan B refinancing Long-Term Debt | Debt Category | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :---------------------------------- | :------------------------- | :--------------------------- | | Senior Secured Debt | 11,397 | 12,291 | | Unsecured Senior Notes and Other Debt | 6,717 | 6,027 | | Unamortized discounts, net | (408) | (395) | | Unamortized debt issuance costs | (216) | (217) | | Total long-term debt | 17,896 | 17,906 | | Less current maturities | (331) | (412) | | Long-term debt, excluding current maturities | 17,565 | 17,494 | - On June 30, 2025, Level 3 Financing issued $2.0 billion of 6.875% First Lien Notes due 2033, using proceeds to redeem $1.76 billion of existing first lien notes, resulting in a $236 million loss on early retirement of debt[78][79] - On March 27, 2025, Level 3 Financing refinanced its Term Loan B-1 and B-2 facilities, establishing a new $2.4 billion Term Loan B-3 facility maturing in 2032, which resulted in a $35 million loss on early retirement of debt[81][82] Note 6—Property, Plant and Equipment Net property, plant and equipment decreased to $18.7 billion at June 30, 2025, primarily due to assets classified as held for sale related to the Mass Markets divestiture Property, Plant and Equipment | Category | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :---------------------------------- | :------------------------- | :--------------------------- | | Gross property, plant and equipment | 41,823 | 43,542 | | Accumulated depreciation | (23,158) | (23,121) | | Net property, plant and equipment | 18,665 | 20,421 | - Depreciation expense decreased by $26 million for the three months and $41 million for the six months ended June 30, 2025, primarily due to the discontinuation of depreciation on Mass Markets fiber-to-the-home business assets classified as held for sale[112][192] Note 7—Severance Accrued severance liabilities remained stable at $11 million, reflecting ongoing workforce reductions due to integration, competitive pressures, cost reduction, and automation Severance Accrual | Metric | Severance (Millions $) | | :---------------------------------- | :--------------------- | | Balance at December 31, 2024 | 12 | | Accrued to expense | 18 | | Payments, net | (19) | | Balance at June 30, 2025 | 11 | - Workforce reductions are primarily driven by post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation, and reduced workloads[113] Note 8—Employee Benefits Net periodic pension expense increased to $75 million for the six months ended June 30, 2025, while post-retirement benefit expense decreased to $30 million Net Periodic Pension and Post-Retirement Benefit Expense | Component | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | | Combined Pension Plan | | | | Service cost | 11 | 12 | | Interest cost | 120 | 125 | | Expected return on plan assets | (127) | (136) | | Recognition of prior service credit | (1) | (3) | | Recognition of actuarial loss | 72 | 54 | | Net periodic pension expense | 75 | 52 | | Post-Retirement Benefit Plans | | | | Service cost | 2 | 2 | | Interest cost | 44 | 47 | | Recognition of prior service credit | (3) | (4) | | Recognition of actuarial gain | (13) | (9) | | Special termination benefits charge | — | 2 | | Net periodic post-retirement benefit expense | 30 | 38 | - Lumen does not expect to be required to make any additional contributions to the Combined Pension Plan in 2025[120] Note 9—(Loss) Earnings Per Common Share Basic and diluted loss per common share for the six months ended June 30, 2025, was $(1.12), reflecting the net loss incurred (Loss) Earnings Per Common Share Data | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income (Millions $) | (1,116) | 8 | | Basic (loss) earnings per common share | (1.12) | 0.01 | | Diluted (loss) earnings per common share | (1.12) | 0.01 | | Weighted-average common shares outstanding (Basic, thousands) | 992,906 | 986,047 | | Weighted-average common shares outstanding (Diluted, thousands) | 992,906 | 987,224 | - For the six months ended June 30, 2025, 9 million potentially issuable shares were excluded from the calculation of diluted loss per share as their effect would have been anti-dilutive due to the net loss position[122] Note 10—Fair Value of Financial Instruments The fair value of long-term debt (excluding finance lease and other obligations) was $17.53 billion at June 30, 2025, compared to a carrying amount of $17.66 billion Fair Value of Financial Instruments | Instrument | Input Level | June 30, 2025 Carrying Amount (Millions $) | June 30, 2025 Fair Value (Millions $) | December 31, 2024 Carrying Amount (Millions $) | December 31, 2024 Fair Value (Millions $) | | :---------------------------------- | :---------- | :--------------------------------------- | :------------------------------------ | :--------------------------------------- | :------------------------------------ | | Long-term debt, excluding finance lease and other obligations | 2 | 17,655 | 17,530 | 17,652 | 17,127 | | Indemnifications related to the sale of the Latin American business | 3 | 87 | 84 | 87 | 84 | - Fair value measurements are categorized into a three-level hierarchy: Level 1 (observable inputs like quoted market prices), Level 2 (inputs other than quoted prices that are directly or indirectly observable), and Level 3 (unobservable inputs)[127] Note 11—Segment Information Lumen manages its business through two reportable segments: Business and Mass Markets, with adjusted EBITDA used to assess performance - Lumen's two reportable segments are Business (serving large enterprise, mid-market enterprise, public sector, wholesale, and international customers) and Mass Markets (serving residential and small business customers)[128][129][130] - Adjusted EBITDA is the key non-GAAP measure used by management to evaluate profitability, operating performance, and make resource allocation decisions for both segments[132][206] Adjusted EBITDA by Segment | Segment | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | | Business segment adjusted EBITDA | 2,318 | 2,332 | | Mass Markets segment adjusted EBITDA | 698 | 759 | | Other unallocated amounts | (1,461) | (1,409) | | Total adjusted EBITDA | 1,555 | 1,682 | Note 12—Commitments, Contingencies and Other Items Lumen is involved in various legal proceedings and contingent liabilities, accruing $76 million for litigation and non-income tax contingencies as of June 30, 2025 - As of June 30, 2025, Lumen had accrued $76 million for litigation and non-income tax contingencies, but cannot estimate the reasonably possible loss or range of loss in excess of this amount due to inherent uncertainties[139] - Significant legal proceedings include a shareholder class action (Houser), multiple lawsuits related to lead-sheathed telecommunications cables, state tax disputes (Missouri), and a Fair Credit Reporting Act (FCRA) class action (Bultemeyer)[141][142][143][144][145][146][147] - The company is also subject to investigations from the U.S. Department of Justice, FCC, and Team Telecom regarding the use of Huawei equipment in its networks[152][157] Note 13—Other Financial Information Details other current assets, net, totaling $1.21 billion at June 30, 2025, and clarifies components of "Other income (expense), net" Other Current Assets, Net | Component | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | | :---------------------------------- | :------------------------- | :--------------------------- | | Prepaid expenses | 420 | 372 | | Income tax receivable | 410 | 483 | | Materials, supplies and inventory | 126 | 146 | | Contract assets | 16 | 16 | | Contract acquisition costs | 104 | 102 | | Contract fulfillment costs | 120 | 109 | | Other | 15 | 22 | | Total other current assets, net | 1,211 | 1,250 | - Other income (expense), net for the three and six months ended June 30, 2024, included a $205 million gain on sale of investment[164] Note 14—Accumulated Other Comprehensive Loss Accumulated other comprehensive loss decreased to $(679) million at June 30, 2025, driven by reclassifications related to pension and post-retirement plans and foreign currency translation adjustments Accumulated Other Comprehensive Loss | Component | Pension Plans (Millions $) | Post-Retirement Benefit Plans (Millions $) | Foreign Currency Translation Adjustment and Other (Millions $) | Total (Millions $) | | :---------------------------------- | :----------------------- | :--------------------------------------- | :----------------------------------------------------------- | :----------------- | | Balance at December 31, 2024 | (1,003) | 320 | (40) | (723) | | Net current-period other comprehensive income (loss) | 54 | (13) | 3 | 44 | | Balance at June 30, 2025 | (949) | 307 | (37) | (679) | Reclassifications from Accumulated Other Comprehensive Loss | Component | Six Months Ended June 30, 2025 Decrease (Increase) in Net Income (Millions $) | Affected Line Item in Consolidated Statement of Operations | | :---------------------------------- | :----------------------------------------------------------- | :--------------------------------------------------------- | | Amortization of pension & post-retirement plans: Net actuarial loss | 59 | Other income, net | | Amortization of pension & post-retirement plans: Prior service credit | (4) | Other income, net | | Total before tax | 55 | | | Income tax benefit | (14) | Income tax (benefit) expense | | Net of tax | 41 | | Note 15—Labor Union Contracts Approximately 20% of Lumen's employees are represented by the CWA or IBEW, with 88% of these covered by collective bargaining agreements expiring within the next 12 months - Approximately 20% of Lumen's employees are represented by the Communications Workers of America (CWA) or the International Brotherhood of Electrical Workers (IBEW)[168] - Approximately 88% of the represented employees are subject to collective bargaining agreements scheduled to expire over the 12-month period ending June 30, 2026[168] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on Lumen's financial condition and results, highlighting a net loss driven by goodwill impairment and debt retirement losses, the planned divestiture, liquidity, capital expenditures, and market risk exposures Overview Lumen Technologies is a digital networking services company focused on enterprise and Mass Markets customers, leveraging its interconnected network for multi-cloud and AI-first solutions, and is divesting its Mass Markets fiber-to-the-home business to AT&T for $5.75 billion - Lumen is a leading digital networking services company, empowering enterprise businesses in a multi-cloud, AI-first marketplace and serving domestic Mass Markets customers[171] - The company entered into a definitive agreement to sell its Mass Markets fiber-to-the-home business in 11 states to AT&T for a pre-tax total of $5.75 billion in cash, with the transaction expected to close in the first half of 2026[172] - Key trends impacting operations include increased demand for robust, scalable network services driven by AI applications, the need to invest in new technologies and automated processes, and the expansion and monetization of its fiber network[182][184] Results of Operations Consolidated operating revenue decreased by 5% to $3.09 billion for the three months and 4% to $6.27 billion for the six months ended June 30, 2025, with a net loss of $915 million and $1.12 billion, respectively, primarily due to a $628 million goodwill impairment charge and a $236 million loss on early retirement of debt Consolidated Results of Operations | Metric | Three Months Ended June 30, 2025 (Millions $) | Three Months Ended June 30, 2024 (Millions $) | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | | :---------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Operating revenue | 3,092 | 3,268 | 6,274 | 6,558 | | Operating (loss) income | (603) | 135 | (496) | 180 | | Net (loss) income | (915) | (49) | (1,116) | 8 | | Basic (loss) earnings per common share | (0.92) | (0.05) | (1.12) | 0.01 | - A non-cash, non-tax-deductible goodwill impairment charge of $628 million was recorded in the second quarter of 2025, significantly impacting operating loss and net loss[196] - A net loss of $236 million on early retirement of debt was recognized for the three months ended June 30, 2025, due to debt refinancing transactions[201] Segment Results Business segment revenue decreased by 3% for both periods, driven by declines in Nurture and Harvest, while Mass Markets segment revenue decreased by 13% (three months) and 9% (six months), primarily due to customer loss and RDOF funding relinquishment, despite Fiber Broadband growth Business Segment Revenue | Product Category | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | % Change | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | :--------- | | Business Segment Revenue | | | | | Grow | 2,263 | 2,122 | 7 % | | Nurture | 1,300 | 1,526 | (15)% | | Harvest | 1,088 | 1,150 | (5)% | | Other | 363 | 371 | (2)% | | Total Business Segment Revenue | 5,014 | 5,169 | (3)% | Mass Markets Segment Revenue | Product Category | Six Months Ended June 30, 2025 (Millions $) | Six Months Ended June 30, 2024 (Millions $) | % Change | | :---------------------------------- | :----------------------------------------- | :----------------------------------------- | :--------- | | Mass Markets Segment Revenue | | | | | Fiber Broadband | 426 | 351 | 21 % | | Other Broadband | 502 | 613 | (18)% | | Voice and Other | 332 | 425 | (22)% | | Total Mass Markets Revenue | 1,260 | 1,389 | (9)% | - Mass Markets Fiber Broadband revenue increased by 20-21% due to growth in fiber customers from the Quantum Fiber buildout, while Voice and Other revenue decreased significantly due to customer loss and the relinquishment of FCC's RDOF funding[216] Liquidity and Capital Resources Lumen's liquidity is primarily from operating activities, with $1.6 billion in cash and equivalents and $723 million in available borrowing capacity as of June 30, 2025, and projects $4.1-$4.3 billion in capital expenditures for 2025 - As of June 30, 2025, Lumen held $1.6 billion in cash and cash equivalents and had approximately $723 million of borrowing capacity available under its revolving credit facilities[218] - The company projects capital expenditures of approximately $4.1 billion to $4.3 billion for 2025, focused on network operating efficiencies, new services, and expanding its fiber network, including Private Connectivity Fabric and Quantum Fiber buildout plans[220][226] - The pending $5.75 billion divestiture of the Mass Markets fiber-to-the-home business is expected to reduce superpriority debt by approximately $4.8 billion, annual interest expense by $300 million, and Mass Markets fiber-related capital expenditures by $1 billion annually[221] - The recently enacted One Big Beautiful Bill Act (OBBBA) is expected to significantly reduce Lumen's 2025 federal income tax liability, leading to a $400 million federal estimated income tax refund claim[223][241] - Lumen relinquished the remainder of its FCC's Rural Digital Opportunity Fund (RDOF) awards in Q2 2025, resulting in a $46 million revenue reduction and $49 million in fees, with an expected $95 million remittance in the latter half of 2025[248] Market Risk Lumen is exposed to market risk from changes in interest rates on its variable rate long-term debt and fluctuations in foreign currencies - Lumen is exposed to market risk from changes in interest rates on its variable rate long-term debt obligations and fluctuations in certain foreign currencies[263] - As of June 30, 2025, approximately $6.0 billion aggregate principal amount of debt bore unhedged floating interest rates based on the Secured Overnight Financing Rate (SOFR)[265] - A hypothetical increase of 100 basis points in SOFR related to the unhedged floating rate debt would decrease annual pre-tax earnings by approximately $60 million[265] Other Information This section directs readers to the company's website for investor information, including SEC filings and webcasts of earnings calls and investor meetings - Lumen's website (www.lumen.com and ir.lumen.com) serves as a primary source for important investor information, including SEC filings and webcasts of earnings calls and investor meetings[268] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item refers to the "Liquidity and Capital Resources—Market Risk" section in Item 2 for quantitative and qualitative disclosures about market risk - Quantitative and qualitative disclosures about market risk are incorporated by reference from the "Liquidity and Capital Resources—Market Risk" section in Item 2 of Part I[270] Item 4. Controls and Procedures The CEO and CFO concluded that Lumen's disclosure controls and procedures were effective as of June 30, 2025, with the only material change being the implementation of controls for the Mass Markets fiber-to-the-home business divestiture - Lumen's CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely information disclosure[271] - The only material change in internal control over financial reporting during the second quarter of 2025 was the implementation of controls over accounting for the divestiture of the Mass Markets fiber-to-the-home business[272] Part II - Other Information Item 1. Legal Proceedings This item incorporates by reference the "Principal Proceedings" and "Other Proceedings, Disputes and Contingencies" sections from Note 12 of the financial statements, emphasizing that outcomes may differ materially from expectations - Information on legal proceedings is incorporated by reference from Note 12—Commitments, Contingencies and Other Items in Item 1 of Part I[275] - The ultimate outcome of legal matters may differ materially from anticipated results, and proceedings currently viewed as not significant may ultimately materially impact the company[275] Item 1A. Risk Factors This section supplements the risk factors from the Annual Report on Form 10-K, highlighting specific risks related to the pending divestiture of the Mass Markets fiber-to-the-home business and changes in U.S. and foreign government administrative policy - Risks include the potential inability to complete the pending divestiture of the Mass Markets fiber-to-the-home business, which could lead to negative financial market reactions, challenges in achieving debt reduction goals, and operational restrictions[277] - Even if the divestiture is completed, risks include incurring greater tax or other costs, realizing fewer benefits than anticipated, experiencing operational difficulties segregating assets, and being exposed to ongoing obligations and liabilities[278] - Changes in U.S. and foreign government administrative policy, including the imposition of or increases in tariffs and changes to existing trade agreements, could have a material adverse effect on the business[279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item reports on 359,602 shares of common stock withheld from employees during Q2 2025 to satisfy tax withholding obligations upon vesting of stock-based awards, at an average price ranging from $3.92 to $4.92 per share Shares Withheld for Taxes | Period | Total Number of Shares Withheld for Taxes | Average Price Paid Per Share ($) | | :---------------------------------- | :---------------------------------------- | :------------------------------- | | April 2025 | 271,183 | 4.92 | | May 2025 | 91 | 4.26 | | June 2025 | 88,328 | 3.92 | | Total | 359,602 | | Item 5. Other Information This section states that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - During the quarter ended June 30, 2025, none of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[283] Item 6. Exhibits This item lists all exhibits filed or furnished as part of the report, including the Purchase Agreement for the Mass Markets fiber-to-the-home business, Composite Articles of Incorporation, Bylaws, Indenture for the 6.875% First Lien Notes due 2033, Forms of Notes, and certifications from the CEO and CFO - Key exhibits include the Purchase Agreement for the Mass Markets fiber-to-the-home business divestiture (Exhibit 2.1), the Indenture for Level 3 Financing's 6.875% First Lien Notes due 2033 (Exhibit 4.1), and CEO/CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2)[285] Signature The report was duly signed on behalf of Lumen Technologies, Inc. by Andrea Genschaw, Chief Accounting Officer and Controller, on July 31, 2025 - The report was signed on behalf of Lumen Technologies, Inc. by Andrea Genschaw, Chief Accounting Officer and Controller, on July 31, 2025[288]