Segment Information

3 Months Ended

Mar. 31, 2024

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 five distinct sales channels: Large Enterprise, Mid-Market Enterprise, Public Sector, Wholesale and International and Other. 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 EMEA business prior to its sale on November 1, 2023.

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.

See detailed descriptions of these product and service categories in Note 3—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 "— 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 months ended March 31, 2024 and 2023, based on the segment categorization we were operating under at March 31, 2024.

	Three Months Ended March 31, 2024
	Business		Mass Markets
	(Dollars in millions)
Segment revenue	$	2,591	699
Segment expenses:
Cost of services and products	739		17
Selling, general and administrative	497		306
Total segment expense	1,236		323
Total segment adjusted EBITDA	$	1,355	376

	Three Months Ended March 31, 2023
	Business		Mass Markets
	(Dollars in millions)
Segment revenue	$	2,968	770
Segment expenses:
Cost of services and products	830		21
Selling, general and administrative	543		335
Total segment expense	1,373		356
Total segment adjusted EBITDA	$	1,595	414

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;

•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, 2024 and 2023:

	Three Months Ended March 31,
	2024		2023
	(Dollars in millions)
Total segment adjusted EBITDA	$	1,731	2,009
Depreciation and amortization	(748)		(733)
Other unallocated expense	(924)		(872)
Stock-based compensation	(14)		(14)
Operating income	45		390
Total other income, net	57		290
Income before income taxes	102		680
Income tax expense	45		169
Net Income	$	57	$	511