Correspondence 0000018926-23-000043 from Lumen Technologies, Inc. (LUMN) (CIK 0000018926) (LUMN)
Lumen Technologies, Inc. (LUMN) (CIK 0000018926)
Date: April 25, 2023 · CIK: 0000018926 · Accession: 0000018926-23-000043
AI Filing Summary & Sentiment
File numbers found in text: 001-07784
Referenced dates: April 11, 2023
Letter
VIA EDGAR Division of Corporation Finance Filed February 23, 2023 Form 8-K Furnished February 7, 2023 Form 8-K Furnished January 27, 2023 File No. 001-07784
Dear Staff of the U.S. Securities and Exchange Commission,
On behalf of Lumen Technologies, Inc. (the “Company”), we submit this letter in response to comments from the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) dated April 11, 2023, relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on February 23, 2023, Form 8-K Furnished February 7, 2023 (the “February 8-K”), and Form 8-K Furnished January 27, 2023 (the “January 8-K").
In this letter, the Staff’s comments are repeated below, followed by the Company’s response. For ease of reference, we collectively refer to the rules adopted in SEC Release No. 33-8176 (Jan. 30, 2003), 68 FR 4820, as “Regulation G” and refer to specific questions included in the SEC’s Non-GAAP Financial Measures Compliance and Disclosure Interpretations as “C&DI” questions.
Form 10-K for the Fiscal Year Ended December 31, 2022
Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 41
1.You refer to various factors that impacted the declines in revenue here and in the segment discussion, including that revenue declines were due to the impact of several divested businesses, but do not quantify the impact of these factors. Where a material change is due to two or more factors, please revise to provide a quantified discussion of the factors impacting revenue. Similar concerns apply to your discussion of expenses on page 42. Refer to Item 303(b) of Regulation S-K.
Response: The Company confirms that in future filings, including the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, when a material change is due to two or more factors the Company will provide a quantified discussion of the factors impacting revenue and expenses in accordance with Item 303(b) of Regulation S-K.
Segment Results, page 46
2.We note you present total Adjusted EBITDA. Please revise to reconcile this non-GAAP measure to net income (loss), the most directly comparable GAAP measure, similar to your reconciliation of Adjusted EBITDA on page 17 in Exhibit 99.1 of the Form 8-K furnished on February 7, 2023. Further, “Total segment EBITDA” and “Operations
and Other EBITDA” are non-GAAP measures and should also be reconciled to the most directly comparable GAAP measure, net income. However, once reconciled it would appear such measures may include adjustments that are inconsistent with the applicable non-GAAP guidance. Therefore, you should consider removing these measures as you do not appear to incorporate them in your results discussion. Refer to Item 10(e)(1)(i)(B) of Regulation S-K and Questions 100.01 and 104.04 of the Non-GAAP C&DIs.
Response: The Company confirms that in future filings, beginning with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, the Company will reconcile the segment’s designated measure of profit or loss, Segment adjusted EBITDA, to the Company’s net income (loss), the most directly comparable GAAP measure. The Company will also remove references to “Total segment EBITDA” and “Operations and Other EBITDA” from its disclosure as previously presented in prior MD&A reconciliation tables. To reconcile the measures of profit or loss to the Company’s net income (loss), amounts previously included in “Operations and Other EBITDA” will now be included as “Other unallocated amounts” to comply with Regulation G. The reconciliation will be substantially similar to the presentation shown on Appendix 1 to this letter, which is comparable to the reconciliation previously included on page 17 of the Company’s February 8-K.
Consolidated Financial Statements
(3) Goodwill, Customer Relationships and Other Intangible Assets, page 83
3.We note that the indicated control premium was approximately 59% as of the October 31, 2022 goodwill impairment test. Please provide us with a comprehensive analysis of how you determined the control premium and how you concluded that it was reasonable.
Response: As of October 31, 2022, the Company estimated the fair value of its four reporting units by considering both a market approach and a discounted cash flow method. For the market approach, the Company reviewed its position amongst its peer groups and analyzed multiples for completed transactions and equity premiums by region. The Company selected revenue and Adjusted EBITDA multiples comparable to the multiples of its (i) divestiture of its Latin American business on August 1, 2022 (approximately 9x Adjusted EBITDA), (ii) divestiture of its 20-state ILEC business on October 3, 2022 (approximately 5.5x Adjusted EBITDA) and (iii) announced EMEA divestiture on November 2, 2022 (approximately 11x Adjusted EBITDA). Consistent with prior goodwill impairment assessments, management reviewed the Company’s selected market multiples to its seven peer companies. The Company’s peer group consists of public companies in the communications sector that generally have similar focus, product offerings and relative size. The Company’s peer group has remained relatively consistent and also includes five companies listed in the Compensation Benchmarking and TSR Peer Groups on page 77 of the Company’s 2022 Proxy Statement. Based upon this analysis and review, management concluded its multiples were reasonable as they were within the range of the peer group multiples and consistent with closed and announced divestitures. For the discounted cash flow (“DCF”) method, a DCF analysis was performed using the latest forecast reviewed by the Company’s Board of Directors. The Company calculated and compared revenue and Adjusted EBITDA growth and unlevered cash flow growth as well as Adjusted EBITDA margin profiles. The long-term growth rates used were in line or below (given perpetuity considerations) comparable average growth for revenue, Adjusted EBITDA and unlevered cash flow in future years based on the Company’s long-term forecast. The weighted cost of capital (“WACC”) was determined using a market participant approach. The market participant approach WACC was built using the Company’s cost of debt and equity with an additional 5% company specific equity risk premium to reflect risk in the Company’s forecast. Management considered this approach consistent with how a purchaser (market participant) would develop a WACC to discount cash flows to address execution and market risk. Management considered macro level, sector and internal drivers when forecasting the expected performance of reporting units and geographies, as well as internal company strategy, operational and execution risk. Consistent with prior years, management prepared the Company’s goodwill impairment test utilizing the forecast reviewed by the Company’s Board of Directors, market multiple ranges of the selected peer companies and ranges of indicated control premiums from historical transactions. Considering all of these factors, management concluded the selected WACC, market multiples, long-term growth rate estimated fair value and indicated control premium were all reasonable.
Management reconciled the estimated fair values of the reporting units to the Company’s market capitalization as of October 31, 2022, and concluded the indicated control premium of approximately 59% was reasonable based on a range of control premiums from recent market transactions discussed below and the valuations from the Company’s recently closed and announced divestitures referenced above. The Company’s market capitalization, when compared to the fair value of equity of its reporting units calculated in accordance with GAAP, was the primary driver of its 59% indicated control premium. Peer analysis and review at the time of the assessment provided additional context to management that the Company’s market capitalization was depressed, and the overall company was undervalued compared to competitors with similar assets, customers, and business models. Based upon 78 closed and announced transactions in the Telecommunication Services industry in the United States, Canada, Europe, Asia Pacific, Africa and Middle East for the period November 1, 2017 to October 31, 2022, the target stock premiums one day prior to the deal announcement ranged from 0.0% to 92.9%. Narrowing the transaction period to November 1, 2021 to October 31, 2022, the target stock premium one day prior to the deal announcements for eleven transactions ranged from 1.3% to 71.6%. Based upon these factors, management determined the Company’s indicated control premium of 59% was within the range for the selected comparable transactions.
4.Please tell us the fair value and carrying value of each reporting unit as well as the goodwill allocated to each reporting unit as of October 31, 2022. Also, provide us with your reconciliation of the estimated fair value of your reporting units to the company’s market capitalization as of October 31, 2022.
Response:
Reporting Units as October 31, 2022
(in millions) Mass Markets NA Business APAC EMEA Total
Concluded Fair Value of Equity $2,632 $7,428 $340 $1,723 $12,123
Carrying Value of Equity $1,337 $10,656 $170 $635 $12,797
Allocated Goodwill $4,752 $11,126 $0 $51 $15,928
Indicated Control Premium Analysis
(in millions except Share Price) October 31, 2022
Concluded Fair Value of Equity of Reporting Units $12,123
Share Price as of October 31, 2022 $7.36
Multiplied by Shares outstanding 1,035
Market capitalization $7,615
Indicated control premium (discount) 59.2%
In addition, during 2022, the Company also impaired $43 million goodwill on a business classified as held for sale, which is included in the $3,271 million ($3,228 million + $43 million) goodwill impairment disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
5.We note that there has been a significant decline in your market capitalization since the October 31, 2022 goodwill impairment test was performed and since your December 31, 2022 year end. It appears that this may be a triggering event that would require you to reassess your goodwill for impairment. Please tell us what consideration you have given to reassessing the recoverability of your goodwill in the first quarter of fiscal 2023. If
you did not perform impairment tests during the first quarter, please explain why. To the extent that an impairment test was performed, tell us whether or not an impairment of goodwill existed. Refer to ASC 350-20-35-30.
Response: As of December 31, 2022 and up to the issuance of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, management considered the decline in the market capitalization after the announcement to eliminate the Company’s dividend and determined that it did not change the Company’s assumptions and conclusions with regards to the fair value of the remaining reporting units as of December 31, 2022. Additionally, the sale of the Latin American business on August 1, 2022 (at a price approximately 9x Adjusted EBITDA), the sale of the 20-state ILEC business on October 3, 2022 (at a price approximately 5.5x Adjusted EBITDA) and the proposed EMEA business divestiture announced on November 2, 2022 (at a price approximately 11x Adjusted EBITDA), all had purchase multiples consistent with those used in the Company’s most recent goodwill impairment tests as of October 31, 2022. These transactions support the position that the Company’s market capitalization during the first quarter of 2023 did not directly correlate with the fair value of equity of the Company’s reporting units calculated in accordance with GAAP (as discussed in the Company’s prior responses above).
During the first quarter of 2023, management (i) assessed the following qualitative factors, (ii) made the determinations summarized below and (iii) determined it was not more likely than not that the fair values of the Company’s reporting units were less than their carrying amount, including goodwill.
•No adverse changes in macroeconomic conditions
◦There were no significant adverse changes, consistent with the disclosures the Company plans to make in its earnings release scheduled for May 2, 2023 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. Additionally, as discussed in response 3 above, we included a 5% company specific equity risk premium at October 31, 2022. As our terminal year forecast did not significantly change and the yield on the 10-year US Treasury Bond declined 62 basis points since October 31, 2022, we considered this risk premium to be adequate to cover the forecast risk at March 31, 2023.
•No changes in industry and market conditions
◦There were no significant adverse changes, consistent with the disclosures the Company plans to make in its earnings release scheduled for May 2, 2023 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
•No changes in cost factors that would have a negative impact on cash flows
◦Inflationary pressures were considered by management for the Company’s October 31, 2022 goodwill impairment assessment, and no significant changes since October 31, 2022 were noted.
•No changes in overall financial performance
◦Management compared the forecast used for the October 31, 2022 goodwill impairment test to the Company’s most recent forecast and noted no significant changes to the long-term forecast and growth rates.
◦Management compared year-to-date first quarter 2023 results to the most recent forecast and did not identify any significant underperformance against the October 31, 2022 forecast.
•No changes in management, strategy, and customers
◦During the Company’s Q4 2022 earnings call on February 7, 2023, members of the Company’s executive team discussed strategic plans for a return to growth. These strategic plans were considered during the Company’s October 31, 2022 goodwill impairment assessment. For the Company’s Mass Markets segment, management is forecasting a high level of capital investment in connection with its Quantum Fiber buildout plans, which will decrease near term cash flow but is expected to improve the Company’s cash flows beyond five years and the Company’s terminal value. For the Company’s Business segment, management is making material capital investments to expand the Company’s ability to service customers in key metropolitan markets. These changes in strategic direction will result in a reduction in revenue and increase in expenses in the short-term but are designed to position the Company for future growth. The Company determined that its terminal year cash flows were not materially impacted by the strategic reset and, therefore, management concluded there was not a trigger for further impairment assessment.
◦During the first quarter of 2023, we implemented senior leadership management changes to align with the previously announced strategic plans and these were considered during our October 31, 2022 goodwill impairment assessment. Management concluded these changes did not trigger the need for further impairment assessment.
•No events affecting a reporting unit
◦Management determined there were no changes affecting reporting units which were aligned with the Company’s strategic plans and considered in the Company’s October 31, 2022 goodwill impairment test.
•No significant company specific adverse events that would potentially cause a sustained decrease in our share price
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CORRESP 1 filename1.htm Document Lumen Technologies, Inc. 100 CenturyLink Drive Monroe, Louisiana 71203 April 25, 2023 VIA EDGAR U.S. Securities and Exchange Commission Division of Corporation Finance 100 F. Street, NE Washington, DC 20549 Re: Lumen Technologies, Inc. Form 10-K for the Fiscal Year Ended December 31, 2022 Filed February 23, 2023 Form 8-K Furnished February 7, 2023 Form 8-K Furnished January 27, 2023 File No. 001-07784 Dear Staff of the U.S. Securities and Exchange Commission, On behalf of Lumen Technologies, Inc. (the “Company”), we submit this letter in response to comments from the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) dated April 11, 2023, relating to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Commission on February 23, 2023, Form 8-K Furnished February 7, 2023 (the “February 8-K”), and Form 8-K Furnished January 27, 2023 (the “January 8-K"). In this letter, the Staff’s comments are repeated below, followed by the Company’s response. For ease of reference, we collectively refer to the rules adopted in SEC Release No. 33-8176 (Jan. 30, 2003), 68 FR 4820, as “Regulation G” and refer to specific questions included in the SEC’s Non-GAAP Financial Measures Compliance and Disclosure Interpretations as “C&DI” questions. Form 10-K for the Fiscal Year Ended December 31, 2022 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 41 1.You refer to various factors that impacted the declines in revenue here and in the segment discussion, including that revenue declines were due to the impact of several divested businesses, but do not quantify the impact of these factors. Where a material change is due to two or more factors, please revise to provide a quantified discussion of the factors impacting revenue. Similar concerns apply to your discussion of expenses on page 42. Refer to Item 303(b) of Regulation S-K. Response: The Company confirms that in future filings, including the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, when a material change is due to two or more factors the Company will provide a quantified discussion of the factors impacting revenue and expenses in accordance with Item 303(b) of Regulation S-K. Segment Results, page 46 2.We note you present total Adjusted EBITDA. Please revise to reconcile this non-GAAP measure to net income (loss), the most directly comparable GAAP measure, similar to your reconciliation of Adjusted EBITDA on page 17 in Exhibit 99.1 of the Form 8-K furnished on February 7, 2023. Further, “Total segment EBITDA” and “Operations 1 and Other EBITDA” are non-GAAP measures and should also be reconciled to the most directly comparable GAAP measure, net income. However, once reconciled it would appear such measures may include adjustments that are inconsistent with the applicable non-GAAP guidance. Therefore, you should consider removing these measures as you do not appear to incorporate them in your results discussion. Refer to Item 10(e)(1)(i)(B) of Regulation S-K and Questions 100.01 and 104.04 of the Non-GAAP C&DIs. Response: The Company confirms that in future filings, beginning with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, the Company will reconcile the segment’s designated measure of profit or loss, Segment adjusted EBITDA, to the Company’s net income (loss), the most directly comparable GAAP measure. The Company will also remove references to “Total segment EBITDA” and “Operations and Other EBITDA” from its disclosure as previously presented in prior MD&A reconciliation tables. To reconcile the measures of profit or loss to the Company’s net income (loss), amounts previously included in “Operations and Other EBITDA” will now be included as “Other unallocated amounts” to comply with Regulation G. The reconciliation will be substantially similar to the presentation shown on Appendix 1 to this letter, which is comparable to the reconciliation previously included on page 17 of the Company’s February 8-K. Consolidated Financial Statements (3) Goodwill, Customer Relationships and Other Intangible Assets, page 83 3.We note that the indicated control premium was approximately 59% as of the October 31, 2022 goodwill impairment test. Please provide us with a comprehensive analysis of how you determined the control premium and how you concluded that it was reasonable. Response: As of October 31, 2022, the Company estimated the fair value of its four reporting units by considering both a market approach and a discounted cash flow method. For the market approach, the Company reviewed its position amongst its peer groups and analyzed multiples for completed transactions and equity premiums by region. The Company selected revenue and Adjusted EBITDA multiples comparable to the multiples of its (i) divestiture of its Latin American business on August 1, 2022 (approximately 9x Adjusted EBITDA), (ii) divestiture of its 20-state ILEC business on October 3, 2022 (approximately 5.5x Adjusted EBITDA) and (iii) announced EMEA divestiture on November 2, 2022 (approximately 11x Adjusted EBITDA). Consistent with prior goodwill impairment assessments, management reviewed the Company’s selected market multiples to its seven peer companies. The Company’s peer group consists of public companies in the communications sector that generally have similar focus, product offerings and relative size. The Company’s peer group has remained relatively consistent and also includes five companies listed in the Compensation Benchmarking and TSR Peer Groups on page 77 of the Company’s 2022 Proxy Statement. Based upon this analysis and review, management concluded its multiples were reasonable as they were within the range of the peer group multiples and consistent with closed and announced divestitures. For the discounted cash flow (“DCF”) method, a DCF analysis was performed using the latest forecast reviewed by the Company’s Board of Directors. The Company calculated and compared revenue and Adjusted EBITDA growth and unlevered cash flow growth as well as Adjusted EBITDA margin profiles. The long-term growth rates used were in line or below (given perpetuity considerations) comparable average growth for revenue, Adjusted EBITDA and unlevered cash flow in future years based on the Company’s long-term forecast. The weighted cost of capital (“WACC”) was determined using a market participant approach. The market participant approach WACC was built using the Company’s cost of debt and equity with an additional 5% company specific equity risk premium to reflect risk in the Company’s forecast. Management considered this approach consistent with how a purchaser (market participant) would develop a WACC to discount cash flows to address execution and market risk. Management considered macro level, sector and internal drivers when forecasting the expected performance of reporting units and geographies, as well as internal company strategy, operational and execution risk. Consistent with prior years, management prepared the Company’s goodwill impairment test utilizing the forecast reviewed by the Company’s Board of Directors, market multiple ranges of the selected peer companies and ranges of indicated control premiums from historical transactions. Considering all of these factors, management concluded the selected WACC, market multiples, long-term growth rate estimated fair value and indicated control premium were all reasonable. 2 Management reconciled the estimated fair values of the reporting units to the Company’s market capitalization as of October 31, 2022, and concluded the indicated control premium of approximately 59% was reasonable based on a range of control premiums from recent market transactions discussed below and the valuations from the Company’s recently closed and announced divestitures referenced above. The Company’s market capitalization, when compared to the fair value of equity of its reporting units calculated in accordance with GAAP, was the primary driver of its 59% indicated control premium. Peer analysis and review at the time of the assessment provided additional context to management that the Company’s market capitalization was depressed, and the overall company was undervalued compared to competitors with similar assets, customers, and business models. Based upon 78 closed and announced transactions in the Telecommunication Services industry in the United States, Canada, Europe, Asia Pacific, Africa and Middle East for the period November 1, 2017 to October 31, 2022, the target stock premiums one day prior to the deal announcement ranged from 0.0% to 92.9%. Narrowing the transaction period to November 1, 2021 to October 31, 2022, the target stock premium one day prior to the deal announcements for eleven transactions ranged from 1.3% to 71.6%. Based upon these factors, management determined the Company’s indicated control premium of 59% was within the range for the selected comparable transactions. 4.Please tell us the fair value and carrying value of each reporting unit as well as the goodwill allocated to each reporting unit as of October 31, 2022. Also, provide us with your reconciliation of the estimated fair value of your reporting units to the company’s market capitalization as of October 31, 2022. Response: Reporting Units as October 31, 2022 (in millions) Mass Markets NA Business APAC EMEA Total Concluded Fair Value of Equity $2,632 $7,428 $340 $1,723 $12,123 Carrying Value of Equity $1,337 $10,656 $170 $635 $12,797 Allocated Goodwill $4,752 $11,126 $0 $51 $15,928 Indicated Control Premium Analysis (in millions except Share Price) October 31, 2022 Concluded Fair Value of Equity of Reporting Units $12,123 Share Price as of October 31, 2022 $7.36 Multiplied by Shares outstanding 1,035 Market capitalization $7,615 Indicated control premium (discount) 59.2% In addition, during 2022, the Company also impaired $43 million goodwill on a business classified as held for sale, which is included in the $3,271 million ($3,228 million + $43 million) goodwill impairment disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. 5.We note that there has been a significant decline in your market capitalization since the October 31, 2022 goodwill impairment test was performed and since your December 31, 2022 year end. It appears that this may be a triggering event that would require you to reassess your goodwill for impairment. Please tell us what consideration you have given to reassessing the recoverability of your goodwill in the first quarter of fiscal 2023. If 3 you did not perform impairment tests during the first quarter, please explain why. To the extent that an impairment test was performed, tell us whether or not an impairment of goodwill existed. Refer to ASC 350-20-35-30. Response: As of December 31, 2022 and up to the issuance of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, management considered the decline in the market capitalization after the announcement to eliminate the Company’s dividend and determined that it did not change the Company’s assumptions and conclusions with regards to the fair value of the remaining reporting units as of December 31, 2022. Additionally, the sale of the Latin American business on August 1, 2022 (at a price approximately 9x Adjusted EBITDA), the sale of the 20-state ILEC business on October 3, 2022 (at a price approximately 5.5x Adjusted EBITDA) and the proposed EMEA business divestiture announced on November 2, 2022 (at a price approximately 11x Adjusted EBITDA), all had purchase multiples consistent with those used in the Company’s most recent goodwill impairment tests as of October 31, 2022. These transactions support the position that the Company’s market capitalization during the first quarter of 2023 did not directly correlate with the fair value of equity of the Company’s reporting units calculated in accordance with GAAP (as discussed in the Company’s prior responses above). During the first quarter of 2023, management (i) assessed the following qualitative factors, (ii) made the determinations summarized below and (iii) determined it was not more likely than not that the fair values of the Company’s reporting units were less than their carrying amount, including goodwill. •No adverse changes in macroeconomic conditions ◦There were no significant adverse changes, consistent with the disclosures the Company plans to make in its earnings release scheduled for May 2, 2023 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. Additionally, as discussed in response 3 above, we included a 5% company specific equity risk premium at October 31, 2022. As our terminal year forecast did not significantly change and the yield on the 10-year US Treasury Bond declined 62 basis points since October 31, 2022, we considered this risk premium to be adequate to cover the forecast risk at March 31, 2023. •No changes in industry and market conditions ◦There were no significant adverse changes, consistent with the disclosures the Company plans to make in its earnings release scheduled for May 2, 2023 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. •No changes in cost factors that would have a negative impact on cash flows ◦Inflationary pressures were considered by management for the Company’s October 31, 2022 goodwill impairment assessment, and no significant changes since October 31, 2022 were noted. •No changes in overall financial performance ◦Management compared the forecast used for the October 31, 2022 goodwill impairment test to the Company’s most recent forecast and noted no significant changes to the long-term forecast and growth rates. ◦Management compared year-to-date first quarter 2023 results to the most recent forecast and did not identify any significant underperformance against the October 31, 2022 forecast. •No changes in management, strategy, and customers ◦During the Company’s Q4 2022 earnings call on February 7, 2023, members of the Company’s executive team discussed strategic plans for a return to growth. These strategic plans were considered during the Company’s October 31, 2022 goodwill impairment assessment. For the Company’s Mass Markets segment, management is forecasting a high level of capital investment in connection with its Quantum Fiber buildout plans, which will decrease near term cash flow but is expected to improve the Company’s cash flows beyond five years and the Company’s terminal value. For the Company’s Business segment, management is making material capital investments to expand the Company’s ability to service customers in key metropolitan markets. These changes in strategic direction will result in a reduction in revenue and increase in expenses in the short-term but are designed to position the Company for future growth. The Company determined that its terminal year cash flows were not materially impacted by the strategic reset and, therefore, management concluded there was not a trigger for further impairment assessment. 4 ◦During the first quarter of 2023, we implemented senior leadership management changes to align with the previously announced strategic plans and these were considered during our October 31, 2022 goodwill impairment assessment. Management concluded these changes did not trigger the need for further impairment assessment. •No events affecting a reporting unit ◦Management determined there were no changes affecting reporting units which were aligned with the Company’s strategic plans and considered in the Company’s October 31, 2022 goodwill impairment test. •No significant company specific adverse events that would potentially cause a sustained decrease in our share price