LUMN - Earnings call transcript Q4 2020 | Lumen Technologies, Inc.

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Operator

Greetings and welcome to Lumen Technologies Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] As a remainder, this conference is being recorded today, Wednesday, February 10, 2021. It is now my pleasure to turn the conference over to Valerie Finberg, Vice President, Investor Relations. Please go ahead, Valerie.

Valerie Finberg

Thank you, France. thank quarter joining XXXX and Lumen for everyone, fourth Technologies earnings afternoon, you us for the Good call.

Vice and Joining are me Dev, Officer; Jeff today Chief Executive Neel Storey, President Officer. on and Chief the President and call Financial Executive

statements to I subject uncertainties. of safe call X cautionary your attention XQ may be this to conference XXXX and presentation, should include Before harbor need factors to forward-looking X, conjunction on statements statement in certain in we risks with All filings. on call SEC statements begin, that in forward-looking Slide our risk our considered the which our notes the Slide

our referring be the GAAP can will earnings most We comparable in that press certain reconciled release. non-GAAP financial measures, measures to found to be

and Relations metrics can today Lumen of items materials, addition, special transformation our Investor costs which website. all detailed of In the section exclude as on other in earnings the found discussed be certain

to with the reporting prior beginning over earnings the and found Finally, on to in we changes and reporting. our website. supplement be forma that, IR reporting categories With pro first our details are earning release with press quarter in turn presentation can our periods These XXXX additional changes I’ll for announcing Jeff. the call

Jeff Storey

and joining our in our quickly reporting review and new of After their and times. and difficult flexibility that, performance we X the our questions. then environment results, a highlighted our the our of cover few proud solid We year your in I’m overview structure employees. financial and I’d highlights an today. operating challenging customers It our of provide for XXXX. was Thanks, XXXX the employees for presentation. offerings our through The for will guide a provide and the year as you customers power, On agility meet Neel of you to scalability our from execution our Slide also quarter fiber-based pivoted for will Valerie, own new during take outlook the delivered exceptionally and of rapidly XXXX our on a us XXXX growth employees. everyone environment. to changing the thank like and today’s summary team’s call, I’ll to fourth XXXX. is this empowered priorities

years, platform for X fall last Lumen transformation last and Level me of the platform. now our primary will the we cost For milestone company. enables of a of the the of say of three I’m in of can introduction Many to is you’ve integration the experience, done see launch also improving improve when but the about the the customer customer but the purpose experience details about transformation right, digital that I’ll enable. it moment, growth The heard have our efforts and as talk culminated with discuss excited digital savings. a the key

other transformation of in transformation associated more savings Our our fourth fourth achieved of a million digitalization, improvement original of fiber-based we grew XXXX, transformation promoter a are simplification in billion also EBITDA for initiatives. in programs, dual $XXX the EBITDA quarter. of efficient scores, for fact the growth million net benefits consumers. of announced we improvement, The ahead and interactions in that those seen where Through our combination we the margin schedule. efforts, drove XXXX, and have adjusted digital These services work enterprise in as we In in cost results reflect that $X in and particularly invested both enable areas with adjusted efforts. benefit quarter to year our of $XXX our the to

XXX You in customer our which up to revenue improving is basis experience better the trajectory, XXXX. of see can also points the benefit compared

encouraged I’m do, to more have we improvement. by that know I While

preserving We parts to with growth cash they managing those focused investing our declining are on are which businesses free and disciplined, are the turning in business the of we in flow generate.

homes we consumer are about cloud Our X.X deploying our technology future infrastructure, now very greater homes enabled experience we fiber more new digital Fiber expanding customers. fiber-to-the-home edge XXXX foundation reached of In excited the providing in growth passed and number investment security, our of added to Quantum in-building for than the gigabit our XXX,XXX for footprint. And customer We are the enterprises, and Lumen brand. for million comes speed service from resilience increasing to and delivery.

strengthening refinance and our We and maturities, balance reducing to also interest debt pay sheet. expense continue down

commitment bond. linked issued Lastly, and to our we’ve initiatives recently sustainability ESG expanded our first

and Additionally, new We review programs, last our our to I adding leadership annual extending ESG of our Officer report. increased Diversity we number accountability our efforts year, over on naming inclusion, goals. remain and focus and a the you in to spearhead and inclusion approach ESG the diversity Chief improving teams to encourage to our engagement and continually a diversity committed

of believe Looking sets the you foundation view launch X a for the a forward, we we gives the strong how sense Slide of progression Lumen growth. of platform the business.

about in years, for several the adoption platform. real-time the our basis automated More areas, more been and growth focused we’ve integrating, on capabilities transforming the we the customers of and With work bring and services expanding us, more XXXX market. seamless, operationalizing behind in last the that revenue Lumen platform. is much of accessing is to Over vision

and pandemic sales that for and and on Of we’re feel remain sales lengthening about to evaluate an do needs. but excited uncertainties as and customer coming both keeping implications, infrastructure Enterprise, we the see new their about in eye macro-economic cycles engagement We we continue XXXX are companies the year. IGAM but our given funnel course, good

revolution computing everything with I’ll more today. resources, economy purpose-built and Lumen infrastructure fiber long-haul I world. the to the and physical foundational obviously slide layer. the those are driving The Turning requirement The before. our Slide onset is of believe best infrastructure than bottom the ever distributed for local demands has higher Lumen the the fourth latency at in physical Lumen start for industrial infrastructure meet X. the of capacity, more a lower and creates resilience to platform needs. market

Let our on me customers. for to what as points few that a touch means

First and to all, infrastructure customers connect than fibers. on directly reliable secured in with more our buildings XXX,XXX we net of

have from and robust facilities We world’s and eyeball networks deep interconnections of and traffic acquiring peering and ISPs endpoints. to and to the distributing millions

tremendously traffic cloud of a of the play global and hyperscalers direct significant to have operate Over fiber X,XXX carry enabling the more the connectivity Internet our role and uniquely Internet we providers, We quickly and with insight each team global fiber which capacity. gain to backbones data-centers customers’ network, to cyber protect Black and one Lotus positions portion global emerging we our and largest we our than and scalable The in secure used networks world’s earth’s Internet into applications. every then threats, Labs day. service visibility

the more, the say, we fourth and security, team of resilience As necessary nutshell, to likes industrial ubiquity needs so to Lumen the start platform meet can we has see the more. scale, the In revolution. the

service connectivity With this to software-based our software-defined of reconfigure layer interact is the add WAN to our interacting everything advanced this network-as-a-service Hyper enabling services. services the that and and and salesperson Moving needed, consume the the customers delivery capacity allow result customers This recognizing and rolling in from for up the as Lumen more of to We dynamic networking that with DDoS. to approach, with Hyper need slides, agility consume like scheduling on instantaneous meet needed old infrastructure. slide, customers’ basic connections our additional can utilizing network contrasts of the with destinations by consumption jobs. the network SD-WAN, capacity model timeline one

with can in to needs approach capturing but also application velocity platform we to their Our and which only the the not improves experienced opportunity converting respond revenue. customers velocity

our locate thousands of The leverage their compute one Lumen to peering Private hybrid cloud networks and facilities major best their Public daily resources one requires to their Lumen cloud, in compute the within are the compute by to beyond Moving the in full cloud allow or and and combined resources as providers ability even an Lumen cloud Internet. with locating cloud capability The our layer edge of access and layer offerings them seamless operate highlights efforts to next the connections resources dynamic to they second-by-second of as the communications another. clouds agile, They capabilities use our or of customers network, secured bypassing control. is the dynamic ISP on-premises connectivity. to capabilities in the all over network critical of SaaS dynamic customers adapt application own our from performance case. environments, with to the physical workloads shifting the data-centers, cloud hybrid much allows specific service hybrid multiple enhance the providers, our fabric Lumen minute-by-minute The

You calls. to take SAP example these Edge improve our I’ve Lumen Lumen our discussed with on announcement. advantage reduce is of to of their with experience, the their other of their saw cost platform capabilities aspects an this customer enhance and service and offering. recent working SAP initiatives previous

capabilities an today, our our expect facilities, revenue control, of covering capabilities final fully locations As recently adopted. XX% and have cost of more partnership that unique the roughly increasingly within we these of enabled simpler increasingly from with announced fiber we of latency. a deployed is of Lumen edge to orchestration widespread software of VMware, solutions applications environment. many our customers year-end, contribute infrastructure, a the enterprises combines and with with orchestrate to layer, operating anywhere capabilities by latency work trends Combining Edge a greater milliseconds X dynamic, U.S. Enterprise U.S. of Lumen encouraged to our Orchestrator more improving The an of cloud it XX% platform. believe it for secure Edge will model is performance. We lower and give robust which solution that customers’ their Lumen latency a We tools ownership as same set offers than automated sensitive that and complex and within fully are compelling our in all the have

this and our growth market believe Lumen. driving joint partnership are part an companies. VMware can VMware these work look and Both services of to expect relationships innovation for about be new excited are important bring We to with they tremendous forward SAP We initiatives. and to lab to through

our take XXXX walk We through additional in announce priorities Slide outlined moment expect X. months. a now to relationships you to on I’ll the strategic coming

The first solutions economics and efficiency, Simply performance to on-premises control, Lumen the of with simplicity priority latency Lumen cloud-based drive put, platform growth combines the and flexibility, the of is platform. the over solutions.

We products are services capabilities Lumen can to of Bare the available capabilities that we an to and and to Metal, replicate. would in marketplace Lumen digital like Private anticipate new latency. we’ve expand these customers. expansion Cloud, to end, Edge and Lumen where continue products Lumen enhance To Edge low the and developed will VN their locations, difficult Edge with to customers unique be leverage applications Together, the Lumen

together. Let to me examples tie couple give a all you this of

vehicle We’re helping metro the that areas an a testing on auto program, accelerated train company their decreases times building data working major systems their headquarters. transfer by with machine their between autonomous access network they’re with learning data them

We’re world. to performance exacting their also a for financial to counter-parties working company with update architecture meet the specifications services financial with computing around

computing centralized and the the infrastructure standardization and network. their computing is the and benefit distribution digital digital flexibility of to network data. connectivity managing broad software-defined are We market their for to efficiency the across distribution with along customer long-term The for footprint simplifying storage the

on portfolio priority product is improve penetration assets. existing Our of to second our robust the our

few buildings, in our years, and latest adding have fiber footprint. our last expanding technology in the fiber-to-the-home network invested Over the long-haul on-net we new deploying in

customers we of their a We workforce do believe we made. we have returned investments where In are been begun those positioned work anywhere as can short, to solutions. better. to their provide portion from office, the to have But grow well

excited As work customers with solutions home. XXXX. a about base remotely, our continue existing Increasing to customer learn symmetrical broadband employees and and gaining for key the is are and we share students wallet for our priority

digital our wrap the investment better visibility demonstrated XXXX making saying that of our customers the work on transformation as reflects to through We moved encouraged for ability We revenue the we growth. for shareholders it products revenue out we’ve managing shareholder We categories opportunity as are experience voice committed changes services Fourth remain reporting for enables costs. these returning to I’ll and investing for to continuation and to on take how which this with through made meet improving our to how and are EBITDA costs in value margins the our I strategy will better allocation. of and we’re focused in We up approach loss. and the revenue them. number customer ahead. further changes capital allocation and balanced properly to by we we our in details dividend our employees allows and evolution strengthened is to the pressure to hope improve improve third our we our make operating easier we where performing, cash. is goals. sheet. Our balance services fully growth easier continue reduce will leave the and into key reducing our by believe but believe can priority to am capital from and marketplace growth, and legacy trends, create support value the we Neel of other consume interactions are increasing of that Lumen debt. the lies velocity the and our have provide digital I focus provide to businesses declining believe our are to that Expanding well we to progress ongoing doing at

I and and operating is about that forward, drive Lumen will customer-centric growth. our stability feature customers in growth driven management. and Going the it for operational ongoing continue is solution will through about right EBITDA to our cost us by experience we efficiencies. platform Rather, EBITDA implement the revenue, customer help improvements, revenue believe

intend discuss to enough are numerous Virtual have earnings opportunities Analyst spring. we an We late about ahead. time the a But underway. We to in doesn’t host call, allow programs excited Day us the

to growth. about turn depth that greater map I'll During we go-to-market event and I solutions strategies, insight information our share that, road this market. and new to the forward will event, exciting tuned Stay future in we the it on providing Neel. our alliances, look you bring for for over to additional With detailed

Neel Dev

Thank good and you, everyone. Jeff, afternoon,

a have We to cover. lot

So I'll with start a few highlights.

macro Despite the Turning environment, we results. to delivered solid Slide XX.

year, total margins trajectory EBITDA and EBITDA, cash $X.X full earning flow. free $X.X basis XXX the of points, generated expanded For we by adjusted adjusted improved billion in generated the our billion

continue capital to We with the of business billion. $X.X expenditures in invest

XXXX, reduced approximately sheet. net $X.X further expense, by Over interest billion $XX and refinanced debt, approximately and billion our the course balance reducing of extending debt we strengthening long-term maturities, in

a EBITDA of range savings $XXX transformation million Finally, achieved savings, of the as our year of end annualized ahead we our timeline. run-rate adjusted reaching of XXXX, approximately targeted cost expected more than

revenue. to Moving

full the total revenue year X.X% declined For billion. to $XX.XXX XXXX,

the As XXXX XXX from is I mentioned decline X% in our revenue highlights, this year-over-year total a XXXX. basis point to improvement from in

in Turning total to quarter fourth billion. declined XX, $X.XXX Slide revenue the X.X% to

our or revenue on and a X.X% basis. basis, or on year-over-year Global currency X.X% a International now segment, IGAM Moving to decreased Accounts business constant

our segment, decreased year-over-year Enterprise Moving on to revenue a X.X%. basis,

revenue see IGAM good about the We growth cycles. and sales continue year-over-year. prospects feel of during Enterprise. in SMB we to quarter, did our But decreased lengthening some X.X%

legacy about portion on sale The the As in this revenue impacted facility sold a by business of significant $XX correctional we quarter quarter fourth million our basis. of of reminder, during a third year-over-year XXXX, a the business. communications

and from services business for represents the the and prior enterprise X.X%. would have business declined we on a Enterprise, a basis year-over-year. grew basis. macro highlights uncertainty relevance the constant this XX% In this Wholesale X.X% In to revenue revenue a combined year products of on Excluding most year IGAM year-over-year XXXX, customers, decreased revenue, facing of summary, full results, of currency offer. slightly which

the SMB the Overall, plans low revenue for growth all focused trajectory will opportunity gives confidence the for to and but macro we on represents us churn channels. continue a were across remain us decline. term. turnaround Wholesale by improving SMB Our pandemic, over long improving impacted conditions, that relatively

on Turning Slide XX. to consumer

fourth of assets. the our our revenue The our X.X% fourth and by customer For Broadband year-over-year. declined quarter improve for revenue has revenue year-over-year. performance XXXX XXXX, the competitive our quarter micro-targeting of driven focus to driving ongoing X.X% grew experience, penetration efforts, been

at beginning of subs. speeds, year. homes XXX about XXXX. speeds quarter, to X.X XX% broadband mix a perspective, and added we now with X total greater last have fourth we subs to compared have of passed meg at the million our than year-end X% approximately now the year, above, For million the Ending in compared of From XXX meg fiber, XX,XXX

XX. EBITDA adjusted Slide to on Turning

was billion, For XXXX, the compares billion year $X.XXX XXXX. full for adjusted $X.XXX which EBITDA to

quarter the XXXX, quarter. $X.XXX adjusted For year-ago compared the fourth $X.XXX to EBITDA was billion, billion from

in with full margin Given the full-year third pleased We fourth expanded to quarter, improvement EBITDA the our difficult along EBITDA macro growth in the XX.X% EBITDA conditions, fourth adjusted with we of year to adjusted for are quarter the the in and XX.X%, year-over-year both compared sequential XXXX. XXXX.

expenditures were of were quarter fourth XXXX, million. capital capital XXXX, and For the for $XXX billion, $X.XXX expenditures

invest and continue the to We in services the lean that in platform. and Lumen products support

in to employee fiber digital footprint also customer in invest We our experience. expanding and continue our

XXXX, flow and For billion $X.XXX year cash the quarter for of of the full fourth we generated XXXX. free $X.XXX billion

For we refinanced billion the approximately debt $XX and more billion. by reduced than full year, net $X.X

reduced to and For We quarter refinanced more profile, lowering debt, our of having the at by in $X sheet, improved debt XXXX, ability maturity we enhancing net XXXX, cost invest exit the debt business. materially $XXX our rates. further lower our balance our strengthening of fourth billion than million

adjusted now is at leverage Our ratio EBITDA X.X times. debt net to

of us in end the than the earlier year we a range savings, of quarter, As rate million targeted transformation of annualized planned. have adjusted EBITDA our fourth approximately achieved run $XXX putting

transformation improving of increasingly efforts now delivering but while difficult in becoming significant savings. the on continue separate initiatives will it to future, cost focused We cost performance most initiatives, into revenue our to lean is transformation with

XXXX. savings will As such, we not transformation report in

next and investing are strategy our XX. for and The are through sight significant years. of line we Transitioning the XXXX better we where cost changes reporting for However, Slide go-to-market growth. we making reflect do expect have several on a savings

segments continue in Our channels, large are is two focus I'll mass IGAM, Enterprise, will business forward now business through customers customer-facing four sales first, to we wholesale. serve on going channel. sales markets. business IGAM and business our our segment largest mid-market

behavior expanded deem For channel, or portion the customers global evaluated buying of and GAM high list accounts, customer we this the potential. as we customer with that

had have some into Enterprise in now the As moved result, channel customers a that IGAM. been

smaller on support have channel the enterprise on focused buying we Enterprise focus we specifically now channel. channel, patterns sales are which changes channel. and mid-sized our channel channel customer its have to the changes and few calling limited wholesale large were and customers narrows Our of Based becomes XX mid-market Within enterprise in a Slide in moved customers, detail. the more our requirements, accounts. previously to segment included realignment some a mid-market describes

long-term, about potential Enterprise, are the the Over IGAM, growth mid-markets. large we optimistic for and

Slide categories that the by Jeff services of now XX application includes his many Moving referenced and our and in product compute segment, solutions remarks. to business

services speed part integral and in In addition, our that CDM, are data products capabilities providing core VPN, ecosystem IP, focus center success with security largely enterprises and platform. Lumen capabilities. products connections Fiber dark include in high from edge cloud with an our category our fiber the Lumen the products networking Optical infrastructure of like IP will business. Services service data include include is also leveraging hybrid on like dynamic Edge. and are SD-WAN This increased revenue and services, partnerships, our

other legacy voice and the represents Our TDM of and primarily category services. bulk our

of and application, services. these expect infrastructure invest fiber over represents data to and business and from categories We IP Together, revenue. XX% compute continue growth and three

basis a year-over-year which about a channels constant grew three business wholesale, slightly represents and think and segment, opportunity. currency aggregate intersection of the products, growth of fourth eventually categories these turnaround in Mid-market four for you currently quarter. As a the headwind product on is excluding a our

segment addition in the to small Slide our consumer of the customers business combination had we is plus customers a channel. the mass-market of form of SMB XX. Turning The

Small are or We SBG. the now customers Business calling these Group

combining As go-to-market needs residential we we at and SBG efficiencies the revenue the looked buying and potentially provides product believe and our approach support patterns, trajectory. customers, both in improvements that model for

report we segment, CAF and revenue broadband, four will voice other Within in consumer II broadband, the revenue. and SBG categories, mass-market

business product and our brand. around updating enhancing and our are reporting our disclosure we quantum Additionally, fiber

micro are subs fiber footprint to us addition represents than of we homes Fiber to enabled reporting are invest locations, continue fiber growth less fiber ARPU. now XX% In with for opportunity several Quantum our targeting strategy. a enabled our we in along fronts. and

now Given market the years, up that were driving offerings business. past low than Moreover, units higher speed near-term new another penetration improve in of over in a to we base, our addressable opportunity represents potential of fiber our have ARPU generally enabled is significant added number a representing opportunity. typical the de-emphasized couple sales

are take consumer we broadband, now us and the the been to breaking or the large we II to SBG broadband. Opportunity have out Fund hasn't from CAF until moment like a we like to to which focus improve for I'd for Finally, Rural trajectory Digital expect RDOF. summarize transition a

most year results. RDOF. of subsidy $XX million approach you an revenue our step-down are aware, above roughly very to to changes impact We do took ROI-based a $XXX will not a from As million These XXXX. XXXX in disciplined

subsidy, the In we are targeting factoring we investments in our after see better micro with strategy. returns making from the fact, fiber-to-the-home even

As resources to up organizational now we accelerate focused by CAF capabilities further and shifting II, wrap on II. CAF strategy we that intend

Moving to XX. Slide

reporting we longer As earlier, costs. I mentioned are transformation no

and similar incorporated which are expect transform continue will of However, guidance. the going into expense, we levels forward business to XXXX our

special continue adjusted one-time legal would EBITDA report severance, flow that to been this would XXXX billion settlements or material adjustment, such been cash and which as With are unusual billion. free expenses will $X.XXX full or year items, material, other unforeseen expenses $X.XXX We have include nature. have in

outlook. to an of our turning financial Slide So and XX overview

the expect be EBITDA to to to in compared billion adjusted XXXX, for in of $X.XXX range $X.X $X.X We billion XXXX. billion

continue business. to transform cost includes now EBITDA to our mentioned, just I've As the

incorporates sales brand in of the to investments success-based product go-to-market guidance revenue and also incremental These focused improve primarily on continuing trajectory. marketing, development, our areas investments, initiatives. significant Our are

billion. capital For expenditures full expect billion the we to year range XXXX, the in $X.X of $X.X

XXXX in $X generate compared to cash in free full-year range flow to the XXXX. $X.X billion to expect billion for of billion the $X.XXX We

capital XXXX from in mind, you and had million about XXXX, benefit XXXX that Act bridged reverses keep working we $XXX XXXX. CARES from a in the As to

do free required any not any have flow does contributions. we cash include the XXXX, fund and discretionary pension For our contributions not guidance to

strong was year status at the performance, market XX%. Given the our end funding of

We high use, quarter contributions has in and will driven capital payments typically timing a monitor prepaid to working continue by of XXXX. first Also make may our as and other expenses. reminder, bonus

expect and interest range the billion represents for expense midpoint $X.XXX of lower net million XXXX. cash interest almost We cash of net $XXX in to $X.XXX guidance billion The compared to XXXX.

We outcome are enabled our aggressive XXXX. embarked in pleased by this on that with we deleveraging plan

credit we significantly have our in our ratios with $X.XX Consistent on billion and XXXX. to We company, questions. up our and faced addressable that, despite open remain solid full-year to balance our billion net continued to explain the strengthened new coverage revenue EBITDA digital would for improved our and to to growing and and debt trajectory. in please investing With and sheet, positioned our profile XXXX, our on transformation With committed with paying $X.XX our continue debt our target. we'll growth, in adjusted business ongoing are our we In balanced a approach focus business, summary, well will leverage down focused the execution results. improving success-based customers and we getting process. it profitable by initiatives, you France, for challenges markets your the delivered the on uncertainty investments focus

Operator

go will line Batya Levi question from Thank be the Please you, Neel. of UBS. And first Instructions] ahead. our with [Operator

Batya Levi

allocation trends for It starting flat the like Maybe you're it? efforts, down. to revenue would Can leverage. outlook cutting you believe we guidance Thank that XXXX. above your why your Can with leverage spend to you. finally, will to cost your side how you. And improving capital on EBITDA? of forward? this will to for us continued looks guidance you you're And remain – EBITDA with maybe transformation going your you your expecting with decline be I planning the focus still still be quantify help at see in potentially of lower much you about off us maybe year-end. one help think a thank Great, and policy it targets did mention

Neel Dev

Batya. Hi,

on start EBITDA. I'll your So with question

lays there is earnings I the So, that pro on EBITDA presentation think out in our forma page view. a

billion. transform starting of billion from or So $X.X alluded cost the to the the is guidance to Like I includes it, the business. $X.X guidance you billion to point to $X.XXX think continue

going So we're down. not slowing to be

cost in of XXXX XXXX. amount similar expect did like in we we So

there costs, So severance so excluding XXXX. expect had in about we about in a cost of million XXXX, you'll see $XXX we amount in similar

other really impacting are business. the the in EBITDA really trajectory and thing growth making revenue we're in The the changing of XXXX investments

investments things So not think they Jeff the are all and that if about expense. you just mentioned, those capital, capital both operating

So working training, cost, the on, product sales marketing, there additionally, some with IT initiatives product expenses, development initiatives of partners, initiatives sales we're to overlay, brand ecosystem is from code cash.

So all of EBITDA those things are our guidance. incorporated into

in term revenue with EBITDA big the really part a long-term the trajectory XXXX of long is investments that the on we're focused all focus improving growth our really are we and So making. over

target. question So your leverage was around second

So we're already X.X at times.

And so down better. guidance, range, X.XX And growth. we're down investing quarter balance to will slightly to or committed debt. is within at you've we X.X still ratio of our a the around we'll look paying exit our so and paying target our in leverage still one target seen likely somewhere in debt it. to year XXXX, us Like is – between are you do our will if we committed ratio to X.XX, target And

And approach be so balanced forward. going that the will

Batya Levi

Got it. you. Thank

Operator

Barden of ahead. Please of Bank with next David go America. line question from Our the the

David Barden

I is for the so Hey, two, questions. much for guys. first Thanks Neel. taking guess

we of in that CapEx is XXXX? to such commitments, would that the guidance be the that how disappear Within then to you've going that given, would out could of kind carve related CAF II assume looking growth, you that on unit. I then, question got in a then this but up on business X, Slide kind at aspirational you've of declines we're trajectory every Jeff. Slide following towards XX, And bit, Batya's almost little much guess

which So looking negatives us what Slide from lot headwinds and is XX this in turning going are the biggest X, from fourth tailwinds? Slide to towards moving the parts, more Thanks. revolution. to a to of industrial growth trajectory They're both get like

Neel Dev

David. Sure. Hi,

reporting it'll So give bring we've just II. capital, Yes, computer and would top three we last think investing other be we're capital on we're sense of product for less. for so headwinds that know of three tailwinds, on the guidance applications, data, end and growth up, for don't a terms a it our a the CAF years, and IP working business the year against and million and series categories, to going ones and on to look you of fiber those way it over really if the really that's in And at CAF will $XXX you probably to spending where of about manage averaged initiatives but new voice down, II I is, exactly infrastructure, forecast, cash. are the actually over segment, this likely

when Now is you grow there point. with and that we're working eventually SMB the and some on lens, channel look challenge some turnaround that at at

the So excluding business wholesale, And on XX if if the for driving channel business even you you percent from lens XX%. segment. at focused is the of about plus from growth look business product a at it we're look perspective, launch,

that's we'll is the driving and on. business of really on of growth. on focused focused the driving and focus penetration in mass in kind and And terms just a gives that part broadband what it be up fiber sense that So of markets, of we're you about our investing

Jeff Storey

our by investments, and we we're our accomplish focus, leaning is And that David, where by in. how

platform, categories if you about at but the interactions things the of improving the invest capabilities us to support experience market. today, deliver are year edge, been and last X invest inside that employees big growing like with years building want of we've heavily three customer that XX% customers product and time, those, to our heavily Lumen Neel in the you've computing, seen that in to U.S. talked way in we going couple within edge milliseconds. look of the our the enterprises announced were that about have in in we same some we But investing them. we last our digital Over

VM, investing capabilities Edge cloud, Bare as Lumen all the been as and been Edge of developing growth this. So capabilities see services we in look at we've heavily you we've on Edge Lumen Lumen the that Metal, the those

As like unified deliver cash capabilities continue new that we and we WAN services service, invest in the communications and well a connections to need as to and the dynamic as products hybrid this. things and

business, to we can partner investing infrastructure our our the sure we're fiber them platform. put in expanding we sure companies also cloud that continue invest and we've making world-class to that and companies are on all making been like partnering edge We Lumen that in companies can like facilities and like with And building provide innovative capabilities. Zoom, partnerships and solutions Lumen the unique the we with companies over platform, that take SAT, out VMware

the that and continue those well invest do to in to continue services. products and we'll so And OpEx drive to as

Batya's about talked that in So response Neel question his to about EBITDA.

that rolling and that more and it's investing So we've products expanding for the been but things, customers at about from buy have And really point. the now couple services doing I'd say years to what those in this they us. been platform platform building last the our of

Neel Dev

we're last pleased I XXX is, improvement Yes. The year. not with year-over-year, decline the think decline the X.X% one X% I but we're with pleased from add, the point would thing very basis David,

we're So revenue on the focused really trajectory. improving

making see our more that hard we're The profitable you profitability can thing see top-line hopefully, durable. and more company which the the other metrics from is with metrics to

David Barden

see Got Thank so much, that. it. Neel. Thanks, Jeff. I you

Jeff Storey

Sure.

Operator

question ahead. Luebchow The next from with Fargo. Please is Wells Eric line the go of

Eric Luebchow

for Great. Thanks taking question. the

on on II follow CAF to up I wanted So roll Neel, the that, off.

a think to flow free sounds said, impact into fiber-to-the-home. and you like several potentially there I be probably million CapEx dollar you would it cash reinvest hundred some could year as next

payout forma this initiatives, you those outlook of beyond makes changes your frame-up the many maybe within color build could segment, and dividend more some your you homes you helpful? that sense whether to how addition, be pro to, year that some about curious, would Thanks. do how at ratio consumer So in allocation maybe all? fiber-to-the-home think for and capital if on And think your initiatives

Neel Dev

Eric. Sure,

for So than million averaged years, capital. if we mentioned, we about were think – more like last CAF you II I $XXX three of

The in are last really areas. and have keep units, about that through of enabled in other X.X thing year, is – these underserved mind million we end we to

quarter. up every selling are that picking and we So that and is penetration into revenue

is footprint there from cash the also So have enabled. coming in that we

going of at it from free next the when customers into year add our is coming subsidy, that flow. So and and you going the takes footprint, puts not the to when capital cash you away, it cash look up, in all material a impact

prepared of that in our change from so significantly fiber-to-the-home on remark, terms even you mentioned disciplined So so a net returns we in subsidy, when very see my anything higher. and took approach perspective. the like – a RDOF, really out we is allocation I And doesn't capital

it's about data price another homes. you billion of build that tag give X out to a $X RDOF to of largest Just million one point, just announced winners to the

certainly If that enabled the we just last we compare that of to XXX,XXX billion. didn't homes a year, couple you spend

specific we're we're profile we'll investing setting we're amount that that And not see have different terms opportunity addressable can into. fair and fiber-to-the-home homes new disclosure, so of we of providing you enabled and on success-based targets. a we have you sell giving be front, any in where to a the penetration, we're so In our

we'll basis success-based a it on if up sense. So makes ramp

Jeff Storey

of customers capacity, into, of Quantum give high Fiber to NPS tie the symmetry and a and acceptance their in add reflect And extremely to the excited bidirectional we market, second that nature about a bring brand super we We're query – just capabilities the the is, the networks the perspective, product, from it. quality the that the market quality that that satisfaction, my digital about the we the products, we're experience that of and capabilities the of very the of I'll opinion, to scores our we're excited none.

Eric Luebchow

Okay, thank you, guys.

Jeff Storey

Sure.

Operator

Oppenheimer. from of question line go next Horan ahead. Our Tim the Please with

Tim Horan

you us – about infrastructure, platform, you maybe revenue Can it you talk sounds can I just with platform, flow improving enabling just your own more differentiated but think customers not just from now give your guys. – also also Thank commutation you're Thanks, know of larger there? revenue seeing a the it's of out around do new your versus are I about about lowering peers? some it's platform, a shares you little growth internal guess we the expenses? Lumen bit then color where kind how like growth you're the And are more maybe that of you. in lastly, your excited

Jeff Storey

Sure.

So over building. the been last we've couple of years, you've seen the that the expense impact of platform

the If and so cost in to see prepared let Fourth transformation that referenced you platform million, more can the what $XXX different and quarter. it's I've of expenses in everybody said else. our a why you million reached think remarks in the now XXXX. we the save quarter, in me bit XXXX, to back, $X going benefit we than were about you platform is structure billion tell in – the we $XXX this little

continue the also milliseconds nobody that that X the the but and none enterprises. COVID fiber, the the the to infrastructure. second there But the to it's year, hyperscaler, really all, at any to the ubiquity our way want upgrade ability. is location, don't connectivity locate XX% the X net I which the capability major via to ability presentation. orchestration bring quality again the be coupling to – into able within of is of referencing have of have services nodes only the invest the service wherever send to service It's saw nobody that got data on can built just they of world's the service connectivity infrastructure. a with The be been compute from consider reach, of XX%, that that it end the get that in customers providers, the I'm Slide fiber – more our our else centers of U.S. connections fiber and we'll that more connectivity, to we'll solution, the But than have us, best entire some else with fiber, has, we the U.S. with computing edge they cloud call not we we don't our any we've and that, First a X,XXX of peering building take By as connectivity to connectivity to that of connectivity, the the network configures is software-defined in and want built a that we've network. enterprises what of a and in and on connectedness they combine their the our has a applications the where and do kind to and capacity XXXX the footprint, in anybody. to density network to peering stand, with cloud have When that want. then software integrate so networks the there we and customers Lumen Hybrid control we software distribute virtually way They to engineer to Cloud it, entire provider, to all the our message they wherever and dynamic they to on you majority our

And so advantage to get of our customers that. take

on data it. connected, customer Lumen any the uniquely the them orchestration better capable, to better more is platform acquire, their across more to so analyze, and we're other give act and the and And advantage more ultimately, on they than platform that services take because get we

SAP. great to services. our great with think collaboration these partners. We also us are out to Partnering got roll continue VMware, partners on partnering Now with for services, with partnering we've those Zoom

that different to So our we've marketplace for partners got platform technology their bring great that and capabilities digital created specific for that they the types application. the we of this becomes we need access customers their

Tim Horan

you unique this how versus competitors? think And is platform your

Jeff Storey

people think cloud strong have fiber there's do a do. few certainly have that we is but hard biased. good it'd great orchestration But competitors, anybody replicate think to others. in we capabilities. just we're certainly Well, in to be what bring we don't people way we a networks, don't capabilities, some I very unique the I There certainly there's that is that certainly do. some think people for anybody and position think that things can I'm have we together those and good have

Tim Horan

Thank you.

Jeff Storey

Sure.

Operator

go sir. next line go ahead question of the ahead. from with Please James. your question, with Louthan, your Frank is Louthan Our is open. Mr. line Raymond Please

Frank Louthan

better. little a button mute the use to learn to Got Sorry.

from that to perspective, you been be to able you're be doing monetize a growth I new. a than of that, discuss mean What capability reach well So I so have, of forth your that perspective wanted calling back build network region from in issue, going maybe and have that most tactically, tactical not sales just growth network to for? past or the you think to you I achieve do you're bit. us the differently think to necessarily to in that the that's in that aware fiber mean, are

Jeff Storey

customers' Well, the it all the Lumen and our is with of combination it's things these of the intersection needs. platform. It's

process critical. revolution, With to with low amounts industrial data the the latency is really very of need massive fourth

of connectivity to to very it in gives any performance customers. allows And another millisecond allows we utilize application the ubiquity view the applications. global us nature latency our traffic fiber that the density in of fiber carry of that give is this infrastructure, world. of of to capability anywhere to it low it the so allows can the The us infrastructure to our of it X how carry we that to world, to deliver The us and place the it

to particular want to different cloud to service you to that one, provider, cloud go we provider, want to we one. can go if you service the a deliver if to can a other So deliver

the those is Lumen network piece platform and that in. other top fiber core it the on come sits then the so, capabilities of And foundational for all

increase things, we've the that to network. continued do value the are Frank, to of intended usefulness Now, the fiber and

our and because conduit fiber-to-the infrastructure. year, scale our the of were of type latest fiber the leveraged also capabilities world's that and technology technology companies, If excuse providers our deployment fiber the building we those that What low but things. big our for connecting largest the with technology. a existing great software-as-a-service and infrastructure, the you traffic, those we at and fiber talked you edge, world's cloud-service about used are we we fast high if internet deploying, there can newest look of and we at fiber pace capabilities, of cost delivering But a super conduit types because build capacity of very or expanding at expansions, in about hyperscalers at me look the use building footprint. home Last that

Frank Louthan

very you much. Thank great. Okay,

Jeff Storey

Sure. Thank you.

Operator

question proceed. The next Flannery Stanley. from line with the of Please is Morgan Simon

Simon Flannery

Great. administration, for Jeff, set etc. focus got on infrastructure proposed talked new the lot There's being a you've RDOF aside much. a very of in broadband about today. money there other builds Congress, We've a device, digital Thanks too. was lot programs

And what Washington, then, you obviously think hearing this might your from Lumen? are could So opportunities folks you in a perhaps lengthening on of do present sort little the for what just you bit of expand would pandemic, be think and any or We're the cycle. kind last what still two great. better – over month or anything the gradually I sales has particularly it's getting there color changed

Jeff Storey

of something there particular I disciplined, to I outside pointed of Neel us Sure. don't have And we RDOF serve. expect Lumen. even some and with driven we really of following a lots expectations. inside some inside the what money our of financially do we better think are at opportunities our I returns have out, Washington don't extent. any expect to we what the footprint, existing work our of as footprint opportunities, dollars or serve subsidies. to put to existing any I to what and logical expect than out approach And But out

of home the stand think more We we small things customers. advantage people that's think footprint is consumer the a our huge from work is And or out on fiber home. of for from work we'll interactions have digital that follow our overcome comes with within so, that whatever service we and best And deliver And to for so they we of device footprints will the have out can a best customer educate capabilities. nature that business and approach very customers the we the digital to one disciplined Washington. best the symmetrical the

Simon Flannery

And on – sorry, yes.

Jeff Storey

And then second question. on

we're look post-pandemic Probably here? the On pandemic cycles. what That the was what found resolving because people of post a lengthening we're middle of is in aren't in the the world Is we still world, yet, different this not there sales, is sales like not. anything it.

different. by this not we And so, I be think that would better thought that getting much it terribly it is But point.

customers is with world people not, post-COVID do the resolve lengthening the and what see that was and back go cycles look I'll of are how sales is the that's different trying Edge, Lumen tell the solutions manage expanding for edge their thousands not challenges. really going capacity so, as the and and create something security customers to anywhere because for from security Now, opinion, that we you work we complex how needs, it actually to these is needs enterprise and think to and to Lumen, expanding orchestration of the And the world their which security and we like for good don't challenges run? capacities for we their my of reasonable to edge, bring needs, are edge, but control management this Challenges thousands the going cloud to can way their networks. to locations not is needs enterprise

– lengthening the work hate And in The so, pandemic after is that that. – good of outcome fairly while that say way mean good, we I and this for is we pandemic still the the we cycles, will the we don't see think the I Lumen. of outcome long-term to

Simon Flannery

Right. Thank you.

Jeff Storey

Sure.

Operator

MoffettNathanson. Deo with of question next Nick the Please line Our Del from ahead. go is

Nick Del Deo

thanks my for Hi, taking questions.

do year. maybe you XXXX, and year capacity think a voice net tease understand from hard on, being up neutral? First you benefit the about year as drag ended you've higher to impossible or the out. this back in But I over or highlighted so last improvement versus augmentations the look rate in it's and growth revenue COVID

Neel Dev

it's delayed, I of tell because But net robust perspective, segment, net I to mid and just negative, plans turnaround to it's to perspective if kind think Nick so our from in it's were I'd that within hard it fairly from was of overall that tell. say environment. my hard a handicap execution got it negative. markets the had But overall or whether we terms

Nick Del Deo

Okay.

Jeff Storey

minuses and I'd Nick, more say okay thing probably than and there minuses, pluses. pluses are

If international hard, a you their particularly customers, markets think about some of where our negative. was were hit there

capacity overall capacity as especially something negative more affected was upgrades positive, that decisions for people, think If solutions. peoples' at about positive, it going by did by forward a you to of than do emergency some by we networks, the

overall, net So, say I'd it's a negative.

Nick Del Deo

economic Okay, given the the a of of conservatism that's And and in takes and helpful. a How you that what how your differently, the Maybe situation about and would cycles characterize how outlook, to do then, maybe the XXXX. effect puts level maybe for loaded stated the incorporate outlook not it's bit the into question. But different turning do you think on or you and sales guide?

Neel Dev

because So the one XXXX as the year, of heavily we uncertainty. were pulled we went some pandemic. the was of things impacted that resilient. we minimal Obviously, much we've seen the saw there the in But in through we are that in impact guidance fairly services XXXX, so industries even offer by

we're also, balance, I have fairly say, business. And with to terms we we of on So the take plans robust comfortable continuing the would of out range. in cost

range. an from we free a good And pretty flow cash perspective, so, EBITDA and about the feel

Jeff Storey

slightly your question to answer going I'm you different slightly, asked. question than then, Yes. And a

As little bit. timing. I what market think that about what timing going our like, the the look investments. know are. We of the capabilities people a know about miss forward, very of not to outcome our capabilities investments, We can optimism where the sure about going on optimistic the I'm always is and We need the

that then and And behavior. so, optimism our driving both we're investing with we're and in CapEx optimistic OpEx

Nick Del Deo

thank you both. right, All

Operator

with Our line question ISI. of ahead. Please from James Evercore the next Ratcliffe go

James Ratcliffe

Thanks. I Two if could.

much last secondly, you much down Can or you you or years previously some interest they think color have XXX,XXX what the or over room this of have were how And that operate do on to the to expansion, go think cash those side, where you how the homes brought that, you you Thanks. footprint? all, would your on runway still couple of added First construction broadband places million fiber-to-the-home front? new about on $XXX give still on already us additions homes to do you've wireline year. and

Neel Dev

tipped we what cash plan. the that from of we're milestone deleveraging when the to would interest, say going we're perspective, ahead where on I thought off a we be significantly So,

So is on market dependent it conditions. really

there so, dependent is we to think it is conditions. focus we'll it really but on opportunity And on and continue and, more market

Jeff Storey

making it in footprint, that in sure homes of of get fiber the above. of great we right is consumer customers James, Yes. And this we cheap you that plan, is of overbuild? answer construction, not to all think the is question. as examples. don't in as into our before them. our outside all already market, it, And markets the but expansion big when we and to you in it's Is build our, just We subdivisions fiber add some operate, we're that there, to grow with build you penetration footprint, footprint? grow time it where that give you build of that the is look infrastructure the if fiber. expansion yes. at building sure part new all have Most making on a The today. homes a fiber-to-the-home I'll fiber a asked, the have focused It's new part we used homes in our is the and on of we our It's those

like the and our market. that so two the providers overbuilt those we to in actually to in we've serve win this conjunction were though where city communities go we use to you of so some Springfield, with capabilities. partnered Missouri, expand want into there an And with we then And

bit a the it's little of So above. all of

– and All revenue a do OpEx think drive and of at characteristics low is above growth that that the has it. cost one two to we can we to low maybe a characteristic capital

opportunity still existing that areas capital an But our use through that that the is efficiently of want, new opportunity touched fiber get improve We the sure and do a outside our that our is us. expansion So bit make we every above little we have markets. penetration footprint. some our we we lens, for all overbuilds construction, traditional of to efficiency opportunity we on, that how then in and in it we how view do sure Neel an make penetration

James Ratcliffe

Great, thank you.

Jeff Storey

Sure.

Operator

Our next question Cusick. from the line Phil of

Jeff Storey

Okay, thank you.

will call last I be our – last think this our question.

So thank operator. you,

Operator

Very good.

be with Morgan. will Please Cusick then of from ahead. question Phil JP the last go Our line

Phil Cusick

Saved every bell. I'm have going by ask the I question left. to

much a revenue CAF for is areas few So What's how housekeeping those me. contributed? penetration in just and the this now ones

Neel Dev

So a I I we that, disclose don't part moving it – would of it's is but target. Phil, say,

that, fairly seeing we're penetration, are building penetration lot as good every building, finished on have we But where in expect relatively what we seeing higher we else. So high units than mind, significantly but quarter. keep the everywhere of we're a

Phil Cusick

Okay. maybe the the like forward it And but return is year, as to expect micro-targeting up a amount similar you way to areas, higher in fiber finish think those on this in right it? built about you going spend construction broadband – sounds a that to maybe

Neel Dev

up That's versus based Jeff very going about calibrate it, to we're success absolutely be or between adding how how fiber we're But footprint fiber, much is to our right. going we're penetration converting going like to mentioned.

execution will and penetration. and the of So we will up calibrate be to – go at which continue that driving to invest, but – approach, have our will pace we micro-targeted that at what

Jeff Storey

we the and while on investments customer don't we've doing two our capable want then investments for on platform. the enterprise. of consumer, And I sight lot in are focusing at that we're than a fiber-to-the-home to of at about the talked fiber of lose time, more and vast same this sets, our That's call majority Lumen

continue mid-market investments we'll can. business, drive to of those to that Now in to the of to benefits them. see great best our approach We with to IGAM, our the small got groups Lumen trajectory each bring consumer customers we've leverage we're bringing that that business, and we enterprise interaction surveys. the of to all those Promoter got Score's Net digital great because we platform benefits of of business, working We've it

and... you thank So,

Phil Cusick

So I there. go was going to

Jeff Storey

ahead. Go

Phil Cusick

sounds going just it you I like for opportunities a as say, was on spend, up necessarily on frees capital enterprise but to well. that to fiber not higher return consumer maybe

Neel Dev

Well, we're the it say constraining way I capital not is, today. would

really we sure we We invest, right point, don't in lot will about And so standard so spent be XXXX, want in as $X.X fair success a to we we're not but a capital, based amount between an see to fiber-to-the-home, constraining it. ongoing going we uncertainty we'll enterprise we're of make of even we and with billion think dynamic dynamically to year and a execution. process opportunities in lean but the getting to very allocate basis And and on do I capital well-calibrated edge we'll our Jeff's have a and that we're outcomes. between consumer financial capital,

Jeff Storey

Well, thank questions. you and the for the engagement all

Lumen capabilities the environment within the delivered platform XXXX and of our that industry. for revenue investments, Before years by our debt, pay expanding improved fiber customers, expect few work. of of through fully the you year, are our me made needs existing improved penetrating In call, sheet and on the the on We we let reach in meeting and platform XXXX, we face But We balance a thoughts significant the evolving our should continue growth the the and down working drive several changing to following of about Lumen edge alliances think the the and strategy, company. the business. industrial our to I in an long-term leveraging focused progress summarize uncertain launched the revolution. conclude expanding how fourth we're growth and last on driving performance,

us free drive look Thank the the shareholder believe today. with our flow joining as in forward we're you per look to per connecting you need much. upcoming very to in doing things growing the I growth the free flow with value share share. we France, at growth always, cash we through That call. at cash guiding all and long-term thank As you concludes for Day. Analyst principle

Operator

you day the using like you, for Technologies that we everyone everyone. ask your and lines, does disconnect please thank conference Thank today. your Storey. would for call, This to Mr. conclude service Lumen We have great participation, a

Lumen (LUMN) 11 Feb 212020 Q4 Earnings call transcript