LUMN - Earnings call transcript Q3 2024 | Lumen Technologies, Inc.

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Operator

Greetings, and welcome to Lumen Technologies Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Jim Breen, Senior Vice President, Investor Relations. Jim, please go ahead.

Jim Breen

Good afternoon, everyone, and thank you for joining the Lumen Technologies Third Quarter 2024 Earnings Call.

are Stansbury, President Chief Executive today Officer; Chief Financial call Chris and Vice the Kate and Johnson, Executive Officer. On President and

to filings. measures, include factors We'll on All begin, conjunction safe which in third and notes the we I statements uncertainties. in with non-GAAP conference to our risk measures forward-looking our subject most SEC be presentation, your referring should Before call to this to may be risks need quarter considered in XXXX harbor statements X Slide attention statement that financial of be forward-looking our and cautionary press certain which to the statements the release. call our found earnings reconciled comparable can GAAP certain

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

turn the Kate. call to With that, I'll over

Kathleen Johnson

is third and everyone, journey Lumen afternoon, Good network progress into offerings, in simple modern infrastructure a We're services to product headline thanks transformation operations. and our turn and digital joining. Lumen's is happening. with making company quarter this. for The

programs growth legacy and revenues. X as We're also with our vectors, running AI pursuing on heavily cloudifying financial core the while performance transformation our telco the weighs our results. expected, heavily major We're And that and secular EBITDA the have on headwinds backbone progress material business, and made building each. said, still which in reflects investing

that it success a to understand around. a clear turnaround, sees coupled turn financial that company talking industry this recognized go and But team We with telcos we for difficult on make are the results, have our a we not to current to long-term way in path about fully this imagine Lumen. have the fact long our journey,

give enterprise take hybrid our cost a in and customers our to multi-cloud plan out, by using new balance architecture a assets drive intellectual and We growth value property deleverage have environment. to sheet

will will financials. path take I'll this want of it our accomplished show and execute, far. is X to be opportunity and to today, share the topics. covering the time All real. we've And so what I up take in time on more ahead to But

drive One, partnership are customer business the than the digital AI customers building sales $X the efficiency XXX billion revenue the more the out. cloudifying Lumen in in with how with to adoption number sales we company growth. for in positioning technology cash ensure economy, continuing generation, and biggest adding sat industry. Lumen to how driving and names three, incremental how and Number the over And private customer operational well value we fabric our connectivity for higher is industry, lifetime growth maximize NaaS to core two, in high-value cost backbone is Digital

Let's start with our operational turnaround.

year-to-date through We We sales continue XXX- quarter IP sales sales up to in September. XXX-gig year-to-date up and notable North XX% the up XX% saw XX% sales mid-market and performance enterprise in strength with large year-over-year. nearly see and third wave solid American

points mid-market up sat To Promoter Net again, by every XX complement whopping in improvement once for of public for these Scores. one points saw a sales points enterprise and measured transactional channels for customer wholesale, scores results, large year-over-year as sector. significant points customer we our enterprise, for XX XX for XX

the down slightly on levers efforts focusing see record in and disconnects to renewals, once quarter our to segment base improve to mass disconnects. did sequential markets, our And had of while adds. over we increased the again, in consumer the installs team usage at and and with execute a secure well in being total net X were for X continue disconnect their drive installs, a quarter, In XX% continues by migrations, We level value key for lowest improvement fiber quarters.

the simplification by estate. take-up we portfolio $X cost billion our of end in X, a XXXX dramatic of allowing last unifying announced product X our Finally, IT quarter, by architectures network to from

While we history with of we tech efforts track provide require to complicated, long further mergers plan this work these curve. work developing loaded said, execute. as debt, on given back-end cost upfront incredibly and is our details important We'll of And progress. have this we the to on accumulation takeout as will are spending cost-out a

pleased we're and I growth simplifying we're clear galvanizing how But driving modernizing business, want we're how Lumen's company. to with core be network the and Quantum summarize, we're here. To in how services Fiber,

legacy to are here We not telco. find in revenue growth

All quick like have and every that GenAI multi-cloud of effortless, enough. which want in of serve just nor technology networks and environments, in business, transformation leverage enterprise. growth. service course, of all work complex reinventing is customers to the and enough, and by Lumen they're They're to legacy fixing yesterday to networking, the won't big neither legacy need fast is what our They're their digital the And tomorrow's secure the of will norm fuel financial become in especially not not enough. long-term hybrid is experience that customer transform is who for business. telco company's not

I'm digital going to We after networking. X see in we're going share several right growth now. vectors that And

Lumen deals trusted to have centers, lot of backbone data recognizes AI. as now need those and a be data, Microsoft, several given what's for in size centers that needs AI biggest connected. data the And signing. names data network Google of including AI we're AWS their technology, The the and chosen building the receiving Meta, for of the market The is needs been first Lumen economy. is the attention

their center model phases shared, we cloud support Lumen? there? what this In How the as for the AI market AI expanding And playing hyperscalers, these are get many will for last? to few platforms time, mean We does X, buildup and spurt all massively companies Phase out. networks social growth I've long asked out see a of deals training. How are their data

we And more gaps. they we're our to then, PCF remain you active more billion progress do use as have Lumen for timed than we As booked data this, for billion quarter's the building centers, our to These update we funding near-term like than deeply opportunity in transformation. some the PCF cash discussions $X the keep And to well we these since and to going them. deals on guidance. materially booked close long connect us in to last providing opportunity and call more in giving will affect deleveraging. have shared accretive when of ample $X that We deals additional are extra sales, liquidity companies sales to

operations we've networks, next on finally, this dedicated to these team ground already a And broken build work. GenAI established and they've exciting

to close than PCF wondering if quickly. in So $X billion we're how why you're sales more able so and

recognize Lumen's I'll for share are emerge network to and investing that needs Big the AI enterprises and other networking this that Lumen networking fiber a control moment, Frost intercity second marketplace. just the Competitive was Sullivan Tech the those connectivity are public gives clouds, this. is we because AI phase And evolution security they by awarded choosing believe the at need. as intra conduit-based customers know and capacity, & use and are unlike these in scale, models Lumen connect is starting built Award they And network architecture also of we beginning Strategy in the all they calling see upgrades. we best-in-class and fabric our need because the geographically future to for any private is major X they enterprises diverse Leadership company performance

wave expanded to customers. showing it's that's over September enterprise and increased sales different We XX% markets for year-to-date and with and space, believe XXX-gig include mid-market year-to-date large -- this in results. expand XX several in demand sales become business for service through markets seeing the in several IP our with XX% Lumen ports Lumen to segments thought has we high-speed and IP We're in more higher-performance year. up services why up specifically plans leader our for And to our these up the an waves IP

footprint markets waves miles XXX-gig Additionally, we across CapEx to route nearly this XX plans XXXX. increase over XX,XXX expand in in currently Wave's to further offer with

we enterprise our AI, property, platform see our intellectual parabolic handle for believe workload is network, are Lumen the well needs, early win. in to space. AI to increase networking data the points portfolio proof of positioned we to given But third that share another In too to talking evolution, phase we complexity potential the playing of of digital It's volume. AI and pace and driving and our volume,

securely and a industry The that's price, it's secured that a to another digitally Lumen natively is our integrating provide use we fiber as Internet other in vector. why infrastructure. see with design, our hybrid fiber generation just a out expect in order that telco to the material the to future. network growth and it and Lumen opportunity a enable platform to is is telecom one. building Cloudifying networking building differentiator to no Expanding disrupt major digital able network consume be quickly, revenue going Lumen world. customers this, owns and knowledge, the multi-cloud To doing required in critical enterprises infrastructure, for the and step And effortlessly with

a launched Lumen offering. team NaaS Now or year and established Network-as-a-Service a flagship our we ago, digital

they lets The good XXX they when want, of Lumen overlay want true how NaaS, want over As pieces a today, our get they customers sure. adopted it network customers form. have consumption start in the for it, NaaS

Metro include Group, provider the America. and MEF, in the as CXAero, Recent named best among NaaS Ethernet formerly the the NaaS Agilysys, product wins Lumen known Forum, just our others, BlackStar and for Pac-XX North

has this is progress time period Our encouraging. repositioned company. of or just beginning. It the in just NaaS short exciting isn't a fundamentally

switch network, and long clouds, all for architecture, ecosystem our world-class network committed big PCF our companies, haul. to With X our tech exit the of fiber an

massive multi-cloud world, the what want a and to exactly drives our value networking We and have is in need. which customers all pieces redefine hybrid

up, to finish have we cash. So the

intellectual and We assets have the property.

a have leadership We team culture. world-class and

future of bright. We strategy, great is we have Lumen's a had very and lot a momentum.

turn the Chris. call to over I'll that, with And

Christopher Stansbury

transforming be continues steps And its choice $X continue in towards the achieving in partner taken billion that the Thanks, PCF Kate. to deals we've additional in trusted of third path Lumen signed the to XXXX forward us over we along to million goal. business. move through $XXX building quarter, in XXXX. as our XX% We the flow maturities quarter, exchange for we bringing to and a generation in given XXXX cash to $XXX out funded. successfully the in the And free networks AI, also, nearly our contributed over pensions we to confidence debt executed million incremental terming

we in new June. Kate at now since discussed, are $X sales PCF As over billion

today billion is the position chose First, have the team backbone opportunity. specific be over reporting once-in-a-generation not will Lumen's for for we what of to PCF incredibly to they've believe reasons: of customers But quarter. X unique Our highlight how able proud our to the economy. validated $X capture market We on every build AI we been quickly sales a we're

the have the AI. people right build networks and We right the assets to for trusted

this announcing flow, will which $X positively XXXX sales PCF we're new given sold of incremental billion PCF billion, Second, over the the I today will a Future And on the with largely previous to it cash on guidance shortly. similar impact in customers. set routes lastly, look also size our of free sales you will scope for enterprise $X include diverse existing update routes.

these discussions complexity and over take these will ongoing builds, place the of quarters. several Given are

We impact structure future, there the opportunity to need to understand on In provide and material was PCF a of investors will sales deals. this a PCF introduced PCF the the last quarter market and them sales guidance. because updates we the our quarter for these strategy, financial extent updated our have

for of cash focusing market opportunities to those continue while core economy, generation. also sales the growth, improvement educate the flow the and We Lumen metrics will margin on AI and on free

on the made brings our free free estimate the TAM, we've cash believe churn We structure provides cash reach sustainable the sticky AI fuel sales of positive from to signed the the we're of to securing stated necessary incremental recently The is by the the flexibility and received for in first and over in contracts delever expect a these cash our business and to network XXXX billion in planning product which PCF sales a driving stages constructing sheet growth. address we We're flow legacy the we builds. quarter, $X labor, large way. increased to revenue networks, where flow new long-term just now As last beginning progress balance higher declines. to and estimated we've cost billion we provides equipment provided our point the confident offsetting margin cash $X in structure in the PCF continue capital meaningful

We of out $XXX from the to million and debt the done quarter XXXX, yet. excluding end sheet, another balance due through leases, have approximately terming at XXXX. $X.X in successful not XXXX of execution approximately of highlight exchange, a XXXX was maturities, our of billion we're through maturities now respect the the With over to quarter second $X.X down billion

Now messy where industries and before. never transformations happened are particularly it in has

through the additional good. of the we In both flow said opportunity. increased In ours, move and cash bring substantially was an and for networking guidance you transparency we was as up. So said less strive we free QX, that, QX, good we demand heating delivered against to there

again. against progress and announced we quarter, This opportunity flow cash free guidance that increased

trends we're future XXXX cost unlock investment and improving QX in in today, The efficiency. and business XXXX. of with of billion which build both will our digital saying be result declining before is EBITDA legacy industry $X lower both to and needs our Importantly, consistent

is and our for significant the in We of on goals accomplishing industry. strategic core we're stages a continue path balance of all our sheet transformation operational is and short, we making we're Lumen consistent additional and for is value and taking messaging the on we of optimization, through for care the the In themselves. structure clear backbone efficiency, improvements cloudifying recognize We the set driving we credibility critical, believe creation as in execute cost remain to building Lumen our great sales, delivery. sure focused goals laser with recognize early AI

Now move the the discussion to of results financial third for on let's quarter.

an large mid-market broadband large once sales business segment, market with year-over-year fiber and mass sales enterprise additions nearly growth our with along and showed enterprise net solid up engines in setting record. mid-market within this Our channels our quantum our XX% again segment quarter, and all-time performance

of that disconnects improved year-over-year revenue segment was improvements adjusted Business commercial a to reported million of $XXX declined XX.X% legacy revenue business. PCF segment year-over-year. EBITDA was sale of the sale the decline XX.X% to and $X.XXX to revenue encouraged $X.XXX and the XX% free both CDN million, total basis, billion to agreements to impacts the decline positive benefiting of we're Mass $X.X in adjusted from contribution sequentially still the impact Market of and revenue due and EBITDA declines, approximately billion, declined While flow sales. consolidated the business. was and making and commercial divestitures of feels the we're XX% margin agreements X.X% $XXX of by the a business the cash was impact as the XX.X% declined cash divestitures, On CDN recent with billion. due from

wholesale, Overall, third our Within Large results other, basis. review excluding declined our X.X%. I'll declined channel, quarter a declined the revenue X.X% business segment, our the detailed America enterprise America North in year-over-year business for Next, which is on quarter. international revenue enterprise X.X%. and revenue North

in Nurture continued with year-over-year X.X% and increased pressure Harvest revenue Grow Our product revenue.

trends X.X% we sector improvement and with stabilization. Grow approximately quarter-to-quarter. revenue year-over-year, year-over-year drive towards and revenue sector by variability offset X% continued Public to year-over-year. an Mid-Market Nurture can revenue lumpy expect overall declined Harvest. X% revenue We in be declined Public as

we continue to to However, which year-over-year that give will confidence And grow in large public traction in see bookings this takes continued with these us to XXXX. revenue. sector time wins space, ramp

are the partners the is This revenue Private of wholesale primarily and services. quarter. by of telco portion Harvest like selling comprised legacy TDM that contract in products voice The year-over-year. X% is driven approximately year-over-year saw declined third revenue Wholesale portfolio, by XX.X% which Line,

XX.X%, primarily we over sale contracts and area Our last of select likely is our and revenue that decline the year. International of revenue will the for Harvest driven quarter other of will manage divestiture by the business, product EMEA cash. declined an and to time fourth CDN in continue

dark by life Harvest, by product results Moving channels. sales business were our our to year-over-year. These America portfolio grow our enterprise I'll X.X% the North overall offset an led enterprise decline declines based in Nurture product broadband, reporting, IP. resulting sales of reference in Higher were cycle and in and fiber on

we X.X% revenue sustained channels, in increased grow Within any in While results expect turnaround. growth vary as America our X% North an Grow enterprise North revenue segment the XX% execute and product America from direct margin revenue last for business approximately can up enterprise core year-over-year on year-over-year, products our approximate our we total of represents XX% quarter. quarter. carried quarter, Grow this

in America and approximately be products decreased Ethernet. Nurture enterprise impacted North Nurture second XX.X% an products enterprise revenue revenue and VPN declines America of TDM-based XX% segment and quarter. Harvest XX% our revenue in quarter. decreased our negatively XX.X% North represented revenue by year-over-year voice. the to for continues margin total our of by impacted carried approximate Harvest in XX% largely business this declines direct represents year-over-year,

carried margin product XX.X% total year-over-year. to to revenue product an Other our business experience nature For products. these tends approximate And segment, variable the reminder, of direct XX% fluctuations due it this quarter. as revenue other a declined

markets. mass to on moving Now

Our revenue of approximately mass year-over-year revenue. markets and fiber grew broadband XX.X% XX% represents broadband

During location total this build our over pacing XXX,XXX $X million bringing annual the September of enabled quarter, XX year. our as towards adds broadband XXX,XXX, target targeted were fiber to and

is over XX,XXX our brings total added to customers, also our quarter this net date, We X best to and add million. reported fiber Fiber Quantum which

year-over-year. approximately Fiber of end penetration X%, stood quarter, was the ARPU $XX, Quantum penetration This work of by is our approximately Fiber team. was flat and just copper at our third XX%. slightly and the sequentially legacy up that At outstanding broadband

ventures, divestitures joint incremental our generate As business to we of mass include Those wholesaling arrangements future we its market-by-market potential options cash. strategic look as explore of the to maximize range a markets assessment ahead, continue or options we'll value.

EBITDA. turning adjusted Now to

billion in adjusted quarter $XXX $X.XXX XXXX, third compared year million of ago. a was EBITDA to the For

legacy as declines, high was by revenue some networks custom costs start-up negatively quarter impacted operating seasonally well Third EBITDA group. with as associated expense our

was the year-over-year XX quarter declined point year-over-year basis compared points XXXX, of For third to EBITDA adjusted EBITDA decline margin the margins our basis in XXX quarter. second XX.X%. a

adjusted The and to transaction special flow, positive free cash excluding $X.X were impacting billion. was $XX special separation items, and million. million this related majority items items EBITDA Capital of Special were quarter totaled expenditures costs. $XXX

leaning our we're our and improving while stated, investments to structure. network previously rapid support we demand As growth our customers facing are cost the overall into

on Now to moving outlook. our financial

EBITDA 'XX to of to continue estimate billion range the to billion. be in FY We $X $X.X

overall incremental PCF cost and the given see we at in the sales, initial 'XX of impacts However, end trends the range. from low business the FY EBITDA that

As broader EBITDA we start-up expect CapEx the year-over-year as interest $X.X incremental a longer-term be costs for of $X.X cash the the billion. to $X.XX transformation to billion range of improving said decline and XXXX of to to previously, and in PCF continued in expected legacy is contracts a we costs cost with result goal billion XXXX in structure. range of billion $X.XX declines,

to $X.X growth includes and with CapEx Lastly, free structure our we're some This to -- as associated PCF guidance ultimately incremental guidance cost to billion. cash XXXX cash sales and $X.X billion our from our well our billion free raising incremental OpEx, flows flow $X.X to $X spending billion improve as margins.

back for with to I'll turn that, remarks. closing And it Kate

Kathleen Johnson

appreciate taking that you industry in the saying. what we're time but know to It's everyone what overcome plans different vectors that. going we're Thanks, And talked our I the Chris. we for up understand about I our financials, than our to story. growth some the is show time and is achieve in to take will headwinds confident exactly else saying the secular

questions. operator, we're With ready that, for

Operator

question first Your Citi. the with from line Michael comes Rollins of Instructions] [Operator

Michael Rollins

get coming where are And magnet to an us There that Can then additional those some business quarter disclosures. also Kate, last did update where you're initial these of providing sales from maybe X new to marketing wins to prior mentioned relate billion? in hyperscale to at customers? just on you give the you from? the weeks. this or were And with curious new I the announcements some wanted these the distribution? customer just on sales the the details specifically relate in PCF ask and few beginning Did $X you over call, a of these sales. the that's improvements PCF seeing And

Kathleen Johnson

Yes, for sure.

between come ecosystem. the $X.X magnet, got we're that Basically, Mike. X X customer billion you clouds, buckets. yourself going stories are all thanks, the a When So get very you've told in not differentiate to we in from total, But an much bag, and the they so.

with couple cash on You that it pretty do to consume the It's that We've it. something is easy running digital a different to you've and infrastructure services got special. than doing. make else to everybody you're what got the platform that

So that. we're super about excited

in our We uptick for the the higher waves, don't an customers. conversation at getting a need customers IP it's workloads data purely conversations from signals a networks to all Regarding the we're and having that because and say recognizing indication is That specific the our particularly levels, it's AI. with the are running. have capacity expanded we're of we're that

think that perfectly in And fits line it talked so with trajectory we we about.

them. big the and models train the the AI networks builds tech and First,

second saying, The having and customers to business massive in needs. models a is transform uptick these my I'm step networking own these using I'm are my

customers leader. I think network realized a needs coming AI because strategy that and strategy we become are every Lumen thought to we've a

Operator

JPMorgan. from the of Petti with Your Sebastiano question line next comes

Sebastiano Petti

just discussed though to I of the quarter there. kind on cash timing just keeping IRU deal, try want know seem laid as time housekeeping said how of out to on that we're of cash as was we reflected -- about announcement. a similar constructs that line in the that last but they're come they to upgrade? flow it PCF what about part similar because last think to you free having I just probably time. as the think and does Should about kind contribution was incremental quick A of the kind thinking as broadly last you

Christopher Stansbury

go ahead. Yes. I'm sorry,

Sebastiano Petti

can ahead, Chris. follow I And then up. Go

Christopher Stansbury

Yes.

right. exactly You're

work, flows, quarter of the looks shape did similar what very If you the billion. the the the will to at signed cash look deals, this that on just we that timing, in the terms all $X margins, those were how incremental it deals of

good way model that's I So a to it. think

Sebastiano Petti

be Okay. to the That's end pretty your I then guidance even does about helpful. did range kind you coming anything imply that lower there And that of pertains we get of -- specifically cuts guide be to or kind should we about XXXX, cost the it online about just from decent point. thinking a mean, perspective? that just thinking to acceleration coming of Anything to should sequentially a maybe thinking as -- timing

Christopher Stansbury

we summer maintenance, the Yes, the it's would fourth really I energy We the quarter. higher more, months. seasonality see in like in say, costs that abate obviously construction, somewhat have more that and

We to the accelerate $X do billion. also investments made work in capture the some need the intentional quarter help we go that to to

things, when you those look year. confidence in guidance the the delivering the that's gives And of lower the end at us for what on so of timing

Operator

question Levi Batya next from UBS. The comes with

Batya Levi

mentioned that will be enterprise revenue think just would incremental In demand that well? mix construct the signed, requirements bit that terms PCF pretty as on of mean And about original new original think confirm, you're of much Does deal? the a to deal. that the this mix incremental how the building that included be in sales? tech? the little should And the starting we we of assume for sales should prepaid PCF CapEx see you existing big to you you are that they're mostly Or I

Kathleen Johnson

you cover part, second first I'll cover the Chris. the part,

Christopher Stansbury

Yes.

Kathleen Johnson

in customers. We're had business. some XX So quarter the it's shared than tranches. customer We these mix, more we repeat last that

new business. We have some

for if mix. that look Predominantly, on are all shared And the to that they're AI And X out are customers we investments Lumen. going build So strategy, models. or the infrastructure That's clouds side-by-side coming you infrastructure at AI, building some platform. it's to what and companies large logos our us and standing long those massive are those story. with a a it's of social the reporting

own piece some is And transform AI to using second for that services planning They're on maybe of next at buying not part. the and commercializing their their of they really wave they're and their not their because offer The own models the same they're customers. enterprises. most business the products size

size the hyperscalers social same the platforms. the not it's as So build-out and and

Christopher Stansbury

of -- secured $XX date today Yes. And that would really that billion piece look I the billion question, Batya, to the kind opportunity second $X.X about we've total of does on say the of we've the so the talked same. set,

that's parameters would last that same the of same that's the I say that would amount versus CapEx value, use upfront, we ratio those shared I quarter. amount recurring the sales So to

in we the a you CapEx, for inflows year, of where XXXX guidance next were is the the time when of have coming terms we signed, see of incorporate this What we'll guidance. this in impact but give cash year those just of some given do timing flows year that obviously, lot the year's

built, opportunity on said I existing Those rather as think just a different. the from we that cost something that important guidance down. around will at until be they're is But the $X new quarters as conversations thing we investor move we than second new number networks, in clarity. few estimation is, routes. look probably forward billion that like guys is or difference we here, of around conferences, get the routes half takes that with will customers give update we locked have you multiple more the a We're better that And that. economics as we'll middle of of that, and

Operator

The next Jim with Goldman question Sachs. Schneider is from

James Schneider

$X beyond had mentioned? that Or of you before $XX you billion wondering sort beyond and mean there left the first could $X on is go, clarify $X was of the to you there's that above billion incremental that extend billion the $X talked maybe you of seen pipeline to pipeline Does incremental about. if billion just billion an I the as total that pipeline.

comment potential and asset. of can seeing maybe kind deal that kind just any then And And there, indications the business? you you're in amount interest market of of acquiring second maybe a whether clarify interest as maybe question, of your on firm mass activity given

Christopher Stansbury

Jim. Sure,

just the we're really, same the $X secured over we of that In So opportunity, all that. billion page. so of on $X billion said had today we

really roughly the call let's remainder, that routes. Of just that's So new half.

to going multiple I mentioned take As just previous that's answer in my quarters.

routes Now in motion. to customer And there going not is existing routes. not that be new course to now pipeline want be continue continues in because we We're just interest it to business. of really to update but normal

The remains year what a about validation This entire alert of we'll the was, against market report and to significant the $X opportunity, talking point with earlier we've of is saying and billion this significant It $X opportunity. in it. fact, the billion true. that points been a was

guidance So a really us process. in see the impacts updates into get communicating you're of it because going to as of cadence we are where

guess, side, just the Now consumer a few on I thoughts.

great want First, enablement rest notice of we're to the relates and to that. as be that by is penetration, doing they're we it to ones only is starting The couldn't the execution emphasize team happier work with work doing. and the this world noticed I and team, the what on not the

They've at we return time, but of that And said also they consolidate. have years would got businesses now invest starting for a Now we've strategically also business we've consumer in eventually the to got to couple see this space was responsibility X said and right? that don't And enterprise I that our profiles. things, decision belong would And our and today. them. great ultimately we've separate a a we're happen the said that that We different right make together. that we should X have business, to in both, think

conference say at When it business other the pretty are. and news between I any What what consumer the your have is, clear economics of today. you conferences, don't we fiber. at report copper and we've about to Now look been will

delever ability how think our the would as it all So do determine focus significant up enterprise to I of an the an you be modeling you on would leave to impact company to company. and that and

Operator

Chaplin next question New with Jonathan from comes The Street.

Jonathan Chaplin

Chris, on follow-up as network then quick question just well. got and that, A I've a

So those just for give And would us you I'm And the accomplish separation you fiber would on of process sale considering thought the been sort mass rest the markets. mass One I if context the of little that, a out had separating think was of markets. business you of wondering work? how of from thing around the could physical sort networks? how that of bit

maybe some overall contracts. of a a little bit network how be PCF context has for more it then to by question, difficult consumed And and it great would get been the much of these but

or XX them you've from some of the wondering think how conduits that into -- got fiber we've the would given been -- left sold that how initially new many Level PCF away these conduits, I'm I have been be So gone, have have -- put yes. contracts had of in given rights memory, been to sort heard many X and have

Kathleen Johnson

Yes.

question the take I'll So first. second

new we very existing any sold did both. modeling, earnings business capacity when on in strategic partnership ground. our were own utilize clear on the are their new plan customers fiber assets. cetera, leases as we I sometimes our conduit, so with new conduit that with in of Corning as fiber, as ground want the and not have So call ground, strategically we solutions network. sometimes the to we fact, putting existing our building just we put long-term these of less net And conduit attention conduit much on of new routes, with very, in which quadruples It's more It's your the a to to and These last should, or call, routes. networks et the

We fiber have we've our the grow access customers. all to the for network and with to in the to all continue right places. And the got in right best world

on Additionally, in those have those long-term these customers any not, of right are to contract, spaces. with us of do ours, the these these leases deep by compete partnerships. routes, They

because So rocket. this infusion. okay? very, are They're cash jet saw We're for fuel these the it super great I So excited. demystify very just huge giving us to that wrong, had deals, few reports a

you Chris, want consumer? to about talk do Now

Christopher Stansbury

businesses. don't what because consumer, can, publicly. consumer I a on into look, to get we don't I will want to what have But said here we you what we lot know. details of business we we the can. And you And when we'll obviously tell as X Yes. know about And think need don't reiterate

that copper and fiber generates of CapEx. the a that consumes have EBITDA most the business have a of You business you most

do things. can is market doing we're reality So of the we've done modeling. it's think harder possible that separate. I easy, there proven Nothing in, we've And would the definitely hard but not to I obviously, The things. afraid say you is to

I that's can all this So we'll at us, but really where on that see takes comment point.

Jonathan Chaplin

worth? you Chris, think asset Ziply that does transaction change is the what

Christopher Stansbury

that happen that play. are consolidation this I to broadly, tremendous transactions our And sizable there's the the value in our of thesis and place we taking that is needs more market think validation assets. consolidation these in an in have asset

on And that. let so the I'll math do you

Operator

with question from of comes Barden Bank David America. The next

David Barden

could. I if So two,

Chris, the look going is The elaborated first $X that billion, did kind lot is before. you you billion to on that $X of like the deal a this

hiring You gave that in that came and came to XX further then and in it and or math us net was of X- we of stuff. period X% could of construction a billion in $X $X million maintenance X-year $XXX a terms XX% a that. that around of do over the billion about years over the another of lot

million about billion, so. contribution or there's like 'XX, cash a 'XX, $X 'XX which just It would build So period, be that. $XXX the would be over

I that out then like is XX they're wiggle And that the balance sheet suggest next address it it a So if of if projects? that new do with But with what sound lot it money using related from have to I'm there's And the to then upfront Are balance this build-out partners. come that get my clear from $X you another payment years. question that's And first back it wondering to before of their do been issues. doesn't lot go and that's numbers, is you deal spend that spend amount would you to things upfront you you if what talking before could. And money come a billion. the these be some room over of you're would created did about. the sheet to

Christopher Stansbury

I'm couple you years. here it, David. Kate's asked been X.X of Yes. look, No, I've a years. here been glad And and

and that I stuff written of there's and being remarks because a for lot -- our this. credibility to be And my of our into all with clear. intentions a exceedingly question want I Our reason in it prepared put I think calling is

off going can base is we anything from not to are deliver. what that message the market We to

so rather not to to not are of it, into no, specific than then characterize that. and delever come debt the the pieces be and money sheet getting want And I clear. we have to networks. math, people's number these doing exceedingly way would reraise We're spending build balance back I one, other to go

the the business matures, transformation reduce to pension to we debt and around that invest funding billion, our and The in with model us $X the in required, now flexibility the But investments out includes investments the investments like the the the turn gap, billion give constitute billion, $X $X future, said. that and payment billion which box as and it deals our $X go close objectives when things that checked, as we debt. more of

remember, on with And started balance we all sheet. this cash of the

hear from we delever more we So you $X have the all deals. all to can $X from company will billion on X at you'll company. you start start when And you have the sheet look the billion. on us that take to balance billion $X these when the ample see those you, delever And pieces. to sources, the before cash to Cash but tell -- to of us

David Barden

And then a guess housekeeping second I my is little bit of Got question. it. a maybe question

your in be at it's quarter as think a to minimum, fourth to point the comments about obvious a step about jumping off we As about the billion need for EBITDA $X up the XXXX. got

us to about to figure how out how down. I'm trying going I far You've is is guess to down. be XXXX talked

And was there's give point that you then looking all for extracted, right, know Could out XQ deals. 'XX, of and us that a starting out? 'XX because think to was I that a XXXX that EBITDA, came there lot plays in XQ at XQ kind of apples the the about thinking been look about of kind would to like? that year might appropriate XXXX what how the And trajectory an from be down a apples

Christopher Stansbury

Yes.

these both So obvious what as reasons into because right get the I the And the contracts, we haven't we need way, the are faster. too so if still deals. assign want in we it calling guidance that are see asking much us this quantifying that customers -- in to can 'XX and yet, because, to we particularly first don't invest here, by set for go I'll said say now us

around discussions that. there's so And

So we to on what the trying we're that, billion there. to the need finalize trying investments do required finalize $X to takeout and

because street averages give time, same significant 'XX to I've 'XX high I to at little fairly you will ability 'XX the this we would But year. I give point a want at expectations inflection say I for probably that point, kind versus given if of cost take look when our we think a said, at you out. next as be

a are to than the little we we further So I I want things said. do. got those along, don't to until further work we've And think that get because go

Operator

Your Deo next Del with question comes Nick MoffettNathanson. from

Nicholas Del Deo

was contributing that it's a sales revenue customers had you hear. what spending those customers to also had are P&L start I several to early, new mentioned When over existing see to but their the more which First, because through do into Kate, enterprise better are you flow then, of metrics XXX guess NaaS obviously I incremental America over last that NaaS more North quarters. good degree up, you customers of suggest you in the the that to much either that signed because we noticeable in shared And mean or is because NaaS product? came way?

Kathleen Johnson

second the to the take I'll Yes. pass I'll you. first Chris, one, one

starting So the NaaS customer. with

on because lucky we have the So natively. we we're is they what focus about adoption, digital building do build new digital that capabilities about about We're super that's need. platform It's to integrated that a platform is it obsession. everything do network the and into driving customer

economics can simply in that companies don't And achieve those so of marketplace the capabilities delta from offerings and we network. a to massive right the compared have other

us to underneath come circuits their the fill to portal. frankly, And they,

as it's possible. very as going on focused so on And many exciting, stay getting there to but customers we're

try I think testing I'll X what is port, try seeing X we're I'll ports. customers it.

horizon on like an is customer, have opportunity et they experience, to service example, As sell a for innovate start storyboard. Defender, NaaS start the drive cetera. that's add That's good us where to And ports. additional to into innovation, they the every Lumen for we and

for a to. How it transparency not ready going to while. We're give We're that simply impacts not revenue. to

take get that it methodology over we're it. accretive models very going using suggest to plan but cloud to time to and cloud this that the That's this have to Right? scale. thing We will every business. And out be for figure is time, true

So Chris, do question? you first want to talk Nick's

Christopher Stansbury

Yes.

And window. time Nick, convert would so expect about in see X-month to to sales typically, a we revenue

one as we I of go which last say services the we're and this. year-over-year. quarter, but said, benefits, would digital obviously, the as Now we only that bucket, that. X.X% is grew Grow narrows, ] forward In aways more we selling [ from we're

quarter, X%. This it's

I that's encouraging. think So

closely. that watch to have We

trend So there -- we're watching. we line of a enough yet, there's not what don't but that's

I to But good also really it's to want have. here, a be problem realistic and

in offset a legacy is cash, given growth have in an enormous Grow how its the amount of which to It that size, buckets. That business we're we business, invest able will We our see continue part enormous. that's to legacy generates of future. those

in expect some in I disconnects. driving some I re-rate cases bad is So what customer I near commented think don't the on what's -- that's in given the don't going on I've industry, term behavior

to that things I But continue the will weigh improvement disconnects I the least that, we decline total fact if of revenue. things over to near and the move stabilizing, in look as that a think think hope appear to like the at scores, coming show on rate sales, ] [ starts will we be I at the in that those continue, term, TMPS forward the slight quarters.

Operator

from with TD Williams Cowen. question next The is Greg

Gregory Williams

Great.

splitting I Just heavily enterprise copper, you dissynergies dis-synergies remember there's be sold to market mass with just if overlapped enterprise. assets on this off wondering mentioned I'm but X guys a some off of the overlap. back if an there you're In there, on greater a going there were potential wasn't when you're X have or markets lot where of as a where Brightspeed, level you'll can you the sales to just result. update wondering fiber potential you dissynergies. the the from provide situation,

question -- ahead, have just is a yes, I -- go and on Second follow-up.

Christopher Stansbury

go Go ahead. ahead. no, No,

Sorry.

Gregory Williams

on actually is separate. North the the question Nurture second that was Harvest bucket. the It's bucket noticed I faster So actually declining than American enterprise.

and kind can some us VPN wondering I that but you of if interesting understand that dynamic. that Ethernet had help mentioned just impacts, You and found

Christopher Stansbury

Yes.

So things. a few

of our there X on of that put that So would be being the came forward. CenturyLink They're enterprise benefits and Level is are Lumen one, critical sell. first going for together CenturyLink delivery the frankly, never one routes to from going

the there's synergies think that to I So continue sure make specific, too -- without ways think us there's before. for getting that I we existed

customer The other simplification the do thing about talk is, look, on work we and business we experience we networks. -- consumer as the the X just better There's on the can legacy consumer can enterprise like copper bring where in on by well. side unifying

have So as I again, would to say this to at But more point. that's share. less more concern follow we a of

is services. QX. do really Nurture and Ethernet. migration VPN bucket to is yet that Nothing migration We point Ethernet plays in many hit. move newer customers not That relates plays specific that, new in those of place, and to VPN help to As it have reality The has to. to what really happened

there nothing you that the say to move point So would focus just have a as quarterly needle. significant of would was more could But we an of that I that's area well. I say blip. it's

Operator

Raymond question comes James. with Frank from Louthan The next

Frank Louthan

on to are expansion products? some your already Can this you tend do those start time you us what over of contracts to go of is creep? see you margins some that then this revenue And see of over faster. you'll frame other idea to what think And wavelengths to on give to the an they're upside and What nature -- the time, annual the some billion? $X the for do potential think telling you relative

Christopher Stansbury

Yes.

for ability And I faster. possible we of go and for conversations why $X still about could are they means So say we're I that and because them. customers nothing this know our share at their again, us. what really us networks go that, these of the our to they because is on to billion, confidence can simply we faster reasons those would the capabilities, in point in calling build much are how here because it's that know

as that's I'm day, willing what they're been Frank. with know share we'll in sorry, us. to It's we a And first And long So it. more, that again? the question something participate was

Frank Louthan

-- Yes, the annual yes.

Christopher Stansbury

yet the disclosing We're point product Yes. where individual details. at we're not

forward, As it's looking we're we at. go something

a with this But probably too But it bit it's it's Nurture, you at below, at early time, we going Grow go early. share what a we're don't ultimately point, that come yet stick we'll of to to and we'll Harvest with think way now. in and for guys. that's different I little looking I think

Operator

Luebchow Your with will come question Fargo. final Eric Wells from

Eric Luebchow

mass So follow-up the business. just on a markets

a to activity a As and this overbuilders. recent from lot deal of -- we've alluded the call, on of private announcements lot

I partner? today, or that think think How copper fiber or opportunity with roughly So does what And at attractive you plan activity million as your by have announcements of homes, some future XX out be how recent those you about think you look at footprint economics? growth competitive to you how could homes. attractive is built either you a

Christopher Stansbury

now. is little more, XX million it's But Yes. million, maybe We've at million there sizable those -- that's potential, again, it's rural. piece so what I think, is that a a said there's Maybe We're a the little X home publicly right reasonable. fairly less. we've X of

the size where fiber And out consolidated. and is that built reality today look there, the being of footprint, to we footprint fiber has at look are the the yet you largest at our So markets. really is attractive asset you the that if be markets fiber are potential

from the we'll go those where So here. see facts, and we are

Eric Luebchow

just that. a Appreciate follow-up. And

is Is consistently You have free year. next flexibility. and think puts cash of more be trying you think just from a touched will of closed lot on now takes of -- to way you about, saying the I'm funding obviously, and kind another into gap here? positive Lumen flow that

flow You talked obviously provide what sales next CapEx about ramping of then kind on EBITDA contributions you of like? the help PCF wildcard from some kind look bit higher any a and of just on PCF directional lower. cash free Presumably, year. could a can But

Christopher Stansbury

for it. $X asking great when we flow. were about mean the the we gap we yes. we said positive I the comes cash that is talked and from answer additional do generating a funding we will it's could the question. you Thank billion, things be The No, with free that cash Yes.

that be of of Because don't thing. to payments there have have where yet of I information that There It's lumpy, share just to of going the but on to flow and be it. statement. the negative, making $X going we received to plan with cumulatively, want the be, to get the the be just be flow advance yes, the and That's tax going really will payments revenue, CapEx really it's billion size takeout tax quantum and the clear enough spent. But could we'll quarter-to-quarter. the to and that, especially pressures cost cash lumpy And impact I It's the confident free be cumulative. on of year-to-year. a with timing in even positive. be we're in CapEx cash one Now free we're could year It's will able lumpy maybe and accordingly. that cash of

Operator

question-and-answer the concludes closing Kate for This the session. to remarks. turn call I'll

Kathleen Johnson

meeting updating story. time the Thanks, you the digging we're everybody, See making. We progress understand at to on soon. and conferences in forward the our to you look for taking significant and unique upcoming you

Operator

joining. conference concludes for call. This today's thank We you

You disconnect. may now

Lumen (LUMN) 5 Nov 242024 Q3 Earnings call transcript