Q4 2021 Lumen Technologies Inc Earnings Call

Okay.

Speaker 1: Greetings and welcome to Lumen Technologies' fourth quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. If at any time during the conference you need to reach an operator, please press star zero.

Greetings and welcome to Lumen technologies fourth quarter 2021 earnings conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.

At any time during the conference you need to reach an operator, Please press star zero.

Speaker 1: As a reminder, this conference is being recorded today, Wednesday, February 9, 2022. It is now my pleasure to turn the conference over to Mike McCormack, Senior Vice President, Investor Relations. Please go ahead.

A reminder, this conference is being recorded today Wednesday February 19, 2022. It is now my pleasure to turn the conference over to Mike Mccormack Senior Vice President Investor Relations. Please go ahead.

Speaker 2: Thank you, France. Good afternoon, everyone. And thank you for joining us to the Loom and Technologies fourth quarter 2021 earnings call.

Thank you, France, good afternoon, everyone and thank you for joining us for the alumina technologies fourth quarter 2021 earnings call. Joining me on the call today are Jeff storey President and Chief Executive Officer, and Neel Dev Executive Vice President and Chief Financial Officer, before we begin I need to call your attention to our safe Harbor statement on slide two of our fourth quarter 2021 presents.

Speaker 2: Joining me on the call today are Jeff Story, President and Chief Executive Officer, and Neil Deave, Executive Vice President and Chief Financial Officer. Before we begin, I need to call your attention to our State Parviz Statement on slide two of our fourth quarter 2021 presentation, which notes that this conference call may include forward-looking statements subject to certain risks and uncertainties.

Asian, which notes that this conference call May include forward looking statements subject to certain risks and uncertainties. All forward looking statements should be considered in conjunction with the cautionary statements on slide two and the risk factors in our SEC filings, we will be referring to certain non-GAAP financial measures reconciled to the most comparable GAAP measures that can be found in our earnings.

Speaker 2: All forward-looking statements should be considered in conjunction with the cautionary statements on slide 2 and the risk factors in our SCC filing.

Speaker 2: We will be referring to certain non-GAAP financial measures reconciled to the most comparable GAAP measures that can be found in our earnings press release.

Speaker 2: In addition, certain metrics discussed today exclude costs for special items as detailed in our earnings materials, all of which can be found on the investor relations section of the Lumen website. With that, I'll turn the call over to Jeff. Good afternoon, everyone, and thank you for joining us.

Press release in addition, certain metrics discussed today exclude costs for special items as detailed in our earnings materials, all of which can be found on the Investor Relations section of the looming website with that I'll turn the call over to Jeff. Good afternoon, everyone and thank you for joining US 2022 brings new beginnings for lumen the team has done.

Speaker 3: 2022 brings new beginnings for Lumen. The team is energized for rapid change as we streamline our assets and aggressively invest to drive growth. I wanna be clear, our focus is on turning our top-line positive with profitable revenue.

Energized for rapid change as we streamline our assets and aggressively invest to drive growth.

To be clear our focus is on turning our topline positive with profitable revenue.

Speaker 3: Every employee in our organization, our sales team, field techs, customer care, support functions is focused on this objective.

Every employee in our organization, our sales team field tax customer care support functions as well.

Focus on this objective and.

Speaker 3: On today's call, I'll provide a few thoughts on our fourth quarter results, an update on our announced transactions, a review of our key capital allocation priorities, and a review of our investment plans, which we believe will position the company for long-term sustainable revenue growth.

On today's call I'll provide a few thoughts on our fourth quarter results and update on our announced transactions a review of our key capital allocation priorities and a review of our investment plans, which we believe will position the company for long term sustainable revenue growth.

Speaker 3: Neil will discuss the 4th quarter in more detail, provide our outlook for 2022 and update expectations for the timing and financial impact of our 2 announced transactions. We'll reserve time after Neil's remarks for your question.

Neil will discuss the fourth quarter in more detail provide our outlook for 2022 and update expectations for the timing and financial impact of our two announced transactions or reserve time after neil's remarks for your questions.

Speaker 3: Our fourth quarter revenue trend was stable compared to the third quarter. And on an organic basis, our business revenue was unchanged from the third quarter. We said previously we do not expect a straight line to revenue growth, but our four indicators provide us confidence that we can achieve our stated long-term goals.

Our fourth quarter revenue trend was stable compared to the third quarter and on an organic basis. Our business revenue was unchanged from the third quarter we saw.

Previously, we do not expect a straight line the revenue growth that our forward indicators provide us confidence that we can achieve our stated long term goals quarterly sales were once again strong in the funnel remains above pre pandemic levels.

Speaker 3: Quarterly sales were once again strong, and the funnel remains above pre-pandemic level.

Speaker 3: The Lumen platform is transforming the way businesses approach their technology needs, bringing best-in-class solutions to enable fourth industrial revolution use cases, and enabling the digital transformation for enterprises.

The women platform is transforming the way business is approached their technology needs, bringing best in class solutions to enable fourth industrial Revolution use cases, and enabling the digital transformation for enterprises.

Speaker 3: enterprises are adjusting to new hybrid workloads, and Lumen, as well as our world-class partners, are delivering the expertise necessary for our customers to succeed.

Enterprises are adjusting to new hybrid workloads and lumen as well as our world class partners are delivering the expertise necessary for our customers to succeed.

Speaker 3: As you can imagine, the excitement within Lumen is high as we position our Quantum Fiber platform for a major acceleration. Our robust, symmetric, all-digital experience is resonating with customers.

As you can imagine the excitement within alumina as high as we position our quantum fiber platform for a major acceleration a robust symmetric all digital experience is resonating with customers.

Speaker 3: Quantum will help drive revenue growth and lower the operating costs for our mass market segments, improving the profitability and durability of the business.

Quantum will help drive revenue growth and lower the operating costs for our mass market segments.

Moving the profitability and durability of the business.

Speaker 3: At the same time, incumbency provides us a meaningful cost advantage as we build and launch new quantum markets and drive penetration gains.

At the same time incumbency provides us a meaningful cost advantage as we build and launch new quantum market and drive penetration gains.

Speaker 3: Our expectation for long-term penetration is fully supported by the strength of the product, as well as the performance in our existing quantum market.

Our expectation for long term penetration is fully supported by the strength of the product as well as the performance in our existing quantum markets.

Speaker 3: Even in our nascent quantum footprint, we have achieved 29% penetration with limited marketing activities, more than doubling the penetration we have in our legacy copper area.

Even in our nascent quantum footprint, we have achieved 29% penetration with limited marketing activities more than doubling the penetration we have in our legacy copper areas.

Speaker 3: As we pivot from micro-targeting to a market-based approach, we expect to be able to attract and retain new and existing customers to our superior product capabilities much more aggressively. The opportunity for quantum is significant. We hope you can feel our excitement for the future of Lumen as we invest to drive enterprise and quantum fiber growth.

As we pivot from micro targeting to a market based approach, we expect to be able to attract and retain new and existing customers to our superior product capabilities much more aggressively.

The opportunity for quantum is significant.

Hope you can feel our excitement for the future of lumen as we invest to drive enterprise and quantum fiber growth.

Speaker 3: Let's shift to a few quick thoughts about our previously announced transaction.

Let's shift to a few quick thoughts about our previously announced transactions. These transactions allow us to focus on the areas of our business that we believe are best poised for growth as you think about the pro forma revenue mix over one third of our mass market exposure to legacy voice and other revenue will be.

Speaker 3: These transactions allow us to focus on the areas of our business that we believe are best poised for growth. As you think about the pro forma revenue mix, over one-third of our mass market exposure to legacy voice and other revenue will be divested.

Speaker 3: Not only does our revenue mix improve, but these transactions also delivered strong valuations, supporting the view that our overall asset portfolio remains deeply discounted by the market.

Divested not only does our revenue mix improve the these transactions also delivered strong valuations supporting the view that our overall asset portfolio remains deeply discounted by the market.

Speaker 3: While we disagree with our current valuation, there's only one way to realize our true market value. Execution. We get it and we're focused on delivering.

While we disagree with our current valuation, there's only one way to realize our true market value execution.

We get it and we're focused on delivering.

Speaker 3: We're making good progress toward closing both deals and you will provide an update on our expected timing and financial impact.

We're making good progress toward closing both deals and ill provide an update on our expected timing and financial impacts we're working to be a strong partner to both <unk> and Apollo as they on board, our employees and customers and as we help position them for success.

Speaker 3: We're working to be a strong partner to both Stone Peak and Apollo as they onboard our employees and customers, and as we help position them for success.

Speaker 3: Last quarter, we provided you our top five capital allocation priorities as we deploy our significant free cash flow and utilize the proceeds from these valuable transactions. I hope I've been clear that investing in growth is always our highest priority and we will invest in both CapEx and OpEx to lay the foundation to achieve our goals. I feel we are in a great position entering 2022.

Last quarter, we provided you our top five capital allocation priorities as we deploy our significant free cash flow and utilize the proceeds from these valuable transactions I hope I've been clear that investing in growth is always our highest priority and we will invest in both capex and opex.

To lay the foundation to achieve our goals I feel we're in a great position entering 2022.

Speaker 3: Let me start with quantum fiber. There's a tremendous amount of activity here at Lumen as we rev up the quantum engine. We are readying the platform to deliver on our plans and remain very confident in our opportunity to deliver the terrific experience provided by quantum to more than 12 million locations over the coming years.

Let me start with quantum fiber, there's a tremendous amount of activity here at lumen as we wrap up the quantum engine. We are readying the platform to deliver on our plans and remain very confident in our opportunity to deliver the terrific experience provided by quantum to more than 12 million locations over the coming years.

Speaker 3: Quantum fiber revenue grew 22% year over year, and we look forward to the growth that will come from our much more aggressive quantum stance. We see a long-term, significant, and sustainable revenue growth opportunity for our mass market business resulting from our quantum fiber industry.

Quantum fiber revenue grew 22% year over year, and we look forward to the growth that will come from our much more aggressive quantum stance, we see a long term significant and sustainable revenue growth opportunity for our mass market business, resulting from our quantum fiber investments.

Speaker 3: As of the end of the 4th quarter, we had approximately 2.6 million enabled locations within the retained 16 states in line with our expectation outlined last quarter.

As of the end of the fourth quarter, we had approximately $2 6 million enabled locations within the retained 16 states in line with our expectation outlined last quarter.

Speaker 3: Our excitement builds as we enter 2022 with our plan to accelerate aggressively and ramp that enablement pace to over 1 million new locations, with a goal of hitting a run rate of 1.5 to 2 million enablements per year as we exit 2022.

Our excitement builds as we enter 2022 with our plan to accelerate aggressively and ramp that enablement pace to over 1 million new locations with a goal of hitting a run rate of 1.5 to 2 million enablement per year as we exit 2022 .

Speaker 3: Our fully funded 2022 Quantum Fiber Plan will enable millions of customer locations to experience our best in breed quantum experience and product capability that we believe will drive higher ARPU, lower turn and significant customer lifetime value.

Our fully funded 20 twenty-two quantum fiber plan will enable millions of customer locations to experience our best in breed quantum experience and product capability that we believe will drive higher <unk> lower churn and significant customer lifetime value.

Speaker 3: We will invest heavily to bring the quantum experience to our customers, especially in the areas of product development, marketing, brand and go-to-market sales initiatives.

We'll invest heavily to bring the quantum experience to our customers, especially in the areas of product development marketing brand and go to market sales initiatives.

Speaker 3: Both enterprise and mass market supply chains are stressed, and we continue working very closely with our diverse and valued suppliers to mitigate risk as we execute on our growth objectives. In addition, we're managing through this inflationary environment, and with some exceptions, do not expect pricing pressures to impede our goals.

Both enterprise and mass market supply chains are stressed and we continue working very closely with our diverse and valued suppliers to mitigate risk as we execute on our growth objectives. In addition, we are managing through this inflationary environment and with some exceptions do not expect pricing.

Pressures to impede our goals.

Speaker 3: Our excitement for quantum fiber is easy to understand, but we are equally excited about our enterprise business as we continue to invest aggressively in our edge compute and storage platforms, our managed service offerings, SASE and our security products.

Our excitement for quantum fiber is easy to understand but we are equally excited about our enterprise business as we continue to invest aggressively in our edge compute and storage platforms, our managed service offerings sassy and our security products.

Speaker 3: Our customers' digital experience across our core networking services is unique and drives success with a customer's first possible.

Our customers' digital experience across our core networking services is unique and drive success with a customer first posture.

Speaker 3: Along those lines, we have successfully launched our fully digital self-service edge compute ordering system, which allows existing and new customers to self-provision services including bare metal and storage solutions in minutes without the need for human interaction.

Along those lines, we have successfully launched our fully digital self service edge compute ordering system, which allows existing and new customers to self provision services, including bare metal and storage solutions in minutes without the need for human interaction.

Speaker 3: We believe our extensive long-haul and dense metro infrastructure and our ultra-low latency, ultra-high capacity network provide cost advantages over many of our competitors and deliver a powerful customer experience.

We believe our extensive long haul and dense metro infrastructure and our ultra low latency ultra high capacity network provide cost advantages over many of our competitors and deliver a powerful customer experience.

Speaker 3: We're seeing early signs that our customers understand that value proposition and our recently announced $1.2 billion network services contract win for the US Department of Agriculture is a great example. As part of this solution, we're delivering secure remote access, managed data, contact center and cloud connectivity solutions to more than 10,000 USDA locations across the country and abroad.

We're seeing early signs that our customers understand that value proposition and our recently announced $1 2 billion dollar network services contract win for the U S Department of Agriculture is a great example, as part of this solution we are delivering secure remote access manage data context.

And cloud connectivity solutions to more than 10000 U S D a locations across the country and abroad.

Speaker 3: Awarded under the $50 billion Enterprise Infrastructure Solutions, or EIS program, the 11-year task order is illustrative of the broad range of products and services offered on the Lumen platform.

Awarded under the 50 billion dollar enterprise infrastructure solutions or E. I S program. The 11 year task order is illustrative of the broad range of products and services offered on the lumen platform. This is a long list, but our services to the USDA include SD Wan and tips.

Speaker 3: This is a long list, but our services to the USDA include SD-WAN, MTIPs, Zero Trust Networking, Edge Computing, VPN, Managed Security, UCAS, Voiceover IP, Ethernet, and Wavelengths, and related equipment and engineering services.

Zero Trust networking edge computing V. P. N managed security Ucas voice over IP, Ethernet and wavelengths and related equipment and engineering services.

Speaker 3: I mentioned earlier that we had another strong sales quarter in 4Q. While the USDA deal highlights our expertise in the public sector, our other sales within North America Enterprise, which do not include public sector, were up both sequentially and year over year. In fact, December was the highest sales month we've seen in several years for this area.

I mentioned earlier that we had another strong sales quarter in for Q, while the U S. D. A deal highlights our expertise in the public sector. Our other sales within North America Enterprise, which do not include public sector were up both sequentially and year over year. In fact December was the highest sales month, we've seen in <unk>.

It'll years for this area.

Speaker 3: Beyond driving growth, we believe returning cash to shareholders is a very important part of the Lumen strategy, and that the $1 per share level is attractive and sustainable long term. As we said, our payout ratio will likely rise in the near term during the accelerated quantum build phase, which we think should be viewed as a discrete project.

Beyond driving growth, we believe returning cash to shareholders is a very important part of the lumens strategy and that the one dollar per share level is attractive and sustainable long term as we've said our payout ratio will likely rise in the near term during the accelerated quantum build phase, which we think should be.

<unk> is a discrete project.

Speaker 3: The completion of the multi-year build phase coupled with our expectation for top line growth should return us to more normalized payout ratios over time.

The completion of the multi year build phase coupled with our expectation for top line growth should return us to more normalized payout ratios over time.

Speaker 3: We will continue to manage our balance sheet to remain relatively leverage neutral through our quantum fiber deployment plan. But we do expect the timeline to reach our target net leverage ratio of 2.75 to 3.25 times adjusted EVA will be extended. To be clear, relatively leverage neutral is inclusive of the impact of not only the transactions but also the CAF2 to ARDOF transition.

We will continue to manage our balance sheet to remain relatively leveraged neutral through our quantum fiber deployment plan, but we do expect the timeline to reach our target net leverage ratio of 2.75 to 3.25 times adjusted EBITDA will be extended to be clear relatively levered.

Neutral is inclusive of the impact of not only the transactions, but also the caf II to Argos transition.

Speaker 3: We will also continue to evaluate our asset portfolio, and I hope our opportunistic but open approach to asset optimization is fully appreciated. Let me be clear, there is no urgency for us to divest additional assets, and we will only pursue opportunities that offer both a compelling valuation and a clear strategic benefit.

We will also continue to evaluate our asset portfolio and I hope our opportunistic but open approach to asset optimization is fully appreciated let me be clear there is no urgency for us to divest additional assets and we will only pursue opportunities that offer both a compelling valuation.

And a clear strategic benefit.

Speaker 3: Lastly, I want to emphasize that we continue to believe our shares are deeply discounted and do not reflect the tremendous opportunity we see for Lumen going forward. Our board remains prepared to authorize further buybacks on short notice if we believe a buyback provides the best and most prudent return for our shareholders.

Lastly, I want to emphasize that we continue to believe our shares are deeply discounted and do not reflect the tremendous opportunity we see for lumen going forward. Our board remains prepared to authorize further buybacks on short notice. If we believe a buyback provides the best and most prudent return for hours.

Speaker 3: With that, I'll turn the call over to Neil to discuss our fourth quarter results. Neil? Thank you, Jeff. And good afternoon. Good afternoon, everyone.

Shareholders.

With that I'll turn the call over to Neil to discuss our fourth quarter results Neil Thank.

Thank you, Jeff and good afternoon, everyone. We are a 2022 with a clear focus on closing two significant transactions and executing on our plans to drive future growth I will begin with our financial summary for 2020 . One we generated adjusted EBITDA of 8.4401 billion in 2021 and on a full year basis.

Speaker 4: We are in 2022 with a clear focus on closing two significant transactions and executing on our plans to drive future growth. I will begin with our financial summary for 2021. We generated adjusted EBITDA of $8.440 billion in 2021 and on a full year basis expanded margins by over 100 basis points year over year. We continue to make progress on our objective of improving revenue trajectory with 4th quarter down 0.8% sequential.

We ended margins by over 100 basis points year over year, we continue to make progress on our objective of improving revenue trajectory with fourth quarter of down 0.8% sequentially.

Speaker 4: When adjusted for foreign currency and the sale of our last remaining correctional facilities business during the quarter, our sequential revenue declined 0.5% in the fourth quarter.

When adjusted for foreign currency and the sale of our last remaining correctional facilities business during the corridor, our sequential revenue decline, 0.5% in the fourth quarter.

Speaker 4: We again delivered solid free cash flow of $3.742 billion. We returned $2.1 billion to our shareholders during the year through quarterly dividend payments in our stock repurchase program.

We again delivered solid free cash flow of 3.742 billion, we returned $2 1 billion to our shareholders during the year through quarterly dividend payments and our stock repurchase program.

Speaker 4: Additionally, we reduced net debt by $1.5 billion during 2021 and exited the year with leverage at 3.6 times.

Additionally, we reduced net debt by 1.5 billion during 2021 and exited the year with leverage at three six times.

Speaker 4: We also announced two significant transactions at very attractive multiples with an aggregate value of over $10 billion. Turning to revenue in the fourth quarter, total revenue declined 5.4% on a year-over-year basis to $4.847 billion. Year-over-year metrics continued to be impacted by COVID-related demand in 2020. On a sequential basis, total revenue declined 0.8% in line with the sequential rate of decline in the third quarter.

We also announced two significant transactions at very attractive multiples with an aggregate value of over $10 billion turning to revenue in the fourth quarter total revenue declined five 4% on a year over year basis to 4.847 billion year over year metrics continued to be impacted by COVID-19 related demand in 2020.

On a sequential basis total revenue declined 0.8% in line with the sequential rate of decline in the third quarter.

Speaker 4: Business revenue in the fourth quarter declined 0.4% sequentially. On a year-over-year basis, revenue declined 4.7% to $3.494 billion. Normalizing for foreign currency headwinds and the sale of our correctional facilities business, sequential revenue was flat and declined 4.3% on a year-over-year basis.

Business revenue in the fourth quarter declined 0.4% sequentially on a year over year basis revenue declined four 7% to 3.494 billion normalizing for foreign currency headwinds and the sale of our Correctional facilities business sequential revenue was flat and declined four 3%.

On a year over year basis.

Speaker 4: Within business, IDM revenue declined 0.2% sequentially and 1.5% on a year-over-year basis. On a constant currency basis, IDM grew 0.6% sequentially and declined 1% year-over-year.

Within business I game revenue declined 0.2% sequentially and 1.5% on a year over year basis on a constant currency basis, I Damn group, 0.6% sequentially and declined 1% year over year.

Speaker 4: The year-over-year decline was due primarily to the large customer disconnect, which I have referenced on previous calls.

The year over year decline was due primarily to the large customer disconnect, which I have referenced on previous calls we saw sequential benefits from compute and application services, which was driven by managed security and cloud services.

Speaker 4: We saw sequential benefits from compute and application services, which was driven by managed security and cloud services.

Speaker 4: Within Large Enterprise, in the fourth quarter, we sold the remainder of our correctional facilities communication services business. The sale of this business at the end of October impacted revenue by about $7 million in the fourth quarter, and the impact on a four-quarter basis would have been about $10 million.

Within large enterprise in the fourth quarter, we sold the remainder of our Correctional facilities communication services business. The sale of this business at the end of October impacted revenue by about 7 million in the fourth quarter and the impact on a full quarter basis would have been about $10 million.

Speaker 4: Normalizing for this cell, large enterprise declined 0.3% sequentially and declined 5.9% on a year-over-year basis. We had strength sequentially in computer and application services driven by our IT solutions in cloud services.

Normalizing for this sell large enterprise declined <unk>, 3% sequentially and declined five 9% on a year over year basis, we had strength sequentially in computer and application services driven by our our I T solutions and cloud services.

Speaker 4: year-over-year trends were impacted by the surge in COVID-related usage in 2020 and the timing of non-recurring revenues in our public sector channels.

Year over year trends were impacted by the surge in COVID-19 related usage in 'twenty 'twenty and the timing of nonrecurring revenues in our public sector channel.

Speaker 4: Mid-market enterprise declined 0.2% sequentially and 7.1% on a year-over-year basis, with both measures showing improvement compared to the third quarter.

Mid market enterprise declined 0.2% sequentially and seven 1% on a year over year basis, with both measures showing improvement compared to the third quarter.

Speaker 4: Wholesale revenue was essentially flat on a sequential basis and year-over-year declined 4.3% versus the 7% decline in the third quarter. Wholesale benefited from demand for fiber infrastructure and a few one-time items. We continue to manage this business forecast.

Wholesale revenue was essentially flat on a sequential basis and year over year declined four 3% versus the 7% decline in the third quarter wholesale benefited from demand for fiber infrastructure and a few onetime items. We continue to manage this business for cash.

Speaker 4: Computer and application services for enterprise channels grew 3.9% sequentially, showing growth across all channels, but declined 2.2% year over year.

Computer and application services for enterprise channels grew three 9% sequentially showing growth across all channels, but declined two point and 2% year over year.

Speaker 4: The year-over-year decline is primarily driven by the previously mentioned large iGame customer disconnect. IP and data services for enterprise channels decline both sequentially and year-over-year due to fewer new VPN network deployments.

The year over year decline is primarily driven by the previously mentioned large IBM customer disconnect IP and data services for enterprise channels declined both sequentially and year over year due to fewer new VPN network deployments. We saw continued increased demand for IP in the fourth quarter.

Speaker 4: We saw continued increased demand for IP in the fourth quarter as customers transitioned to SD-WAN in a hybrid work environment.

As customers transition to SD Wan and hybrid work environments.

Speaker 4: Fiber infrastructure services for enterprise channels declined 2.6% sequentially and 2.4% year over year. These products have significant professional services and equipment related to complex network deployment.

Fiber infrastructure services for enterprise channels declined two 6% sequentially and two point and 4% year over year. These products have significant professional services and equipment related to complex network deployments.

Speaker 4: The sequential and year-over-year revenue variability is driven primarily by these nonrecurring services.

The sequential and year over year revenue variability is driven primarily by these nonrecurring services.

Speaker 4: The voice and other services, which include our legacy services, decline both sequentially and on a year-over-year basis as we manage these areas for CAC.

The voice and other services, which include our legacy services declined both sequentially and on a year over year basis as we manage these areas for cash voice comparisons continued to be impacted by a higher COVID-19 related usage in the year ago quarter.

Speaker 4: Voice comparisons continue to be impacted by higher COVID-related usage in the year of a quarter.

Speaker 4: Turning to mass markets, fourth quarter 2021 revenue declined 1.9% sequentially. As our mass markets fiber broadband revenue grew 22% year over year this quarter.

Yeah.

Turning to mass markets fourth quarter, 2021 revenue declined 1.9% sequentially, our mass markets fiber broadband revenue grew 22% year over year this quarter.

Speaker 4: During the quarter, we added 29,000 Quantum Fiber customers, up from 25,000 ads in the prior year 4th quarter.

During the quarter, we added 29000 quantum fiber customers up from 25000 adds in the prior year fourth quarter.

Speaker 4: Turning to adjusted EBITDA, for the fourth quarter 2021, adjusted EBITDA excluding special items was 2.088 billion compared to 2.188 billion in the year ago quarter. Special items this quarter totaled 19 million and were related primarily to transaction and separation activities. We continue to drive healthy EBITDA margins during the quarter growing by about 40 basis points year over year to 43.1%.

Turning to adjusted EBITDA for the fourth quarter of 2021 adjusted EBITDA, Excluding special items was 2.088 billion compared to 2.188 billion in the year ago quarter special items. This quarter totaled $19 million and were related primarily to transaction and separate.

Asian activities, we continue to drive healthy EBITDA margins during the quarter growing by about 40 basis points year over year to 43, 1%.

Speaker 4: Capital expenditures for the fourth quarter 2021 were $848 million.

Capital expenditures for the fourth quarter of 'twenty, 'twenty, one where $848 million.

Speaker 4: While we continue to focus on capital efficiencies, capital spending was up both sequentially and year over year as we increased success-based spending and invested in the accelerated quantum fiber build plan.

While we continue to focus on capital efficiencies capital spending was up both sequentially and year over year as we increased success based spending and invested.

In the accelerated quantum fiber build plan.

Speaker 4: We expect capital expenditures to increase going forward as our Quantum Fiber Builds ramp.

We expect capital expenditures to increase going forward as our quantum fiber build ramps in.

Speaker 4: in the fourth quarter of 2021, the company generated free cash flow of $776 million.

In the fourth quarter of 2020 , one the company generated free cash flow of $776 million.

Speaker 4: At the beginning of each year, we evaluate our external reporting and make adjustments to better align our financial reporting with management focus and drivers of our business.

At the beginning of each year, we evaluate our external reporting and make adjustments to better align our financial reporting with management focus and drivers of our business.

Speaker 4: In 2022, we are adjusting our mass markets product revenue reporting categories to fiber broadband, other broadband and voice on audio.

In 2022 we are adjusting our mass markets product revenue reporting categories do fiber broadband other broadband and voice and other.

Speaker 4: The two key reasons for these changes are the increasing importance of our quantum fiber platform and the completion of the CAF2 program.

The two key reasons for these changes are the increasing importance of our quantum fiber platform and the completion of the Caf II program.

Speaker 4: Given its relatively small impact, the RDOF subsidy revenue will be included in the voice another category in our new reporting structure.

Given its relatively small impact the art of subsidy revenue will be included in the voice another category in our new reporting structure.

Speaker 4: We do not contemplate making any additional changes to our reporting at this time.

We do not contemplate making any additional changes to our reporting at this time.

Speaker 4: Moving on to the business outlook for 2022. As we focus on portfolio rationalization and transforming the business, we will have several moving pieces that will complicate year-over-year comparability. Before I get into financial guidance, I will touch on some of those back...

Moving on to the business outlook for 2022.

As we focus on portfolio rationalization and transforming the business. We will have several moving pieces that will complicate year over year comparable <unk>.

Before I get into financial guidance I will touch on some of those factors first of all as a reminder, the caf II subsidy ended in 'twenty, 'twenty, one which will impact year over year adjusted EBITDA by about $500 million.

Speaker 4: First of all, as a reminder, the CAF II subsidy ended in 2021, which will impact year-over-year adjusted EBITDA by about 500 million.

Speaker 4: The two divested assets are expected to generate about 1.7 billion of EBITDA with capital spending of about 450 million in 2022.

When combined.

The two divested assets are expected to generate about 1.7 billion of EBITDA with capital spending of about $450 million in 2022 .

Speaker 4: We now expect the transactions to close in early third quarter of this year.

We now expect the transactions to close in early third quarter of this year.

Speaker 4: For simplicity of guidance, we have assumed first half results are included in our consolidated results. At this point, we don't expect deal close related timing variance to be material.

For simplicity of guidance, we have assumed first half results are included in our consolidated results. At this point, we don't expect deal close related timing variance to be material.

Speaker 4: For the full year 2022, we expect adjusted EBITDA to be in the range of $6.5 billion to $6.7 billion.

For the full year 2022, we expect adjusted EBITDA to be in the range of $6 5 billion to $6 7 billion.

Speaker 4: When bridging to our 2022 full year adjusted EBITDA guidance, in addition to the obvious CAF II completion and divested business EBITDA, there are a few other drivers to keep in mind.

When bridging to our 2022 full year adjusted EBITDA guidance. In addition to the obvious Caf II completion and divested business EBITDA. There are a few other drivers to keep in mind.

Speaker 4: As Jeff mentioned, we have significantly stepped up our investments in growth initiatives for enterprise and scaling our quantum fiber business. As for the divestitures, we will have separation costs and disenergies which will impact near-term results.

As Jeff mentioned, we have significantly stepped up our investments in growth initiatives for enterprise and scaling our quantum fiber business as for the divestitures, we will have separation costs and dis synergies, which will impact near term results.

Speaker 4: As we prioritize growth initiatives and supporting our divestitures in 2022, we expect our transformation savings to be lower than prior years.

As we prioritized growth initiatives and supporting our divestitures in 2022 we expect our transformation savings to be lower than prior years.

Speaker 4: For the full year 2022, we expect total capital expenditures in the range of $3.2 billion to $3.4 billion. Within that, we expect to spend about a billion dollars of capital on quantum during 2022.

For the full year 2022 we expect total capital expenditures in the range of $3 2 billion to $3 4 billion within that we expect to spend about $1 billion of capital on quantum during 2022 .

Speaker 4: We expect to generate free cash flow in the range of $1.6 billion to $1.8 billion for the full year 2022. For 2022, we do not have any required contributions to the pension fund and our free cash flow guidance does not include any discretionary contributions to the pension fund.

We expect to generate free cash flow in the range of $1 6 billion to $1 8 billion for the full year 2022.

For 2022 we do not have any required contributions to the pension fund in our free cash flow guidance does not include any discretionary contributions.

Speaker 4: As a reminder, our first quarter typically has higher working capital use driven by timing of bonus payments and other prepaid expenses.

As a reminder, our fourth quarter typical typically has higher working capital use driven by timing of bonus payments and other prepaid expenses.

Speaker 4: We expect net cash interest expense in the range of 1.3 billion to 1.4 billion for 2022. As Jeff mentioned, we expect to stay leverage neutral as we close the transactions and scale our quantum fiber business.

We expect net cash interest expense in the range of $1 3 billion to $1 4 billion for 2022 as Jeff mentioned, we expect to stay leverage neutral as we close the transactions and scale, our quantum fiber business.

Speaker 4: In terms of special items for 2022, we expect a significant ramp up in costs compared to prior years primarily driven by dedicated third-party costs to support transition services for the CSI Invitation Unit pulse service.

In terms of special items for 2022 we expect a significant ramp up in costs compared to prior years, primarily driven by dedicated third party costs to support transition services for the divestitures.

Speaker 4: The reimbursement for these services will be in other income with no material net impact to our cash flows.

The reimbursement for these services will be in other income with no material net impact to our cash flows.

Speaker 4: In closing, 2022 is all about executing on our growth initiatives for the Enterprise Lumen platform and scaling our quantum fiber business that fuel our return to growth. As a reminder, in addition to free cash flow generated from the business, we expect about 7 billion in discretionary cash proceeds.

In closing 2022 is all about executing on our growth initiatives for the enterprise lumen platform and scaling our quantum fiber business that fuel our return to growth as a reminder, in addition to free cash flow generated from the business. We expect about 7 billion in discretionary cash proceeds.

Speaker 4: from the transactions after the transfer of debt in transaction.

From the transactions after the transfer of depth and transaction costs the.

Speaker 4: the combination of free cash flow from the business and proceeds from portfolio rationalization efforts.

The combination of free cash flow from the business and proceeds from portfolio rationalization efforts.

Speaker 4: support our capital allocation priorities that Jeff highlighted. With that, I'll stop there.

Support our capital allocation priorities that Jeff highlighted.

With that we are ready for your questions.

Speaker 1: Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a 3-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw, please press the 1 followed by the 3.

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Speaker 1: Our first question is from the line of Michael Rollins with Citi. Please go ahead.

Our first question is from the line of Michael Rollins with Citi. Please go ahead.

Speaker 5: Thanks and good afternoon. As you're thinking about

Thanks, and good afternoon as you think.

Speaker 5: the opportunities in 2022 to improve revenue with some of the priorities you mentioned earlier in the call. Just curious, as you look at the charts on page 6 and 7 that kind of lay out the year-over-year changes in revenue versus the sequential changes in revenue, where should investors focus more in trying to think about the evolution of performance? Is this sequential?

About.

The opportunities in 2020 Qt improved revenue.

Some of the priorities you mentioned earlier in the call just curious as you look at the chart on page six and seven that kind of lay out the year over year changes in revenue.

Sequential changes in revenue.

Where should investors focus more and trying to think about the evolution of performance is the sequential.

Speaker 5: much more relevant or is the year over year as sometimes, you know, beginning of the year you have price changes and other, you know, annual updates to, you know, your customers and your sales. And then just separately one housekeeping item, I think there was a mention earlier that in wholesale there were some one-time items. Just curious if you can unpack the amount of those one-time items impacting the wholesale revenues. Thanks.

Much more relevant or as the year over year and sometimes you know beginning of the year you have price changes another.

Annual update to your customers and your sales and then just separately one housekeeping item I think there were some mentioned earlier that your wholesale there were some one time items and just curious if you can unpack the amount of those one time items impacting the wholesale revenues.

Speaker 4: Sure, so I'll start with the wholesale one time. You know, in the wholesale channel, you always have carrier settlements and things like that. So there's always one time, but just stepping back roughly, you know, 10, 15 million more than what we typically see. That's wholesale.

Sure.

I'll start with the wholesale one time you know in.

The wholesale channel you always have.

Already our settlements and things like that.

So theres always one time, but just stepping back roughly 10 to 15 million more than what we typically see so that's that's wholesale.

Speaker 4: In terms of your question on sequential versus year over year.

In terms of your question on <unk>.

Shell versus year over year.

Speaker 4: In 2020, obviously, we had a fair amount of revenue driven by COVID in our legacy services.

In 2020, obviously, we had a fair amount of revenue.

Driven by Covid in our legacy services, so going forward I think sequential.

Speaker 4: So going forward, I think sequential and both sequential and year over year are going to become more meaningful. Having said that, as you highlighted, first quarter we always tend to have some large re-dates, etc. Nothing specific to highlight, but that is generally when we have some contract re-date pressure, etc., and fourth quarter tends to be seasonally strong. So we will have a little bit of that seasonality.

Both sequential and year over year are going to become more and more meaningful.

Having said that as you highlight at fourth quarter, we always tend to have you know some large rebates etcetera nothing specific to highlight but generally when we have some contract rebate pressure et cetera in fourth quarter tends to be seasonally strong. So we'll have a little bit of that seasonality.

Speaker 4: But other than that, nothing specific to call out. The other thing I'll highlight is, Jeff touched on that in his remarks, is as we close the transactions, the mix will significantly improve. So there is a fair amount of voice and other legacy revenue.

But other than that nothing nothing specific to call out.

The other thing I'll highlight.

Jeff touched on that in his remarks is as we close the transactions.

The mix will significantly improve so there is a fair amount of voice and other legacy revenues that move with the transaction so that will be a positive impact.

Speaker 4: that move with the transaction so that that will be a positive impact in terms of the next going forward.

In terms of the Mexican going forward.

Thanks.

Speaker 1: Our next question is from Eric Lutko with Wells Fargo. Please go ahead.

Thanks, Michael.

Our next our next question is from Eric <unk> with Wells Fargo. Please go ahead.

Hi, Thanks for taking the question.

Speaker 2: Quickly, I just wanted to talk about the capital allocation priorities. Obviously your dividend coverage on free cash flow is tightening this year as you ramp up fine fiber spending. And beyond this year, as you ramp that up even more, wondering if that will even be fully covered. And if it's not, how should we think about the split between one-time fiber expansion, CapEx versus recurring capital intensity in the business and how we should think about that.

Quickly I just wanted to talk about.

The capital allocation priorities, obviously your dividend coverage on free cash flow is tightening this year as you ramp up find fiber spending.

And beyond this year as you ramp that up even more wondering if that will even be fully covered and if it's not how should we think about the split between one time fiber expansion capex versus recurring capital intensity in the business and how we should think about that through the investment cycle and then second.

Speaker 2: through the investment cycle. And then second, I just wanted to get a sense, Neil, if you could help size up some of the costs, the synergies. I think if you take out the.

Second I just wanted to get a sense Neil if you could help size up some of the.

Cost dis synergies I think if you take out the.

Speaker 2: the 500 million of CAP-2 and the divested assets, the half year contribution, you get to about 7 billion of EBITDA on your guide is for about 400 million decline from that level for the full year. So just wondering how we should think about how those impact the outlook for the full year. Thank you.

The $500 million of Caf II and the divested assets a half year contribution you get to about 7 billion of EBITDA in your guidance is for about $400 million.

Decline from that level for the full year. So just wondering how we should think about the how those impact your outlook for the full year. Thank you.

Speaker 3: Sure. Eric, I'll take the first part and then let Neal take the second.

Sure Eric I'll take the first part and then but Neil.

It takes a second question.

Speaker 3: You know, as we look at the dividend and the payout ratio, and I've said this before, we think that the dividend is an important part of our shareholder value proposition. We think the dollar per share is attractive to the stock market.

As we look at the dividend and the payout ratio and I've said this before we think that the dividend is an important part of our shareholder value proposition. We think the dollar per share is attractive to investors and it's sustainable. So so we're very comfortable with the dividend there.

Speaker 3: investors and it's sustainable. So we're very comfortable with the dividend there. I've also said that in 2022, in the next few years, we are going to be investing in growth. And you mentioned quantum fiber and with the quantum fiber build.

Also said in 2022 in the next few years, we are going to be investing in growth and you've mentioned quantum fiber and with the quantum fiber build we think that that should be viewed as a discrete project that starts already and ends in a few years as we complete the 12 million.

Speaker 3: We think that that should be viewed as a discrete project that starts

Speaker 3: already and ends in a few years as we complete the 12 million enablements that we expect over the coming years. We also expect to return to top line revenue growth and with those two things, while we do see the payout ratio rising in the near term, with those two things we think that it will return to more normal levels over time.

Moments that we expect over the coming years, we also expect to return to topline revenue growth and with those two things while we do see the payout ratio rising in the near term with those two things I said, we think that it will return to more normal levels over time.

Speaker 4: So Eric, on your question on disenergies, I think just to step back a little bit, and if you think about the transaction EBITDA, those are deal basis EBITDA if you will, so we have allocated costs for shared function, etc.

So on your question on Dis synergies I think just to step back a little bit.

And if you think about the transaction EBITDA those are deal basis EBITDA. If you will so we have allocated cost for shared function et cetera, and so it's a little bit of a moving target in terms of we know what they are going to be but we're already working on right sizing those costs will continue to do so.

Speaker 4: And so it's a little bit of a moving target in terms of we know what they are going to be, but we're already working on right sizing those costs, so as we go.

As we as we go forward.

Speaker 4: And another thing I mentioned is that there is also a little bit of an opportunity cost.

And the other thing I mentioned.

Is that there is also a little bit of an opportunity cost in 2022, yeah. As we focus on the separation of the business and as we focus on all the investments for growth just think about our I T and resources, we are not focused as much on transformed.

Speaker 4: in 2022 as we focus on the separation of the business and as we focus on all the investments for growth.

Speaker 4: just think about our IT resources, we are not focused as much on transformation.

Speaker 4: And so our savings will be a little lighter and so we factored all of that into the guidance, but the savings don't go away and so we'll continue to focus on our transformation savings and we'll be able to continue to focus on driving those costs out of the business.

Asia.

And so our savings will be a little lighter.

And so we factored all of that into the guidance, but the savings don't go away.

And so we'll continue to focus on our transformation savings.

And we will be able to.

I'll continue to focus on driving those costs out of the base business.

Alright, thanks, guys.

Thanks, Eric next question.

Speaker 1: Our next question is from Simon Flannery with Morgan Stanley . Please go ahead.

Our next question is from Simon Flannery with Morgan Stanley . Please go ahead.

Speaker 6: Great, thank you. Good evening. So good to hear on the quantum fiber revenue growth.

Yeah.

Great. Thank you good evening, so good to hear on the quantum fiber revenue growth and the build plans I guess on the build plans should we think about the you're doing I think you did 400000. This year should we think about the $1 million this year as being fairly linear or.

Speaker 6: and the build plans. I guess on the build plans, should we think about the you're doing, I think you did 400,000 this year, should we think about the 1 million this year as being fairly linear or is it still very much second half loaded I guess to get to that you know one and a half to two million.

Is it still very much second half loaded I guess to get to that you know when and after 2 million I guess the question is why not go faster. We've obviously seen you know the infrastructure Bill Award a lot of funding we've seen fixed wireless gained some traction here. So if you see the opportunity here.

Speaker 6: I guess the question is why not go faster? We've obviously seen the infrastructure bill award a lot of funding.

Speaker 6: fixed wireless gain some traction here. So if you see the opportunity here, you've got obviously a lot of homes with potential.

You've got obviously a lot of homes.

With potential so.

Speaker 6: What's keeping you from accelerating that pace?

What's the what's keeping you from from accelerating that pace and then Neil just one on taxes I saw you highlighting I think $100 million of cash taxes, but what is what should we be thinking about run rate cash taxes. Once the transactions are complete.

Speaker 6: And then Neil, just one on taxes. I saw you highlighting, I think, 100 million of cash taxes, but what should we be thinking about run rate cash taxes once the transactions are complete in terms of the ongoing, as a sort of a full taxpayer? Does that go up a few hundred million as we get out of 22 into 23? Thanks.

In terms of the ongoing.

You know as as a sort of a full taxpayer does that go up a few hundred million as we get out of 'twenty two into 'twenty three thanks.

Speaker 3: So Simon on the build plan for quantum fiber, it's not going to be linear. It takes a while to ramp these capabilities, to ramp, to do the engineering, to make sure that we've got the construction resources in place. So it's not going to be linear, but it's not going to be fully back in loaded either. We're already at a pace of, call it 500,000 homes, 400,000, 500,000 homes.

So Simon out of the build plan for quantum fiber, it's not going to be a linear it takes a while to ramp these capabilities to ramp to do the engineering to make sure that.

Got the construction resources in place so it's not going to be linear, but it's not going to be fully backend loaded ether.

We're already at a pace of call it 500000 homes.

400000, and 500000 homes.

Speaker 3: and business locations. So there's going to be that as a starting point, but we'll get to the full million toward the end of the year, obviously. So it's a little back and loaded, but not substantially. That keeps us from going faster.

And business locations, so there's going to be that as a starting point.

It will get to the 4 million towards towards the end of the.

The year obviously.

So so it's a little backend loaded but not substantially.

What keeps us from growing faster this is hard work.

Speaker 3: It's hard work. There's a lot of things to do. We want to make sure that we do it right. We're exceptionally good at building networks.

Hard work, there's a lot of things to do we want to make sure that we do it right. We're exceptionally good at building networks.

Speaker 3: And we will continue to do that with the quantum fiber build. But there's hard work. And we also have supply chain challenges. And I mentioned that in the prepared remarks.

And we will continue to do that.

With with the quantum fiber build that there's hard work and we also have supply chain challenges.

And I mentioned that in the in the prepared remarks, I don't want to overemphasize it, but it's an issue and we see it with equipment vendors and their chips in them getting access to chips.

Speaker 3: I don't want to overemphasize it, but it's an issue. And we see it with equipment vendors and their chips and them getting access to chips.

Speaker 3: So we'll continue to manage that, but that's also a constraining factor on how to accelerate faster. Now the main point is we want to accelerate to a point of one and a half million to two million homes by the end of the year. So we want to be on that run rate finishing the year and going into 2023. And that's really a large effort to make sure that we do go as fast as we possibly can.

So we'll continue to manage that.

But that's also a constraining factor on on how to accelerate faster now that is the main point is we want to accelerate to a point of one and a half million to 2 million homes by the end of the year. So we want to be on that run rate, finishing the year and going into 2023.

And that's really.

A large effort to make sure that we do go as fast as we possibly can.

Speaker 4: Neil, do you want to take the cash taxes? Yeah, Simon, on cash taxes, as we've mentioned before, we'll use up most of the substantial part of the NLOs. This year, a combination of our operating income and the transaction...

Neil do you want to take the cash taxes.

Simon on on cash taxes, as we've mentioned before we will use up most of the substantial part of the Nols.

This year, a combination of our operating income and the transactions and you can see that $100 million that we guided to this year is fairly close to what it has been in the past, but going forward. A good assumption is our cash taxes will be fairly close to ours.

Speaker 4: And you can see that 100 million that we guided to this year is fairly close to what it has been in the past. But going forward, a good assumption is our cash taxes will be fairly close to our GAAP taxes. And at this point, the 26% effective rate is probably a pretty good assumption. Great.

GAAP taxes and.

At this point that 26% effective rate is probably a pretty good assumption.

Great. Thanks, a lot.

Thanks, Simon next question Chris.

Speaker 1: Our next question is from Phil Cusick with the JP Morgan. Please go ahead.

Our next question is from Phil Cusick with J P. Morgan. Please go ahead.

Hey, guys.

Speaker 5: Forgive me if we just sort of go back to this, but I wanted to talk about the sort of CapEx pace and that acceleration into the back half. You've talked in the past about other projects like network transformation that wouldn't need to be done this year as an offset. And so I wanted to sort of quantify what that reduction might be.

Forgive me if we just sort of go back to this but I wanted to talk about the sort of capex pace and that acceleration into the back half you've talked in the past about their.

Are there projects like network transformation that wouldn't need to be done this year is an offset.

And so I wanted to sort of quantify what that reduction might be as.

Speaker 2: As we think about the growth in fiber spending this year, and the pace that we're going to exit as we start to think about 23 CapEx. Can you help us with that?

How should we think about the growth in fiber spending this year and the piece that we're going to exit as we start to think about about 'twenty. Three capex can you help us with that thanks, Yes, let me take a first pass it and then let neill.

Speaker 3: Yeah, let me take a first pass and then let Neil.

Speaker 3: I don't want to get into discrete projects that we're funding and not funding, but let me give you a spin.

Add to it.

I don't want to get into the script to discrete projects that we're funding enough funding, but let me give you a sense of the Capex and what we found.

Speaker 3: of the CapEx and what we fund. There is a certain amount of capital that we call just ongoing operational capital, keep the lights on type stuff.

There is a certain amount of cap capital that we call them.

Yeah, just ongoing operational capital keeps a lifetime type stuff.

Speaker 3: But the majority of our capital funding is success based or project based.

But the majority of our capital funding is success based or project based and the project based things that we've talked about in 2021, we spend a lot of money.

Speaker 3: And the project-based things that we've talked about in 2021, we spent a lot of money on edge computing, building a coverage model for edge computing. We finished the year with more than 95% of our U.S. enterprises within five milliseconds on Resort junk o

On the edge computing building our coverage model for edge computing, we finished the year with 90 more than 95% of our U S enterprises within five milliseconds.

Speaker 3: of our footprint. We're not going to spend that money again next year. Now what I hope we do, or this year in 2022, what I hope we do is continue to densify the equipment in those locations because that means we're being successful in selling our products and services. So we spend a substantial amount of money on that success-based stuff.

Of our of our footprint, we're not going to spend that money again next year now what I hope we do this.

This year in 2022, but I hope we do is continue to densify the equipment in those locations because that means we're being successful in selling our products and services. So we spend it.

A substantial amount of money on that success based.

Speaker 3: Quantum fiber, we spent money to enable 400,000 homes in 2021. We will spend money to enable a million homes and get to the run rate that I talked about in answering Simon's question. We'll continue to spend on that project and really focus there. Beyond that, we manage projects in and out. We're not, we're not.

On fiber, we spent money to enable 400000 homes in 2021, we will spend money to enable a million homes and get to the run rate that I talked about in answering Simon's question. We will continue to spend on that project in and really focus there beyond that we.

We manage projects in and out we're not we're not.

Speaker 3: starving anything to do those activities. We're investing heavily in growth. And I say that on CapEx, I also say it on OpEx. We're investing heavily in growth on OpEx to make sure that we have the product capabilities, to make sure that we have the go-to-market strategy, the brand awareness, all of the things that go into effective selling. We're seeing with the results in the fourth quarter, we're seeing all of that continuing to benefit the company.

Starving anything to do those activities, we are investing heavily in growth and I say that on Capex I also say it on Opex, we're investing heavily in growth on opex to make sure that we have the product capabilities to make sure that we have the go to market strategy. The brand awareness all of the things that go into effective.

We're seeing with our results in the fourth quarter, we're seeing all of that continuing to benefit the company.

Speaker 4: Yeah, just to underline the if I could follow up.

Yeah, just to underline the if I can follow up sorry.

Speaker 4: Just to underline the point that you have made on we're not constraining anything.

And then just to underline the point that Jeff made.

We're not constraining anything.

Speaker 4: I mentioned in my prepared remarks that we have about a billion for quantum fiber.

I mentioned in my prepared remarks that we have about 1 billion for quantum fiber.

Speaker 4: in the capital guidance that we provided.

And the capital guidance that we provided.

Speaker 4: and to the extent that we can scale faster, if you look at the combination of our free cash flow and EO adipate,

To the extent that we can scale faster.

You look at the combination of our free cash flow at El <unk>.

Speaker 4: we can easily ramp up more spending for quantum fiber. That won't be the constraint. The constraint really is gonna be mundane things like permitting, construction, getting it built, and those are the things that we're focused on scaling. And if we can scale those things, and that means we end up spending more, I think we'll lean into it.

We can easily ramp up more spending for quantum fiber that wont be the constraint. The constraint really is gonna be mundane things like permitting construction getting it built and those are the things that we're focused on scaling and if we can scale those things and that means we end up spending more I think we will lean into it.

Speaker 3: And just one other follow-up comment, Phil, and then you can ask your follow-up questions.

And just one other follow up comment.

Ask your follow up questions.

Speaker 3: In the meantime, we're focused on our existing 2.6 million enablements that we have and driving penetration in those. We're at about 29% penetration, but that includes homes that we just turned up last month. We want to make sure that we continue to focus on driving the penetration in the existing 5s.

In the meantime, we are focused on our existing $2 6 million.

Enablement that we have in driving penetration in nuts and worry.

At around 29% penetration, but that.

Includes homes that we just turned up last month.

Wanted to make sure that we continue to focus on driving the penetration in those existing in the existing footprint.

Speaker 7: Thanks. If I can just follow up quickly. And again, I'm trying to think of the exit run rate this year. You've talked about the exit run rate in builds, but also I'm thinking about CapEx. I mean, it seems like there could be another another 700 to a billion dollars of CapEx next year in fiber in quantum.

Yeah.

If I can just follow up quickly and again I'm trying to think of the exit run rate. This year, you've talked about the exit run rate in and builds but also I'm thinking about capex.

It seems like there could be another.

$700 1 billion of.

Capex next year in fiber and quantum.

Speaker 7: Are there other projects that are still happening this year that we could think about sort of dropping away or should we think about next year being sort of the the peak of capex on

Is it are there other projects that are still happening this year that we could think about sort of dropping away.

Or should we think about next year being sort of at the peak of Capex.

Quantum.

Okay.

Speaker 4: So Phil, I think the key point there is, you know, our plan, like Jeff said, on capital is dynamic. So it's not the same priorities that we support every year.

So I think the key point there is.

Our plan like Jeff said on capital is dynamic so it's not the same priorities that we support every year.

Speaker 4: So for example, on Edge, a lot of the investments we made, the step function investments I would say were more in 2020. And this year it's more success-based at a much lower intensity.

So for example on the a lot of the investments we've made the step function investments I would say where are.

You know more in 2020.

In this year and it's more success based on at a lower much lower intensity.

Speaker 4: So without getting into specifics around 2023, I think you're right, quantum will ramp up. We do view that as a discrete project, but the rest of the plan will be dynamic and will be successful.

So without getting into.

Specifics around 2023, I think youre right quantum we'll ramp up we do view that as a discrete project, but the rest of the plan will be dynamic and will be success based.

Okay. Thanks, Tim.

Thanks, Bill next question.

Speaker 1: Our next question is from David Barden with the Bank of America. Please go ahead.

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

Speaker 8: Hey guys, thanks so much for taking the questions. I guess the first one would be, Neil, if you could kind of give us any color about the revenue that we need to be taking out of the model when we're thinking about the second half of the year alongside some of the stuff you've shared on the EBITDA, the cash flow side. And then the second question, I guess, Jeff, is if we take that one seven...

Hey, guys. Thanks, so much for taking the questions I guess.

The first one would be Neil if you could kind of give us any color about the revenues.

That we need to be taking out of the model when we're thinking about the second half of the year.

Alongside some of the some of the stuff you've shortly are shared on the EBITDA the cash flow side.

And then the second question I guess.

Jeff is if we take that one 7 billion.

Speaker 8: billion minus the 450 capex and divided it in half at $625 million and then subtract that from the free cash flow guidance. It says that the kind of second half of the year, the dividend is barely covered, maybe a little covered. You talked about buybacks being in the mix with the board. I was wondering if you could kind of elaborate on that a little bit, but where that money would come from. Would you lever up to buyback stock if it got to that point? That'd be helpful. Thank you.

Billion minus the 450, Capex and divide it in half at 625 million and I subtract that from the free cash flow guidance.

It says that the kind of second half of the year.

The dividends barely covered maybe a little covered you talked about buybacks being in the mix with the board I Wonder if you could kind of elaborate on that a little bit about where that money would come from would you would you lever up to buy back stock if it if it got to that point there would be helpful. Thank you.

Speaker 3: Let me do this. The second question first. I'm not going to, you know, sorry, there's going to be an unfulfilling answer, David. I'm not going to speculate on what the board might decide and how we might decide to do it. I am.

Let me do that.

Second question first.

I'm not going to sell.

This is gonna be Unfulfilling answer David.

Thank you laid on on what the board might decide and how we might decide to do it.

I am.

Speaker 3: very clear, I hope I'm very clear, on the priorities for our capital allocation and the first one being investing in growth. So as we look at the CapEx, we are very committed to investing in quantum fiber. We are very committed to investing in SASE and IT solutions and edge computing and those types of things where we think significant growth can come from over the next few years.

Clear I hope I'm very clear on the.

The priorities for our capital allocation and the and the first one being investing in growth. So you know as we look at the Capex. We are very committed to investing in quantum fiber, we're very committed to investing in SaaS and I T solutions, and and edge computing and those types of things.

We think significant growth can come from over the next few years secondly, we've talked about the dividend and we want to maintain the dividend I will point out that our our last buyback reduced our dividend obligation by about $81 million a year. So so that's not it.

Speaker 3: Secondly, we talked about the dividend and we want to maintain the dividend. I will point out that our last buyback reduced our dividend obligation by about $81 million a year. So that's not exclusive issue to just the dividend. That also factors in by the...

Exclusive.

Issue to just the dividend and that also was.

Factored in by the by the buybacks.

Speaker 3: And we want to maintain relatively leverage neutral, meaning roughly where we are, maybe not exactly where we are, but roughly where we are. And then if we think it's appropriate, we will come up with a plan to make additional buybacks.

And and we want to maintain relatively leverage neutral, meaning roughly where we are maybe not exactly where we are roughly where we are and then if we think it's appropriate we will we will come up with a plan to make additional buybacks, but I'm not going to speculate on.

Speaker 3: But I'm not going to speculate on what that plan would be or how the board would view it. I just want you to know that we are open to that.

And what that plan would be or has the board would would view. It I just want you to know that we are open to that.

Speaker 4: And on your first question, David, you know we don't provide revenue guidance, so I'm not going to get into providing revenue guidance for the vested asset.

Yeah.

And on your first question, David You know, we don't provide revenue guidance, so I'm not going to get into providing guidance for revenue guidance for the divested assets, but like I said on EBITDA, yes, our expectation is $1 seven and our guidance assumes that.

Speaker 4: But like I said on EBITDA, our expectation is a billion seven and our guidance is huge.

Speaker 4: that we have half a year's worth of EBITDA in our consolidator.

We have half year's worth of EBITDA in our consolidated results.

Speaker 3: And one other point, we're getting $10.2 billion for the two transactions that we're doing. And so there are other sources of funds.

One other point, we're getting $10 $2 billion for the two transactions that we're doing.

And so there are other sources of funds.

Speaker 8: And if I could just maybe just one quick follow-up, Neil. Based on kind of some of the revenue mix benefits that you've talked about getting out of this thing, would it be fair to say that the margin on this portfolio, the Apollo portfolio in particular, it's going to be a higher margin portfolio than kind of the business that you'll have which you're investing to grow?

Got it and if I could just maybe just one quick follow up.

Based on kind of some of the revenue mix benefits that you've talked about getting out of this thing.

Would it be fair to say that the margin on on on this portfolio. The Apollo portfolio in particular is going to be higher margin portfolio.

Then kind of the business you'll have what's your investing to grow.

Speaker 4: Yes, you're right. It's a higher EBR margin business. Generally, our legacy revenues are higher margin.

Yes, youre right its a higher EBITDA margin business.

Generally our legacy revenues are higher margin margins.

Speaker 4: Post the transactions you will see a dip in our EBITDA margin which also means we will have more opportunity to expand margin.

So post the transactions you'll see it.

And our EBITDA margin, which also means we will have more opportunity to expand margins going forward.

Speaker 3: And we also expect quantum fiber to be successful. If you look at the markets that we retained, they have a couple of things going for us. Most of those big markets are growing markets. More people are moving to them. There are higher tech markets, you know, that we see a lot of opportunity in those states. And we have incumbency. And incumbency helps us sell, but it helps us build. It helps us build at a lower cost, helps us operate. And we're moving to the all digital experience that those customers have. And so we expect good things from our quantum business.

And we also expect quantum fiber to be successful. If you look at the markets that we retained we had a couple of things going for US most of those big markets are growing markets more people are moving to then they're they're higher tech markets, we see a lot of opportunity in those states and we have incumbency and incumbency.

It helps us sell but it helps us build it helps us build at a lower cost to operate and we're moving to the all digital experience that those customers have and so we expect.

Good things from our quantum business.

Speaker 8: Alright, thanks guys, appreciate it.

Alright, Thanks, guys I appreciate it.

Thanks, David Congrats next question.

Speaker 1: Our next question is from Batcha Levey with the UBS. Please go ahead.

Our next question is from Berkshire Levy with UBS. Please go ahead.

Speaker 9: Great, thank you. Can you provide more color and maybe quantify the planned investment for growth specific for this year that could come off next year and how we should think about the pacing through the year?

Great. Thank you can you provide more color and maybe quantify the planned investments for growth specific for this year that could come off next year and how we should think about the pacing through the year and the second question on subsidies with wood task on can you can you just remind us how much subsidy.

Speaker 9: And a second question on subsidies. With CAFCON, can you just remind us how much subsidy dollars are left in the model? And I think you applied for $200 million in subsidies to replace some foreign equipment in the network. To the extent that you get that approved, how would you account for it? Does the guidance include it?

All those are left in the model and I think for $200 million in subsidies to replay some foreign equipments in the network to the extent that you get that approved how would you account for it is the does the guidance include it.

Thank you.

Speaker 3: There's a lot packed in there, Bhatia. So what quantum fiber investments are we going to make in 2022 that come out in 2023?

There's a lot packed in there about you.

Uh huh.

What kind of fiber investments that we're going to make in 2020 to come off in 2023, we're not giving guidance for 2023.

Speaker 3: We're not giving guidance for 2023. But we do plan to ramp our quantum fiber investments. We said that we said that our plan for the year in 2022 is a million homes, and then we plan to do a million five to 2 million at a run rate basis by the end of the year. So we're not giving forward looking guidance, but we have given you an indication of.

But we.

We do plan to ramp our quantum fiber investments, we've said that we've said that our plan for the year in 2000 22 million homes and that we plan to do a million $5 2 million.

Run rate basis by the end of the year.

So we're not giving forward looking guidance, but we have given you an indication of.

Speaker 3: of what we expect and how we expect to build.

What we expect and how we expect to build them.

Speaker 3: Neil, I'll let you take the question on how do we account for 200 million.

I'll, let you take the question on how do we account for $200 million yeah.

Speaker 4: Yeah, on the I think your other question was calf to do art off. Obviously calf to is roughly, you know, 500 million art off is about 26 million a year, but just keep in mind significant part of that will move with the divested divested assets. So so it's not going to be that material going forward.

I think your other question was Caf II to art off obviously caf two.

It was roughly 500 million art off is about $26 million a year, but just keep in mind significant part of that will move with the divested divested assets. So it's not going to be not material going forward.

Speaker 4: In terms of the equipment reimbursement, we're still working through the details on that. So, you know, that's probably too premature to comment on that.

In terms of the equipment reimbursement, we're still working through the details on that so yeah. You know, there's a that's probably too much for them.

Sure Amit I'll comment on that.

Speaker 9: So just one quick follow-up on the investment. I appreciate the CapEx part, but in terms of the OpEx part that could hit this year, is there any way you could provide some color around that?

Got it just one quick follow up on the investment I appreciate the Capex part, but in terms of the Opex budget that could hit this year is there any way you could provide some color around that.

Speaker 4: Yeah, so but that's all incorporated into our, you know, even our guidance and you know, I think it'll be in the, you know, start to stamp ramp a little bit and, but not going to be materially different quarter over quarter, maybe a little higher in the second half of the year.

Yeah. So that's all incorporated into our EBITDA.

EBITDA guidance.

Yeah, you know I think it'll be.

Start to stamp ramp a little bit.

But not going to be materially different quarter over quarter, maybe a little higher in the second half of the year.

Speaker 4: But the whole reason we're making those investments, like Jeff mentioned, is improved revenue and EBITDA trajectory in the other years, and we're confident of that. Okay, thank you.

But the whole reason, we're making those investments like Jeff mentioned is improved revenue and EBITDA trajectory in the outer years, and we're confident of that.

Okay. Thank you.

Speaker 1: Our next question is from Nick DelDao with Moffitt Nathanson. Please go ahead.

Brad next question please.

Our next question is from Nick del Deo with Moffett Nathan. Please go ahead.

Speaker 7: Hey, thanks for taking my questions. One for Jeff and one for Neil. Jeff, on the supply chain, you said it's an issue, but you didn't want to overstate it. I guess as we think about your 1.5 to 2 million passings target in the coming years, is that predicated on the supply chain situation proving or is that achievable if things stay stressed? I guess more generally, what's your outlook on the supply chain?

Hey, Thanks for taking my questions, one for Jeff and one for Neil.

Jeff on the supply chain you said, it's an issue, but you didn't want to overstate. It I guess as we think about your one five to 2 million.

Passing this target in the coming years is that predicated on the supply chain situation, improving or is that achievable if things.

<unk> stressed and I guess more generally what's your outlook on the supply chain.

Speaker 7: And then for Neil, I was wondering if you could help us better understand what, you know, relatively means in the context of staying relatively leverage neutral. You know, are you talking about a quarter turn, a half turn? You know, what sort of balance should we think about?

And then for Neil I was wondering if you could help us better understand what relatively means in the context of staying relatively leveraged neutral you talked about a quarter turn and a half turn what sort of bound should we think about.

Speaker 3: Yes, let me take the first one Nick on supply chain. What's my general attitude towards supply chain?

Yeah. So let me take the first one Nick.

On supply chain most of my general attitude towards supply chain. We are monitoring closely and we have vendors are on on the enterprise side and vendors on the.

Speaker 3: We are monitoring closely and we have vendors on the enterprise side and vendors on the consumer side, the mass market side, and vendors on the fiber side, where we are continuing to work closely with them and

Consumer side, the mass market size and vendors on the fiber side, where we are.

<unk> to work closely with them.

<unk>.

Speaker 3: put in mitigation plans in the event that

Put in mitigation plans in the event that the they're unable to deliver for us, but we see it on all fronts of the business again, I don't want to buy by focusing on this I don't want to overstate the issue, but it's something that we're really paying attention to and working with vendors.

Speaker 3: that they're unable to deliver for us. But we see it on all fronts of the business.

Speaker 3: Again, I don't want to, by focusing on this, I don't want to overstate the issue, but it's something that we're really paying attention to in working with vendors. Months ago, we put in full year orders, nine month orders for our vendors and making sure that we were in the queue early and often.

Months ago, we've put in full year orders in nine months orders.

For our vendors and making sure that we were in the queue early.

Speaker 3: to ensure that we got equipment and that we get the resources that we need. We're starting to see some companies hold off on taking new orders. And as we see that, we're working to put in our mitigation plans to make sure.

And often two to ensure that we got equipment in and we get the resources that we need them, we're starting to see some companies hold off on taking new orders and as we see that and we're working to put in our mitigation plans.

Plans to make sure it is factored in to our build plan.

Speaker 3: It's factored in to our build plan, but it is an issue that I will highlight as a real one that we have to mitigate.

But it is an issue that I did I will highlight is a real one that we have to mitigate.

Speaker 4: On the leverage, Nick, if you look at 2020, we were at about roughly around 3.6. 2021, we exited about 3.6. And we played down about $6 billion in debt since we announced our deleveraging plan, $7 billion since the close of the level 3 transaction.

Yeah.

On the on the leverage.

Nick if you look at 2020.

We were at about roughly around 362.

2021, we exited about three.

<unk>.

So and we paid down about $6 billion of debt since we announced our deleveraging plan 7 billion since we since the close of the level three transaction. The key point is I think we've been pretty good about calibrating, our leverage to the business profile.

Speaker 4: The key point is, I think we've been pretty good about calibrating our leverage to the business profile.

Speaker 4: So even though we're divesting a fair amount of legacy revenues, we haven't really –

Even though we're divesting.

A fair amount of legacy revenues, we haven't really love it.

Speaker 4: If you think about quantum fiber, that's going to be a high growth business and infrastructure business. So you always have to think about de-averaging our leverage and think about whether that's appropriate going forward.

If you think about quantum fiber out of that.

Now going to be a high growth business and infrastructure business.

So you always have to think about the averaging our leverage and think about whether that is appropriate going forward.

Speaker 4: Our view right now is the 3.6 is probably a good assumption. Now we have said that it will be roughly in that zip code. So any quarter over quarter you might see some fluctuation.

Our view right now is that <unk> is probably a good assumption now we we have said that older being roughly in that ZIP code. So at any quarter over quarter or you might see some fluctuations, but until the business profile changes significantly we don't see the need to change that at this point unlike.

Speaker 4: But until the business profile changes significantly, we don't see the need to change that at this point. And like Jeff has mentioned several times, is we're going through an investment cycle. And it truly is a discrete project. It is upgrading our copper network to fiber. And it's a long life asset. And so as we do that, we're okay with the leverage fluctuating a little bit as we fund that build.

Jeff has mentioned several times as we're going through an investment cycle and it truly is a discrete project. It is.

Trading our copper network with fiber.

And it's a long life asset and so as we do that where we are okay with the leverage fluctuating a little bit as we fund that build.

Okay. Thank you both.

Thanks, Nick next question perhaps.

Speaker 1: Our next question is from Greg Williams with Cowan. Please go ahead.

Our next question is from Greg Williams with Cowen. Please go ahead.

Speaker 5: Great, thanks for taking my questions. First one's just on rising rates. I mean, you have a couple commitments here, the fiber to the home builds and staying leverage neutral through the build, end of the dividend. How should we think about your priorities if they should change in your cap allocations and your balance sheet amid escalating rate environment?

Great. Thanks for taking my questions first one just on rising rates I mean, you have a couple of commitments here the fiber to the home builds and staying leverage neutral through the build and the dividend how should we think about your priorities.

Change in your capital allocation.

And your balance sheet.

Escalating rate environment.

Speaker 5: Second question is just on the penetration goals for your fiber-to-the-home plan. I see you're at 29% and you noted it's nascent markets and unlimited marketing. So, as you ramp up that marketing engine, what are your longer-term penetration targets or terminal penetration targets as we just think about your revenue collection and pre-cash flow growth in the other years? Thanks.

Second question is just on the penetration goals for your fiber to the home plan. That's the 29% and you know does it nascent markets and unlimited marketing. So you know as you ramp up that marketing engine what are your longer term penetration targets or terminal penetration targets. As we just think about your revenue inflection and free cash flow growth in the outer years.

Speaker 3: OK, so rising rates, Neil, I'll let you take penetration. I'll take and I'm sorry Greg, the third one was.

Okay, So rising rates Neil I'll, let you take penetration.

I'll take and I'm, sorry, Greg the third one was.

Speaker 3: Just the penetration, you know, as I think about the revenue inflection and your outer year free cash flow. Okay. Well, first of all, we are always focused on free cash flow. We think that is the primary driver of business success. And free cash flow is sustainable long term free cash flow growth is what we're after. That's why we're investing today. That's why we divested or divesting the properties that we're divesting because we weren't going to invest.

Just the penetration.

As I think about the revenue inflection in your outer year free cash flow.

Okay.

Well first of all we are always focused on free cash flow. We think that is the primary driver of business success.

And free cash flow.

Sustainable long term free cash flow growth is what we're after and that's why we're investing today, that's why we divested.

Our divesting the properties that we're divesting because we werent going to invest.

Speaker 3: to the level that we think they can tolerate. But it's why we're investing in the 16 retained states. It's why we're investing in...

To the level that we think they can tolerate.

It's why we're investing in the 16 retained states. It's why we're investing in our growth initiatives on the enterprise side, It's why we've invested in and our relationship with the federal government at all that's why we're investing is to drive long term sustainable free cash flow penetration for quantum fiber and we're at 29 person.

Speaker 3: in our growth initiatives on the enterprise side. That's why we've invested in our relationship with the federal government. That's why we're investing is to drive long term.

Speaker 3: sustainable free cash flow. Penetration for quantum fiber, and we're at 29%, but that's always going to be a blended average of new homes, new business locations for mass markets.

But that's always going to be a blended average of new homes, new new business locations for mass market that we've just added with ones that we've been marketing it for a while.

Speaker 3: that we've just added with ones that we've been marketing at for a while. But we expect when we reach steady state that it will be north of 40%.

But we expect when we reach steady state it'll be north of 40%.

Speaker 3: and every indicator is there supporting it. If you look at the quality of the product that we have, we have a very effective, competitive product. Even with the limited marketing, we're doubling our penetration rates.

Every every indicator.

Is there supporting it if you look at the quality of the of the product that we have you know we have a a very effective competitive product and even with the limited marketing, we're doubling our penetration rates.

Speaker 3: in our traditional copper areas. The symmetrical nature of our product is far better for work from anywhere environment. The capacity needs continue to expand for consumers just like they are for businesses and business customers.

Our traditional copper copper areas symmetrical nature of our product is far better for work from anywhere environment and the capacity needs.

Continue to expand for consumers just like they are they are for businesses and business customers.

Speaker 3: with the abundance of streaming providers and the bundling of video is becoming less relevant. And so we see lots of factors in addition to our all-digital world-class experience that we're offering to customers, our great NPS scores. We see a lot of factors that give us high confidence in the 40% plus numbers. meal on the rising rate.

With the abundance of streaming providers in.

The bundling of video is becoming less relevant and so we see lots of factors. In addition to our all digital World class experience that we're offering to customers are great NPS scores, we see a lot of factors that give us high confidence.

And in the 40% plus numbers Neil on the rising rates.

Speaker 4: Yes, so total avoidance one, about 80% of our debt is fixed. If you combine that with the fact that we refinanced about, you know, 20 plus billion in the last three years.

So couple of points, one about 80% of our debt is fixed.

If you combine that with the fact that.

We refinanced about 20 plus billion in the last three years and.

Speaker 4: and the fact that we are going to be paying down a significant amount of debt. You look at our maturity profile, we have very minimal needs in terms of tapping the market. I think we are very well positioned in terms of our balance sheet to negotiate a rising rate environment. p.m.

We're gonna be paying down a significant amount of debt.

And you look at our maturity profile.

Very minimal needs in terms of tapping the market so.

We're very well positioned in terms of our balance sheet floor to negotiate a rising rate environment.

Great. Thank you.

Operator next question.

Speaker 1: Our next question is from Frank Loughton with Raymond James. Please go ahead.

Our next question is from Frank Louthan with Raymond James. Please go ahead.

Speaker 2: Great, thank you. I wanted to ask about the longer term top line growth. And I want to take quantum fiber out of it. You've set some aggressive goals there. That's a great opportunity. I'm sure you'll be able to show the growth. But post these deals...

Great. Thank you I wanted to ask you about the longer term top line growth.

And I wanted to take quantum fiber out of it at you set some aggressive goals there.

Opportunity I'm sure you'll be able to show the growth, but post the deal.

Speaker 10: You can have close to 80% of your revenue from the enterprise side, which has struggled for many years to show top-line growth for a 12-month period.

You could have close to 80% of your revenue from the enterprise side, which has struggled for many years to show topline growth for a 12 month period, what's going to change or what are you going to be doing differently over the next two to three years to hit the overall topline growth goal that will really affect meaningful change in that business.

Speaker 10: what's going to change or what are you going to be doing differently over the next two to three years to hit the overall top line growth goal that will really affect meaningful change in that business.

Yeah.

Well, it's all of the things that.

Speaker 3: that I've talked about today and some before. Edge computing, 95-97% of the U.S. enterprises are within 5 milliseconds of our network. That makes machine to machine control possible for our customers. That would make...

That I've talked about today and in some before edge computing 90, 795%, 97% of the U S enterprises are within five milliseconds of our network that makes the machine to machine control possible for our customers that that.

Speaker 3: AI applications and

Uh huh.

Applications and machine learning applications, a real possibility for our customers as they enter into the fourth industrial revolution and their ability to acquire analyze and act on their data it's things like SaaS.

Speaker 3: machine learning applications, a real possibility for our customers as they enter into the fourth industrial revolution and their ability to...

Speaker 3: acquire, analyze, and act on their data. Like that

Speaker 3: We'll continue to move as fast as the secure access service edge. It's software defined networking at the customer premise for...

We will continue to move.

SASSA is defer secure access service edge.

Software defined networking at the customer premise.

Four four.

Speaker 3: for connectivity and security capabilities. It's things like dynamic connections, which is really network as a service. That's more of an enabling technology, but it enables our customers to use their network that they buy from us to connect to cloud, a variety of cloud service providers. It's orchestration of those capabilities.

For connectivity and security capabilities.

It's things like dynamic connections, which is really network as a service that's more of an enabling technology that enables our customers to use their network that they buy from us to connect to cloud a variety of cloud service providers is toward frustration of those capabilities and making it easier and more.

Speaker 3: and making it easier and more manageable for customers to maintain their kind of...

Manageable for customers.

Two two.

Maintaining their connectivity and then.

Speaker 3: in very complex environments and it's helping them do that with our IT solutions capabilities.

And very complex environment, and it's helping them do that with our.

Speaker 3: So it's kind of a host of things that we're launching and really showing success in.

<unk> capabilities.

Kind of a host of things.

The that were that were.

Launching in and really showing success.

Speaker 10: So that network proximity has been the case for a while, but are you saying there are new salespeople you're hiring or a significant number of new products that you're bringing to market that you're ahead of your competitors? I mean, again, what's sort of different about this opportunity with these new products that's gonna change versus the last?

So that network proximity has been the case for a while but so are you, saying there there are new sales people, you're hiring or and significant number of new products that you're bringing into market that are that are you ahead of your competitors I mean again, what sort of different about about this opportunity with these new.

Products, that's going to change versus the last several years.

Speaker 3: Well, so all of the above, but the fundamental nature of the products are different. There's nobody else out there. You say network proximity has been there for a while.

Well, so all of the above but the fundamental nature of the products are different there's nobody else out there you say network proximity has been there for a while.

Speaker 3: It's been there for a while for us, but there's nobody else out there that has the network proximity of edge computing facilities within a few milliseconds of the customer.

Been there for a while for us, but there's nobody else out there that has the network proximity of edge computing facilities within a couple of Mila a few milliseconds of the customers and so those are different capabilities. There's nobody out there that's really been able to.

Speaker 3: And so those are different capabilities. There's nobody out there that's really been able to provide network as a service or integrate security into access.

Providing network as a servicer or integrate security into access solutions and so we'll continue to focus on that and and I argue there's nobody better.

Speaker 3: solutions. And so we'll continue to focus on that. And I argue there's nobody better in helping people build and manage networks.

In helping people build and manage networks and orchestrate their connectivity needs than than lumen and so we will continue to differentiate.

Speaker 3: and orchestrate their connectivity needs than lumen. And so we'll continue to differentiate.

I'd also throw in the all digital experience our lumen platform brings world the world's best partners.

To our customers for different types of applications, whether it's T mobile for for wireless.

Speaker 3: T-Mobile for wireless or VMware for virtual machines. You know, we have partnered, and I always feel bad when I start listing partners ad hoc because we got some great ones and I don't wanna leave anybody out, but I'm not gonna go through an exhaustive list. But we've got great partners bringing those capabilities. And so I think it's the total package of solutions. And I don't think you're right in thinking that there are other people out there that have all those capabilities.

Or vmware for for virtual machines, we.

Have partnered.

And I always feel bad when I start lifting.

Partners AD hoc because we got some great wins and I want to leave anybody out, but I'm not going to go through an exhaustive list, but we've got great partners, bringing those capabilities. So I think it's the total package.

Solutions and I don't think I don't think you are right in thinking that there are other people out there that that have all those capabilities.

Thanks, Frank Okay. Thank you very much.

Speaker 11: We got time.

We've got time for just one more.

Speaker 1: Very good. And then our last question will be from the line of Tim Horan with Oppenheimer. Please go ahead.

Very good and then our last question will be from the line of Tim Horan with Oppenheimer. Please go ahead.

Speaker 7: Thanks guys. The edge compute product, can you talk about maybe some new use cases? Because I guess a lot of what we're predicated on the growth here is for kind of new use cases and uniqueness of the infrastructure. And any color of what you're seeing out there now would be great.

Thanks, guys of the edge compute product can.

Can you talk about maybe some new use cases, because I guess a lot of what were predicated on the growth here is for.

New use cases, and uniqueness of the infrastructure and any color on what youre seeing out there and that would be great.

Speaker 3: Yeah, we're seeing a lot of different use cases. First of all, storage.

Yeah, we're seeing a lot of different use cases first of all storage.

Speaker 3: Edge computing and storage capabilities are very important. They want to store their data, our customers want to store their data close to their in-house compute resources, but they don't want to have to store it within their own facilities. They want the benefit of the cloud and the proximity of their own data center. And that's what our edge computing is all about.

Edge computing and storage capabilities are very important they want to store their data our customers want to store their data close to their in house.

Compute resources.

But they don't want to have to start within their own facilities. They want the benefit of the cloud and the proximity of their own data center and Thats, what our edge does we see retail customers that are exploring how can they take all of their video feeds all of their camera feeds from their store and process those.

Speaker 3: does. We see retail customers that are exploring how can they take all their video feeds, all their camera feeds from their store and process those.

Speaker 3: for watching for shoplifting or looking at shelf restocking. You know, how can they take all of that information and utilize it? Now they don't want to haul that traffic.

For watching for shoplifting or looking at shelf shelf restocking how can they take all of that information and utilize it now they don't want to haul that traffic.

Speaker 3: thousands of miles to some

And Myles too to some.

Speaker 3: remote compute resource. They also don't want to build a data center in every one of their stores so they come to us and look for us to help them build compute resources to take an entire market, aggregate it within very slow, very quick.

Remote compute resource they want it. They also don't want to build a data center in every one of their stores. So they come to us looking for us to help them build compute resources to take an entire market aggregated within very slow very quick connect.

Speaker 3: connectivity and very short hauling across the country and so forth.

Connectivity and very short.

Hauling across the country and so forth and so those are some of the use cases, if you think about the fourth industrial Revolution and I already said this but the.

Speaker 3: And so those are some of the use cases. If you think about the fourth industrial revolution, and I already said this, but...

Speaker 3: the amount of data is exploding. I mean, it's just exploding. And the applications to use that data is exploding. And our customers want to acquire that data.

The amount of data is exploding I mean, it's just exploding and the applications to use that data is exploding and our customers want to acquire that data they want to analyze that data and they want to be able to act on that data quickly and effectively and that's what our edge compute applications are all up.

Speaker 3: They want to analyze that data and they want to be able to act on that data quickly and effectively. That's what our edge compute applications are all about, is helping them do that. So we're starting with bare metal. We've moved into storage solutions. We'll continue to augment with virtual machines and all sorts of other edge computing capabilities. We'll layer on top of that orchestration so that our customers can manage the hybrid cloud environment that they...

That is helping them do that so we're starting with bare metal.

We've moved into storage solutions will continue to augment with our with the virtual machines and all sorts of other edge computing capabilities will layer on top of that orchestration. So that our customers can manage the hybrid cloud environment that they have.

Speaker 3: and really be effective in managing their IT environment. Be really agile in their response to IT change.

And and really be effective in managing their there it is.

Environment being really agile.

And their response to changes.

Speaker 7: Hope that helps to answer some. Thank you. On the fiber side, 12 million homes, what percentage of your homes will that be? And will the infrastructure bill enable you maybe to expand that or help get subsidies to that 12 million homes?

That helps to answer.

Thank you on the fiber side 12 million homes, what percentage of your homes will that be and what does the infrastructure Bill enable you maybe to expand that or help get some subsidies that after that 12 million homes.

Speaker 4: Yeah, Tim, I'm too early on the infrastructure bill, but the 12 million, I think it's about 21 million we have post the transaction. The 12 gets to kind of the large urban areas.

Yeah, Tim on too early on the infrastructure Bill about.

The $12 million I think.

It's about $21 million, we have post the transaction the <unk> gets to kind of the large urban areas, but that doesn't mean, that's the portal opportunity as we continue to build out we'll continue to evaluate our footprint and we also look at different technology solutions to reduce the build cost and so we will.

Speaker 4: But that doesn't mean that's the total opportunity. As we continue to build out, we'll continue to evaluate the footprint. And we also look at different technology solutions to kind of create the right kind of infrastructureBrian

Speaker 4: build cost. And so we'll continue to evaluate that aspect of it as well.

You have to evaluate that aspect of it as well.

Thanks.

Speaker 3: So let me wrap up. But I hope that you all on the call today get a sense of the excitement that we have here at Lumen. We're poised for growth and expect our investments in the business to not only give strong growth in revenue and earnings, but also deliver value creation for our stakeholders.

So let me wrap up but I hope that.

Are you all on the call today to get a sense of the excitement that we have here in the report.

Poised for growth and expect our investments in the business to not only get strong growth in revenue and.

Earnings, but also deliver value creation for our stakeholders.

Speaker 3: So we're excited about what we're doing. We see progress in our results, and we appreciate all of your interest in Lumen. With that, I'll end the call. Thank you all for joining today.

So we're excited about what we're doing we see progress in our results and we appreciate all of your interest in room and with that I'll end the call. Thank you all for joining today.

Speaker 1: We would like to thank everyone for your participation and for using the Lumen Conferencing service today. This does conclude the conference call. We ask that you please disconnect your lines. Have a great day everyone.

We would like to thank everyone for your participation and for using the lumen conferencing service today.

Does conclude the conference call. We ask that you. Please disconnect your lines.

Good day everyone.

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