Q2 2023 Lumen Technologies Inc Earnings Call
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Yes.
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Greetings and welcome to the lumen Technologies' second quarter 2023 earnings call.
During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please press the one followed by the four on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Tuesday August 1st 2023.
I'd now like to turn the conference over to Mike Mccormack Senior Vice President Investor Relations. Please go ahead.
Good afternoon, everyone and thanks for joining Illumina technologies second quarter 2023 earnings call on the call today are Keith Johnson, President and Chief Executive Officer.
Chris Stansbury, Executive Vice President and Chief Financial Officer.
Before we begin I want to call your attention to our safe Harbor statement on slide two of our second quarter 2023 presentation, 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.
<unk> reconciled to the most comparable GAAP measures, which can be found in our earnings press release.
There are some certain metrics discussed today excellent cost for special items as detailed in our earnings materials, which can be found on the Investor Relations section of the limit website with that I'll turn the call over to Kate Thanks, Mike Hi, everybody. Thanks for joining us today in a few minutes I'm going to turn the call over to Chris as usual, but first I just want to give you a quick overview of our transformation progress. This.
Quarter, we added two big leaders that Illumina executive team Kai Prig inexperienced telecom exact steeped in both driving large scale network transfer dransfield patients and leading big teams joined US last month as EVP of enterprise operations, and Ana White inexperienced Chr one with an impressive track record of color.
Her renovation and tech companies joined Us as our Chief people Officer. These additions round out what I believe to be the most talented team in the industry and I couldn't be more excited to see the positive impact of both of these two new kids spring to alumina.
Alright, turning to the transformation work itself I'm going to use the framework, we introduced at Investor Day on June 5th to refresh your memory, we're pursuing a three part plan to deliver on our North star.
Secure the base second drive commercial excellence and third innovate for growth each of these three parts of the plan will require hard work and and they're going to take time to deliver results, but I'll share several positive early indicators, which give us confidence we're on the right path and I got to start with securing the base.
This is about intentionally migrating customers from legacy telecom platforms to modern ones to stem churn and deliver fundamentally better customer experiences success.
Success here drives higher customer lifetime value of the lumen well it will be a multi quarter journey to yield material financial results with this new motion. Our recent results are noteworthy.
For example, we've been building up a scaffolding for voice migration program over the past couple of months, we stopped up with great talent significantly growing the dedicated team and then we instituted a no cell left behind enablement program, giving our reps are winning sales playbook AI enabled sales targeting and digital tools.
To enable quick creation and delivery of customer focused sales contest.
And.
We gave ourselves managers tooling to enable deep data driven inspection of the funnel across the lifecycle with analytics to feed learning into the process. This newly dedicated team with their new digital tools and sales content.
They've only been in place fully since June 1st of this year and at less than 60 days, we've seen material increases in pipe and close rates and probably more importantly, a quadrupling of the dollar value of wins from June to July and I'm happy to share that we also had two record breaking voice migration deals in.
Terms of dollar value they both close in July and they're basically confirming our hypothesis that we're likely to see our migration efforts yield greater customer lifetime value.
We're also seeing material progress and learning from our focus on migrating customers from V. P. M to SD Wan and sassy greet customers like Nissan and W. E. Bowers are choosing to work with lumen because of our new customer centric approach and our long term orientation around customer lifetime value. It just shows that when we for.
Yes, we will.
Now I'll move on to the second part of our three pronged strategy driving commercial excellence, which is all about consistent execution across all of our core businesses and success here it looks like growing at or greater than market rates wherever we compete.
In our mass market segment, we've added approximately 250000 fiber enabled locations year to date in 2023, and we're confident that we can meet or exceed our plan of 500000 for the year.
With the fiber enablement factory delivering nearly deliver.
Delivering predictable output now.
We're well positioned to nearly double our current quantum fiber footprint to over 7 million locations in the next four years and as I've shared in the past a couple of times the federal program could potentially represent enablement and economic upside, but its not currently forecasted in our model.
In our business segments, we're building a program to drive commercial excellence that uses all the same tools I just described in our voice migration program and we built the hiring engine to go after tech sales talent, we're using AI in our sales platform to drive more automated and informed seller activities and where do you see it and analytics to create winning formula.
To help our managers coach our salespeople.
This programmatic focus is driving better results in our small mid market pilot, where we deploy these tools and saw an 80% reduction in sales cycle time, and an 85% shortened customer onboarding time.
Additionally, our opportunity win rates in this channel they've increased 160% since the start of the year and we've seen 50% year over year increase in new logo acquisitions for grow products.
One thing I mentioned at Investor Day was our belief that emerging technology trends, such as AI and data driven services will lead to large scale demand decreases for our growth products.
We are seeing early signs of this with second quarter wins in tech retail manufacturing and financial services.
Again, the consistent themes and these wins at customers like Kwik trip and Provident Bank is that Lumens focus on customer experience and their business outcomes was a key differentiator in the selection process. We think this focus as part of the reason why our grow product sales trend returned to year over year growth for the first time in four quarters.
Now, let's talk about innovating for growth and there are two key pieces to this part of our strategy to build a digital enterprise and to innovate new capabilities in our network to drive more value for customers, while we're making material progress in both areas. This quarter is all about two breakthrough innovations that we brought to market. The first is <unk>.
Switch our new on demand 400 gig capable optical undertake interconnection platform that we announced in mid June it's an amazing piece of technology that is strategically important as we position our network and infrastructure at the center of connectivity.
Created in partnership with Google, Microsoft and another large scale large hyper scaler. This platform leans into the growth tailwind. So we talked about at Investor day tailwind like Gen AI and edge cloud by enabling the low latency and flexibility customers are going to need as network demands increase with explosive data growth.
Exit switch is a great example of the new lumen strategy coming to life.
We're using our intellectual property and innovating side by side with customers and partners to create differentiated technology in an on demand digital fashion to untap more value from our crown Jewel the network.
The second Big breakthrough innovation this quarter it was announced yesterday.
Lumen launched its flagship capability on its network as a service platform, it's called lumen Internet on demand and it's offered in limited availability and is already oversubscribed. This is the first and a very important step towards the company's bold vision to disrupt the telecom industry.
Offering customers radical flexibility in how they buy using managed networking services lumen is cloud defying traditional telecom.
We've been preparing for the smell it for a long time building a world class Telecom network with state of the art fiber broad coverage and unsurpassed route diversity and scalability.
Louis now is offering takes that next step to deliver on our customers' networking dreams, the ability to fire up any port with any service at any time.
It's your network your way with Illumina as platform.
So I hope that it's clear we're playing to win here the team and I are super excited by our position in progress and we'll be sure to keep you updated on our roadmap as we advance our networking as a network as a service platform and capabilities and with that I'll turn the call over to Chris.
Thank you Kate and good afternoon, everyone as Keith described our turnaround is underway and we're very excited with what lies ahead. Our teams are energized we're.
We're pleased with our progress on the quantum build with fiber enablement outpacing our first quarter results and we expect further acceleration in the third quarter.
Gives us confidence that we will meet or exceed our plan of 500000 locations in 2023 or.
Our group product groups performance was solid this quarter and when excluding the divested businesses and foreign currency impacts it grew year over year at a similar rate compared to our first quarter's performance.
I will now discuss in more detail the financial summary of our second quarter.
As I did on our first quarter earnings call all references our financial performance, primarily on a sequential basis for better comparability as the year ago period included the impact of our divested Latam and ILEC 20 state businesses.
We're again, providing supplemental information of these discrete impacts in our footnotes.
Where applicable and our earnings presentation and on a separate page in our financial training schedule when.
When these impacts of the divestitures and commercial agreements are excluded from our results our year over year growth rates are substantially better than the GAAP reported rates.
Our second quarter total revenue declined two 1% on a sequential basis to $3 66 1 billion adjust.
Adjusted EBITDA was one point to two 9 billion in the second quarter with a 33, 6% margin.
Free cash flow was negative $896 million in the second quarter, including $938 million of taxes paid related to our two divestitures last year. We've now paid all the transaction related taxes for those divestitures as a reminder, our 2023 free cash flow guidance.
<unk> excludes the impact of these taxes.
Next I'll review, our detailed revenue results for the quarter on a year over year basis reported revenue was down 26% with the impact of the divestitures and commercial agreements representing approximately 72% of the reported decline.
Within our two key segments business revenue declined 2% sequentially to $2 897 billion.
And mass markets revenue declined two 3% sequentially to $764 million.
Within our enterprise channels, which is our business segment, excluding wholesale revenue declined one 8% sequentially our exposure to legacy voice revenue continues to improve and is now less than 11% of enterprise channel revenue and is down approximately 50 basis points sequentially.
Large enterprise revenue declined one 3% sequentially in the second quarter large enterprise revenue trends were similar to the first quarter year over year, when excluding the impact of divested businesses driven primarily by declines in harvest due to legacy voice and partially offset by stronger trends and grow due to demand for cloud co location and IP.
Public sector revenue declined three 7% sequentially, excluding the impacts of our divested businesses public sector trends worsened year over year, primarily due to lower other revenue, which includes nonrecurring equipment in it solutions declines in nurturing harvest products were also contributed to the declines with.
A partial offset by accelerating growth within grow driven by IP voice over IP and wavelengths. As a reminder, we had a contract expiration at the end of the year ago quarter, which is impacting the year over year comparisons for some public sector grow products by approximately $10 million.
Mid market revenue declined one 6% sequentially, excluding the impacts of our divested businesses. There was a similar level of year over year decline compared to last quarter strength in growth products was driven primarily by broadband IP and <unk> and was partially offset by lower legacy voice revenue within harvest.
Wholesale revenue declined two 4% sequentially, excluding the impacts of our divested businesses trends worsened year over year as with public sector of the accelerated decline rate was primarily due to lower other revenue.
Recall that in the second quarter of last year, we benefited by approximately $25 million related to a nonrecurring.
Professional services agreement.
That was provided in connection with him now divested 20 states ILEC assets separately, we lap the benefits from certain carrier contract discount explorations, which we previously identified in the year ago quarter. We expect our wholesale channel will likely continue to decline over time and it is an area we manage for cash.
Now moving to our business product lifecycle reporting grow products revenue grew 9% sequentially as I mentioned earlier, excluding the impact of our divested businesses. This quarter. The results showed a similar level of strong year over year growth to.
The first quarter of this year.
<unk> results can vary in any given quarter. We expect continued strength in this area as we execute on our overall pivot to growth.
<unk> now represents approximately 39% of our business segments and carried an approximate 83% direct margin this quarter accelerating grow product growth is a key focus of our strategy and we continue to be pleased with these early results.
Moving on to nurture and harvest, we continue to expect headwinds in these categories as we take proactive steps to migrate customers to newer technologies. This improves our customers' experience and provides an uplift in lifetime value of those customers for lumen.
As Kate mentioned, securing the base is hard work and we will take some time to be reflected in our results.
<unk> products revenue declined 4% sequentially due to continued pressure in VPN and Ethernet services nurture represents about 30% of our business segments and carried an approximate 68% direct margin this quarter.
<unk> products revenue declined 3% sequentially.
Call that harvest is an important part of our business and generates cash to fuel our growth initiatives harvests represents approximately 25% of our business segment and carried an approximate 81% direct margin this quarter.
A subtotal of our business product revenue, including grow nurture and harvest collectively declined one 7% sequentially and 14, 8% on a year over year basis, the impact of the divestitures and commercial agreements accounted for approximately 68% of the reported decline.
Other products revenue declined 6% sequentially or other product revenue tends to experience fluctuations due to the variable nature of these products within other we've deemphasize low margin equipment and changed our sales commission structure, which will continue to impact comparisons to prior periods.
These changes are focusing our sales efforts on products that provide a better customer experience and stronger returns for alumina.
Moving on to mass markets revenue declined two 3% sequentially, our mass markets fiber broadband revenue grew three 3% sequentially and represented approximately 31% of mass markets broadband revenue.
Also note that our exposure to legacy voice and other services revenue continues to improve with a nearly 40 basis point reduction sequentially.
During the quarter total fiber broadband enablement, where approximately 130000, bringing the total fiber enabled locations to approximately $3 4 million as of June 30.
We're focused on penetrating our deployed fiber assets through our simplified quantum fiber broadband product to maximize subscriber and <unk> growth in the second quarter. We added 21000 quantum fiber customers. This brings our total quantum fiber subscribers to 877000.
We expect to add subscribers at a faster rate in the second half of the year with our significant increase in quantum marketing.
Our marketing plans are ramping in conjunction with our conversion of the Centurylink fiber brand to quantum fiber later in the third quarter of this year potentially further benefiting subscriber growth has more potential customers can benefit from our world class quantum digital experience.
Fiber <unk> increased both sequentially and on a year over year basis to approximately $61 in the second quarter, new customers are seeing the value and quality of quantum fiber with most choosing our flagship symmetrical gig and in some cases multi gig service benefiting our fiber broadband <unk>, which grew both sequentially.
Actually in year over year.
As of June 30, our penetration of legacy copper broadband was approximately 11% highlighting the significant share taking opportunity as we accelerate the quantum fiber build our quantum fiber penetration stood at approximately 26% and as we expand our footprint, we expect penetration to fall as we increase our addressable.
But at a higher rate the new customers are at.
Our quantum fiber 18 month penetration rate of the 2021 vintage was at approximately 20% to performance of our 2021 vintage continues to track below that of 2020 at these milestones and I expect the same will be true of our 2022 vintage. This performance was the catalyst for us to reevaluate our quantum build enablement tar.
<unk> during the fourth quarter of last year refocusing our efforts on locations that provide the best opportunity and returns for alumina we.
We expected our 2023 vintage will exhibit stronger performance given our more disciplined approach to our build.
That said, our quantum fiber NPS score remains greater than positive 60, an indication of the quality value and superior service to quantum fiber delivers quantum fiber as an all digital prepaid product features simplified pricing with no contracts, helping reduce call center volumes and supporting our very strong NPS scores.
Now turning to adjusted EBITDA for the second quarter of 2023, adjusted EBITDA was one point to two 9 billion.
Compared to $1.811 billion in the year ago quarter.
The second quarter of last year included $398 million.
Related to the divested businesses in the second quarter of this year included a negative impact of $51 million from divestiture related commercial agreements.
These items represent approximately 77% of the year over year decline.
Adjusted EBITDA benefited during the second quarter from a year to date adjustment related to a carrier settlement given legal agreements I will not be able to comment further on this settlement.
Special items impacting adjusted EBITDA this quarter totaled $102 million.
Our second quarter 2023, adjusted EBITDA margin, including special items was 33, 6%.
Capital expenditures for the second quarter were $796 million.
In the second quarter, the company generated free cash flow of negative $896 million. As previously noted this includes $938 million of taxes paid related to our two divestitures that closed last year.
Now moving on to our financial outlook, we are reducing our estimate for stock based compensation expenses to approximately $65 million for the full year 2023, we are reiterating all other guidance metrics.
Now before we go to Q&A I'd like to take a moment to address recent media reports regarding lead sheet cables and telecommunication networks.
We began phasing out lead sheet cables from our network infrastructure during the 19 fifties.
And based on our initial analysis, we currently estimate that less than 5% of our approximately 700000 mile copper network contained lead of which we believe the majority is buried in conduit based infrastructure.
We thoughtfully manage our network to ensure the health and safety of our employees and the communities. We serve we also regularly assess our safety protocols and meet established regulatory and scientific standards related to potential lead exposure for workers moving forward, we're committed to working with independent experts regulators and our industry peers.
To maintain our positive track record of safety and compliance.
With that we're ready for your questions.
Thank you very much.
If you'd like to register a question. Please press the one followed by the four on your telephone.
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And our first question comes from the line of Simon Flannery with Morgan Stanley .
Proceed with your question.
Great. Thank you very much good evening.
Chris if I could just stay on the lead issue.
Have you had any discussions around remediation.
And any sense of what sort of.
The amounts that might take to do some of this for whatever area or underwater plans you might have.
So I guess first of all I think it's very early for that.
Again, we spent a lot of time determining how much lead us in the system and the good news visits it's quite small.
But beyond that we don't really think there is any meaningful way to estimate what that would be at this point.
And so we will continue to as we said work with regulators and and outside experts as this moves forward but.
Again, we feel good about our network and the fact that a lot of it is as kind of a base and subterranean.
Okay. Thank you and then just one more housekeeping on the EMEA transaction could you just update us on the timing I think you've got a decision out of Europe coming up in the next few weeks here, what's your latest thinking.
So we're still on track I mean, I would say at this point.
It'd be great. If we could close this year I think it's a little too early to call that.
As we said it was going to be late this year early next year and we're still on track for that.
Great. Thanks, a lot.
The next question comes from the line of Bajaj Levy with UBS.
Please proceed with your question.
Great. Thank you.
First maybe on the enterprise trends can you provide more color on what youre seeing from the macro environment and if theres any change in the sales funnel versus booking.
And.
On the EBITDA side, you're tracking above your guidance so far how should we think about some of the puts and takes.
<unk> expenses in pacing of new investment in the second half. Thank you.
But the I'll hit the first part and I'll, let Chris Chris The second piece, so the the macroeconomic environment remains complex and tough.
We still see slow decision, making we are still working on training our sellers to be focused on business outcomes, selling which is a new motion for them, but one that is deeply appreciated when we can connect how our network can.
It can help deliver fundamentally new business outcomes for our customers. So.
In all of the places that I talked about driving commercial excellence, we're seeing better motions and and and more.
<unk> from a selling perspective, while there is work to be done, but you wont have EBITDA sure. So back to you on the EBITDA to your point.
We did come in a little stronger than that relates.
To what I mentioned in terms of.
Year to date adjustment.
For that carrier negotiation.
And we will continue to get some benefits from that as we go forward, but that was contemplated.
Our guidance for the year and as we said and what he said at Investor Day, we.
We do have.
Higher opex and investments in the back half of the year as were staying very aggressive and committed to our turnaround plan. So we.
We kept guidance, where it is for a reason and and again, we'll we'll be spending more in the back half to support those plans. Great example, as you know we just got the voice migration team in place on June 1st and always has been a lot of down into that.
Got it just one more quick follow up on the EMEA sale.
Can you provide an update on how we should think about the proceeds would that mainly go towards paying down the revolver. The term loan or would you consider splitting it across our other issues. It definitely will go to reducing leverage and we've got a lot of flexibility under our agreements.
And to how we use that so we're we're evaluating that now to see what the best uses but it's definitely going to be a leverage reducing.
Okay. Thank you.
Thanks, Patrick next question number.
The next question is from the line of Michael Rollins with Citi.
Please proceed with your question.
Thanks, and good afternoon, just curious as you.
Look at the opportunity to save customers.
Migrating them sooner to more strategic technology can you give us a sizing of what that amount is in terms of the percent of revenue a quarter or a year just to get some sense on the quantum of opportunity.
And then if there's other metrics that you could share on some of the progress broadly across the entire.
Customer stack that would be great. Thanks.
Yes, Mike, it's Chris I'll take a shot at that.
If you look at our harvest bucket.
We said that that was about 25% of the business segment.
That's the opportunity I mean, the reality is those are products that would that we really no longer sell theres very limited use cases, where those legacy products are being sold.
Quite frankly, we don't compensate our sales force to sell those things because we're focusing on on Nextgen. So.
I think between what's and harvest and then.
The VPN and Ethernet pizza to nurture you take those those two pieces of the business it's about.
I think it's actually over 50% of what we sell today, that's the opportunity set as we go forward.
Harvest piece the legacy voice, obviously has I would say more movement in it the VPN will take place over a longer period of time, but both of those I think it would be good problem and I think the big change you know where are we talking about okay. What's different.
We funded a team to go after this business in a dedicated fashion, it's no longer a hobby, it's no longer an option. That's how they get paid you know we've given them all the tools and the playbooks to do sell and we're starting to get some return from that.
Thanks.
Thanks, Mike Operator next question.
Yes, Sir the next question comes from the line of Greg Williams with TD Cowen and company.
Please proceed with your question.
Sure. Thanks for taking my question first one is just the idea of perhaps securitizing some debt one of your peers frontiers in the midst of raising quite a bit by securitizing stabilized fiber homes.
And they can read the kind of capacity on these sounds something there ample runway and just think about your 2020 maturities I'm wondering if this is something you could explore or are there covenants or limitations that would preclude that.
And then just the second question is on your copper subscribers in your mass market that you lost 193000 copper just all sorts of this just migration potential by you guys or.
Losing gross adds or fixed wireless pressure, maybe I'll get the problem just curious if the cadence from here. Thanks, Yeah. So.
On the first one it's a great question I mean, obviously addressing our capital structure. So that we can continue to support our strategy and the things that are working.
Is paramount and it's something we've been focused on for some time.
I would say that <unk>.
Securitization as an option there is other options as well I think some options are closer in some options or further out but as we go forward.
Figuring out ways to capitalize what is a very intensive.
Investment in the consumer business is something that we've got to explore and we are exploring.
As it relates to that to the copper subs.
The reality is is that a lot of our our quantum builds is really in markets, where we don't have a lot of copper subscription remaining so our best guess is is that this is really.
<unk> being driven by some pressure from fixed wireless which is not unanticipated.
Okay got it thank you.
Thanks, Greg next question please.
The next question comes from the line of Frank Louthan with Raymond James.
Please proceed with your question.
Great. Thank you just sticking on the quantum side can you give us an idea of what kind of success youre, having with the SMB side with winning back some customers there and then on extra Squit extra switch in that network as a service can you kind of walk us through what are some of the major aspects of those products that you were doing that other.
Carriers aren't necessarily doing or might not be able to replicate.
Yeah. So I'll take the first one and then K can do excess which as it relates to the SMB, it's definitely an opportunity area for us with quantum.
<unk> is going to play very well in that regard I would also say, though Frank that that's not been the primary focus as we're ramping enablement that really has been more on the consumer side, but the team is working on on SMB.
Pricing and it's a huge opportunity for us just given the share we've lost to cable over the years. So more to follow on that okay, and we're pretty excited about the Nash platform for a couple of different reasons.
The first is.
We know that our customers are demanding digital experiences and the notion of sort of cloud of <unk> networking in delivering fundamentally you know more.
More friction free buying usage management supported these platforms is the way to go I think what's different is we are committed to the long term. What you saw yesterday was the first step in our multiyear plan to really show up in this fundamentally different way with our customers. We think it's going to help us capture.
More share and legacy telecom markets, but also sets us up really well for all of the adjacent markets that we see a lot of potential growth and and if you add exit switched to this story book it becomes a very compelling.
Opportunity to capitalize on some of these growth areas like NII in cloud.
Okay, great. Thank you.
Greg next question please.
Our next question comes from the line of Nick del Deo with Moffett Nathanson.
Please proceed with your question.
Hi, Thanks for taking my questions.
Another question on <unk>.
Recognizing that you plan on offering a broader suite of services through that platform over time, not just what you announced yesterday.
What's the use case for something like D. I a build hourly.
When I think about some of the other use cases that have been successfully enabled by now is across the industry like cloud connectivity. It feels like there is maybe more of a natural.
Variable consumption dynamic to it so I'm curious about how you how do you think that attribute ports to other services. So so you know what I you know how we think about this I think about it the same way that when the world went to cloud youre going to have customers to go after optimization and they spend a lot of time.
Managing for cost now originally a lot of the naysayers and the cloud market were like Oh. My Gosh. This is the end of our attack and we know that that is simply not true. We know the overall demand is going to be very very significant for more and more and more bandwidth that zero latency and thats what <unk> positions.
As well to do.
I think frankly that the complexity around trying to optimize to match our demand patterns. There is just too much friction in that and that's what we saw in cloud and so I'm kind of using that as a model in our head.
These first a couple of use cases for math it puts us into.
You know I don't want say new markets, but new places in the market, where we haven't been able to show up in the past. So we're pretty excited about our ability to become ubiquitous and frictionless.
Okay. Okay.
And then separately you know Chris you noted in your prepared remarks that youre looking to rebrand.
Centurylink fiber to quantum fiber later, this quarter and you're ramping up your marketing spend too.
Can you dimension, what sort of penetration rates you have in those old Centurylink fiber markets and help us understand what sort of uplift you might get overtime.
And what's the magnitude of the marketing spend increase you're planning how substantial is this.
Yes.
So.
Don't want to get into specifics around kind of penetration on the Centurylink brand, but I would tell you in and.
It's no secret Centurylink does not have the best brand in the marketplace and the quantum experience is just fundamentally different.
Cause if it's all digital nature. So if you think about that there is a.
We think there is a sizeable opportunity there beyond just the efficiency of trying to carry two brands as one technology stack, it's one of the consumer experience.
It works well for everyone as it relates to the marketing.
I want to give specific dollars what I would tell you is is that to date until we really got.
The build factory scaling.
Our marketing was limited to local efforts like door hangers right.
And now as we are we get the build factory ramping it gives us the ability in specific markets to scale, our marketing as well and we think that'll have a nice benefit on.
On driving subscription growth.
Okay. Thank you. Thanks, Nick next question please.
Yes.
Certainly the next question comes from the line of David Barden with Bank of America Merrill Lynch.
Please proceed with your question.
Hey, guys. Thanks, so much for taking the questions.
I guess the first one Chris I mean, I know you're expecting this question.
If you can talk a little bit about what.
This group of level three.
Bondholders.
He is asking for from you guys.
I think we understand on our side of the fence that theres been a letter sent to you guys. You guys said that we're getting ready for the quarter. We can't comment. So if now that the quarters over you have a comment it would be super helpful for us to hear that.
And then I guess second.
More of a business question maybe for Kate.
At the analyst day talked about this.
A third a third a third people buying in people not buying in people in the middle of having to be won over specifically with respect to the sales force could you talk a little bit about you know.
Where we are in terms of.
And our skills 10 full strength with the sales force that you think needs to be in place to execute on your plan.
To get enterprise services and others moving in the right direction. Thanks sure I'll go first and then I'll turn it over to Chris because the the second question about sales force is kind of a little bit easier, we're seeing exactly what we expected to see.
You know when you Institute, new comp plans, new sales platforms and processes deeper level of inspection.
It's not for everybody.
And as we go out to the marketplace and get Tech talent that we have relationships with that help us with those adjacent markets in the stories and narratives and value propositions that we need to be fluent in.
That's the exchange that we're making.
In terms of our evolution gosh, it's it's still early innings right. I mean, we've just had the strategy in place for a couple of months, we we've done a really really good job hiring.
Hiring in sales.
Yeah, I think the number that I saw earlier today with 295 net new.
Or sorry, new salespeople, that's not net it's a it's a new salesperson number.
Getting all of those people up to speed and you know what.
All of the tools and enabling materials that they need some of them coming from you know markets that they need to learn from the telecom that's going to take a little bit of time. So I'm excited about where we are because we're as I discussed we are starting to see fruits of the labor. We also have low hanging opportunities because in the past we have.
Used sales platforms data analytics, and AI and the way that I think modern sales forces do so I hope that our ramp is quicker I do think it takes a bit of time for somebody to get to full productivity and so we'll be leaning in and trying to accelerate that as often as possible, but ah, but more to follow as we can.
Report on on the fruits of the labor and the sales team over time.
And as it relates to the debt questions and the rumors that have been swirling in the market over the last few weeks.
Wanted to step back and addressing the question.
And just to reiterate.
<unk> talked about the progress that we've been making against the strategy, we had really exciting news.
Yesterday with NASA and the reason that that conversation is so important.
As we've got to get the debt structure.
Right at our capital structure right. So that we can fund what we think is a very bright future.
So.
With that we obviously understand the obligations of our credit instruments, and we don't believe that there's been any default under those agreements.
<unk> remained focused.
As we've said before on addressing the upcoming maturities through 'twenty seven.
And we want to do that in a in a manner that benefits the company and all of its stakeholders. So.
Just without getting into specifics I would say that we're open to engaging with our stakeholders to achieve that.
And as we've previously indicated we're going to continue to assess other options to address upcoming maturities in the overall capital structure.
Okay, great guys. Thank you both for that thank you.
Thanks George.
And our next question comes from the line of Bora Lee with RBC capital markets.
Please proceed with your question.
Hi, Thanks for taking my questions first understanding any impact is still to be determined back on the luck cabling issues is there any residual responsibility for the ILEC gasses divested to Paula and then second you've.
You've spoken about trimming the number of Skus, starting with cleaning up perhaps some legacy variations and then moving on to more substantive reductions can you just update us on where you are in that process and how that's been impacting your sales process.
Okay, Yeah, I'll take the first one.
The ILEC sale.
Was <unk>.
<unk> sales. So you know all assets and liabilities were sold.
With that.
And as it relates to our network, we talked about it in my prepared remarks less than 5% of.
Of our 700000 mile copper network contained led and most of that is conduit based and subterranean so are we.
We don't think that this is a major issue for us and it's something we will continue to work on a monitor.
And regarding the simplification efforts that we have we still have our evergreen simplification process we're identifying.
Projects and programs and activities that we stop every day. The SKU simplification was a part of that it was a major step forward in preparing for frankly and ERP implementation that is growing you know very well and is on target and on budget and preparing us to be able to implement streamlined digital enter.
Apprise processes for sales and inventory and the ordering and all of the things. So that the initial reduction was the easy step the compression beyond that that's sort of low hanging fruit becomes more complex as it's tied to products.
At her existing in our order and billing systems that.
We've just seen more work and more time to be able to prepare to simplify further.
Great. Thank you very much.
And we have no further questions at this time, Mike I will turn the call back to you.
Terrific. Thanks, everyone for joining us today have a great night.
Okay.
We would like to thank everyone for your participation and for using the lumen conferencing service. Today. This does conclude the conference call and we ask that you. Please disconnect your lines have a great day everyone.
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