Q1 2024 Lumen Technologies Inc Earnings Call

Operator: Greetings and welcome to Lumen Technologies' first quarter 2024 earnings call. During the presentation, all participants will be in a listen only mode. Afterward, we will conduct a question and answer session. At that time, if you have a question, please press the star followed by the number on your telephone. If at any time during the conference you need to reach an operator, please press star zero. And as a reminder, this conference is being recorded on Tuesday, April 30th, 2024. I would now like to turn the conference over to Matthew Debnem, Director of Investor Relations. Matthew, please go ahead.

Greetings and welcome to lumen Technologies' first quarter 2024 earnings call during the vacation 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 star followed by the one on your telephone if at any time during the conference you need to reach an operator, Please press star Zero and as a reminder, this conference is being recorded Tuesday April.

<unk> 'twenty 'twenty four I would now like to turn the conference over to Matthew Debnam Director Investor Relations. Matthew. Please go ahead.

Matthew Debnem: Good afternoon, everyone, and thank you for joining Lumen Technologies' first quarter 2024 earnings call. On the call today are Kate Johnson, President and Chief Executive Officer, Chris Stansbury, Executive Vice President and Chief Financial Officer, and Jim Breen, Senior Vice President, Investor Relations.

Matthew Debnam: Good afternoon, everyone and thank you for joining Illumina technologies first quarter 2024 earnings call on the call today are Jay Johnson, President and Chief Executive Officer, Chris Stansbury, Executive Vice President and Chief Financial Officer, and Jim <unk> Senior Vice President Investor Relations before we begin I need to call your attention to our safe Harbor statement.

Matthew Debnem: Before we begin, I need to call your attention to our safe harbor statement on slide one of our first quarter 2024 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 and the risk factors in our SEC filing. We'll be referring to certain non-GAAP financial measures reconciled to the most comparable GAAP measures, which can be found in our earnings press release. In addition, certain metrics discussed today include costs for special items detailed in our earnings materials, which can be found in our investor relations section of the Lumen website.

Matthew Debnam: Slide one of our first quarter 2024 presentation, which notes that this conference call may include forward looking statements subject to certain risks and uncertainties.

Matthew Debnam: All forward looking statements should be considered in conjunction with the cautionary statements 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, which can be found in our earnings press release.

Matthew Debnam: In addition, certain metrics discussed today exclude cost for special items as detailed in our earnings materials, which can be found on our Investor Relations section of alumina website with that I'll turn the call over to Keith.

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

Kathleen E. Johnson: Good afternoon, everyone, and thanks for joining us. I'm excited to have a chance to share Lumen's turnaround progress with all of you. As you know, our strategy is focused on empowering enterprises with next-gen, on-demand connectivity solutions powered by our fiber network. We're effectively cloudifying telecom to meet our customers' need for blazing fast speed, ultra-low latency, and dynamic capacity to support the immense expansion in data workloads, all in a secure and hybrid world.

Keith: Good afternoon, everyone and thanks for joining us I'm excited to have a chance to share lumens turnaround progress with all of you as you know our strategy is focused on empowering enterprises with Nextgen on demand connectivity solutions powered by our fiber network.

Keith: Secondly, we're quantifying telecom to meet our customers' need for blazing fast speed ultra low latency and dynamic capacity to support the immense expansion in data workloads, all in a secure and hybrid world.

Kathleen E. Johnson: But before I get into the transformation update, I want to address our 2024 first quarter financial performance. As we shared last quarter, the debt restructuring in the second half of 2023 created uncertainty for our customers and partners, which translated into softer sales during that period. As a result, we saw weaker 2024 Q1 revenue and EBITDA results.

Keith: But before I get into the transformation update I wanted to address our 2024 first quarter financial performance.

Keith: As we shared last quarter the debt restructuring in the second half of 2023 created uncertainty for our customers and partners, which translated into softer sales during that period. As a result, we saw weaker 2020 for Q1 revenue and EBITDA result, now. Despite these pressures we did maintain.

Kathleen E. Johnson: Now, despite these pressures, we did maintain sequential and year-over-year revenue growth in Q1 within our North America Enterprise Grow product portfolio, and we also made material traction in driving customer adoption of our flagship digital offering, Network as a Service, or Lumen NAS, both important components of our turnaround story. Now that we've successfully executed the TSA agreement with a broad group of our creditors, our balance sheet is significantly stronger.

Keith: <unk> and year over year revenue growth in Q1 within our North America enterprise grow product portfolio and we also made material traction in driving customer adoption of our flagship digital offering network as a service or luminesce, both important components of our turnaround story.

Keith: Now that we've successfully executed the TSA agreement with a broad group of our creditors our balance sheet is significantly stronger.

Kathleen E. Johnson: When we unveiled our transformation plans at our mid-2023 Investor Day, it would have been hard to imagine the level of financial flexibility we would achieve through this agreement that addressed over $15 billion of our debt, extending over $10 billion of our maturities due over the next four years to 2029 and beyond, while securing access to over $2.3 billion in new liquidity. We're pleased with the runway this deal created for our transformation.

When we unveiled our transformation plans at our mid 2023 Investor day, it would've been hard to imagine the level of financial flexibility, we would achieve through disagreement that addressed over $15 billion of our debt extending over $10 billion of our maturities due over the next four years through 2029 and beyond while securing acts.

Keith: <unk> to over $2 3 billion in new liquidity.

Keith: We're pleased with the runway to steal created for our transformation and.

Kathleen E. Johnson: And you can expect us to continue to find ways to strengthen our balance sheet and return value to shareholders. Additionally, we're continuing to reshape and right-size our business through automation and AI, continuously redeploying resources to the highest impact growth priorities, and taking costs out in the form of people and vendor spend reductions. As such, we materially reduced our cost base in early Q2. These actions were a direct result of our transformation programs and were already contemplated in our 2024 EBITDA guide. Okay, moving on to the transformation update.

Keith: And you can expect us to continue to find ways to strengthen our balance sheet and return value to shareholders.

Keith: Additionally, we're continuing to reshape and rightsize, our business through automation and AI continuously redeploying resources to the highest impact growth priorities and taking cost out in the form of people and vendor spend reductions.

Keith: As such we materially reduced our cost base in early Q2.

Keith: These actions were a direct result of our transformation programs and were already contemplated in our 2020 for EBITDA guidance.

Kathleen E. Johnson: I'll start with our enterprise business focused on driving commercial excellence. This is about better sales execution, securing the base of traditional telecom customers to reduce churn, and delighting our customers with quick, secure, and effortless digital experiences. We had excellent sales performance in the first quarter, with North American Enterprise sales up 27% year over year, our strongest first quarter performance in some time. Additionally, new logo sales increased by 21%, and total contract value for all sales nearly doubled year over year.

Okay movie.

Keith: Onto the transformation update I'll start with our enterprise business focused on driving commercial excellence.

Keith: This is about better sales execution, securing the base of traditional telecom customers to reduce churn and delighting our customers with quick secure an effortless digital experiences.

Keith: We had excellent sales performance in the first quarter with North American enterprise sales up 27% year over year, our strongest first quarter performance in some time. Additionally, new logo sales increased by 21% and total contract value for all sales nearly doubled year over year.

Kathleen E. Johnson: A great example is within our public sector business, where we recently won a $73 million contract to transform the U.S. Government Accountability Office's network, data, voice, and video connectivity so the agency can better serve Congress and the American people. Overall, we're excited by these significantly improved sales results, as they should be a leading indicator for improved revenue performance. I also want to note that we're seeing a dramatic rise in demand for high-capacity, low-latency network and edge services, often requested in the form of custom private networks. We believe this is driven by the advent of Gen AI and the complexity of hybrid multi-cloud architecture.

Keith: Ah.

Keith: Great example is within our public sector business, where we recently won a $73 million contract to transform the U S government accountability offices network data voice and video connectivity. So the agency can better serve Congress and the American people.

Keith: Overall, we're excited by the significantly improved sales results as they should be a leading indicator for improved revenue performance.

Keith: I also wanted to note that we are seeing a dramatic rise in demand for high capacity low latency network and edge services often requested in the form of custom private networks.

Keith: We believe this is driven by the advent of Gen AI and the complexity of hybrid multi cloud architectures.

Kathleen E. Johnson: We've established a dedicated team focused on capturing this demand, and we are confident this will be an important tailwind for our turnaround. It is a spike in demand, perhaps a once in a lifetime kind of opportunity to leverage what we do best at Lumen. Okay, on to securing the base, a crucial program that is all about five key levers, including installs, renewals, migrations, usage, and disconnect.

Keith: We've established a dedicated team focused on capturing this demand and we are confident this will be an important tailwind for our turnaround.

Keith: It is a spike in demand, perhaps a once in a lifetime kind of opportunity to leverage what we do best at lumen.

Keith: Okay onto securing the base are crucial program that is all about five key levers, including installs renewals migrations usage and disconnection.

Kathleen E. Johnson: While our Q1 sequential install trends were affected by the TSA-related uncertainty that I mentioned earlier, we did see strong results in the other secure the base levers. Specifically, renewals were up 5%, disconnects improved by nearly 5%, and migrations were up double-digit percentages, benefiting from a large deal. If we double-click on our migration performance, we see signs of better execution, closing deals with compelling economics as customers transition from legacy services to next-gen solutions in our growing product portfolio.

Keith: While our Q1 sequential installed trends were affected by the TSA related uncertainty that I mentioned earlier, we did see strong results in the other secure the base levers spin.

Keith: Specifically renewals were up 5% disconnects improved by nearly 5% and migrations were up double digit percentages benefiting from a large deal if.

Keith: If we double click on our migration performance, we see signs of better execution closing deals with compelling economics as customers transition from legacy services to next Gen solutions, and our <unk> product portfolio.

Kathleen E. Johnson: We are focused on securing the base because when we transition customers from legacy systems like TDM and voice to digital first solutions like NAS and IP, we're not only supporting our customers' growth but also our own. That said, this part of our transformation is the most challenging because of well-known secular headwinds, as well as complex and unpredictable pricing dynamics across on net and off net peering partnerships. Negative growth in these areas masks the progress we are making in selling and delivering the more modern capabilities in our portfolio.

Keith: We are focused on securing the base because when we transition customers from legacy systems like Tdm and voice to digital first solutions like NASA and IP.

Keith: Not only supporting our customers' growth, but also our own that.

Keith: That said this part of our transformation is the most challenging because of well known secular headwinds as well as complex and unpredictable pricing dynamics across on net and off net peering partnerships.

Keith: Negative growth in these areas masked the progress, we're making and selling and delivering the more modern capabilities and our portfolio.

Kathleen E. Johnson: As such, we will not only continue to adjust our resourcing here to ensure the highest returns on our transformation program spend, but we will also make those investments and results more transparent to you. A foundational part of our pivot to growth involves a relentless focus on enhancing the customer experience. We're delighting customers with process optimization and a truly digital platform, giving them better visibility into their orders with real-time status updates. And as a result, we're meeting and exceeding customer expectations more consistently.

Keith: As such we will not only continue to adjust our resourcing here to ensure the highest returns on our transformation program spend but we will also make those investments and results more transparent to you all.

Keith: A foundational part of our pivot to growth involves a relentless focus on enhancing customer experience.

Keith: We're delighting customers with process optimization, and a truly digital platform, giving them better visibility to their orders with real time status updates.

Keith: And as a result, we're meeting and exceeding customer expectations more consistently.

Kathleen E. Johnson: In the first quarter, I'm super excited to tell you that every one of our customer segments showed dramatic year-over-year improvements across all products and customer satisfaction, as measured by Net Promoter Scores, or NPS. Specifically, large enterprise NPS rose by 24%. Wholesale NPS rose by 35 points, and mid-market and public sector NPS rose by more than 50 points each.

Keith: In the first quarter I'm Super excited to tell you that every one of our customer segments showed dramatic year over year improvements across all products and customer satisfaction as measured by net promoter scores or MTS and specifically large enterprise NPS ROE rose by 24%.

Keith: Wholesale NPS rose by 35 points and mid markets and public sector NPS is rose by more than 50 points each.

Kathleen E. Johnson: We look at these improvements in customer experience as a cornerstone for continued momentum in sales, churn reduction, and ultimately revenue growth, alongside commercial excellence. We're driving disruption and building our future by delivering next-gen networking capabilities to our customers. Our Lumen Digital team has been hard at work, empowering enterprise customers with on-demand access to the cloud, with direct control of network bandwidth, connectivity, and latency paths. Lumen is enabling customers to design, price, order, and consume networking and security services online with a truly digital, low-friction customer experience.

Keith: We look at these improvements in customer experience as the cornerstone for continued momentum in sales churn reduction and ultimately revenue growth.

Keith: Alongside commercial excellence, we're driving disruption in building, our future, but delivering nextgen networking capabilities to our customers. Our lumen digital team has been hard at work empowering enterprise customers with on demand access to two cloud with direct control of network bandwidth connectivity in late.

Keith: CPAP.

Keith: Luminous, enabling customers to design prize order and consume networking and security services online with a truly digital low friction customer experience.

Kathleen E. Johnson: It all started with Lumen NAS, which we launched in Q3 of 2023. And since then, the team has delivered 14 new NAS innovations, including native DDoS and automated transport in a family of secure, composable services that span our network and edge locations. Through Q1, we saw diversity in NAS adoption with activated customers across over 20 industries, and the customer feedback is fantastic. For example, Avaya is using Lumen's NAS to establish internet connectivity in minutes rather than the traditional service model taking weeks, improving its operational agility.

Keith: It all started with Illumina <unk>, which we launched in Q3 of 2023 and since then the team has delivered 14, new <unk> innovations, including native Ddos in the automated transport.

Keith: Our family of secure Composedly services that span our network and edge locations through Q1, we saw diversity and nice adoption with activated customers across over 20 industries and the customer feedback is fantastic. For example, avaya is using lumens NAV to establish internet connectivity.

Keith: In minutes, rather than the traditional service model, taking weeks improving their operational agility.

Kathleen E. Johnson: Norwegian Cruise Lines recently shared that with Lumen's NAS, they've reduced the time to establish internet connectivity from weeks to minutes, which is great for their customer experience. And speaking of delighting customers, Arena Operating Company delighted fans with a bump in bandwidth while hosting the Florida Panthers NHL playoff game, thanks to Lumen Nav. All right, let's talk about the exit switch.

Keith: Norwegian cruise lines recently shared that with Newman Lumens NAV, they've reduced the time to establish internet connectivity from weeks to minutes, which is great for their customer experience.

Keith: And speaking of delighting customers Arena operating company delighted fans with a bump in bandwidth, while hosting the Florida Panthers NHL playoff game. Thanks alumina.

Keith: Alright, let's talk about exit switch.

Kathleen E. Johnson: We created this award-winning high-capacity optical switching platform to meet the demands of hyperscaler peering, while also functioning as a high-capacity on-ramp to the public cloud for enterprises. Now, the need to reimagine multi-cloud connectivity has never been more important as AI, autonomous systems, and exploding data growth redefine enterprise networking and security needs. Every millisecond counts.

Keith: We created this award winning high capacity optical switching platform to meet the demands of Hyperscale are peering, while also functioning as a high capacity on ramp to the public cloud for enterprises.

Keith: Now the need to re imagine multi cloud connectivity has never been more important as AI autonomous systems, and exploding data growth redefined enterprise networking and security needs.

Keith: Every millisecond counts.

Kathleen E. Johnson: That's why Exaswitch use cases are extending far beyond hyperscaler peering into things like AI exchanges because it's the only optical switching platform of its kind that can rise to today's performance and security challenges. Finally, we're taking a major step forward in security innovation by launching an exciting new subscription service that leverages patented AI-powered, IP-based threat detection and prevention capabilities from Lumen's very own Black Lotus Lab In the second half of 2024, this security service called Lumen Defender will be broadly available on our NAS and VIA connections, enabling enterprise customers to have more secure connectivity as we help identify and block threats at the network level.

Keith: That's why exits, which use cases are extending far beyond hyperscale are peering into things like AI exchanges, because it's the only optical switching platform of its kind that can rise to today's performance and security challenges.

Keith: Finally, we're taking a major step forward in security innovation by launching an exciting new subscription service.

Keith: That leverages patented AI powered IP based threat detection and prevention capabilities from Lumens very on Black Lotus labs.

Keith: In the second half of 2020 for the security service called Lumen defender will be broadly available on our <unk> and DAA connections, enabling enterprise customers to have more secure connectivity as we help identify and block threats at the network level.

Kathleen E. Johnson: Let's look at our mass markets business now. We continue to execute our strategy to deploy capital where we see the greatest opportunities for growth. And we're on track to deliver more than 500,000 new fiber-enabled locations this year, and we're optimizing our pre-sales efforts to drive penetration into those assets as quickly as possible. Our strong Fiverr sales momentum from late last year continued, highlighted by our Q1 quarterly Fiverr net ads being the best we've ever reported.

Keith: Yeah.

Keith: With that lets look at our mass market business now we continue to execute our strategy to deploy capital, where we see the greatest opportunities for growth.

Keith: We're on track to deliver more than 500000, new fiber enabled locations. This year and we're often optimizing our pre sales motions to drive penetration into those assets as quickly as possible.

Keith: Our strong fiber sales momentum from late last year continued highlighted by our Q1 quarterly fiber net adds being the best we've ever reported.

Kathleen E. Johnson: This was achieved with our sales, marketing, and retention efforts, including improved results, converting existing copper customers to our best in class quantum fiber product. And look, it's not me saying it's best in class. It's our customers. They're saying it, too.

Keith: This was achieved with our sales marketing and retention efforts, including improved results in converting existing copper copper customers to our best in class quantum fiber product and look it's not me, saying, it's best in class, it's our customers, they're saying it too.

Kathleen E. Johnson: We're continuing to deliver amazing net promoter scores, with quantum fiber hitting positive 67 and Q1, once again, rising sequentially and year over year. Finally, I'll wrap with a comment on people and culture. I said that we would rebuild Lumen from the people up, and this focus on culture is enabling our transformation, and it's creating a company that continues to get external recognition. In fact, we've won 11 awards for superior culture in the past few months alone.

Keith: We're continuing to deliver amazing net promoter scores with quantum fiber hitting positive 67 in Q1, once again rising sequentially and year over year.

Keith: Finally, I'll wrap with a comment on people and culture I've said that we will rebuild lumen from the people up and this focus on culture is enabling our transformation and it's creating a company that continues to get external recognition. In fact, we won 11 awards for superior culture in the past.

Keith: Few months alone.

Kathleen E. Johnson: More importantly, it helps us continue to attract amazing talent. On our last earnings call, I spoke about our key innovation hires, including Satish Lakshmanan as Chief Product Officer and Dave Ward as our new Chief Technology Officer. And since that time, we've made three important talent additions to our team. Jim Breen, our new SVP of Investor Relations, is with us on this call, and as many of you know, he brings more than 25 years of tech and telecom equity research experience and will lead our efforts to clearly communicate our transformation progress to all of you.

Keith: More importantly it.

Keith: It helps us continue to attract amazing talent on our last earnings call I spoke about our key innovation hires including fatigue Lakshmi, none as chief product Officer, and Dave Ward as our new Chief Technology Officer, and since that time, we've made three important talent additions to our team.

Kathleen E. Johnson: Ryan Azdourian, our new EVP and Chief Marketing Officer, joins us from Microsoft and will play a critical role in raising visibility around our game-changing innovations as we disrupt traditional telecom. And finally, Bianca Lanier, a tech company CEO with an amazing track record in tech, military leadership, retail, and logistics, has joined our board of directors. The team is gelling. We're executing really well, and our customers are seeing our progress. I'm confident that Lumen's future is very bright, and with that, I'm going to turn the call over to Chris.

Keith: Jim Breen, our new SVP of Investor Relations is with US on this call and as many of you know he brings more than 25 years of Tech and Telecom equity research experience and will lead our efforts to clearly communicate our transformation progress to all of you.

Keith: Brian as Dorian, our new EVP, and Chief marketing Officer joins us from Microsoft and will play a critical role in raising visibility around our game changing innovations as we disrupt traditional telecom and finally bianco linear a tech company CEO with an amazing track and Tech military leadership retail.

Keith: And logistics joined our board of directors.

Keith: The team is gelling well.

Keith: We're executing really well and our customers are seeing our progress.

Keith: I'm confident that Lumens future is very bright and with that I'm going to turn the call over to Chris.

Christopher David Stansbury: Thanks, Kate. Good afternoon, everyone.

Christopher David Stansbury: Thanks, Kay and good afternoon, everyone in the first quarter, we took important steps towards strengthening our balance sheet and reshaping the business.

Christopher David Stansbury: In the first quarter, we took important steps toward strengthening our balance sheet and reshaping the business model. As we position Lumen Technologies for driving for long-term growth, as expected, our first quarter revenue and EBITDA performance were affected by TSA-related customer uncertainty, as well as some seasonality factors discussed in our last earnings call. While we have more hard work ahead of us to improve trends, we're demonstrating our ability to execute. Here are a few key highlights.

Christopher David Stansbury: As we position limit towards driving for long term growth as expected our first quarter revenue and EBITDA performance was affected by TSA related customer uncertainty as well and some seasonal seasonality factors discussed on our last earnings call. We have more hard work ahead of us to improve trends, we're demonstrating our ability to execute.

Christopher David Stansbury: First, as Kate mentioned, we successfully completed the TSA in the first quarter, which creates additional runway for our pivot to growth in terms of refinancing our debt maturities and providing more than $2.3 billion in new liquidity. The transaction included high participation from creditors across our capital structure, underscoring their broad support in our turnaround strategy, and will continue to strengthen our balance sheet as we move forward. As planned last week, we took material cost-out actions as we continue to improve processes and shapeshift our organization to support our strategy. These savings were included in our full year 2024 guide.

Christopher David Stansbury: A few key highlights first as Keith mentioned, we successfully completed the TSA in the first quarter, which creates additional runway for our pivot to growth in terms of re phasing our debt maturities and providing more than $2 3 billion in new liquidity.

Christopher David Stansbury: The transaction included high participation from creditors across our capital structure underscoring the broad support in our turnaround strategy and we will continue to strengthen our balance sheet, because we move forward as.

Christopher David Stansbury: As planned last week, we took material cost out actions as we continue to improve processes and shape shift our organization to support our strategy. These savings were included in our full year 2020 for guidance going forward, we expect to realize additional cost take out opportunities as we further reshape our organizational structure.

Christopher David Stansbury: Going forward, we expect to realize additional cost takeout opportunities as we further reshape our organizational structure, rationalize third-party spend, drive increased adoption of AI to automate manual processes, and shut down non-core legacy products. Finally, and most importantly, our sales growth engines within our business and mass market segments accelerated in the first quarter, as we saw a strong improvement in performance within both North American enterprise sales, with a 27% year-over-year growth, and quantum fiber broadband net addition.

Christopher David Stansbury: <unk> third party spend drive increased adoption of AI to automate manual processes and shut down non core and legacy products.

Christopher David Stansbury: Finally, and most importantly, our sales growth engines within our business and mass market segments accelerated in the first quarter as we saw a strong improvement in performance within both from North American enterprise sales with a 27% year over year growth and quantum fiber broadband net additions.

Christopher David Stansbury: All of this gives us confidence in our 2024 guidance, with EBITDA expected to improve from a low point in the first quarter. Before covering our first quarter results in more detail, I'd like to first discuss several changes impacting our 2024 revenue reporting. As we discussed last quarter, we're breaking out a new international and other channel within our business segment, which includes all international and CDN revenue. We're also providing updated business product category reporting to move CBN from Harvest to Other within the International and Other channel.

Christopher David Stansbury: All of this gives us confidence in our 2024 guidance with EBITDA expected to improve from a low point in the first quarter.

Christopher David Stansbury: Before covering our first quarter results in more detail.

Christopher David Stansbury: The first discuss several changes impacting our 2020 for revenue reporting as we discussed last quarter, we are breaking out our new international and other channel within our business segment, which includes all international in CDN revenue.

Christopher David Stansbury: We're also providing updated business product category reporting to move CDN from harvest to other within the international and other channel. Additionally, with the sale of our EMEA business and select TVN contracts completed in the fourth quarter of 2023.

Christopher David Stansbury: Additionally, with the sale of our EMEA business and select CBN contracts completed in the fourth quarter of 2023, we will provide the historical contributions of these sales, as well as the associated commercial agreement impacts, within our financial trending schedule. Please keep in mind that when these impacts are excluded from results, our sequential and year-over-year growth rates are substantially better than the reported rates.

Christopher David Stansbury: We will provide the historical contributions of these sales as well as the associated commercial agreement impacts within our financial trending schedules.

Christopher David Stansbury: Please keep in mind and these impacts are excluded from results, our sequential and year over year growth rates are substantially better than the reported rates.

Christopher David Stansbury: Finally, related to our annual customer realignment process, we moved a small amount of revenue from our mass market segment to our business segment within the mid-market enterprise channel, and historical revenue has been reclassified into our financial training schedules to reflect this change. Let's move to the discussion of the financial summary for the first quarter.

Christopher David Stansbury: Finally related to our annual customer realignment process, we moved to a small amount of revenue from our mass market segment to our business segment within the mid market Enterprise channel and historical revenue has been reclassified into our financial trending schedules to reflect this change.

Christopher David Stansbury: Let's move to the discussion of financial summary for the first quarter on a year over year basis total reported revenue declined 12% to $3 two 9 billion.

Christopher David Stansbury: On a year-over-year basis, total reported revenue declined 12% to $3.29 billion. Approximately 34% of the decline was due to the impact of divestitures, commercial agreements, and CDN. Business segment revenue declined 12.7% to $2.591 billion, and approximately 41% of that decline was due to the impact of Devestiture's commercial agreement. Mass market segment revenue declined 9.2% to $699 million. I just said EBITDA was $977 million in the first quarter with a 29.7% margin. Free cash flow was $518 million in the first quarter.

Christopher David Stansbury: Approximately 34% of the decline was due to the impact of divestitures commercial agreements and CDN.

Christopher David Stansbury: Business segment revenue declined 12, 7% to $2 $5 91 billion in.

Christopher David Stansbury: And approximately 41% of that decline was due to the impact of divestitures commercial agreements and CDN.

Christopher David Stansbury: Mass market segment revenue declined nine 2% to $699 million.

Christopher David Stansbury: Our adjusted EBITDA was $977 million in the first quarter with a 29, 7% margin free.

Christopher David Stansbury: Free cash flow was $519 million in the first quarter.

Christopher David Stansbury: Next, I'll review our detailed revenue results for the quarter on a year-over-year basis. Within our North America enterprise channels, which is our business segment excluding wholesale, international, and other, revenue declined 5.5%. As we mentioned last quarter, we had a one-time public sector revenue benefit in the fourth quarter within our other product group, and this did not recur in the first quarter. Additionally, as I mentioned earlier, the customer uncertainty related to the TSA through the second half of 2013 and early this year had a lagging effect on revenue trends in the first quarter. These pressures were fully contemplated in our 2024 guidance that we provided in early February and are expected to gradually abate over the coming quarter.

Christopher David Stansbury: Next I'll review, our detailed revenue results for the quarter on a year over year basis within our North America Enterprise channels, which is our business segment, excluding wholesale international another revenue declined five 5% as we mentioned last quarter, we had a onetime public sector revenue benefit in the fourth quarter within our other products.

Christopher David Stansbury: Group and did not recur in the first quarter. Additionally, as I mentioned earlier, the customer uncertainty related to the TSA to the second half of 'twenty three in early this year had a lagging effect on revenue trends in the first quarter. These pressures were fully contemplated in our 2024 guidance that we provided in early February and our.

Christopher David Stansbury: Just to gradually abate over the coming quarters, we continue to expect public sector to be the first channel to pivot to sustainable growth. Later this year, followed by mid markets and in large enterprise.

Christopher David Stansbury: We continue to expect the public sector to be the first channel to pivot to sustainable growth later this year, followed by mid-markets and then large enterprises. Overall, North American business declined 7.3%. Large enterprise revenue declined 5.8% in the first quarter. Our growth revenue increased 1.4% year-over-year, and this growth was offset by other product revenue, as well as continued declines in nurture and harvest product revenue. We expect continued variability and trends as we drive towards overall stabilization.

Christopher David Stansbury: Overall, North America business declined seven 3%.

Christopher David Stansbury: Large enterprise revenue declined five 8% in the first quarter was in large enterprise or grow revenue increased one 4% year over year and this growth was offset by other product revenue as well as continued declines in nurture and harvest product revenue.

Christopher David Stansbury: We expect continued variability in trends as we drive towards overall stabilization.

Christopher David Stansbury: Mid-market revenue declined 7.1% year over year. Continued strength in IP and enterprise broadband within grow product revenue was offset by lower VPN and voice, which contributed to the declines in our nurture and harvest products. Public sector revenue declined 2.8%, influenced primarily by declines in nurture and harvest, which more than offset growth within our grow and other product revenue. As Kate mentioned, we continue to see traction with large bookings in this space, which take time to ramp to revenue. And these wins give us continued confidence that the public sector will be the first sales channel to return to sustainable growth this year.

Christopher David Stansbury: Mid markets revenue declined seven 1% year over year.

Christopher David Stansbury: <unk> strength in IP and enterprise broadband within grow product revenue was offset by lower VPN and voice, which contributed to the declines in our nurture and harvest products.

Christopher David Stansbury: Public sector revenue declined two 8% influenced primarily by declines in nurturing harvest, which more than offset growth within our grow and other product revenue.

Christopher David Stansbury: As Keith mentioned, we continue to see traction with large bookings in this space, which take time to ramp to revenue and these wins give us continued confidence to public sector will be the first sales channel to return to sustainable growth this year.

Christopher David Stansbury: Wholesale revenue declined 11.3% year-over-year. The harvest portion of the wholesale portfolio, which is comprised of products like TDM, Voice, and Private Lion, saw revenue contract by 17.2% year-over-year in the first quarter. This is primarily driven by telco partners that are shedding legacy services.

Christopher David Stansbury: Wholesale revenue declined 11, 3% year over year, the harvest portion of the wholesale portfolio, which is comprised of products like Tdm voice in private lines saw revenue contract by 17, 2% year over year in the first quarter. This is primarily driven by telco partners that are selling legacy services are.

Christopher David Stansbury: Our harvest product revenue will likely continue to decline over time and is an area that we will manage for cash. International and other revenue declined 65.2%, driven primarily by the divestiture of our EMEA business and the sale of select CDN contracts in the fourth quarter of last year. Moving to our business product lifecycle reporting, I'll reference the results based on our North America enterprise channels, which represent our core strategic revenue category.

Christopher David Stansbury: Harvest product revenue will likely continue to decline over time and is an area that we will manage for cash.

Christopher David Stansbury: National and other revenue declined 65, 2% driven primarily by the divestiture of our EMEA business and the sale of select CDN contracts in the fourth quarter of last year.

Christopher David Stansbury: Okay.

Speaker Change: Moving to our business product lifecycle reporting I'll reference the results based on our North America enterprise channels, which represent our core strategic revenue categories.

Christopher David Stansbury: As Kate shared, we maintained higher growth products revenue both year-over-year and sequentially in the first quarter, despite the TSA-related headwinds. The 3.3% year-over-year improvement was driven by strength in IP and enterprise broadband across all channels, as well as dark fiber and edge fabric growth primarily within large enterprises.

Christopher David Stansbury: As Kate shared we maintained higher growth products revenue, both year over year and sequentially in the first quarter. Despite the TSA related headwinds to three 3% year over year improvement was driven by strength in IP and enterprise broadband across all channels as well as dark fiber and edge fabric growth primarily within large enterprise.

Christopher David Stansbury: While results can vary in any quarter, we expect sustained strength in GROW product revenue as we execute in our core turnaround. GROW represented approximately 43% of our North America enterprise revenue and, for our total business segment, carried an approximate 81% direct margin this quarter. Within Nurture and Harvest, we continue to see expected headwinds in these market declining categories. However, we continue to take proactive steps to migrate customers to newer technologies, and these actions improve our customers' experience and provide an uplift in customer lifetime value for Lumen. Additionally, we will continue to pursue opportunities for cost optimization when we help customers migrate from off-net legacy and TDM-based services onto Lumen's network.

Christopher David Stansbury: While results can vary in any quarter, we expect sustained strength in the grow product revenue as we execute on our core turnaround.

Christopher David Stansbury: <unk> represented approximately 43% of our North America enterprise revenue and for our total business segment carried an approximate 81% direct margin this quarter.

Christopher David Stansbury: Within nurture and harvest, we continue to see expect.

Christopher David Stansbury: We expect headwinds in these markets are declining categories. However, we continue to take proactive steps to migrate customers to newer technologies and these actions improve our customers' experience and provide an uplift in customer lifetime value for women. Additionally, we will continue to pursue opportunities for cost optimization, when we help customers migrate.

Christopher David Stansbury: Off net legacy and Tdm based services onto Lumens network.

Christopher David Stansbury: Nurture products revenue declined 13.3% year over year, with VPN and Ethernet services driving their performance. Nurture represents about 31% of our North America enterprise revenue, and for our total business segment, carried an approximate 67% direct margin this quarter. Harvest products revenue declined 11.9% year-over-year and continues to be negatively impacted by declines in TDM-based voice and private line revenue. Harvest represented less than 17% of our North America enterprise revenue in the first quarter, an improvement of approximately 120 basis points year-over-year. For our total business segment, it carried an approximate 78% direct marginless core. Other products' revenue declined 1.8%.

Christopher David Stansbury: Nurture products revenue declined 13, 3% year over year.

Christopher David Stansbury: <unk> and Ethernet services driving a performance nurture represents above 31% of our North America enterprise revenue and for our total business segment carrying approximately 67% direct margin this quarter.

Christopher David Stansbury: Harvest products revenue declined 11, 9% year over year and continues to be negatively impacted by declines in Tdm based voice and private line harvest represented less than 17% of our North America enterprise revenue in the first quarter, an improvement of approximately 120 basis points year over year for.

Christopher David Stansbury: For our total business segment picture at an approximate 78% direct margin this quarter.

Christopher David Stansbury: Other products revenue declined one 8% our other product revenue tends to experience fluctuations due to the variable nature of these products now.

Christopher David Stansbury: Our other product revenue tends to experience fluctuations due to the variable nature of these products. Now moving on to mass markets, our fiber broadband revenue grew 11.8% and represents approximately 35% of mass market broadband revenue. Also note that our exposure to legacy voice and other services revenue improved by approximately 170 basis points year over year. During the quarter, Fibroblast Band-enabled location ads were 129,000, bringing our total to approximately 3.8 million as of March 31, and pacing towards our targeted annual 500,000 build target this year.

Christopher David Stansbury: Now moving on to mass markets, our fiber broadband revenue grew 11, 8% and represented approximately 35% of mass markets broadband revenue.

Christopher David Stansbury: Also note that our exposure to legacy voice and other services revenue improved by approximately 170 basis points year over year.

Christopher David Stansbury: During the quarter fiber broadband enabled location adds were 129000, bringing our total to approximately $3 8 million as of March 31.

Christopher David Stansbury: And pacing towards our targeted annual 500000 build target this year during.

Christopher David Stansbury: During the quarter, we added 36,000 quantum fiber customers, which is our best fiber net add quarter reported today, and this brings our total to 952,000. Fiber ARPU was flat sequentially and increased year over year to approximately $61 in the first quarter. At the end of the first quarter, our penetration of legacy copper broadband was less than 10%, and our quantum fiber penetration stood at approximately 25%.

Christopher David Stansbury: During the quarter, we added 36000 quantum fiber customers, which is our best fiber net add quarter reported to date and this brings our total to 952000 <unk>.

Christopher David Stansbury: <unk> was flat sequentially and increased year over year to approximately $61 in the first quarter.

Christopher David Stansbury: At the end of the first quarter, our penetration of legacy copper broadband was less than 10% and our quantum fiber penetration stood at approximately 25%.

Christopher David Stansbury: As we look ahead, we will continue our market-by-market assessment of the mass markets business as we explore a range of strategic options to maximize its value. Those options include potential joint ventures and wholesaling arrangements to improve its EBITDA contribution, and asset-backed securitization and future divestitures to generate incremental cash. Now turning to Adjusted EBITDA, for the first quarter of 2024, Adjusted EBITDA was $977 million compared to $1.251 billion in the year-ago quarter.

Christopher David Stansbury: As we look ahead, we will continue our market by market assessment of the mass market business as we explore a range of strategic options to maximize its value.

Christopher David Stansbury: Those options include potential joint ventures, and wholesaling arrangements to improve its EBITDA contribution and asset backed securitization and future guidance.

Christopher David Stansbury: Teachers to generate incremental cash.

Christopher David Stansbury: Now turning to adjusted EBITDA for the first quarter of 2024, adjusted EBITDA was $977 million compared.

Christopher David Stansbury: Compared to 125 1 billion in the year ago quarter.

Christopher David Stansbury: The first quarter of this year included a net headwind of $43 million related to the divested EMEA business, a net benefit of $2 million from divestiture-related post-closing commercial agreements, and a net headwind of $18 million from the sale of select CDN contracts. These items represent approximately 22% of the year-over-year decline.

Christopher David Stansbury: First quarter of this year included a net headwind of $43 million.

Christopher David Stansbury: Related to the divested EMEA business and the benefit of $2 million from the divestiture related post closing commercial agreements and a net headwind of $18 million.

Christopher David Stansbury: From the sale of select CDN contracts. These items represent approximately 22% of the year over year decline.

Christopher David Stansbury: Due to expected revenue benefits from our strong first quarter sales bookings and previously won large deals, as well as efficiency improvements from our second quarter and ongoing cost actions and overall margin management, we expect the first quarter to be the low point for EBITDA in 2024. Special items impacting adjusted EBITDA this quarter totaled $170 million, reflecting expected charges related to the negotiation and execution of our TSA. For the first quarter of 2024, our adjusted EBITDA margin was 29.7%, and capital expenditures for the first quarter of 2024 were $713 million.

Christopher David Stansbury: Due to expected revenue benefits from our strong first quarter sales bookings and previously won large deals as well as efficiency improvements from our second quarter and ongoing cost actions and overall margin management, we expect the first quarter to be the low point for EBITDA in 2024.

Christopher David Stansbury: Special items impacting adjusted EBITDA this quarter totaled $170 million, reflecting expected charges related to the negotiation and execution of our TSA agreement.

Christopher David Stansbury: For the first quarter of 2024, our adjusted EBITDA margin was 29, 7%.

Christopher David Stansbury: Capital expenditures for the first quarter of 2024 was $713 million.

Christopher David Stansbury: For free cash flow, $518 million was generated in the first quarter, and this included an expected tax refund of approximately $700 million. Importantly, we're leaning into our network investments to support the rapid growth in demand our customers are facing and remain confident in our free cash flow guidelines. Moving on to our financial outlook, we're reiterating all of our 2024 full-year guidance. With that, we're ready for your questions.

Christopher David Stansbury: For free cash flow of $518 million, we generated in the first quarter and this included an expected tax refund of approximately $700 million importantly.

Christopher David Stansbury: Importantly, we're leaning into our network investments to support the rapid growth in demand our customers are facing and remain confident in our free cash flow guidance.

Christopher David Stansbury: Moving on to our financial outlook, we are reiterating all of our 2020 for full year guidance metrics and with that we're ready for your questions.

Operator: Thank you. If you would like to ask a question, please press the star by the number one on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the star one again. One moment, please, for your first question. Your first question comes from Michael Rollins with Citi. Please go ahead.

Speaker Change: Thank you if you would like to ask a question.

Speaker Change: Please press the star by the one on your telephone you will hear a three Tom prompt to acknowledge your request. If you have question. If your question has been answered and you would like to withdraw your registration. Please press the star one again one moment. Please for your first question.

Speaker Change: Your first question comes from Michael Rollins with Citi. Please go ahead.

Michael Ian Rollins: Thanks, and good afternoon. There are two topics. The first one, in terms of the performance sequentially and year over year, the organic business revenue decline for things like Harvest and for Nurture, and then just for the Customer Vertical Designation. Can you share a bit of how much of that was seasonal versus other factors, whether it's competition or an acceleration in the legacy revenues, and how much of that is customer-driven versus some of the initiatives that you have to try to drive out the unprofitable or lower Then I'll have one other topic for you afterwards. Yeah.

Michael Ian Rollins: Thanks, and good afternoon two topics.

Michael Ian Rollins: One in terms of the performance sequentially.

Michael Ian Rollins: Year over year, the organic business revenue declined.

Michael Ian Rollins: Are things like harvests and for nurture and then just for the.

Michael Ian Rollins: Customer vertical designation.

Michael Ian Rollins: You share a bit of how much of that was seasonal versus other factors, whether it's competition or an acceleration.

Michael Ian Rollins: In the legacy revenues and how much of that is customer driven versus some of the initiatives that you had to try to drive out the unprofitable or lower margin or legacy revenue to help your customer relationships.

Michael Ian Rollins: One other topic for you afterwards.

Michael Ian Rollins: Yes.

Christopher David Stansbury: Michael, good questions. We don't have the split outs and all that.

Michael Ian Rollins: Michael good good questions.

Michael Ian Rollins: Have the split us and all of that but what I would say very broadly and generally is.

Christopher David Stansbury: But I would say, very broadly and generally, that these are the industry declines that I think everybody's talking about, right? Customers are leaving legacy telecom services. Our competition is also trying to turn off off-net services. We're trying to turn off off-net services that are increasingly expensive to operate.

Michael Ian Rollins: These are the industry declines and I think everybody is talking about customers.

Michael Ian Rollins: Our leaving legacy Telecom services.

Michael Ian Rollins: Our.

Michael Ian Rollins: Competition is also trying to turn off off net services, we're trying to turn off off net services that are increasingly expensive to operate and all of that is driving some of those trends. So I would say this is more the continued behavior that exists.

Christopher David Stansbury: And all of that is driving some of those trends. So I would say this is more the continued behavior that exists. It's not something new that we're seeing. And I wouldn't say that it's seasonal.

Michael Ian Rollins: That's something new that we're seeing I wouldn't say that it is seasonal and.

Christopher David Stansbury: And we expect that to continue. But the more important point is that that's why we're changing the rules of the game and focusing on bringing newer products consumed digitally that meet the needs of customers today rather than the needs of customers from the past. And that's really where the focus is, and it's why our growing category is the biggest portion of our overall portfolio, and you'll see that continue to grow.

Michael Ian Rollins: And we expect it to continue.

Michael Ian Rollins: The more important point is that that's why we are changing the rules of the game and focusing on bringing newer products consumed digitally that meet the needs of customers today, rather than the needs of customers from the past.

Michael Ian Rollins: And Thats really where the focus is and it's why our grow category is the biggest portion of our overall portfolio and and Youll see that continue to.

Michael Ian Rollins: To grow.

Christopher David Stansbury: And then the second topic you mentioned, in terms of the market by market assessment for the mass market business, the possibility of wholesaling and joint ventures. Could you expand on that a bit more? And are you considering offering fiber on a wholesale basis, whether it's to wireless carriers or other third parties? Thanks.

Michael Ian Rollins: And then the second topic, you mentioned in terms of the market by market assessment for the mass market.

Michael Ian Rollins: The possibility of wholesaling in joint ventures, if you could expand on that a bit.

Michael Ian Rollins: More and are you considering offering fiber on a wholesale basis.

Michael Ian Rollins: Whether it's wireless carriers or other third parties.

Christopher David Stansbury: So we're looking at all possible arrangements. It's no secret, obviously; there was an announcement last week that joint venture arrangements exist with a number of our competitors.

Michael Ian Rollins: So we're looking at at all possible arrangements there is no.

Michael Ian Rollins: There is no secret obviously, there's been there was an announcement last week, where.

Michael Ian Rollins: Joining venture arrangements exist with a number of our competitors.

Christopher David Stansbury: So we're looking at them. Wholesaling is one that could be added to that. And there may be opportunities to sell any given market if the valuation is right. So the whole point here is driving incremental enablements and penetration, and then how we increase our EBITDA leverage on those investments as we go forward. So there's no one answer at this point, and as we get closer to making decisions around those things, we'll certainly communicate.

Michael Ian Rollins: So we're looking at those wholesaling as one that can be added to that and there may be opportunities to sell.

Michael Ian Rollins: Any given market if if the valuation is right. So the whole point here is on driving.

Michael Ian Rollins: And current mental enablement and penetration.

Michael Ian Rollins: And then how we increase.

Michael Ian Rollins: Our EBITDA leverage on those investments as we go forward. So there's no one answer at this point and as we.

Michael Ian Rollins: Get closer to making decisions around those things will certainly communicate that.

Operator: Thank you, Mike. Operator, we'll take the next question. Your next question comes from Sebastiano Petty with Morgan Stan or JP Morgan. Please go ahead. Hi, thanks for taking the question. I was hoping, perhaps, Chris, if you could give some more color on

Speaker Change: Thank you Mike operator, thank you for taking my questions.

Operator: Your next question comes from Sebastiano Petty with Morgan, or J.P. Morgan. Please go ahead. Hi, thank you for taking

Speaker Change: Your next question comes from Sebastian <unk> <unk> with Morgan Stanley Jpmorgan. Please go ahead.

Sebastian: Hi, Thanks for taking the question I was hoping perhaps Chris.

Sebastian: If you can give us some more color on the levers of what's driving that continued momentum in quantum fiber.

Speaker Change: Obviously, great great to hear on the NPS side as well, but.

Sebastian: Any if you can unpack the drivers of the subscriber growth and perhaps maybe what youre seeing from a take or.

Sebastian: Rate perspective in terms of your product.

Sebastian: Service level speed mix that would be great. Thank you.

Operator: Thank you. So, again, broadly speaking, there's been an enormous amount of focus by the team and great work by the team to really scale up our marketing efforts. We said last year that one of the issues we had until we got to scale was our, on the build side, our ability to scale the marketing effort. And so a lot of our marketing efforts in the past were focused on very localized efforts. We have expanded that. There's a lot more media in the market today than there was.

Speaker Change: Again broadly speaking, there's been an enormous amount of focus by the team and great work by the team.

Speaker Change: To really scale up our marketing efforts, we said last year that.

Speaker Change: One of the issues, we had until we got to scale.

Sebastian: <unk> are on the build side was our ability to scale the marketing motion and so a lot of our marketing efforts in the past we're focused on very localized efforts.

Sebastian: We have expanded that theres, a lot more media and market today than there was.

Christopher David Stansbury: We continue to refine that media approach to make sure that it's effective, and that's driving improved penetration. And again, really importantly for that team, their focus is two things. It's about getting really good enablements on the ground efficiently and at speed. And it's about driving penetration as fast as we can so that we can shorten the time to payback. So kudos to the team. We'll continue to evolve those programs to make sure they're effective, but we feel very good about what we've done to date.

Sebastian: We continue to refine that media approach to make sure that it's effective and thats driving.

Speaker Change: <unk> penetration and again really importantly for that team. Their focus is two things, it's about getting really good enablement and the ground efficiently and at speed and it's about driving penetration.

Speaker Change: As fast as we can so that we can shorten the time to payback so kudos to the team will continue.

Speaker Change: To evolve those programs to make sure they are effective but.

Speaker Change: We feel.

Speaker Change: Very good about what we've done.

Speaker Change: Good day.

Speaker Change: Thank you.

Operator: Your next question comes from Batya Levi with UBS. Please go ahead. Great, thank you. Um, can you provide a little bit more context on

Operator: Your next question comes from Batya Levi of UBS. Please go ahead.

Speaker Change: Your next question comes from but yeah like Levy with UBS. Please go ahead.

Levy: Great. Thank you can you provide a little bit more context on this show sales funnel that you mentioned in the <unk> and with that coming into the second quarter or can we also expect business revenue decline to be the low point.

Levy: In <unk> as well and maybe if you could touch on the competitive environment for these new Nextgen services that you're building up that very helpful. Thank you.

Christopher David Stansbury: So you want to start? Yeah. So I'll take the first part and then turn it back to Kate.

Speaker Change: So if you want you want to start yes, so I'll take the first part and then I'll turn it back to Kate.

Christopher David Stansbury: I think, Batya, it's too early to say that, you know, the first quarter is going to be the low point because we obviously do have the legacy drag that we've talked about openly. And it's going to be choppy as we go through the year. What I would say is that the results that we saw in the first quarter are really pleased with, but it's one data point. And the team is focused on rigorous execution to make sure that that continues and, obviously, converting that funnel into installs as we go forward.

Kate: But yet it's too early to say that.

Kate: First quarter is going to be the low point, because we obviously do have the legacy drag that we've talked about openly.

Kate: And it's going to be choppy as we go through the year. What I would say is is that the results that we saw in first quarter, we're really pleased with.

Kate: But it's one data point and the team is focused.

Kate: On rigorous execution to make sure that that continues and obviously converting that funnel into installs as we go forward. So a little early yet to call.

Christopher David Stansbury: So it's a little early yet to call how revenue performs, you know, quarter by quarter this year. EBITDA, we're more confident in because of the cost savings that we've been able to generate with some of the activities we've talked about.

Kate: How revenue performs.

Kate: Quarter by quarter. This year EBITDA, we're more confident in because of.

Kate: The cost savings that we've been able to generate some of the activities we've talked about.

Kathleen E. Johnson: And with respect to your question around the competitive environment, it's clear that we are focusing on the future and applying all of our resources to building a platform to give customers what they want. And every customer conversation that I have basically is reflected in this notion of capacity on demand. And really, when I talk about cloudifying telecom, it's really about having the ability to fire up any service, anytime, anywhere, and to do so with dynamic bandwidth and all of the digital capabilities that make it easy to not just consume network services but to do so in a really, really complex environment from on-premises to edge and in the cloud and back, and to push processing and data workloads where it makes sense to do so cost-effectively.

Kate: Yeah.

Kate: With respect to your question around the competitive environment.

Levy: It's clear that we are focusing on the future and applying all of our resources to building a platform to give customers what they what they want in every customer conversation that I have.

Levy: Basically as is reflected in this notion of capacity on demand and really when I talk about clarifying telecom.

Levy: It's really about having the ability to buy.

Levy: Buyer up any service anytime anywhere and to do so with dynamic bandwidth and all of the digital capabilities that make it easy to not just consume network services, but to do so in a really really complex environment from on Prem to edge and in the cloud and back and to push.

Levy: Processing and data workloads, where it makes sense to do so cost effectively traditional telecom doesn't account for that it is to physically oriented and doesn't have that digital wrapper to enable what I. Just explained we're investing in it heavily and what we're hearing from our customers and our partners.

Kathleen E. Johnson: Traditional telecom doesn't account for that. It's too physically oriented and doesn't have that digital wrapper to enable what I just explained. We're investing in it heavily, and what we're hearing from our customers and our partners is that we're the only ones that are. And I think that's differentiated. We're very committed to it, and as such, we're getting what I see as a nice increase in demand across the board for our products and services that's translating into a healthier pipeline.

Levy: Is that we're the only ones that are.

Levy: And I think that's differentiating we're very committed to it and as such we are getting what I see as a nice increase in demand across the board for our products and services, that's translating into a healthier pipe.

Operator: Thank you, Batya. Operator, we'll take the next question.

Speaker Change: Thank you Bob Operator, we'll take the next question.

Operator: Your next question comes from the line of Dave Bearden with Bank of America. Please go ahead.

Speaker Change: Your next question comes from the line of Dave Barden with Bank of America. Please go ahead.

David Barden: I don't have a beard, but I appreciate it. Thank you so much, guys. So, if I could, just the first question would be related to Batya's question. Kate, you know, if we went backwards five or six years ago, MPLS would have been the growth driver of the business. SD-WIN was this very small thing that was coming up the curve. Then three or four years ago, MPLS kind of stopped growing, and SD-WIN started growing significantly as a cost savings opportunity. And now we're talking about, you know, high speed, low latency, custom private network.

David Barden: I don't have a beard, but I appreciate it. Thank you so much guys.

David Barden: So if I could just the first question would be related to <unk> question.

Speaker Change: Hum.

David Barden: Went backwards five or six years ago.

David Barden: Mpls would've been the growth driver of the business SD Wan was this very small as being that was coming up the curve than three or four years ago, Mpls kind of stopped growing and SD Wan started growing significantly.

David Barden: Cost savings opportunity and now we're talking about maybe high speed low latency custom private networks.

David Barden: And I'm wondering, kind of, as you think about the kind of interplay of these different product arcs, you know, your confidence level in that the next generation of the next product isn't the product that kind of, you know, cannibalizes the existing products that are the meat and potatoes of the business today. And then the second question. Chris, if I could, just on the TSA, congrats for getting it all

Speaker Change: And I'm wondering kind of as you think about the kind of interplay of these different products are.

Speaker Change: Your confidence level that the.

Speaker Change: The next generation of the next product isn't the product that kind of.

Speaker Change: Cannibalize the existing products that are the meat and potatoes of the business today.

Speaker Change: And then the second question.

Speaker Change: Chris if I could just on the TSA congrats for getting it all done.

David Barden: Our math is that it contributes $200 million of incremental interest expense to the business. Is that roughly right? And if it is, you've reiterated all your guidance. Can you talk about how that $200 million fits into all the numbers and where the offset comes from? Thank you.

Speaker Change: Our math is that it contributes to $200 million.

Speaker Change: Incremental interest expense to the business.

Speaker Change: Is that roughly right.

Speaker Change: And.

Christopher David Stansbury: If it is you've reiterated all of your guidance kind of can you talk about how that 200 million fits into all the numbers and where the the offset comes from thank you.

Kathleen E. Johnson: I'll start and pass the mic over to Chris. So the first part of your question regarding net new capabilities and how the portfolio grows over time rather than just cannibalizing is a great one. What we see is increased demand for the ability to consume services in the digital era. And as I said before, there's not a lot, there aren't a lot of companies out there who are doing this, which gives us a bit of a differentiated value proposition when we approach customers with NAS, but also with ExaSwitch, which is an important part of the story of creating fabric to basically create infinitely flexible and dynamic connectivity solutions That's going to do two things.

Speaker Change: I'll start and passenger capacity out of the mine.

Speaker Change: Chris So the first part of your question regarding net new capabilities and how the portfolio grows over time, rather than just cannibalizing.

Speaker Change: Is it it's a great one what we see is increased demand for the ability to consume.

Speaker Change: Services in the digital era, and as I said before there's not a lot there aren't a lot of companies out there who are doing this which gives us a bit of a differentiated value proposition.

Speaker Change: When we approach customers with Nash, but also with eggs switch, which is an important part of the story of creating fabric.

Speaker Change: You can basically create infinitely flexible and dynamic connectivity solutions, that's going to do two things number one it is.

Christopher David Stansbury: Number one, it builds a digital platform upon which we can build more services, like the Lumen Defender Service I just described earlier in my remarks, and increase our portfolio and the amount of available market we're going after. We're entering into a new space with some of these new offerings. It allows us to provide a seamless customer experience where we can help customers go faster in terms of their digitization, and they are starting to recognize that and choose us more, which gives us a huge share-take opportunity.

Speaker Change: It builds a digital platform upon which we can build more services like alumina defend ourselves I. Just described earlier in my remarks, an increase.

Speaker Change: Our portfolio and the amount of available market, we're going after we're entering into a new space with some of these new offerings. The second thing it does is.

Speaker Change: It allows us to provide a seamless customer experience.

Speaker Change: Where we can help customers go faster in terms of their digitization and they are starting to recognize that and choose us or which gives us a huge share take opportunity. So two ways to grow acquire more customers, which is happening in the second way is is to sell more to them, which is also happening.

Christopher David Stansbury: So the two ways to grow are to acquire more customers, which is happening, and the second way is to sell more to them, which is also happening, which you saw in both of the metrics that I shared earlier with net new customers and the size of the deals that we're selling. Great.

Speaker Change: Which you saw and in both of the metrics that I shared earlier with net new customers and the size of the deals that we're selling to them.

Christopher David Stansbury: Yeah, and that's correct on the interest expense, roughly $200 million. This year we gave a range, you know, it could be a little less than that, just given the timing of when that deal was consummated. And we talked really last year and late last year and in our guidance about the fact that we adjusted our capital spend to compensate for that from a free cash flow standpoint. You know, between that and the cost of capital considerations and the time to pay back on consumer fiber, we pulled back on the bill plan from $750,000 a year to half a million a year.

Christopher David Stansbury: Chris Yes.

Speaker Change: <unk>.

Speaker Change: That's correct.

Speaker Change: On the on the interest expense of roughly $200 million.

Speaker Change: This year, we gave a range.

Speaker Change: Could be a little less than that just given the timing of when that deal was consummated and we talk really last year and.

Speaker Change: Late last year and in our guidance about the fact that we adjusted our capital spend to compensate for that from a free cash flow standpoint.

Speaker Change: Between that and the cost of capital considerations and the time to payback on on consumer fiber, we pulled back on the build plan from 750000, a year or two to half a million dollars a year. So that's that's how that's contemplated.

Christopher David Stansbury: So that's how that's contemplated. But I think importantly, though, David, we're not done, right? There will be opportunities for us to use new sources of cash, additional sources of cash to continue to focus on de-levering. And that's job number one. So you'll see more.

Speaker Change: I think importantly, though.

Speaker Change: David we're not done right.

Speaker Change: There is no way there will be opportunities for us.

Speaker Change: To use.

Speaker Change: New sources of cash additional sources of cash to continue to focus on Delevering and that's job number one so you'll you'll see more as we go forward.

Speaker Change: Thanks, Chris Thanks, Kate.

Operator: Operator, we'll take a few questions. Your next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Operator, we are hearing question.

Speaker Change: Your next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Simon William Flannery: Great. Thank you very much good evening I'm, Chris I Wonder could you help us a little bit more with the EBITDA cadence.

Simon William Flannery: I understand the head count reductions, but I think according to the Q. It looks like there is sort of being phased in during the second quarter. So how do we think about the cost.

Simon William Flannery: So, how do we think about the cost line items over the kind of Q1 to Q2, Q2 to Q3, any sense of what the step functions will be there? And then, yeah, go ahead.

Speaker Change: Your line items.

Speaker Change: Over the kind of Q1 to Q2 Q2 to Q3 any sense of.

Speaker Change: What the step functions will be there.

Speaker Change: Yes go ahead sorry.

Simon William Flannery: I think, Kate, you briefly touched on AI in your comments, and I'd just love to dig a little bit more deeply into what you see as the big buckets of opportunity to drive costs out of the business, and drive improved customer experience through AI. And what's the timing on getting those sort of work streams to kind of full strength?

Speaker Change: Thank you.

Speaker Change: You briefly touched on AI and your comments I'd, just love to take a little bit more deeply into what do you see as the big buckets of opportunity to drive cost side of the business drive improved customer experience in AI and what's the timing on getting those sort of work streams.

Speaker Change: Two to kind of full.

Speaker Change: Full strength.

Christopher David Stansbury: Yeah, so the, you know, just on the timing, Simon, obviously, we don't give quarterly guidance, so I'm going to be careful here. The reality is that I think if you look at the savings, you'll see a lot of the benefits start in Q2, and we'll be at run rate in Q3. Don't forget in your modeling, Q3 is always our highest cost quarter seasonally because it's when we do a lot of maintenance.

Speaker Change: Sure.

Speaker Change: Yes so.

Speaker Change: Just on the timing Simon obviously, we don't give quarterly guidance under.

Speaker Change: I'm going to be careful here.

Speaker Change: The reality is is that.

Speaker Change: If you look at the at the savings.

Speaker Change: Youll see a lot of the benefits start in Q2 will be at run rate in Q3 don't forget in your modeling Q3 is always seasonally our highest cost quarter because it's one we're doing a lot of maintenance. It is obviously, our highest use of energy for cooling and whatnot.

Christopher David Stansbury: It's obviously our highest use of energy, you know, for cooling and whatnot. But I don't want to get into specific quarterly guidance other than to say that we're confident that Q1 is the lowest point in the Duffer. And regarding your question about leveraging some of these technologies to drive growth,

Speaker Change: But I don't want to get into specific quarterly guidance other than to say.

Speaker Change: We're confident that Q1 is the low point in EBITDA for the year.

Kathleen E. Johnson: And regarding your question about leveraging some of these technologies to drive productivity and create a digital experience for our customers to help them choose us over other platforms. We're super excited about our progress so far, but what I've explained to you in my prepared remarks is really just one portion of this. Chris used the term shape-shifting.

Speaker Change: And regarding your question about leveraging some of these technologies to drive productivity.

Speaker Change: And create the digital experience for our customers to help them.

Speaker Change: Choose us over other platforms, we're super excited about our progress so far but what I've explained to you in my prepared remarks was really just one portion of this Chris.

Speaker Change: Use the term shape shifting where we're reshaping lumen to be a digital company and that requires us to do a bunch of things, we're going to import net new skills into the company Youre seeing we do that at the leadership team it's happening across the entire company number two youll see.

Kathleen E. Johnson: We're reshaping Lumen to be a digital company, and that requires us to do a bunch of things. We're going to import new skills into the company. You're seeing me do that on the leadership team.

Kathleen E. Johnson: It's happening across the entire company. Number two, you'll see us re-skill and up-skill different populations across the company, depending on what organization. And of course, but we'll do that selectively as and where, and we'll always take the opportunity to redeploy those folks to higher priority items. And what we're seeing so far last year, we went really hard at this opportunity to be beta customers for various AI capabilities, both native to our enterprise system platform, as well as, you know, being beta customers for things like Microsoft 365 Copilot. We're really pleased with the adoption of those capabilities across the company at every level, across every function. And we're seeing an amazing return on those investments. I'll give you two examples.

Speaker Change: Reskill and upskill different populations across the company, depending on what organization.

Speaker Change: Great.

Speaker Change: Okay.

Speaker Change: And of course, but we will do that selectively everywhere and we'll always take the opportunity to redeploy those folks to higher priority items.

Speaker Change: And what we're seeing so far last year, we weren't really hard at this opportunity being beta customers, who are various AI capabilities, both native to our enterprise.

Speaker Change: Enterprise system platform as well as.

Speaker Change: Being beta customers for things like Microsoft 365 co pilot.

Speaker Change: We're really pleased with the adoption of those capabilities across the company at every level across every function and we're seeing amazing return on those investments I'll give you two examples the first is in <unk>.

Kathleen E. Johnson: The first is in knowledge worker productivity. We're seeing about 30 minutes of productivity per person across the company. That equates to around 700,000 hours of time that we get to redeploy towards higher priority items.

Speaker Change: <unk> worker productivity.

Speaker Change: Seeing about 30 minutes, a day of productivity per person across the company that equates to around 700000 hours of time that we get to redeploy towards higher priority items were.

Kathleen E. Johnson: We're super excited about that. The second thing we're seeing is about a 30% increase in our developer productivity by deploying AI in GitHub. And so that is also extremely exciting for, you know, a company that's now developing a digital platform. I think we can talk about the 14 new innovations in NAS being directly attributable to a highly productive development team. We have another 16 innovations that we've delivered to market across XSwitch and our security and edge platforms, all since October.

Speaker Change: Super excited about that the second thing we're seeing.

Speaker Change: <unk> is about a 30% increase in our developer productivity deploying.

Speaker Change: AI and Github and so that is also extremely exciting for a company that is now developing a digital platform. I think we can talk about the 14, new innovations and as being directly attributable to a highly productive development team.

Speaker Change: We have another 16 innovations that we've delivered to market across Texas switch and in our security and edge platform.

Kathleen E. Johnson: So 30 net new innovations since that October timeframe. That's multiple times the productivity that we were able to achieve in prior periods. Lots of progress there, and we're continuing to go after it. It's a major part of our turnaround.

Speaker Change: Since October to 30 net new innovations.

Speaker Change: That October timeframe.

Speaker Change: Multiples times, the number of productivity that we were able to achieve in.

Speaker Change: In prior periods, so lots of progress there and we're continuing to go after it's a major part of our turnaround.

Speaker Change: Thanks, Bob.

Operator: Thank you, Simon. Operator, we're ready for the next question.

Bob: Thank you Simon operator, we're ready for the next question.

Operator: Your next question comes from Nick Del Dio with Moffitt Nathanson. Please go ahead.

Speaker Change: Your next question comes from Nick del Deo with Moffett Nathanson. Please go ahead.

Nicholas Ralph Del Deo: All right. Thanks for my questions.

Speaker Change: Alright, Thank you taking my questions.

Speaker Change: First you talked about seeing demand for high capacity solutions driven by AI.

Nicholas Ralph Del Deo: First, Kate, you talked about seeing demand for high-capacity solutions driven by AI. Is it fair to say that it's Wave and Dark Fiber that are benefiting the most from that trend? And to what degree was this component of your bookings responsible for the overall increase in bookings that you cited? And then second, I think you've also talked about the mid-market enterprise being a segment that's turned to growth after the public sector. And I think you've talked about the channel being an important driver that engages with channel partners more. So I guess, what can you share regarding the quality of the deals that the channel is bringing in? And the compensation you're paying to those partners?

Speaker Change: Is it fair to say that its weight in dark fiber that is benefiting the most from that trend and to what degree was this component of your bookings responsible for the overall increase in bookings that you cited.

Speaker Change: And then.

Speaker Change: Secondly, I think you've also talked about.

Speaker Change: Mid market Enterprise segment, that's returned to growth after public sector.

Speaker Change: And I think you've talked about the channel being an important driver of that engagement channel partners more so I guess, what can you share regarding the quality of the deals that the channel is bringing in.

Speaker Change: And the compensation you are paying to those partners for them.

Kathleen E. Johnson: I'll start with your first question. Yes, we're seeing a huge increase in demand for Waves and for dark fiber, for sure. We're also seeing an increase in demand for what I referred to as custom private networks. Think of it as big technology companies or cloud companies that need to interconnect their data centers to push data back and forth, huge workloads, and to do so in the most friction-free way as possible. And they're coming to us for a couple of reasons.

Speaker Change: I'll start with your first question.

Speaker Change: Yes, we're seeing a huge increase in demand for wave and for dark fiber for sure. We're also seeing an increase in demand for what I referred to as custom private networks and think of it as big technology companies are cloud companies that need to interconnect.

Speaker Change: Third data centers to push data back and forth huge workloads.

Speaker Change: And to do so in a friction free way as possible.

Speaker Change: And they're coming to us for a couple of reasons number one we have conduit. So there is this ability to to continue to over pull fiber and and given a lot of flexibility there and room to grow.

Kathleen E. Johnson: Number one, we have conduits, so there's this ability to continue to overpull fiber and give a lot of flexibility there and room to grow. The second piece of it is because of the digital platform and because of our mission around delivering capacity on demand at every level of the network. It's, you know, the value proposition of doing business with Lumen. So that's the first part.

Speaker Change: The second piece of it is because of the digital platform and because of our mission around delivering capacity on demand at every level of the network. It's.

Speaker Change: The value proposition of doing business the lumen.

Speaker Change: So that's the first part I think the second part regarding channel productivity.

Kathleen E. Johnson: I think the second part regarding channel productivity. Let me just say that we're excited to be focused on the channel. We're excited to continue to recruit and help our partners be as productive as humanly possible. We're seeing improvement there, but it's not enough yet.

Speaker Change: Let me just say that we're excited to be focused on the channel. We're excited to continue to recruit and help our partners be as productive as humanly possible.

Speaker Change: Seeing improvement there, but its not enough yet and so I just look at it as a huge opportunity to have more feet on the street selling these net new capabilities and I think we're getting better at building the rhythms around a true commercial engine, which is both direct and indirect for these net new capabilities like not like enterprise to cloud connectivity.

Kathleen E. Johnson: And so I just look at it as a huge opportunity to have more feet on the street selling these net new capabilities. And I think we're getting better at building the rhythms around a true commercial engine, which is both direct and indirect for these net new capabilities like NAS, like enterprise-to-cloud connectivity through EgnaSwitch, and like Lumen Defender with our security offering. So there's more to the story coming, but Chris, do you want to add anything? Yeah, yeah, Nick.

Speaker Change: Exits, which unlike lumen defender with our security offering so more to the story coming but Chris you want to add anything yes, yes.

Christopher David Stansbury: And, you know, I think Kate hit most of it. I think the key thing for us, you know, if I think about a large enterprise mid-market public sector, public sector first to turn a well-established sales motion, deeply connected to the customer and understanding of the customer, and that was, really, strong muscle tissue at Lumen, frankly.

Christopher David Stansbury: I think Kate hit most of it I think the key thing.

Christopher David Stansbury: For us if I think about.

Christopher David Stansbury: Large enterprise mid market and public sector public sector first to turn a well established sales motion deeply connected to the customer and understanding of the customer and that was really strong muscle tissue at lumen frankly.

Speaker Change: Mid markets was almost the exact opposite hits there wasn't a lot. There there was a heavy reliance on a direct selling motion product set was really large enterprise focused trying to to sell to a mid market customer and so the bar was was lower and theres been tremendous.

Christopher David Stansbury: Mid markets was almost the exact opposite. There wasn't a lot there, there was a heavy reliance on a direct selling motion. The product set was really large enterprise focus trying to sell to a mid market customer. And so the bar was lower.

Christopher David Stansbury: And there's been tremendous work on fixing the product set, dramatically expanding the partner ecosystem to reach a bigger customer base, and, as Kate said, putting a lot of processes and measurement in place that's beginning to work. And I won't give you the number specifically, but what I can tell you is that, you know, our partner ecosystem, those new logos are selling at a rate that's into double digits in terms of growth. And it really is those growth products.

Speaker Change: This work on fixing the product set.

Speaker Change: Dramatically expanding the partner ecosystem to reach a bigger customer base as Kate said getting a lot of processes and measurement in place.

Speaker Change: That's beginning to work in.

Speaker Change: We won't give a number specifically, but what I can tell you is that.

Speaker Change: Our partner ecosystem, those new logos are selling at a rate that's into double digits in terms of growth and it really is those growth products. So the motion is working.

Christopher David Stansbury: So the motion is working. Large enterprise is the most difficult pivot because it's big, and because it was probably least prepared for where we're going in terms of the kind of instrumentation measurement, etc. And it's obviously where a lot of the products are focused. So a lot of work has happened there. It's not like it hasn't happened. It's just going to be longer to see that turnaround take place.

Speaker Change: Large enterprise is the most difficult pivot because it's big and because it was probably least prepared for where we're going in terms of the kind of instrumentation measurement.

Speaker Change: Et cetera, and it's obviously, where a lot of the product set is focus so.

Speaker Change: A lot of work has happened there and I think its it hasnt happened, it's just going to be longer to see that turnaround take place.

Speaker Change: Yeah.

Operator: Thank you, Nick. Operator, we'll take the next question.

Speaker Change: Thank you Nick operator, we'll take the next question.

Operator: Your next question comes from Greg Williams with TD Cowen. Please go ahead.

Speaker Change: Your next question comes from Greg Williams with TD Cowen. Please go ahead.

Gregory Bradford Williams: Great, thanks for taking my questions. I just have one on the ILEC opportunities.

Gregory Bradford Williams: Great. Thanks for taking my questions I just have one on the ILEC opportunities you mentioned you take a market by market approach I'm, just wondering if the operational complexity with the plant.

Gregory Bradford Williams: You mentioned, you take a market-by-market approach. I was just wondering about the operational complexity of the plant, specifically if you just sold some of it. You know, when you sold Brightspeed, you noted there wasn't much overlap with the enterprise markets, so it was like a cleaner break, and now you have a lot of plants that's intertwined with the enterprise segments. Just wondering if there's more complexity and more time to take for any opportunities. Yeah, I mean, it's

Gregory Bradford Williams: Specifically, if you sold some of it.

Gregory Bradford Williams: You know when you sell a bright speed you noted there wasn't much overlap with the enterprise.

Gregory Bradford Williams: So it was like a cleaner break and now you have a lot of plant that's intertwined with the with the enterprise segments. Just wondering if there is more complexity and more time to to take for any opportunities.

Christopher David Stansbury: Yeah, I mean, there is more complexity, but that's part of what we do. It's obviously contemplated in everything that we look at, and it is in no way an impediment to us having the flexibility to do the things that we think are right strategically. So I would say it's a consideration, but it's certainly not a driver of our thinking.

Speaker Change: Yes.

Speaker Change: There is more complexity, but that's part of what we do it's obviously contemplated in everything that we look at and it is in no way an impediment to us having the flexibility to do things that we think are right strategically so I would say, it's a consideration, but it's certainly not a driver of our thinking.

Speaker Change: Got it thank you.

Speaker Change: Thank you operator, we'll take the next question.

Operator: Thank you. Operator, we'll take the next question. Your next question comes from Frank Louthan with Raymond James. Please go ahead. Great, thank you. Can you walk us through on slide six? What percentage is that Luma digital platform?

Operator: Your next question comes from Frank Louthan with Raymond James. Please go ahead. Okay.

Speaker Change: Your next question comes from Frank Louthan with Raymond James. Please go ahead.

Frank Garrett Louthan: Great. Thank you can you walk us through on slide six what percentage is that lumen digital platform of revenue now and where can that go and then second question.

Frank Garrett Louthan: Black Lotus labs pretty fair amount of success would would that be better as a standalone company to drive could you drive some shareholder value by spinning that out or is that best left inside of the company.

Kathleen E. Johnson: Thanks. So, there are a couple of things. The first is slide 6, which shows the digital platform, NASX, which adds fabric and security. That is, you know, a significant opportunity for growth across all those capabilities, not something we're ready to report on. As we look to become a growth company, we're maniacally focused on delivering customer value. That's about making sure we delight every single customer, one at a time, and bring them in the door. And we're going to focus on our key metric internally, customer adoption.

Speaker Change: Thanks, So a couple a couple of things the first is the.

Speaker Change: Slide six shows the digital platform NASDAQ can switch edge fabric and security that is.

Speaker Change: Yeah.

Speaker Change: A significant opportunity for growth across all of those capabilities not something we're ready to report on as we look to become a growth company. We're maniacally focused on delivering customer value that's about making sure. We delight every single customer one at a time and bring them in the door and we're going to focus on our key metric into.

Speaker Change: Finally is customer adoption, that's why I shared where across 20 different industry because the number of industries. We can get to and then first second third 10th 2025th customer you start to go faster in each one and you get some momentum and critical mass for scale.

Kathleen E. Johnson: That's why I shared we're across 20 different industries because the number of industries we can get to and then, you know, first, second, third, 10th, 20th, 25th customer, you start to go faster in each one, and you get some momentum and critical mass for scale. So, we're excited about the progress, lots more to do, but this is the future of the company. And it represents net new profit pools and available marketplaces that Lumen didn't have access to before, in the tens of billions across each one of these spaces, some in the hundreds of billions. And so, we're excited, you know, at the opportunity. Black Lotus Labs is without a doubt a NASA secret weapon.

Speaker Change: So we're excited about the progress lots more to do but.

Speaker Change: This is the future of the company and it represents net new profit pools and available marketplaces that lumen didn't have access to before.

Speaker Change: In the tens of billions across each one of these spaces some in the hundreds of billions and.

Speaker Change: So we're excited.

Speaker Change: The uptake Black Lotus labs is without a doubt announce a secret weapon and they.

Kathleen E. Johnson: And they, you know, have helped keep the country safe. Their value is incredible. And we're incredibly proud to have them in our portfolio. The reason why they're so valuable is because they see our network traffic, and the capabilities that we're developing and launching in Lumen Defender take their patented data models and basically enable those to be available in an integrated fashion with our network. Nobody else is doing that right now, so we're excited about the potential value, and you will see them as an integral part of our team moving forward.

Speaker Change: Have helped keep the country safe their value is incredible and we're incredibly proud to.

Speaker Change: To have them in our portfolio. The reason why they are so valuable is because they see our network traffic and the capabilities that we're developing and launching an alumina defenders take their patented.

Speaker Change: Data models and basically enable those to be available in an integrated fashion with our network.

Speaker Change: Nobody else is doing that right now so we're excited about the potential value.

Speaker Change: And you will see them as an integral part of our team moving forward.

Speaker Change: Alright, great. Thank you very much.

Operator: Thank you, Frank. Operator, we've got time for one last question.

Speaker Change: Thank you Frank operator, we've got Tom one last question.

Operator: Your next question comes from Jonathan Chaplin with Newstreet. Please go ahead.

Speaker Change: Your next question comes from Jonathan Chaplin with New Street. Please go ahead.

Jonathan Chaplin: Thanks, guys, for squeezing in. I had just a couple on the mass markets business. So I was wondering the timing of when you think you'll get to the end of your inquiry into how best to monetize these assets, whether it's wholesale agreements or JVs or selling off markets. And I'm wondering if you look at different assets differently as you go through that process. For instance, you're more likely to hang on to fiber assets and sell copper assets, or vice versa.

Jonathan Chaplin: Thanks, guys for squeezing me in I had just a couple on the mass market business I was wondering if there.

Jonathan Chaplin: The timing of when you think youll get to the end of your inquiry into how best to monetize these assets whether its wholesale agreements with <unk> are selling off market.

Speaker Change: Wondering if you look at.

Speaker Change: <unk>.

Speaker Change: Different assets differently as you go through that process for instance are you more likely to.

Speaker Change: Hang on to fiber assets and sell copper assets.

Jonathan Chaplin: And then on NetApp, the result was really strong this quarter. As you mentioned, I'm wondering if the momentum that you built in the quarter will continue as we go through the year, or if you sort of reached a new level, and this is the new normal. Thank you.

Speaker Change: Vice versa.

Speaker Change: And then.

Speaker Change: The result was.

Speaker Change: Really strong this quarter.

Speaker Change: As you mentioned I'm wondering if the momentum that you built in within the quarter continues as we go through the year or if you sort of reached a new level.

Speaker Change: And this is the new normal thank you.

Christopher David Stansbury: Yeah, so as it relates to the market by market assessment, I don't want to put a time frame on that because I think it's something that we're going to continue to look at, but as we have news, we'll certainly share it. The net ad performance, We're not committing at this point to see that increase quarter-on-quarter. That said, as we have scaled the marketing and continue to refine that approach, that's obviously the goal. So I can tell you that there's just an intense focus from the team on driving that performance, and hopefully, we can continue to show good results in the coming quarter.

Speaker Change: Yes so.

Speaker Change: As it relates to the market by market assessment.

Speaker Change: To put a timeframe on that because I think it's something that we're going to continue to look at but as we have news, we'll certainly share it.

Speaker Change: The the net add performance.

Speaker Change: We're not committing at this point to see that increase quarter on quarter that said as we have scaled our marketing and continue to refine that approach. That's obviously the goal. So I can tell you that there is.

Speaker Change: Just intense focus from the team on driving that performance and <unk>.

Speaker Change: Hopefully we can continue.

Speaker Change: Continue to show good results in the coming quarters.

Christopher David Stansbury: And one more, Chris, on ARPU. It's the one where I'd expect ARPU to be sort of accelerating for you guys as well. It's a bit slower for you than it is for peers. Is there something, given that you guys have some of the fastest fiber products in the market, most of your stuff is taking a gigabit per second, is there something holding back ARPU growth?

Speaker Change: And one more Chris if I may on <unk>.

Speaker Change: The one where.

Speaker Change: I would expect <unk> to be solid.

Speaker Change: Accelerating for you guys, it's while it's a bit slower.

Speaker Change: Within minutes prepared so is there something given that you guys have that's one of the fastest fiber products in the market most of yourself and taking it a gigabit.

Speaker Change: Gigabit per second is there something holding back ARPA growth.

Christopher David Stansbury: There's nothing structurally that's holding it back. Obviously, as we're driving penetration, we've got to make the trade-off between, you know, at what time do you raise prices, right? Do you do it at the front end and then try to drive penetration, or is that something that changes over time? And again, there's a lot of work that's done really on a market-by-market basis given the competitive environment to determine that. Our view, my view, is we're far better off driving sub-growth as fast as we can, obviously taking the price that we can along the way, but turning this into a pricing game up front rather than driving overall customer adoption is probably not the best approach.

Jonathan Chaplin: makes sense. I really appreciate it, guys.

Speaker Change: There's nothing structurally that's holding it back obviously as we're driving penetration we've got to make the trade offs between at what time do you raise prices right to do it at the front end and then try to drive penetration or is that something that changes over time and again theres a lot of work that's done.

Speaker Change: Really on a market by market basis, given the competitive environment to determine that.

Speaker Change: Our view my view is we're far better off driving sub growth as fast as we can obviously, taking the price that we can along the way, but to turn this into a pricing game upfront rather than driving overall customer adoption.

Speaker Change: Probably not the best approach.

Speaker Change: Makes sense I appreciate it guys.

Operator: That does conclude our question and answer session, and with that, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.

Speaker Change: That does conclude our question and answer session and with that that does conclude the conference call for today. We thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change:

Speaker Change:

Speaker Change: