IBM Consulting will act as the preferred systems integrator, supporting clients in their efforts to scale deployments, reduce their costs and fully leverage AI capabilities through their deep technology, domain, and industry expertise. "Our work with Lumen underscores a strong commitment to meeting clients where they are —bringing the power of enterprise-grade AI and hybrid cloud to wherever data lives," said Adam Lawrence, General Manager, Americas Technology, IBM. "Together, we're helping clients accelera ...

Core Insights - Lumen's stock price increased by 11% on a day when major indices like the S&P 500 and Nasdaq Composite declined, indicating strong market interest [1] - Despite being down approximately 21% year-to-date, Lumen's stock has appreciated by 219% over the past year, showcasing significant recovery [1] - Raymond James upgraded Lumen's stock rating from market perform to outperform, setting a one-year price target of $4.50 per share, suggesting an additional upside of about 7% [3] Business Developments - Lumen is experiencing growth in sales of fiber internet infrastructure and services, particularly in support of AI data centers, which is a promising area for the company [4] - There are reports of a potential sale of Lumen's consumer fiber business to AT&T for $5.5 billion, which could indicate a strategic shift away from the consumer market [5] - The potential divestiture of the consumer unit may help Lumen reduce its substantial debt and allow a greater focus on the enterprise market, which has been a key driver of performance [5]

Core Viewpoint - Lumen Technologies is undergoing a significant transformation after experiencing years of stock declines and distressed debt levels, leading to a remarkable rally in 2024 [1]. Company Summary - Lumen Technologies is a telecommunications company that has faced challenges in the past, including stock price declines and high levels of debt [1]. - The company has recently seen a turnaround, with a notable increase in stock performance in 2024, indicating a potential recovery and transformation [1]. Investment Position - The article indicates a beneficial long position in Lumen shares, suggesting confidence in the company's future performance [2].

Lumen Technologies, Inc. (LUMN) reported first quarter of 2025 adjusted loss (excluding special items) of 13 cents per share, which was significantly narrower than the Zacks Consensus Estimate of a loss of 29 cents. The company reported adjusted loss per share of 4 cents in the prior-year quarter.Quarterly total revenues were $3.182 billion, down 3.3% year over year. However, the metric beat the Zacks Consensus Estimate by 2.7%. Higher revenues from North American Grow Business (up 9.9% year over year) and ...

Core Viewpoint - Lumen reported a quarterly loss of $0.13 per share, which was better than the Zacks Consensus Estimate of a loss of $0.29, indicating a significant earnings surprise of 55.17% [1] Financial Performance - The company posted revenues of $3.18 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.71%, although this represents a decline from $3.29 billion in the same quarter last year [2] - Over the last four quarters, Lumen has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Lumen shares have declined approximately 33.3% since the beginning of the year, contrasting with the S&P 500's decline of 5.3% [3] - The current Zacks Rank for Lumen is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.25 on revenues of $3.08 billion, and for the current fiscal year, it is -$1.11 on revenues of $12.39 billion [7] - The trend of estimate revisions for Lumen is mixed, which could change following the recent earnings report [6] Industry Context - The Diversified Communication Services industry, to which Lumen belongs, is currently ranked in the top 35% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Telus, another company in the same industry, is expected to report quarterly earnings of $0.15 per share, reflecting a year-over-year decline of 21.1% [9]

Core Viewpoint - Lumen Technologies (LUMN) reported better-than-expected earnings, leading to a 1.7% increase in after-hours trading Financial Performance - The company reported a Q1 adjusted loss per share of $0.13, compared to analyst expectations of a loss of $0.26 [2] - Q1 revenue was $3.18 billion, exceeding analyst expectations of $3.11 billion [3] Guidance - The company maintained its full-year adjusted EBITDA guidance at $3.2 billion to $3.4 billion, while analysts expected $3.35 billion [4] - The company also kept its full-year capital expenditure guidance unchanged at $4.1 billion to $4.3 billion, with analysts anticipating $4.2 billion [5]

Financial Data and Key Metrics Changes - Total reported revenue declined 3.3% to $3,182 million, with business segment revenue down 2.6% to $2,524 million and mass market segment revenue down 5.9% to $658 million [25] - Adjusted EBITDA was $929 million with a 29.2% margin, compared to $977 million in the year-ago quarter [33] - Free cash flow was $354 million, and capital expenditures were $791 million [34] Business Line Data and Key Metrics Changes - North American enterprise channels revenue declined by 1.7%, while North American enterprise grow revenue increased 9.9% year over year [25][30] - Large enterprise revenue declined 3.7%, and mid-market revenue declined approximately 11.1% [25] - Public sector revenue grew 14.7% year over year, although it can be lumpy quarter to quarter [25] - Wholesale revenue declined approximately 3.6% year over year, with the Harvest portion contracting by 5.8% [27] Market Data and Key Metrics Changes - Fiber broadband revenue grew 22.9% year over year, representing 45% of mass markets broadband revenue [32] - The company added 101,000 fiber-enabled homes, bringing the total to approximately 4.3 million [32] - Quantum fiber penetration stood at approximately 26% [32] Company Strategy and Development Direction - The company focuses on three priorities: driving operational excellence, building the backbone for the AI economy, and cloudifying telecom [5][22] - The modernization and simplification initiatives are expected to generate at least $250 million in savings by the end of 2025 and $1 billion by the end of 2027 [7] - The company is actively constructing $8.5 billion in private connectivity fabric projects, with 57 ILA sites under construction [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in margin expansion and total EBITDA returning to full-year growth in 2026 [24] - The company is optimistic about the public sector's strength despite potential budget pressures [71] - Management noted that the demand for AI-driven services is increasing, positioning the company favorably in the market [56][58] Other Important Information - The company has initiated deployment of new fiber technology and is on track with project management [9] - The company is undergoing a strategic review of its consumer fiber business, focusing on enterprise connectivity [35] Q&A Session Summary Question: Context on grow revenue increase - Management indicated that grow revenue was driven by dark fiber deals, primarily from large enterprises and public sector, and expects these trends to continue [39][40] Question: Legacy TDM revenue impact - Management acknowledged some disconnect activity in the first quarter but remains optimistic about EBITDA and margin improvements [41] Question: Cloud economics differentiation - Management explained that the Lumen digital platform enables cloud economics by allowing multiple services on a single port, enhancing value without necessarily lowering prices [47][65] Question: Public sector revenue trends - Management confirmed that public sector revenue remains strong, with ongoing engagement in large-scale opportunities [62][80] Question: Pricing strategy for new services - Management emphasized that the focus is on total value of ownership rather than simply lowering prices, aiming to provide higher performance and lower latency [63][65] Question: CapEx and cash flow cadence - Management stated that CapEx will ramp up but is volatile quarter to quarter, and they are confident in the annual guidance [70] Question: Risks in public sector due to budget cuts - Management remains bullish on public sector opportunities, citing government commitments to modernization and simplification [71]

Financial Data and Key Metrics Changes - Total reported revenue declined 3.3% to $3,182 million, with business segment revenue down 2.6% to $2,524 million and mass market segment revenue down 5.9% to $658 million [25] - Adjusted EBITDA was $929 million with a 29.2% margin, compared to $977 million in the year-ago quarter [33] - Free cash flow was $354 million, with capital expenditures at $791 million [34] Business Line Data and Key Metrics Changes - North American enterprise channels saw a revenue decline of 1.7%, while North American enterprise grow revenue increased 9.9% year over year, driven by large enterprise and public sector growth [25][30] - Wholesale revenue declined approximately 3.6% year over year, with the Harvest portion contracting by 5.8% [27] - Fiber broadband revenue grew 22.9% year over year, representing 45% of mass markets broadband revenue [32] Market Data and Key Metrics Changes - Public sector revenue grew 14.7% year over year, although it can be lumpy quarter to quarter [25] - International and other revenue declined 11.3%, primarily driven by VPN declines [28] - The company added 101,000 fiber-enabled homes, bringing the total to approximately 4,300,000 as of March 31 [32] Company Strategy and Development Direction - The company focuses on three priorities: driving operational excellence, building the backbone for the AI economy, and cloudifying telecom [5][22] - The construction of $8.5 billion in private connectivity fabric projects is underway, with 57 ILA sites under construction [8][9] - The Lumen Digital platform aims to transform the customer experience and drive operational efficiency through automation and AI [13][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in margin expansion and total EBITDA returning to full-year growth in 2026 [24][35] - The company is optimistic about the demand for its services, particularly in the context of AI and digital transformation [56][57] - Management noted that while there may be uncertainty in the market, the investments in fiber and digital services are critical for long-term competitiveness [57] Other Important Information - The company refinanced $2.4 billion in term loans, reducing annual interest expense by approximately $55 million [23] - Management addressed rumors regarding the sale of the consumer fiber business, emphasizing a focus on enterprise connectivity [35] Q&A Session Summary Question: Context on grow revenue increase and sustainability - Management indicated that grow revenue was driven by dark fiber deals and expects trends to continue, although specifics on new versus existing customers were not provided [39][41] Question: Impact of legacy TDM revenue and disconnects - Management acknowledged some activity in disconnects but expressed confidence that it would not negatively impact EBITDA [40][42] Question: Differences in cloud economics versus traditional telecom - Management explained that the Lumen Digital platform enables cloud economics by allowing multiple services on one port, reducing marginal costs [46][48] Question: Public sector revenue trends and potential risks - Management noted strong performance in the public sector and ongoing engagement in large-scale opportunities, despite potential budget pressures [60][70] Question: Pricing strategy for new digital services - Management emphasized that the focus is on total value of ownership rather than discounting prices, highlighting the inherent value of their services [62][64] Question: CapEx spend cadence and public sector risks - Management refrained from providing specific quarterly guidance on CapEx but expressed confidence in annual targets, while remaining optimistic about public sector opportunities [68][70]

Financial Data and Key Metrics Changes - Total reported revenue declined 3.3% to $3,182 million, with business segment revenue down 2.6% to $2,524 million and mass market segment revenue down 5.9% to $658 million [27] - Adjusted EBITDA was $929 million with a 29.2% margin, compared to $977 million in the year-ago quarter [35] - Free cash flow was $354 million, with capital expenditures at $791 million [36] Business Line Data and Key Metrics Changes - North American enterprise channels saw a revenue decline of 1.7%, while North American enterprise grow revenue increased 9.9% year over year, driven by large enterprise and public sector growth [27][31] - Wholesale revenue declined approximately 3.6% year over year, with the Harvest portion contracting by 5.8% [29] - Fiber broadband revenue grew 22.9% year over year, representing 45% of mass markets broadband revenue [34] Market Data and Key Metrics Changes - Public sector revenue grew 14.7% year over year, although it can be lumpy quarter to quarter [28] - International and other revenue declined 11.3%, primarily due to VPN declines [30] - The North American business overall declined 2.2%, with large enterprise revenue down 3.7% and mid-market revenue down approximately 11.1% [27] Company Strategy and Development Direction - The company is focused on three priorities: driving operational excellence, building the backbone for the AI economy, and cloudifying telecom [4] - Significant progress has been made in modernizing and simplifying operations, with a goal of generating at least $250 million in savings by the end of 2025 and $1 billion by the end of 2027 [6][21] - The company is enhancing its digital platform to provide network as a service offerings, aiming to transform the customer experience and operational efficiency [13][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in margin expansion and total EBITDA returning to full-year growth in 2026, driven by increased sales and cost structure optimization [26][37] - The company is optimistic about the demand for its private connectivity fabric projects, despite some uncertainty in the market [9][60] - Management noted that the modernization efforts are essential regardless of external conditions, positioning the company for improved efficiency and customer experience [24] Other Important Information - The company refinanced $2.4 billion in term loans, reducing annual interest expense by approximately $55 million and extending loan maturity [25] - The company is proud of its consumer fiber platform but is focusing on enterprise connectivity and services, indicating a strategic review of its consumer business [37] Q&A Session Summary Question: Context on grow revenue increase and sustainability - Management indicated that grow revenue was driven by dark fiber deals and expects trends to continue, although specifics on new versus existing customers were not provided [41][42] Question: Impact of legacy TDM revenue and churn - Management acknowledged some activity in disconnects but expressed confidence that it would be neutral to positive for EBITDA [44] Question: Differences in cloud economics versus traditional telecom - Management explained that the Lumen digital platform enables cloud economics by allowing multiple services on one port, reducing marginal costs [49][50] Question: Pipeline conversion for PCF projects - Management noted active discussions with customers and an increase in demand for private connectivity fabric, although specific timelines were not provided [57][58] Question: Public sector revenue trends and potential risks - Management confirmed strong performance in the public sector and ongoing engagement in large-scale opportunities, despite potential impacts from government efficiency cuts [72][80]

[Part I - Financial Information](index=7&type=section&id=Part%20I%20-%20Financial%20Information) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Lumen Technologies reported a net loss of $201 million in Q1 2025, a significant downturn from prior-year net income, driven by revenue decline and debt retirement losses [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20%28Unaudited%29) Lumen reported a net loss of $201 million in Q1 2025, driven by a 3.3% revenue drop and a significant swing in other expenses, despite improved operating income Consolidated Statements of Operations (Unaudited) | Financial Metric | Three Months Ended March 31, 2025 (Millions USD) | Three Months Ended March 31, 2024 (Millions USD) | | :--- | :--- | :--- | | **Operating Revenue** | $3,182 million | $3,290 million | | **Operating Income** | $107 million | $45 million | | **Net (Loss) Income** | $(201) million | $57 million | | **Diluted (Loss) Earnings Per Share** | $(0.20) | $0.06 | - Total other expense was **$352 million** in Q1 2025, a stark contrast to total other income of **$57 million** in Q1 2024. This was primarily due to a **$35 million** net loss on early retirement of debt in 2025, compared to a **$275 million** net gain in 2024[20](index=20&type=chunk) [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets%20%28Unaudited%29) As of March 31, 2025, Lumen's total assets were $33.54 billion, with long-term debt at $17.33 billion, leading to a decrease in total stockholders' equity Key Balance Sheet Items | Balance Sheet Item | March 31, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :--- | :--- | :--- | | **Total Current Assets** | $4,277 million | $4,394 million | | **Total Assets** | $33,538 million | $33,496 million | | **Long-Term Debt** | $17,334 million | $17,494 million | | **Total Liabilities** | $33,249 million | $33,032 million | | **Total Stockholders' Equity** | $289 million | $464 million | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) Net cash from operations was $1.095 billion in Q1 2025, with increased cash used in investing activities and significantly decreased cash used in financing activities Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2025 (Millions USD) | Three Months Ended March 31, 2024 (Millions USD) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $1,095 million | $1,102 million | | **Net Cash Used in Investing Activities** | $(769) million | $(698) million | | **Net Cash Used in Financing Activities** | $(314) million | $(1,060) million | | **Capital Expenditures** | $(791) million | $(713) million | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Notes detail accounting policies, revenue breakdowns, debt structure, refinancing, segment performance, and ongoing legal contingencies including lead-sheathed cable litigation - As of March 31, 2025, the company expects to recognize approximately **$6.1 billion** of revenue in the future related to existing, unsatisfied performance obligations[57](index=57&type=chunk) - The company had accrued **$77 million** for litigation and non-income tax contingencies as of March 31, 2025, but cannot estimate the reasonably possible loss in excess of this amount[123](index=123&type=chunk) - Approximately **21%** of employees are represented by unions, with **90%** of these employees covered by collective bargaining agreements set to expire within the next 12 months ending March 31, 2026[152](index=152&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 3% YoY revenue decline across segments, projecting $4.1-$4.3 billion in 2025 capital expenditures and detailing liquidity [Overview](index=40&type=section&id=Overview) Lumen focuses on networking, acknowledging macroeconomic challenges, and pursuing strategic goals like infrastructure delivery, network monetization, and financial strengthening - The company's strategic goals include delivering best-in-class infrastructure, monetizing network assets through Private Connectivity Fabric (PCF) solutions, expanding the AI backbone, and executing the Quantum Fiber buildout plan[167](index=167&type=chunk) - Key trends impacting operations include increased demand for robust, scalable network services due to AI and cloud adoption, and declining demand for mature service offerings, which necessitates continuous right-sizing of the cost structure[166](index=166&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Consolidated operating revenue decreased 3% YoY to $3.182 billion, with expenses falling 5%, increasing operating income but resulting in a pre-tax loss due to other expenses Operating Revenue by Segment (YoY Change) | Segment | Q1 2025 Revenue (Millions USD) | Q1 2024 Revenue (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | **Business Segment** | $2,524 million | $2,591 million | (3)% | | **Mass Markets Segment** | $658 million | $699 million | (6)% | | **Total Revenue** | **$3,182 million** | **$3,290 million** | **(3)%** | Operating Expenses (YoY Change) | Expense Category | Q1 2025 (Millions USD) | Q1 2024 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Cost of services and products | $1,687 million | $1,652 million | 2% | | Selling, general and administrative | $675 million | $823 million | (18)% | | Depreciation and amortization | $713 million | $748 million | (5)% | | **Total Operating Expenses** | **$3,075 million** | **$3,245 million** | **(5)%** | - The decrease in SG&A expenses was primarily due to a **$140 million** decline in legal and other professional fees, mainly driven by a large debt transaction in Q1 2024 that did not have a comparable event in Q1 2025[172](index=172&type=chunk) - Interest expense increased by **$56 million** YoY due to a higher average interest rate (**7.67%** vs **6.98%**), despite a decrease in average outstanding long-term debt[178](index=178&type=chunk) [Segment Results](index=48&type=section&id=Segment%20Results) Business segment revenue declined 3% YoY, while Mass Markets saw a 6% decline, with Fiber Broadband growth insufficient to offset legacy service declines Business Segment Revenue by Product Category (Q1 2025 vs Q1 2024) | Product Category | Q1 2025 Revenue (Millions USD) | Q1 2024 Revenue (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Grow | $1,136 million | $1,059 million | 7% | | Nurture | $666 million | $776 million | (14)% | | Harvest | $534 million | $582 million | (8)% | | Other | $188 million | $174 million | 8% | - Business segment 'Grow' revenue increased by **$77 million**, driven by dark fiber and conduit (+$51 million) and IP services (+$19 million)[186](index=186&type=chunk) Mass Markets Segment Revenue by Product Category (Q1 2025 vs Q1 2024) | Product Category | Q1 2025 Revenue (Millions USD) | Q1 2024 Revenue (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Fiber Broadband | $209 million | $170 million | 23% | | Other Broadband | $257 million | $315 million | (18)% | | Voice and Other | $192 million | $214 million | (10)% | - Mass Markets segment adjusted EBITDA margin improved to **58%** in Q1 2025 from **55%** in Q1 2024, despite a revenue decline, due to a **12%** decrease in segment expenses[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) Lumen held $1.9 billion in cash, projecting $4.1-$4.3 billion in 2025 capital expenditures, with recent debt refinancing and ongoing management of obligations including pension liabilities - The company projects capital expenditures for 2025 to be between **$4.1 billion** and **$4.3 billion**[194](index=194&type=chunk) - In March 2025, subsidiary Level 3 Financing refinanced its term loan facilities, extending the maturity to 2032 and reducing pricing. The transaction involved **$2.4 billion** of outstanding borrowings[69](index=69&type=chunk)[199](index=199&type=chunk) - The company does not expect to be required to make any contributions to its Combined Pension Plan in 2025[213](index=213&type=chunk) - The company is exposed to potential costs related to lead-sheathed copper cables in its network, which have resulted in regulatory inquiries and lawsuits. As of March 31, 2025, no costs have been accrued as they are not yet considered probable and reasonably estimable[229](index=229&type=chunk) [Market Risk](index=57&type=section&id=Market%20Risk) Primary market risks stem from interest rate changes on $6.0 billion unhedged floating-rate debt, where a 100 basis point SOFR increase would decrease annual pre-tax earnings by $60 million - A hypothetical **100 basis point** (1%) increase in SOFR would decrease annual pre-tax earnings by approximately **$60 million** due to the company's **$6.0 billion** of unhedged floating-rate debt[234](index=234&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the 'Market Risk' discussion within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - This section incorporates by reference the Market Risk discussion found in Item 2 of Part I of the report[239](index=239&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls during Q1 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[240](index=240&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2025[241](index=241&type=chunk) [Part II - Other Information](index=59&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference detailed legal matters from Note 10, including shareholder lawsuits and lead-sheathed cable litigation - Information regarding legal proceedings is incorporated by reference from Note 10—Commitments, Contingencies and Other Items[244](index=244&type=chunk) [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section supplements Annual Report risk factors, highlighting potential adverse effects from changes in U.S. and foreign government policies and trade agreements - The company highlights risks related to changes in U.S. and foreign government administrative policy, including the imposition of tariffs and changes to trade agreements, which could have a material adverse effect on the business[246](index=246&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company withheld 2,148,593 common shares from employees for tax obligations related to stock-based award vesting Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Withheld for Taxes (Shares) | | :--- | :--- | | January 2025 | 48,080 | | February 2025 | 99,236 | | March 2025 | 2,001,277 | | **Total** | **2,148,593** | [Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including the Level 3 Credit Agreement amendment, CEO/CFO certifications, and Inline XBRL financial statements - Key exhibits filed include an amendment to the Level 3 Credit Agreement, CEO/CFO certifications, and financial statements in Inline XBRL format[249](index=249&type=chunk)