Lumen(LUMN) - 2025 Q1 - Quarterly Results

Overview and Key Highlights Lumen Technologies reported better-than-expected Q1 2025 results, driven by operational excellence and strategic initiatives, despite a net loss of $201 million - CEO Kate Johnson attributed better-than-expected financial results to operational excellence and emphasized innovation on the fiber network for value creation[5] - Strategic initiatives included a partnership with Google for direct fiber access to Google Cloud, continued NaaS port adoption, and a term loan refinancing to strengthen the balance sheet[6] Q1 2025 Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (Loss) Income | $(201) million | $57 million | | Diluted (Loss) Earnings per Share | $(0.20) | $0.06 | | Adjusted EBITDA (Excl. Special Items) | $929 million | $977 million | | Free Cash Flow (Excl. Special Items) | $354 million | $518 million | Financial Performance Lumen's Q1 2025 total revenue declined 3% year-over-year to $3.182 billion, resulting in a net loss of $201 million and a 5% decrease in Adjusted EBITDA Revenue Analysis Total revenue for Q1 2025 decreased 3% year-over-year to $3.182 billion, with declines across most business segments and product categories, except for Public Sector and 'Grow' products Total Revenue Trend | Period | Total Revenue ($ in millions) | YoY Change | | :--- | :--- | :--- | | Q1 2025 | $3,182 | -3% | | Q1 2024 | $3,290 | N/A | Revenue by Sales Channel (YoY Change) | Sales Channel | Q1 2025 Revenue ($M) | YoY Change | | :--- | :--- | :--- | | Large Enterprise | $737 | -4% | | Mid-Market Enterprise | $513 | -11% | | Public Sector | $483 | +15% | | Wholesale | $705 | -4% | Business Revenue by Product Category (YoY Change) | Product Category | Q1 2025 Revenue ($M) | YoY Change | | :--- | :--- | :--- | | Grow | $1,136 | +7% | | Nurture | $666 | -14% | | Harvest | $534 | -8% | Profitability Analysis Q1 2025 profitability significantly declined, reporting a net loss of $201 million compared to a net income of $57 million in Q1 2024, with Adjusted EBITDA falling 5% YoY Q1 2025 Profitability Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (Loss) Income | $(201) million | $57 million | | Net (Loss) Income Margin | (6.3)% | 1.7% | | Adjusted EBITDA (Excl. Special Items) | $929 million | $977 million | | Adjusted EBITDA Margin (Excl. Special Items) | 29.2% | 29.7% | Cash Flow and Liquidity Free Cash Flow, excluding special items, decreased to $354 million in Q1 2025, while the company maintained $1.9 billion in cash and successfully refinanced a $2.4 billion term loan - Free Cash Flow, excluding Special Items, was $354 million in Q1 2025, a decrease from $518 million in Q1 2024[11] - As of March 31, 2025, Lumen held $1.9 billion in cash and cash equivalents, having successfully refinanced its $2.4 billion term loan at lower rates with extended maturity[12] Operating Metrics Mass Markets fiber broadband subscribers grew to 1.116 million in Q1 2025, but total broadband subscribers decreased to 2.508 million due to declines in copper-based subscribers Mass Markets Broadband Subscribers (in thousands) | Subscriber Type | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Fiber broadband | 1,116 | 1,077 | 952 | | Other broadband | 1,392 | 1,469 | 1,758 | | Total broadband | 2,508 | 2,546 | 2,710 | Mass Markets Broadband Enabled Units (in millions) | Unit Type | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Fiber broadband | 4.3 | 4.2 | 3.8 | | Other broadband | 17.7 | 17.8 | 18.0 | | Total enabled units | 22.0 | 22.0 | 21.8 | 2025 Financial Outlook Lumen Technologies reiterated its full-year 2025 outlook, projecting Adjusted EBITDA between $3.2 billion and $3.4 billion, Free Cash Flow between $700 million and $900 million, and capital expenditures of $4.1 billion to $4.3 billion Full-Year 2025 Financial Outlook | Metric | Outlook ($ in billions) | | :--- | :--- | | Adjusted EBITDA | $3.2 to $3.4 | | Free Cash Flow | $0.7 to $0.9 | | Net Cash Interest | $1.2 to $1.3 | | Capital Expenditures | $4.1 to $4.3 | | Cash Income Taxes | $0.1 to $0.2 | Appendix: Non-GAAP Reconciliations and Financial Statements This appendix provides definitions for non-GAAP financial measures, their relevance, and comprehensive reconciliation tables, alongside the company's unaudited Consolidated Statements of Operations, Balance Sheets, and Cash Flows Description of Non-GAAP Metrics This section defines key non-GAAP metrics like 'Special Items,' 'Adjusted EBITDA,' and 'Free Cash Flow,' explaining their calculation and management's use in evaluating business trends and debt servicing ability - Special Items are defined as significant costs related to Modernization and Simplification, Transaction and Separation, and Other items, which management believes warrant separate investor consideration[34][35] - Adjusted EBITDA is defined as net income before interest, taxes, D&A, stock-based compensation, and impairments, serving as a key management measure for profitability and operating performance[36][37] - Free Cash Flow, defined as net cash from operating activities less capital expenditures, is a key indicator of the company's ability to generate cash for debt servicing[41] Consolidated Financial Statements This section presents the unaudited Consolidated Statements of Operations, Balance Sheets, and Cash Flows for the three months ended March 31, 2025, detailing the company's financial position and performance - The report includes the unaudited Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024[23] - The report includes the unaudited Consolidated Balance Sheets as of March 31, 2025, and December 31, 2024[25] - The report includes the unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024[27] Reconciliation Tables This section provides detailed reconciliation tables for non-GAAP measures, including 'Special Items,' Adjusted EBITDA, and Free Cash Flow, ensuring transparency between GAAP figures and management's emphasized metrics - A detailed table outlines specific Special Items impacting Adjusted EBITDA, Net Income, and Cash Flows for Q1 2025 and Q1 2024, including costs for transactions, modernization, and severance[44][45] - The report provides a reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Unlevered Cash Flow, both with and without the effects of cash Special Items[46][47] - A reconciliation from Net (Loss) Income to Adjusted EBITDA details adjustments for taxes, interest, D&A, and other items to derive final Adjusted EBITDA and Adjusted EBITDA excluding Special Items figures[48][49]