Lumen(US:LUMN)2025-05-01 21:00Financial 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]