Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lumen Technologies Inc (LUMN, Financial) has secured over $8 billion in Private Connectivity Fabric (PCF) sales, indicating strong demand for their network services.
- The company is making significant progress in its transformation into a digital network services company, focusing on AI and cloud services.
- Lumen Technologies Inc (LUMN) reported a 14% year-over-year increase in North American large enterprise and midmarket sales.
- The company achieved record fiber net additions in the mass market segment, demonstrating strong consumer demand for fiber services.
- Lumen Technologies Inc (LUMN) successfully executed a debt exchange, extending maturities and improving its balance sheet position.
Negative Points
- Lumen Technologies Inc (LUMN) continues to face secular headwinds in its legacy revenue streams, impacting overall financial performance.
- The company's EBITDA results are weighed down by heavy investments in transformation programs.
- Lumen Technologies Inc (LUMN) expects EBITDA to decline year-over-year in 2025 due to legacy declines and transformation costs.
- The nurture product revenue decreased by 15.2% year-over-year, largely impacted by declines in VPN and Ethernet services.
- The company acknowledges that its current financial results make it difficult to envision long-term success, requiring time for transformation efforts to reflect in financials.
Q & A Highlights
Q: Can you clarify if the recent $3 billion in PCF sales are related to new customer announcements or previous deals? Also, how are these sales impacting your business growth?
A: The $3 billion in PCF sales are part of the total $8.5 billion, and we won't differentiate between buckets. These sales act as a magnet, especially with all three clouds involved, creating an ecosystem. The uptick in IP and wave sales indicates customers' need for expanded networks due to increased workloads, aligning with AI strategies that require robust network strategies. β Kathleen Johnson, CEO
Q: Regarding the incremental PCF sales, should we expect a similar timeline and structure as the previous deals?
A: Yes, the incremental deals signed this quarter are similar in terms of margins, cash flows, and timing to the previous $5 billion. This consistency should help in modeling future expectations. β Christopher Stansbury, CFO
Q: Are the new PCF sales mostly from big tech, or is there enterprise demand as well? How does this affect CapEx requirements?
A: The customer mix includes both repeat and new business, predominantly from companies building AI models. Enterprises are also involved but on a smaller scale. The CapEx requirements for these sales are similar to previous deals, and future sales will involve new routes, which will be incorporated into next year's guidance. β Kathleen Johnson, CEO and Christopher Stansbury, CFO
Q: Can you provide clarity on the mass market business and any potential interest in acquiring that asset?
A: The mass market business is seen as two separate entities: copper and fiber. While we have no news to report today, the market is noticing our execution, and consolidation is expected. The economics of the consumer business are clear, and we are open to strategic options. β Christopher Stansbury, CFO
Q: How does recent competitive activity affect the attractiveness of your mass market growth opportunity?
A: The markets where fiber is being built are attractive, and our fiber footprint is significant. We are the largest asset yet to be consolidated, and we see potential for further fiber build-out. β Christopher Stansbury, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
