Lumen Technologies, Inc. Q3 FY2025 earnings call

• Strong financial results with revenue, EBITDA, and free cash flow ahead of Street consensus.
• Phase 1 implementation of new ERP system completed, with $250 million in run rate cost takeout by end of Q3, on track for $350 million year-end.
• $2.4 billion debt refinancing and term loan repricing, continuing balance sheet cleanup.
• Consumer fiber-to-the-home sale to AT&T targeted to close in early 2026.
• Signed over $1 billion in additional PCF deals, total PCF deal value over $10 billion; NaaS adopted by over 1,500 enterprise customers; launched IoD off-net.
• Built connected ecosystem with dozens of tech partners, including Palantir, Microsoft, Google, etc.
• North America enterprise revenue now 50% from growing products.

Total business grow revenue was up 7.7% year-over-year and total business revenue was only down 3.2% year-over-year. North America enterprise grow revenue increased 10.5% year-over-year and now represents 50% of North America enterprise revenue. Mass markets: fiber broadband revenue increased 18.4% year-over-year, added approximately 122,000 fiber-enabled homes, 39,000 Quantum Fiber customers, with fiber subs at approximately 1.2 million and fiber ARPU at $64. Wholesale revenue declined approximately 7.6% year-over-year, and international and other revenue declined 13%.

• 2025 adjusted EBITDA expected near high end of $3.2 billion to $3.4 billion guidance.
• CapEx spending guidance $4.1 billion to $4.3 billion, expecting low end of range.
• Free cash flow guidance $1.2 billion to $1.4 billion.
• PCF expected to yield $400 million to $500 million incremental revenue by end of 2028.
• Digital (NaaS, cloud on-ramp security, ecosystem partnerships) expected to yield $500 million to $600 million incremental revenue by end of 2028.

• Potential delay in IRS tax refund receipt due to prolonged U.S. government shutdown.
• Risks associated with execution of business transformation and digital growth initiatives, including ensuring successful adoption of new systems and partnerships.

Q: On PCF deals, how do new $1 billion bookings compare to prior deals in terms of margins and pipeline?

A: Kate Johnson states new PCF deals have margins equivalent to prior tranches, and pipeline includes hyperscalers, neoclouds, etc., with a protracted phase of development.

Q: Greg Williams asks about revenue impact from Palantir and QTS network announcements and timing.

A: Kathleen Johnson says it's part of the connected ecosystem flywheel, with revenue impact seen over time as part of improved go-to-market partnerships.

Q: Michael Funk asks about cash EBITDA CAGR and valuation relative to peers.

A: Christopher Stansbury mentions details will be shared at Investor Day, emphasizing Lumen's free cash flow generation and improving financial profile.