Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Greg Williams - TD Cowen - Analyst : So I just wanted to start with a brief introduction of your role at Lumen and where you're spending most of your time these days?

Question: Greg Williams - TD Cowen - Analyst : Okay. Got it. And I want to talk about the buckets that you guys now bifurcate or trifurcate, grow, harvest, and manage. And maybe talk about some of the products in your grow bucket (inaudible) you seem to stack the SD-WAN, IP Waves. What are the largest opportunities that you think are there for Lumen and how the company is poised to win that space over time?

Question: Greg Williams - TD Cowen - Analyst : Manage them.

Question: Greg Williams - TD Cowen - Analyst : Maybe we'll just dive into each of these. Maybe with Edge, you mentioned the physical advantage. Help us with the ramp in this space. When should we expect to see Edge proliferate? How is that going to look over time? When will it start moving the needle for you and the rest of the telcos for that matter? Yeah, just interested in that.

Question: Greg Williams - TD Cowen - Analyst : Use cases.

Question: Greg Williams - TD Cowen - Analyst : Yeah. And what are the use cases? Maybe if you can get more specific on low latency that you're seeing in machine, machine control like robotics, manufacturing, warehouse, IRP? Again, just what are the ones that are gaining the most traction that you think will help Lumen? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : Right. And AI is really one of the top themes at this conference and probably other conferences these days. Just help us understand the ways Lumen could be a contributor and let's see if revenue grow through AI? May be both outside and how is AI helping you internally?

Question: Greg Williams - TD Cowen - Analyst : Right. So it's maybe Dark Fiber and Waves connecting data centers would be a big opportunity as you go from like the training centers.

Question: Greg Williams - TD Cowen - Analyst : And so is that maybe the Waves connecting data centers in the -- for AI. In which case this is probably the [use case]?

Question: Greg Williams - TD Cowen - Analyst : And then how about AI internally, how are you thinking about like Lumen? And does it help you route faster or better or anything like that? Is there anything you can think about internally? Customer care seems like an easy one.

Question: Greg Williams - TD Cowen - Analyst : Got it. I wanted to talk about another exciting opportunity would be your new NaaS offering or network-as-a-service that was recently out there. We spoke to Zayo this afternoon today and they're looking at NaaS offering, and you guys seem to be ahead of that curve. Help us understand -- it seems like it could be a big deal in the next few years. And what's the offering, what's its capabilities, and why it matters? Some of us aren't necessarily bellheads, we're just finance folks and investors and trying to understand what that means.

Question: Greg Williams - TD Cowen - Analyst : Okay. Versus your typical DIA, which you get a certain amount of capacity in a month circuit kind of thing.

Question: Greg Williams - TD Cowen - Analyst : Is there a worry that it cannibalizes your DIA if you -- is it priced better or is your margins still the same? Or is this part of that catching your customer strategy where if they're going to migrate anyway, throw them into NaaS.

Question: Greg Williams - TD Cowen - Analyst : Okay. Sure.

Question: Greg Williams - TD Cowen - Analyst : How about the margin profile and something like that versus the traditional DIA?

Question: Greg Williams - TD Cowen - Analyst : And who is your competition on NaaS platform and more specifically, Internet On-Demand? I know it's a tough question because you offer this as a broader solution, or you actually sell this product in isolation? Just wondering how you sell it and who is your competition.

Question: Greg Williams - TD Cowen - Analyst : Right. This goes back to the physical asset. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : And having that [share].

Question: Greg Williams - TD Cowen - Analyst : It's known as economics.

Question: Greg Williams - TD Cowen - Analyst : Contribution margin's huge.

Question: Greg Williams - TD Cowen - Analyst : Are there any early learnings? It sounds like -- it's a little early, but you have been trialing it on the upside surprise or even downside surprise. And it sounds like maybe pricing is one where you work that out and figure that out, but curious what you learned so far?

Question: Greg Williams - TD Cowen - Analyst : And that's a good question, too, is when is your initial availability, which is rather limited today. And I guess your message is also oversubscribed, so there's demand there. When does it go to full commercial availability? Is it market by market? And when do we finally get to a place where it's across the US? Both, I guess, on just Internet On-Demand and then, of course, like all the other products that you're going to put on it. So I guess two questions there.

Question: Greg Williams - TD Cowen - Analyst : What's next, I guess? What's the other product?

Question: Greg Williams - TD Cowen - Analyst : Security.

Question: Greg Williams - TD Cowen - Analyst : And by the networking services?

Question: Greg Williams - TD Cowen - Analyst : Okay. Wow. So you can do a type two and bring it off-net and also offer them. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : Because your other networks might not have the capability obviously themselves, but -- okay, so do you launch the networks with the one product first or are you adding products -- you mentioned two facets of the growth, and do they both go in tandem?

Question: Greg Williams - TD Cowen - Analyst : And when do you, to your best guess, envision that being out there in most NFL cities and all the product sets? Is that years, is that at one year? I'm just trying to understand when that happens.

Question: Greg Williams - TD Cowen - Analyst : And then your Edge Compute centers?

Question: Greg Williams - TD Cowen - Analyst : You're one of the ones leading the way and when is that (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : Maybe like the iPhone when it first came out. I guess it's interesting. And then nowadays it's like how do I live without it?

Question: Greg Williams - TD Cowen - Analyst : There's another product that you guys mentioned on the call, ExaSwitch, which was announced actually couple weeks before the call. I think it was in its key part of your innovative for growth strategy or be innovative for growth. And can you explain, maybe in layman's term, what ExaSwitch is and why it's important, the opportunity there and maybe the competition?

Question: Greg Williams - TD Cowen - Analyst : So instead of the interconnect like in an Equinix facility where you're all in a meet me room, you're saying that you have equipment and a bunch of data centers that can bypass that interconnect. Is that right?

Question: Greg Williams - TD Cowen - Analyst : Do you need the gateway somewhere like go elsewhere? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : Okay. Interesting. And then I guess that would save your customers on interconnect costs in turn.

Question: Greg Williams - TD Cowen - Analyst : I wanted to move on to your Waves business, more specifically, Cogent's entering the Wave business. And they're also at this conference as well. And they noted, they bought Sprint GMG's assets, so they bought it from T-Mobile. And with that, they're doing a bunch of things. But one thing they're doing is they want to enter the Waves business. And their goals are ambitious. They said they can maybe get to $500 million in a $2 billion industry, it's obviously ambitious and it seems like a direct threat to who are the Wave providers: Zayo, Lumen. So are you thinking about that? Are you concerned about that? It's a big number, how are you differentiated and how can you defend share there?

Question: Greg Williams - TD Cowen - Analyst : Fewer transponders and things like that.

Question: Greg Williams - TD Cowen - Analyst : That's where all the cost of the transponder is?

Question: Greg Williams - TD Cowen - Analyst : Okay.

Question: Greg Williams - TD Cowen - Analyst : Right. And provide additional solutions, whereas maybe the competition might be limited in the suite of services that you otherwise provide as well, then?

Question: Greg Williams - TD Cowen - Analyst : Okay. Yeah. Kate also mentioned on the call, your [self-installs] and/or just your install rates, huge decreases, right? Onboarding time was cut back to 85%, sales cycle times by 80%. It seemed like staggering numbers to me, drastic improvements. Can you help me with examples of past installs versus present and what you are doing now and what your onboarding time looks like currently?

Question: Greg Williams - TD Cowen - Analyst : And you mentioned NaaS, again, and it seems like all roads lead to NaaS. And part of that is the cloudification of telco services. We wrote a report earlier this year on it and the issues we are having, this is happening more in the wireless world, but the core networks are being cloudified, right. AT&T is going to -- has Microsoft Azure for Operators. And of course everyone knows AWS and DISH. The worry is the cloud is running core network services. Do you bring the cloud into your core network services and is that bringing the fox into the henhouse? If they are doing some of the services, is there a worry that they could run other telco services going forward?

Question: Greg Williams - TD Cowen - Analyst : Right. And speaking of so much to offer, one of the other offers we haven't talked about is security. Really, we touched on it, but help us understand your security offering with Black Lotus. And it seems like it's more of a network-based security model versus others? And then maybe talk about how do you migrate that to NaaS? How does that really work?

Question: Greg Williams - TD Cowen - Analyst : Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : So literally into the equipment that's in the cloud, right, those software solutions into the equipment and into the cloud.

Question: Greg Williams - TD Cowen - Analyst : Yeah, I guess it's not just the cloud, you put it in your Edge data centers and your regular data centers and even on-prem for them, I mean sure so by putting it anywhere.

Question: Greg Williams - TD Cowen - Analyst : Okay. Got it. And then you also mentioned in the call, actually you mentioned on Analyst Day, your big push into a partnership ecosystem. You are partnering with the who's who. Just help us understand where you are working and relying on partners. Help us with examples of partnerships that are working, like just the rev share model. Like how does that work?

Question: Greg Williams - TD Cowen - Analyst :

Question: Greg Williams - TD Cowen - Analyst : And you are white labeling it or you're going in with Fortinet?

Question: Greg Williams - TD Cowen - Analyst : Sure. Also at Investor Day, Lumen spoke about $100 million in run rate savings. And it's going to be productivity and network improvements, some of it, and some decommissioning and consolidation into one platform. So where are the ways you and you're doing them in your shop, but where are you doing the savings and where you are contributing to that?

Question: Greg Williams - TD Cowen - Analyst : Right. So data integrity. Andrew DuganNo more [Excel] handoffs and things like that. Just more automated data stream.

Question: Greg Williams - TD Cowen - Analyst : Got it. That's helpful. I also want to talk about just possible divestitures. As we think about the balance sheet, et cetera, but from where you sit, you sold off, obviously, some assets. You are closing out an EMEA sale. Are there any other legacy or non-core assets from where you sit that could be carved out from your network?

Question: Greg Williams - TD Cowen - Analyst : I mean can you talk generally about the complication of some of these carve outs? How hard is it to carve out a piece of the enterprise business from this network at this point? I mean is it -- seems like it's impossible to -- not impossible, nothing is impossible. But like, figuring out which ports -- who owns which port, who owns which cabinet, who owns this in which data centers, like, seems very complicated and it would take a long time. Much like we have seen in a lot of carve outs and the complexity behind that, if you can add some color to that.

Question: Greg Williams - TD Cowen - Analyst : Yeah. But those are geographically cleaner to you, right? And even the ILECs you have mentioned weren't overlapping in enterprise in a big way. So now the next ones get a little tougher. Maybe Wyoming and the Dakota as well and that -- the next sales of ILEC should be in places you also have enterprise, right?

Question: Greg Williams - TD Cowen - Analyst : Sure. Last question is on Fiber to the Home in that network. Costs did come up over last year for you guys. But you also took your build count down and help us with the balance and the commitment to the fiber build? That seems like you are ready to hit a flywheel again in terms of building more, or is it -- where is the cadence going from here? And how do you think about build costs from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2023 / 9:40PM, LUMN.N - Lumen Technologies Inc at TD Cowen Communications Infrastructure Summit

Question: Greg Williams - TD Cowen - Analyst : And labor equipment, it's all getting lined up for this and orchestrating it with sales teams and getting your platform ready?

Question: Greg Williams - TD Cowen - Analyst : All right. Great. Thank you for your time, Andrew.