Lumen Technologies Inc Q4 2024 Earnings Call Transcript

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

Question: Michael Rollins - Citigroup - Analyst : A couple of questions, if I could. First, if you look just in total in terms of what's happening with sales that you mentioned in the business, I think, in North America, up 15%. How is that translating to progress in the verticals like large enterprise and mid-market. And then secondly, just looking at the schedule that you provide, it was like the customer verticals and product verticals. As you mentioned, grow was up sequentially, and it looks like maybe about $82 million sequentially and wholesale, I think it was wholesale harvest was also a significant number in the quarter. How much of that might have been recurring, and it's a bouncing off point for 1Q 25 versus onetime in nature?

Question: Batya Levi - - Analyst : Great. A couple of questions. First, on your network utilization chart, what kind of enterprise needs growth are you assuming that drives your assumption for lower utilization for the enterprise segment by 28%. Is that just a function of revenue mix, meaning much higher growth from the hyperscaler side versus the enterprise? Or is there anything else that's in there? And then the second question if you don't mind helping out with the cadence of incremental cost we should expect for '25. I believe you mentioned $200 million included in the EBITDA guide, and there's an incremental $300 million that's not included. And within free cash flow, are you assuming any incremental deferred revenue?

Question: David Barden - Bank of America Merrill Lynch - Analyst : So I guess just maybe for Chris, two questions. The first would be with respect to the free cash flow guidance this year and maybe as it translates into 2026, is it would be, how much money is coming in from the construction contract customers versus how much is going out. And so if we excluded that, what would the cash flow actually look like? That's question one. And then the second question would be, I think, Chris, you also kind of alluded to this, is that as we look at 2026 and then even more in '27 and beyond, the accounting of how we put the cash flow we're getting today into the income statement down the road when we've built it and then we can start accounting for it, what kind of contribution is that making to the 2026 better than $3.5 billion EBITDA expectation?

Question: David Barden - Bank of America Merrill Lynch - Analyst : Just on the free cashflow. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:00PM, LUMN.N - Q4 2024 Lumen Technologies Inc Earnings Call

Question: David Barden - Bank of America Merrill Lynch - Analyst : And Jim, before you cut me off if it's possible, I would love to -- Chris, one more question, which is -- we've seen some pretty successful fiber securitization deals out of Unity, out of Zayo. You guys obviously have redone your whole balance sheet and I'm not smart enough to figure out how much opportunity is there for you to kind of take advantage of what's happening in the market right now for fiber financing?

Question: Jim Schneider - Goldman Sachs Group Inc - Analyst : First of all, I was wondering if you could maybe contextualize your view on the recent Deepseek announcement. I realize it's still very early days. But directionally, how do you think this changes the connectivity market going forward? Do you think this is likely to result in, because of the lower cost, more inference or more training? Or could we actually get less training and more inference? And what do you think that means, if anything, for the content demand needs you're seeing from hyperscalers? Do you think there's a chance that we could actually exceed less? Or is it more likely that we actually see the market stimulated by lower cost?

Question: Jim Schneider - Goldman Sachs Group Inc - Analyst : And then maybe as a follow-up. Can I maybe just sort of ask about the sort of competitive dynamics you're expecting to see in the PCF market going forward? I mean, clearly, you've talked about all the reasons why you believe you have a privileged advantaged market position today. One of those, I believe, is because of the empty or available conduits you have to fill right now. But I'm sort of curious, as we go into the next couple of years, do you see more competition for these kinds of deals? And do you see your sort of your lead extending yourself? Or do you think more incremental competition is likely to come in?

Question: Greg Williams - TD Cowen - Analyst : Actually, Chris, your last answer is a good segue into my question is, in your deep conversations you're having above and beyond the $8.5 billion pipeline, are you seeing any of the inference days starting to materialize? Or are we still too early there? Second question is on Deepseek. I get the democratization of AI, which you see a larger TAM. But is there a near-term risk with massive scalable AI that would drive a temporary pause of the hyperscalers to rethink some of their plans?

Question: Frank Louthan - Raymond James - Analyst : Great. Can you give us a little bit more color on the public sector for next year? I think you said it was going to pull back a bit. Is any of that related to federal government cost cutting. And does that add any additional risk? Can you give us an update on the billing system collapsed and the other system changes that you're working on? Where are you as far as completing those projects?

Question: Sam McHugh - BNP Paribas Exane - Analyst : On your intercity fiber mile vision, I think the 2028, 47 million-mile or 47 miles. Is that based on the announced PTF deals? Or would that require additional PCF deals and CapEx to kind of get to that vision, part one? And then secondly, on the investment in new fiber routes. Does that change your view on how many fiber homes in the mass market business you might be able to reach? And is that helping you in discussions with partners on basically being able to provide more backhaul for that only ventures?

Question: Sam McHugh - BNP Paribas Exane - Analyst : Yes. Sorry, I was just saying, as you build out more of the conduit and build new conduits, is that changing your view of kind of the terminal kind of build in mass market? I think you talked to 6 million to 8 million locations in the past. So can you do more with fiber miles? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:00PM, LUMN.N - Q4 2024 Lumen Technologies Inc Earnings Call