Lumen Technologies, Inc.

Greetings and welcome to the Lumen Technologies fourth quarter 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Tuesday, February 7th, 2023. I would now like to turn the conference over to Mike McCormack, Senior Vice President, Investor Relations. Please go ahead.

Thank you and good afternoon, everyone. And thank you for joining us for the Lumen Technologies fourth quarter 2022 earnings call. Joining me on the call today are Kate Johnson, President and Chief Executive Officer, and Chris Stansbury, Executive Vice President and Chief Financial Officer. Before we begin, I need to call your attention to our safe harbor statement on slide two of our fourth quarter 2022 presentation, which notes that this conference call may include forward-looking statements subject to certain risks and uncertainties. All forward-looking statements should be considered in conjunction with the cautionary statements on slide two and the risk factors in SEC filings. We will be referring to certain non-GAAP financial measures reconciled to the most comparable GAAP measures that can be found on our earnings press release. In addition, certain metrics discussed today exclude costs for special items as detailed in our earnings materials, all of which can be found on the investor relations section of the Lumen website. With that, I'll turn the call over to Kate.

Thanks, Mike. Good afternoon, everyone, and thanks for joining us today. In a few minutes, Chris will cover our fourth quarter results and discuss 2023 outlook measures. Let me begin by saying how excited I am to be here at Lumen during such a pivotal time in our company's history. I have a passion for leading businesses through the challenging world of digital transformation. It's what I've been doing for a few decades, and it's where I feel most comfortable. And while it's only been three months since I joined Lumen, I already feel at home. I've had the opportunity to get to know many of our employees, customers, and partners, and I've spent time understanding our business processes, our proprietary gifts, and our go-to-market capabilities. I can tell you that I see a very significant opportunity for Lumen and its stakeholders. Now, that said, there's hard work ahead for our team as we make significant changes to how we serve our customers and how we execute for better financial results. 2023 will be a year of rapid change for Lumen as we execute on our plans and pivot towards growth. As with any successful transformation, it's essential to get the right talent, and I am delighted to report the addition of three seasoned technology executives to the Lumen team. Sean Chotai has been appointed Executive Vice President of Product and Technology running our newly integrated product development and IT organizations. Ashley Haynes Gaspar has been appointed Lumen's Executive Vice President and Customer Experience Officer, running our marketing functions as well as customer success. And Jay Barrows has been appointed Executive Vice President of Enterprise and Public Sector Sales. With the addition of these three executives to the team, we infuse deep digital transformation leadership, product development and innovation muscle, marketing and customer lifecycle thought leadership, and enterprise selling expertise, all essential components of our transformation. Now with the team in place, we're ready to execute our plan. Clarity is an existential priority for any company seeking to transform. As such, over the past three months, we've spent considerable time with employees, customers, and partners drafting and rolling out a crystal clear strategic plan what we're calling inside the company the Lumen North Star. In short, our North Star defines who we are, who we serve, our proprietary gifts that yield a competitive advantage, our targeted success metrics, and of course, our aspirational culture. This important plan provides clarity to the Lumen team and our stakeholders on our path to growth. It starts with our mission to digitally connect people, data, and applications quickly, securely, and effortlessly. The first part, connecting people, data, and apps, that's our core DNA and positions our world-class network as the crown jewel of our portfolio. The three words at the end of that mission statement, quickly, securely, and effortlessly, that's really what our customers are demanding as we solve their core problems, such as delivering cost-effective operations securing their data and apps, innovating for their customers, and helping their employees thrive. It's where we have the most amount of work to do, and it's the underpinning of our investment and operating plans. A big part of our North Star plan is a detailed economic model that provides some sensitivity analysis around our grow, nurture, and harvest revenue categories. This work has informed our plans to disrupt negative growth trends in our legacy businesses and bolstered our intention to innovate for growth as a result of this work we've established five core priorities for lumen. Our first priority is to develop company wide customer obsession lumen is the product of many mergers and, as such. We've been forced to drive operational efficiency to ensure we achieve the synergies and the value intended from combining these entities. Now, that takes a fair amount of looking inward, and we've built thick muscle memory doing this. Our path to growth lies in solving customer problems and helping them deliver on their desired business outcomes, and that requires looking outward first. Reorienting our people to focus on understanding customer problems and shaping our core intellectual property in connectivity, security, and edge cloud to solve those problems will be a material mindset shift. As with any mindset shift, this will take time and practice. It will require deep skills building, a significant part of our culture development priority, which I'll talk about shortly. But more than just a mindset shift, delivering on our desire to become a customer-obsessed company requires innovating and investing for growth, our second core priority. As such, we are reshaping our organizational structure by combining our product development teams with our IT teams for greater speed and agility. We're centralizing marketing for tighter alignment to the customer lifecycle, and we're installing what we call a growth operating system to build the muscle inside of Lumen that enables us to innovate new products that delight customers and drive shareholder returns. Our innovation focus will be to create and monetize capabilities that enhance the value and commercial potential of our work. Now, I think it's worth spending a minute on this concept of growth operating system. Lumen's been focused on driving operational efficiency, as I said, in our scaled businesses. But to grow, we need to become great at innovating and establishing new to big businesses. We want our teams to act like entrepreneurs, collaborating with our customers and the Lumen teams to solve problems that our customers experience. And at the same time, much like in the VC world, we will foster this innovation in an environment with important guardrails, including a growth board, executive sponsorship, and co-founder teams to ensure we're pursuing and maximizing the value of high potential projects. This means performing extensive testing with our customer base, bailing fast on many concepts, but recognizing the high potential of others and quickly allocating capital accordingly to maximize growth. This is a critical motion as we pivot to an outside-in mindset. And while I just shared our intention to develop net new capabilities that enhance the value of our network, I also want to emphasize that we will continue to invest in our world-class network. We just won't stop innovating here, and we'll continue to invest in our fiber infrastructure to meet the demands of our sophisticated customer base who are dealing with complex business problems, coupled with a workforce that now demands remote work flexibility in the post-pandemic world. We recently announced our major network expansion plan to drive 6 million additional intercity fiber miles to our already expansive network by 2026. As we execute and pivot towards growth, our third core priority will be to ensure we have the complete go-to-market capability in place to enable us to compete in today's technology market. We believe Lumen will benefit significantly from incremental investment in our marketing and field-facing teams to properly cover the market and capitalize on near-term opportunities in growing spaces like security and edge cloud. We will therefore inject OPEX and CAPEX to ensure that Lumen can serve two distinct groups requiring unique approaches. The first group includes large customers in the public sector, large enterprise, and upper mid-market channels. These organizations offer or require extensive, intricate, and customized solutions. And to serve this group, we aim to offer scalable solutions with a higher level of personal engagement and a robust set of managed service offerings. The second group includes customers in the consumer SMB and lower mid-market channels. This group tends to prefer a less hands-on approach and often utilizes self-service options. To serve this group, we'll offer a simplified product selection with a user-friendly digital platform for easy ordering and seamless interactions. Our goal is to remove any obstacles for them by offering straightforward solutions that can easily be accessed and managed securely and digitally. To support our first three priorities of developing customer obsession, innovating and investing for growth, and building a reliable execution engine, we're going to lean heavily into the fourth to radically simplify our company. Simplification will come in two major forms. First, we'll focus on doing fewer things better. That means shutting down subscale or non-accretive businesses, which includes no longer selling products or services that don't directly enhance our value to customers or benefit Lumen and its shareholders. We will ensure all resources are aligned to promote the programs and projects that support our mission to digitally connect people, data, and apps quickly, securely, and effortlessly. The second form of simplification will come as we build the digital enterprise, consolidating systems and modernizing our IT infrastructure to support effortless employee and customer digital experiences. These two forms of simplification will help us optimize for cost and growth simultaneously. Our fifth and extremely important core priority at Lumen will be to further develop our culture. We know that the cultural common denominators of companies that successfully transform in the digital era include Clarity, customer obsession, courage, and a growth mindset. At Lumen, straight from the top, we're committing to clarity in everything we do. And I hope my comments today have reflected that commitment. The remaining common denominators won't come in the form of an edict or a mandate. We will invest in and train our employees to develop the skills required to change. That wraps up the high-level summary of how we plan to transform Lumen to pivot to growth. We need to do a lot of things, some basic and some quite complex, to position ourselves to take advantage of the opportunity that lies before us. We will continue to move with great speed, but also very thoughtfully and collaboratively, leveraging our customer and partner relationships to guide us. The team is coming together with formidable energy, and I'm really looking forward to sharing more of our story with you as the year progresses. Before we move on to our discussion of results and the 2023 outlook, It's important that I talk about a couple of items as we enter 2023. First, on EBITDA and CapEx, we're leaning into our growth and optimization priorities, and Chris will provide financial details of these initiatives shortly. We believe these investments are critical to position Lumen for strong execution and scalable, sustainable growth, and we expect revenue and EBITDA stability in less than two years. Second, let's talk about our quantum pacing. As we said previously, we hit the pause button during the fourth quarter. Now, to be frank, it was more of a stop button than a pause button, which impacted our quantum metrics for the quarter. That said, the evaluation we undertook was absolutely critical to position quantum for long-term success. By focusing on all metrics and not just the location enablement goal, we've established a higher IRR more predictable long-term outcome for this exciting project. A natural outcome of our assessment of quantum is a more focused build target where we're able to achieve proper returns for shareholders. We believe the overall quantum enablement opportunity is 8 to 10 million locations. The engine is revving back up and we're aggressively working to ramp our build activities in 2023. And to that end, We made an important change during the fourth quarter to separate our operational activities like planning, engineering, and all field operations between mass markets and business. Maxine Moreau, our president of mass markets, now has top-to-bottom operational and P&L responsibilities. This is a significant change internally that I expect will improve our quantum deployment pacing, but it will take time to reach scale. My expectation is that later this year, you'll see significant improvement in our execution on enablements. And with that, I will turn the call over to Chris to discuss our fourth quarter results. Chris?