Lumen Technologies, Inc.

Greetings and welcome to the lumen technologies first quarter 2023 earnings 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, May 2, 2023. I would now like to turn the conference over to Mike McCormack, Senior Vice President, Investor Relations. Please go ahead.

Thanks, Darcy. Good afternoon, everyone, and thank you for joining Lumen Technologies' first quarter 2023 earnings call. 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 first quarter 2023 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 our SEC filings. We'll be referring to certain non-GAAP financial measures reconciled to the most comparable GAAP measures, which can be found in our earnings press release. In addition, certain metrics discussed today exclude costs for special items, as detailed in our earnings materials, 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. Before I turn the call over to Chris to discuss our first quarter results, I want to give you an update on our company's turnaround plans. As I shared on our last call, we've established a new mission for Lumen, to digitally connect people, data, and applications quickly, securely, and effortlessly. We assembled a new executive leadership team and created five core priorities for the company. We then set financial expectations that included the funding of a portfolio of change programs to deliver on our revenue and EBITDA stability goals. It's still early days in our transformation journey. We're staffing up the change programs with the right talent. We're standing up an agile project framework to standardize how work gets done. And we're implementing business analytics across the company to help drive execution rigor. These things are the basic scaffolding needed to support our transformation efforts. Now, that said, in addition to an improved revenue story this quarter, we're seeing green shoots of progress in several areas. I'll share some of the leading indicators with you now aligned to our core priorities. I'll start with the first two priorities, to develop company-wide customer obsession and to invest and innovate for growth. Obviously, these priorities go hand in hand. We're immersing ourselves in our customer challenges and using that proximity to guide our innovation investment decisions. It's helping us pivot to an outside-in mindset and accelerating our speed to market. We already have an in-market example of high-value innovation using this new approach. On April 20th, we launched Lumen SASE with Rapid Threat Defense, our company's proprietary threat detection and remediation platform powered by our very own Black Lotus Labs. Now, you might be asking, why is this innovation example interesting? Because we sat side by side with customers and heard their feedback loudly and clearly. They have enough threat detection reports. What they want, what they need, is an automated threat detection and remediation capability. So with Lumen's intellectual property, we co-innovated with our partner Fortinet to leapfrog traditional threat protection offerings. And from concept to commercialization, it took just a few short months. And enterprise customers like Hewlett-Zoller's a full-service, multi-discipline design firm with extensive construction management expertise, they're seeing the value. We call this new VC-style approach to innovation the Lumen Growth Operating System, or the Growth OS for short. And it's not only helping us become more customer-focused, but it's also driving tighter alignment with important ecosystem partners while uncovering net new problem spaces where Lumen's proprietary gifts can drive value. For example, We're excited to announce that we're partnering with Microsoft using tools like digital twins and large-scale 3D environments that need edge-to-cloud capabilities to support next-gen operations. Together, Microsoft and Lumen are collaborating with great companies like Sunbelt, a global leader in the equipment rental industry, to solve complex business problems ranging from emergency response and supply chain management to fleet optimization and environmental risk assessments. Our partners and customers alike see the value of our network, security, and edge compute capabilities. And even more, they're recognizing and enjoying our appetite to co-innovate. Building reliable execution engine in both mass markets and enterprise is another core priority for Lumen. Here too, we see several positive indicators of progress on our path to growth. Let's start with enterprise. You may recall that beginning in January of 2023, We changed our sales incentive plan to drive a laser focus on growth. In the first quarter, we outperformed our internal revenue target for growth products with strength in IP, Wavelength, SASE, Managed Security, and UCNC. It's clear, when we focus, we win. At the start of the new year, we established a dedicated mid-market sales team, augmenting both direct and indirect selling resources to drive new logo acquisition. And in Q1, new logo ads were up 5% sequentially. And importantly, these new customers have about 30% higher sales value than the new customer cohort added in the prior quarter. Now, to stem organic customer churn and revenue decline in legacy voice products, we established a dedicated outbound calling team to migrate customers to modern UCNC platforms, paired with Lumen Network offerings, of course. Early results. Early results show that strategic migrations of these legacy customers increase the average spend by about 10%, reduces risk of churn, and gives Lumen a modern platform through which we can continue to upsell next-gen offerings. The powerful combination of customer obsession and focused go-to-market execution is really starting to bear fruit. We have several recent wins with customers like Byline Bank, ProLiant Surgeons, and iHeartMedia all of whom trust Lumen with their mission-critical applications as they seek to modernize their digital transformation. Now, we recognize that we have a lot of work to do on our enterprise sales execution. Over the next few quarters, you'll see us continue to galvanize our sales readiness programs, refuel our digital marketing campaigns, and refine our analytics-driven sales platform and upskill our talent across our field organizations. I'm going to turn to mass markets next. As you know, we did a reassessment of our quantum fiber build-out plan during the fourth quarter of last year. We pivoted away from focusing on counting enabled locations and instead we're targeting locations that have the greatest potential for penetration. This move required significant business process and planning changes, but will deliver superior returns for our shareholders. Our fiber build factory is now up and running fast with planning yields approaching 90% up from as low as 10% last year. In the first quarter of 2023, we saw net enablement growth accelerate, with March enablements eclipsing January enablements by more than double. This gives us confidence that we'll meet or exceed our 2023 enablement target of 500,000 locations. What's more, fiber installs have exceeded copper installs this quarter, and that gap should widen, accelerating fiber subscriber growth and revenue growth going forward. We're proud to share that our fiber customers, the majority of whom choose our one gig offering, are enjoying Quantum's world-class experience, driving a net promoter score of above positive 60. Look, I hope these impressive execution results make it clear that the Quantum fiber business is core to our strategy. You're going to see us continue to lean in hard as we ramp our build pace and increase our subscriber ads moving forward. Our priority to radically simplify Lumen, it comes in many forms, from rationalizing IT applications, to reducing skews in our product portfolio, and so much more. We're making material progress on this key priority, which will not only help reduce cost, but will also be the foundation for how we create quick, secure, and effortless digital experiences for our customers, partners, and employees. I'll share a few quick examples for you now. First, we established an evergreen program called The Stop List. where our 29,000 employees can share ideas for driving simplification by shutting down business practices that don't seem to add value or align to our strategy. So far, we've shut down 45 non-value-added processes, saving the company about 120,000 people hours and removing tens of millions of dollars of operating costs, which we're now redeploying to support our growth agenda. Next, we've made great progress in dramatically simplifying our product portfolio. We started the year with more than 12,000 enterprise SKUs and retired more than 60% of them so far just by eliminating legacy products. This simplification positions us well to reduce our enterprise ordering systems from 10 systems down to three, which will dramatically improve our billing accurately, it's going to reduce customer care costs, and of course, it's going to improve customer experience overall. There are just so many more examples of simplification at Lumen, such as unifying the company onto one communication platform, down from five, or upgrading our ERP system to reduce our bespoke and complicated business processes. Our simplification agenda is aggressive and it's going to yield material results and I'll continue to share progress with you throughout the year. Okay, finally, I've been very, very public about our core priority to rebuild this company, starting with our greatest asset, our people. We're building a culture based on team trust and transparency. One that celebrates clarity, customer obsession, a growth mindset, and courage. Basically, one that enables change. We have a lot of progress to share in this space. First, Lumen's being recognized by the industry for several reasons. In the past few months, we were named as one of America's most trustworthy companies, we were recognized for championing diversity, and we were celebrated for excellence in providing employees with remote work flexibility. Second, we're making bold investments that demonstrate our commitment to building a diverse and inclusive company. Over the past 90 days, we launched initiatives to revamp our performance management systems, systematize courageous leadership skill building, and drive greater transparency and remediation of pay disparities with the pay equity platform, Cindeo. You take the industry recognition and the people investments I just described, they seem to be paying off. We're seeing lower employee turnover, higher engagement within our workforce, and more outside interest in joining the Lumen team. In fact, we've had a greater than threefold increase in employment applications year over year. It's clear that we're building a company and a culture that people really want to be a part of. And I'm so proud of the team for making such material progress across all of our priorities in such a short period of time. Now with that, I'm going to turn the call over to Chris to discuss our first quarter results. Chris?