Lumen Technologies, Inc. — Call Transcript 2026

All right. Let's get started. Good afternoon. Welcome to day one of our 54th annual TD Cowen TMT Conference. My name is Gregory Williams. I cover cable, wireless, telco, and fiber here at TD Cowen. Joining me this session is Chris Stansbury, CFO of Lumen Technologies. Chris, thanks for joining us. Thank you. Great to be here. Lumen has a lot on this plate, including recently closing the AT&T Fiber to the Home deal. PCF execution now. Yeah. Ramping up digital revenue, the Alkira deal- Yeah cost savings initiatives. Yeah. Where are your priorities at the moment? Our priority is really on the inflection of the business. This year we inflect EBITDA. There's a lot of focus on that. The cost savings help drive that before revenue inflects. The revenue inflection is right behind that, and we're doing everything we can to try to accelerate that. As we said in our investor day, we expect revenue to inflect in 2028. I think at that time, Alkira was not contemplated in those economics, and so we think that will accelerate our revenue growth, but we've got to dimensionalize that. First we got to close the deal. It's really about inflecting the business. Okay. Looking forward to that. Part of inflecting the business is PCF demand, at least from a cash flow perspective. You now have $13 billion in PCF deals to date. As a leading indicator for fiber demand, we're tracking data center leasing because these data centers are eventually going to need photons, if you will. We saw another massive step-up last quarter, 9.4 gigawatts of leasing in the past quarter alone. Yeah. Should we, in turn see a similar step-up in PCF wins, or is your $13 billion in wins already capturing what we just saw in leasing-? So- data centers? I think we have to think about them in different buckets. PCF is really largely consumption for the hyperscalers' internal use to train their AI models. There is more demand there. We see more demand. I think we will do more. It's really not the big growth opportunity for Lumen. The big growth opportunity when you think about DC growth is it goes back to what we've been talking about for a few years now, which is data is getting further and further away from the point of consumption. In a world of AI, that's a huge problem because as you have agents interacting with customers or running smart factories or whatever it is, those agents are looking for data in real time, trying to make decisions as fast as a human would make them. If that data is across the country, you cannot have a data lag, or any kind of interruption in getting it there. What we see with the data center growth is really the growing demand in what a network engineer would refer to as east-west traffic. That's the movement of data from anywhere to anywhere, through a single pane of glass in a very programmable way. That's what we're building, and that's what Alkira brings. I think our enterprise focus, which is something our competitors have not had, it's really starting to show as an advantage as AI starts to move more into an inference phase. Right. PCF's good for the cash flow, but the programmable network is the future of Lumen. Exactly. When you think about that the PCF deals have largely been focused on just the training of AI, right? Now we're moving into inference, and that's where the programmable network becomes more important. When does inference really start to overcome training? I think it's starting now. How fast it builds is hard to say. I think the latest thing as we all learn our way through AI is, I think the phraseology is tokenomics, right? You've got where does AI make sense and where does AI not make sense? I think the companies that ultimately will win the day are the companies that rewrite business processes, and use AI to fundamentally transform the way they go to market. It's not about taking a bad process and putting AI on top of it. It's about completely rewriting business rules and moving into the next phase of growth. While inference will be a huge opportunity, a higher margin perhaps, lower CapEx since a lot of the conduit's in the ground. On the flip side, a lot of inference will be done perhaps in the availability zones where there's other fiber providers. Do you see more competition? Do you see pricing risk because you'll be going up against? I don't. Let's break it down a little bit. Historically, legacy telco, enterprise telco has been focused only on north-south traffic. North-south is defined as premise to somewhere. It can be another premise, it could be a DC, it could be a cloud. That market in the U.S. is about a $12 billion market, and its TAM is growing at 1%. Okay? The amount of data growing every year in that is much, much greater than that. What is that? That's price compression. That is the cloud that has hung over legacy telco's head forever, is you sell to the procurement department, and it's a race to the bottom on who's going to have the lowest price the next time that the contract comes up for renewal. East-west traffic is what changes all of that because it's about the movement of data between clouds, between DCs. It never touches the prem. That TAM is a global TAM because you don't need to own the network. If you think about what happens with the closure of the Alkira deal, we will be the first telco on the planet that has married north-south traffic and east-west traffic together. The point of intersection is Multi-Cloud Gateway. It will work on-net or off-net in a very programmable way, meaning through one pane of glass, I want to move data from here to here right now. You design your own network, you push go. It works. There is no one else who's doing that. That is what is absolutely critical in terms of giving enterprise the ability to reduce their total cost of ownership, because networking has only been thought of in a very static way. This turns it into a very dynamic asset, and that's where we see we can win. With Alkira, since you brought it up, it's nice to see Lumen back on the acquisition path again. Yeah. It's a healthy sign. You acquired them for $475 million. Can you just provide, you just already did a little bit, for real-world examples, like the enterprises have a pane of glass? Yeah in dynamic capacity. A lot of it could be off-net as well as on-net. Exactly. You have SLAs, so you'll depend on other carriers. Do they bring you on broadband here? If you think about a global solution, think about a large multinational bank. We could license this technology to a provider in Europe, to a provider in Asia with standards. Part of what the value is of marrying that incredibly powerful software layer with our network is the privacy of our network. A lot of what gets moved around for enterprise today is done over the public internet. More network hops, slower, less secure and that privacy element is critical from a security standpoint. If we can find partners who will provide that same level of privacy on their footprint where they have it, the orchestration layer is what Alkira brings, and that's ultimately what gets monetized. I think ultimately you will continue to see Lumen invest in fiber where it makes economic sense to invest in fiber. The reality is we don't have to lay one more foot of fiber to have a global footprint that allows the complete orchestration of AI networking needs. The deal rationale is, I feel like you needed to do or build an orchestration platform anyway. Correct. Maybe this is going to cost you a little bit more, but you're ready day one. Is that the right way? Yeah. Our estimates are we were going to spend, in the next couple of years, $100 million-$200 million to build a lot of what Alkira brings. It's ready effectively day one. Our technical team would say that this builds the entirety of the foundation that we need. It integrates very easily, then we can innovate from here. There's already a lot of innovation that has happened with things like direct cloud on-ramps, Multi-Cloud Gateways, the plumbing that's required to move these big workloads around. The orchestration layer now makes that very programmable through one pane of glass. Look, what do I mean by programmable? Because this is really important. The math that matters isn't the cost of a wave. That is no longer a point of conversation. What matters is the total cost of ownership. I need to move petabytes of data from clouds into GPU clusters to be processed. The math that matters is the cost of a GPU cluster, $2,000 an hour. If I've got 10 gig connectivity and it's slow and it's clunky, or I've got 400 gig connectivity, it doesn't matter what that cost of that wave is. It matters how long it's going to take me to transport that data. Yeah. We're talking hundreds of thousands of dollars in terms of cost differential for a petabyte of data over 400 gigs versus 10 gigs. Right. The network cost is so small compared to the cost- It's so small. of just flood. When we talk about a programmable network, think about a situation where data is trying to get into a region of the country to be processed by GPU clusters, and it's reached a capacity limit. It's reached a capacity limit either because the GPUs are already running at capacity or because there's an energy cap. The local providers are putting a cap on how many of those GPUs can be running. You route that traffic somewhere else. What does a programmable network do? It automatically reroutes it where there's capacity. You don't have to have a telco go out and dig a trench and build connectivity from A to B. You literally log into a screen, you move the workloads, or the network does it for you. That's what we're talking about, that's the power that we unlock with Alkira and Lumen married together. Got it. The network topology and where data goes is a great segue to my next question, which is the edge. We recently got back from Connect (X) a few weeks ago, and the edge, or the topic of the edge was all the rage. It felt like the 5G edge all over again. Yeah eight years ago. Lumen could stand to win big because I remember in the older days of Lumen, they had a lot of edge connections, a certain amount of milliseconds to every customer. Investors were naturally skeptical. Why spend the extra $ millions just to shave off a couple milliseconds? Just curious to hear your thoughts. It seems like there's some validation, even yesterday when I Squared bought some of these smaller edge data centers from Cogent. Just curious to hear your thoughts of where the edge is going to go and where data gravity is going to go with AI? Edge will continue to grow because again, think about east-west traffic, where you've got data sitting in multiple cloud environments, and you need to do API development. You can pull that data down to the edge, manipulate what needs to be done, and send it back wherever it needs to go, the data, wherever it needs to go, rather than trying to pull it all onto a campus somewhere and do it yourself. It's that proximity matters, and latency really matters in a world of AI. I can't think of a better example than, say, a smart factory. How about a customer service agent where you are engaging with a voice agent or a chat agent? What happens if it takes 90 seconds for it to respond, right? Yeah. Versus if it's responding instantaneously as it sources data from everywhere to answer your question. Yep. That matters. Latency is a huge issue for AI. It ultimately limits AI's capacity. We talk about our network being within 95% of U.S. businesses within under five milliseconds. That benchmark needs to continue to tighten. I want to talk about the NaaS and digital revenue that you spoke of. Your digital revenue was, I think, $37 million. Route to the $500 million-$600 million target. That was just in the quarter, yeah. Yep, just in the quarter alone. Yeah. You're assuming a linear ramp in your projections, but you actually think it might be more of a J curve? Yeah. Help us envision the scenario and rationale for this J-curve adoption. Is it one of these situations where a couple companies do a proof of concept and they see it, and then the adoption skyrockets? Can you help us time the J-curve? Any insight there would be helpful. I would love to time the J-curve, it's a hard one to call. Look, we're developing a new category. I think the best reference point that we have is what happened in cloud. If you think about cloud adoption, when cloud companies came into existence, what did enterprise say? Well, I don't need that. I've got my on-prem data centers. What ended up happening is over time, people realized, hey, wait a minute. The variable nature of that capability, the ability to provision, compute, and storage on demand all of a sudden it exploded. That was the J-curve. We think that's ultimately what happens here. Alkira could be a J-curve moment. We'll see. I can tell you this, we're doing everything we can to make it a J-curve moment. We've got to obviously close the deal, but we're already thinking about the types of engagements that we can have with customers. We obviously can't do much until the deal closes. At that point, we will have a target of companies in various industries that we want to go into and use as use cases that we can then share with other customers. The selling motion is very different, we're changing the inside of enterprise as we go and sell these solutions. Again, today, you sell to procurement departments and network engineers. What do procurement departments and network engineers not want to happen? They don't want you to move their cheese. They don't want you to say, "You know what? We don't need you guys doing this anymore. We don't need you to figure out how to cobble together a network solution to move data everywhere. We don't need you to figure out if you can get a lower cost on a wave." It's a very different selling process. Yeah, you have to evangelize it. It's C-suite driven. When we talk to CTOs about the capabilities that we're bringing, they're like, "Wait, what? You can do this when. This changes everything." They will rewire the inside of their organizations to adapt to the capabilities that we can bring. The way the network works today, the network architecture never envisioned AI. The way companies access cloud data today, through neutral third-party facilities with cross-connect fees and slower speeds, that doesn't serve AI, and it's expensive. It's slower, it's expensive, it's less secure. Our belief is we come with a solution that addresses all of that, and they start to rewrite the way they buy and manage network services inside of their company. It's very much going to be a C-suite sale. Right. You mentioned cross-connects are expensive on the on-ramps and the meet room. Speaking of expensive or not expensive, how are you envisioning pricing the NaaS services then? I think it's going to look very much like the way cloud prices. You will, depending on what your commit level is, you'll get varying degrees of price discount. Based on data, like per volume. Based on volumes. volume to your structure. Exactly. By the way, that's not just connectivity because there's other services that we'll continue to bring to the market that can be delivered digitally through this motion. That'll be a primary component, but again, one of the beauties of what we have available is the ability to turn up and turn down capacity on demand as you need it. There'll be base levels of volume that every enterprise needs, but there's also going to be those peak moments. You don't have to buy to peak anymore. You can scale up, you can scale down. Our belief is because of that flexibility, that as we do more east-west volume with corporations and fix their networking problems, we actually start to take share in north-south. On Analyst Day, you talked about the P times Q scenarios. Yeah. I think your balanced view was like $1,400 per port. Is that where we are today? I'm just trying to understand. We haven't disclosed that. What we've said is, look, if you really think about the full use case of NaaS and the combination of north-south traffic and east-west traffic, we were talking about as much as $5,000 a port. We're obviously at the very early stages, but again, Alkira accelerates a lot of that. The answer is we don't know. I wish we did know. I wish I could give you better modeling information today. What I can share is that as we talk to more enterprises about the capabilities we will have once the deal closes in the second half of the year, they're very excited about the kind of problem-solving we can bring to their enterprise. What's the margin profile versus traditional telco margins on these services? It's much higher. If you think about traditional telco, one of the reasons why there's really been a lack of innovation in the space is everything is infrastructure based. Every service required its own infrastructure layer, its own set of ports, people driving around in trucks plugging in the next thing. Because that was so capital intensive and expensive, it really thwarted innovation. What we're bringing to market is software based. As Alkira is a software layer that will be able to talk to multiple ports. As we install more NaaS ports for connectivity into Lumen's network, those ports can receive more services. Those services get delivered digitally. No more truck rolls. No more infrastructure layers every time you come out with a new service. It's a very scalable model. What you will see over time, and we committed to this in Investor Day, I think Alkira only furthers that, is significant margin growth in the coming years, as well as much lower capital intensity. Do you see competition flowing to the NaaS market? Who's your competition? I feel like it could be like a Megaport, but they don't have the network, or the telcos, but they're doing Fiber to the Home and wireless. It's a good question, and it's one that is always difficult for us to answer because we don't mean this in any kind of an arrogant way. There isn't a pure play competitor. There is no other competitor that owns the network and has the software connectivity. Megaport is a good example of a provider that can bring a software layer to a company, but it's limited in a couple of ways. Their ability to scale is driven by how much network they have to buy to support the customer, because they don't own the network. The second piece of it is that they can't deliver services deep in the network. You can only deliver it at the highest levels of the network. Think about all the layers of the network. Our ability to digitally bring services over time to every layer of that network architecture is meaningfully different. It's really the marriage of the two that makes this incredibly powerful. Got it. Want to switch gears and talk about some finance stuff to the CFO of the company. The cost savings plan, for one. You went from $400 million of savings at year-end. I think the goal is $700 million by the end of this year- Yeah $1 billion by year-end 2027. Can you elaborate on the efforts, what you've done so far? I think you've flattened the network and the systems. What's in store over the next balance from there? It's really more of the same. Again, like a lot of others that have been in the historical space, the way these companies grew was through acquisition. There's an enormous amount of tech debt. There's things that were never addressed. The efficiency of any kind of M&A activity historically has really been limited to spans and layers. It's not about fixing the underlying problem, and we're dealing with that. We've just completed our ERP. We went from over 30 GLs to one. We went from multiple procurement systems to one. There's efficiency that comes with that. We still have work to do on things like CRM, as an example, that will allow us to unify order entry systems. That work will continue, but ultimately what we're doing is all of the digital products are being built in go-forward systems, one system. The old stuff, we're not going to try to lift and shift. It's just too much work for too little benefit. We're going to slowly retire those products, and as those products retire and convert to a digital product, the IT systems retire with it. A lot of the work is really around that. Again, just driving more efficiency. The remaining copper assets in consumer are being managed by the same operations team that manages enterprise. There's a lot of efficiency there. There's copper mining, there's a number of activities. It's really across the board. copper decommissioning, that's not part of the plan? It's part of the plan. It's part of the plan. Yeah. Any updates to sizing that savings in particular, or even the timing of that? No, we haven't. It's small today. Over time, I think it will take us well into the future and therefore isn't contemplated completely in the billion, because that decommissioning is going to take place over many, many years. Right. Well, interestingly, would LEO threats actually accelerate copper decommissioning and then fix wireless, too? I don't know. The reality is, I think on the copper side, barring something completely unforeseen, I think we're going to continue to see that business kind of attrit at the levels that it has been. It's just a long, slow decline. One of the things that we continue to look at is are there opportunities to more aggressively create that churn by converting customers to a digital product that we can deliver in a much more efficient way? We would love nothing more than to not have those customers attrit, but to cannibalize them ourselves and have them stay in the family and be able to consume other services from us longer term. As we go forward, we may do some things very intentionally to take some of that legacy business and convert it, but we'll obviously communicate that if and when we do that. Got it. I want to talk about the EBITDA cadence for the year. You easily beat EBITDA in the first quarter, but you had the help of the $32 million sort of one-time PCF help. 2Q is typically flattish, but then again, in the first quarter, you had a month of Fiber to the Home. Yeah. A lot of moving parts here. A lot of moving parts. Third quarter is typically higher spend, maintenance. Yeah OpEx. The fourth quarter is usually that large step up. You have cost savings coming through this whole entire. Yeah balance of the year. Just layer that on top of it. Just with all that said, help us with the general puts and takes as we think about the balance of the year. Yeah. In the first quarter, I think it would be a mistake to model the first quarter and forward by just seasonally adjusting it. Because between the one-time nature of some PCF revenue, as well as the consumer business, between those two things, you're talking between $60 million and $70 million of really kind of high margin revenue. We also had, and I'm not prepared to call this as an ongoing benefit, a little better performance in legacy than we thought. What we think is going on there is that as customers are buying more digital services, they're keeping the old for a little while to make sure everything's working the way they want it to. I mean, again, we'll take that. That's a nice tailwind, but I don't think that's a trend line change. We've also, we're seeing some higher medical costs like everybody else is. I think you need to adjust first quarter pretty heavily. Where we see it is we will inflect EBITDA this year. We said it wasn't going to be a significant inflection. Next year's where we start to see, I think, a more significant build in the EBITDA, and that's our guidance. We feel good about the guidance for the year. Got it. You did mention input costs are up, the cost of resin is up, optical equipment and DRAM within that is up, I think as much as 70%. Cost of fiber, we've seen reports up to 75%. Your deal with Corning is proving out excellent. Yeah. Could we see higher input costs or costs pressuring the operations at this point? I mean, yeah. Again, a lot of that we're able to pass to customers where it truly exists, and we'll do that where we can. I'm not as concerned about input costs, as we are really about making sure we drive the inflection in revenue. That's the key focus. How about labor? I mean, how much of is it insourced versus outsourced? A lot of the labor's outsourced, and we've got great partners. Two of them are publicly available. They've been very public about what they do, but it's really a west, central, and east. They kind of meet each other, where those boundaries touch, as we're building these networks for ourselves and for others. And they've been fantastic partners. They've really helped us keep things on time and on schedule. Just moving to the balance sheet, you've done a tremendous job on the balance sheet. You paid down the super priorities as promised. I think pro forma leverage is now below four times. Yeah. What's next? Are there any other balance sheet initiatives from here? The big one is, it's publicly, it's out there right now, there's a few things that we needed to do on our capital structure. The first is reduce the quantum of debt. That's happened. We've gone from $20 billion in debt to under $13 billion. The second is fix the maturity curve, right? 50% of our debt due in one year, a few years ago, 2027 is what it was. Now we've got a maturity curve that looks normal and boring, and quite frankly, we really don't have anything to do for the next number of years. The last thing was to simplify the structure and not have three borrowing entities. When we close Q2 with the debt exchange that we're doing right now, we will have one reported entity. Equity investors, credit investors, management, everybody's going to be looking at one balance sheet and one P&L. Beyond that, I think it's just more regular course of business. It's nice to be here. It's been a lot of hard work, but the focus is on growth. Got it. In the last minute we have, I just want to bring it all together. When I think about Lumen a few years from now, when the PCF dust settles, and then your revenue does inflect in 2029. When I look at your long-term targets from analyst day, I'm trying to put them together and extrapolate from what I saw. It seems like you'd be like a $500 million free cash flow company, and there's a lot of numbers here, but EBITDA maybe $3.6. There's some $400 million in non-cash EBITDA in those slides. $2 billion in CapEx, $700 million in interest. Is that directionally correct? Yeah, let me answer it this way. first of all, what we said at Investor Day was business revenue growth in 2028. 20 total. Total Lumen in 2029. Again, we'll see how much Alkira can pull that forward. We'll get back to the market on that after we close. What the model showed us at Investor Day was that, even if you strip out PCF, the investments we need to make are fully funded. We would hit, at the end of a five-year window, a leverage target of three and a quarter, and we'd have extra cash flow beyond that. We're in a very healthy spot where we are generating great free cash flow. EBITDA inflects this year. Now it's a question as to how fast we can inflect revenue, and it's happening. I mean, just look at the rates of decline on revenue. Obviously, just saying that out loud has a negative connotation, but look at those rates of decline vis-à-vis others in the space. We are way ahead because our business mix is already over half of that in growth buckets versus legacy declining buckets, and nobody else can say that. Right, the 51% mix is growth. Yeah. We're not looking back on that. Great. With that, we're out of time. Thanks, Chris. Great. Thanks a lot.

Speaker 2: All right. Let's get started. Good afternoon. Welcome to day one of our 54th annual TD Cowen TMT Conference. My name is Gregory Williams. I cover cable, wireless, telco, and fiber here at TD Cowen. Joining me this session is Chris Stansbury, CFO of Lumen Technologies. Chris, thanks for joining us. All right. all right Let's get started. let's get started Good afternoon. good afternoon Welcome to day one of our 54th annual TD Cowen TMT Conference. welcome to day one of our 54th annual td cowen tmt conference My name is Gregory Williams. my name is gregory williams I cover cable, wireless, telco, and fiber here at TD Cowen. i cover cable wireless telco and fiber here at td cowen Joining me this session is Chris Stansbury, CFO of Lumen Technologies. joining me this session is chris stansbury cfo of lumen technologies Chris, thanks for joining us. chris thanks for joining us

Speaker 1: Thank you. Great to be here. Thank you. thank you Great to be here. great to be here

Speaker 2: Lumen has a lot on this plate, including recently closing the AT&T Fiber to the Home deal. Lumen has a lot on this plate, including recently closing the AT&T Fiber to the Home deal. lumen has a lot on this plate including recently closing the at&t fiber to the home deal PCF execution now. PCF execution now. pcf execution now

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Ramping up digital revenue, the Alkira deal- Ramping up digital revenue, the Alkira deal- ramping up digital revenue the alkira deal-

Speaker 1: Yeah Yeah yeah

Speaker 2: cost savings initiatives. cost savings initiatives. cost savings initiatives

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Where are your priorities at the moment? Where are your priorities at the moment? where are your priorities at the moment

Speaker 1: Our priority is really on the inflection of the business. This year we inflect EBITDA. There's a lot of focus on that. The cost savings help drive that before revenue inflects. The revenue inflection is right behind that, and we're doing everything we can to try to accelerate that. As we said in our investor day, we expect revenue to inflect in 2028. I think at that time, Alkira was not contemplated in those economics, and so we think that will accelerate our revenue growth, but we've got to dimensionalize that. First we got to close the deal. It's really about inflecting the business. Our priority is really on the inflection of the business. our priority is really on the inflection of the business This year we inflect EBITDA. this year we inflect ebitda There's a lot of focus on that. there's a lot of focus on that The cost savings help drive that before revenue inflects. the cost savings help drive that before revenue inflects The revenue inflection is right behind that, and we're doing everything we can to try to accelerate that. the revenue inflection is right behind that and we're doing everything we can to try to accelerate that As we said in our investor day, we expect revenue to inflect in 2028. as we said in our investor day we expect revenue to inflect in 2028 I think at that time, Alkira was not contemplated in those economics, and so we think that will accelerate our revenue growth, but we've got to dimensionalize that. i think at that time alkira was not contemplated in those economics and so we think that will accelerate our revenue growth but we've got to dimensionalize that First we got to close the deal. first we got to close the deal It's really about inflecting the business. it's really about inflecting the business

Speaker 2: Okay. Looking forward to that. Part of inflecting the business is PCF demand, at least from a cash flow perspective. You now have $13 billion in PCF deals to date. As a leading indicator for fiber demand, we're tracking data center leasing because these data centers are eventually going to need photons, if you will. We saw another massive step-up last quarter, 9.4 gigawatts of leasing in the past quarter alone. Okay. okay Looking forward to that. looking forward to that Part of inflecting the business is PCF demand, at least from a cash flow perspective. part of inflecting the business is pcf demand at least from a cash flow perspective You now have $13 billion in PCF deals to date. you now have $13 billion in pcf deals to date As a leading indicator for fiber demand, we're tracking data center leasing because these data centers are eventually going to need photons, if you will. as a leading indicator for fiber demand we're tracking data center leasing because these data centers are eventually going to need photons if you will We saw another massive step-up last quarter, 9.4 gigawatts of leasing in the past quarter alone. we saw another massive step-up last quarter 9.4 gigawatts of leasing in the past quarter alone

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Should we, in turn see a similar step-up in PCF wins, or is your $13 billion in wins already capturing what we just saw in leasing-? Should we, in turn see a similar step-up in PCF wins, or is your $13 billion in wins already capturing what we just saw in leasing-? should we in turn see a similar step-up in pcf wins or is your $13 billion in wins already capturing what we just saw in leasing-

Speaker 1: So- So- so-

Speaker 2: data centers? data centers? data centers

Speaker 1: I think we have to think about them in different buckets. PCF is really largely consumption for the hyperscalers' internal use to train their AI models. There is more demand there. We see more demand. I think we will do more. It's really not the big growth opportunity for Lumen. The big growth opportunity when you think about DC growth is it goes back to what we've been talking about for a few years now, which is data is getting further and further away from the point of consumption. In a world of AI, that's a huge problem because as you have agents interacting with customers or running smart factories or whatever it is, those agents are looking for data in real time, trying to make decisions as fast as a human would make them. I think we have to think about them in different buckets. i think we have to think about them in different buckets PCF is really largely consumption for the hyperscalers' internal use to train their AI models. pcf is really largely consumption for the hyperscalers' internal use to train their ai models There is more demand there. there is more demand there We see more demand. we see more demand I think we will do more. i think we will do more It's really not the big growth opportunity for Lumen. it's really not the big growth opportunity for lumen The big growth opportunity when you think about DC growth is it goes back to what we've been talking about for a few years now, which is data is getting further and further away from the point of consumption. the big growth opportunity when you think about dc growth is it goes back to what we've been talking about for a few years now which is data is getting further and further away from the point of consumption In a world of AI, that's a huge problem because as you have agents interacting with customers or running smart factories or whatever it is, those agents are looking for data in real time, trying to make decisions as fast as a human would make them. in a world of ai that's a huge problem because as you have agents interacting with customers or running smart factories or whatever it is those agents are looking for data in real time trying to make decisions as fast as a human would make them If that data is across the country, you cannot have a data lag, or any kind of interruption in getting it there. What we see with the data center growth is really the growing demand in what a network engineer would refer to as east-west traffic. That's the movement of data from anywhere to anywhere, through a single pane of glass in a very programmable way. That's what we're building, and that's what Alkira brings. I think our enterprise focus, which is something our competitors have not had, it's really starting to show as an advantage as AI starts to move more into an inference phase. If that data is across the country, you cannot have a data lag, or any kind of interruption in getting it there. if that data is across the country you cannot have a data lag or any kind of interruption in getting it there What we see with the data center growth is really the growing demand in what a network engineer would refer to as east-west traffic. what we see with the data center growth is really the growing demand in what a network engineer would refer to as east-west traffic That's the movement of data from anywhere to anywhere, through a single pane of glass in a very programmable way. that's the movement of data from anywhere to anywhere through a single pane of glass in a very programmable way That's what we're building, and that's what Alkira brings. that's what we're building and that's what alkira brings I think our enterprise focus, which is something our competitors have not had, it's really starting to show as an advantage as AI starts to move more into an inference phase. i think our enterprise focus which is something our competitors have not had it's really starting to show as an advantage as ai starts to move more into an inference phase

Speaker 2: Right. PCF's good for the cash flow, but the programmable network is the future of Lumen. Right. right PCF's good for the cash flow, but the programmable network is the future of Lumen. pcf's good for the cash flow but the programmable network is the future of lumen

Speaker 1: Exactly. When you think about that the PCF deals have largely been focused on just the training of AI, right? Now we're moving into inference, and that's where the programmable network becomes more important. Exactly. exactly When you think about that the PCF deals have largely been focused on just the training of AI, right? when you think about that the pcf deals have largely been focused on just the training of ai right Now we're moving into inference, and that's where the programmable network becomes more important. now we're moving into inference and that's where the programmable network becomes more important

Speaker 2: When does inference really start to overcome training? When does inference really start to overcome training? when does inference really start to overcome training

Speaker 1: I think it's starting now. How fast it builds is hard to say. I think the latest thing as we all learn our way through AI is, I think the phraseology is tokenomics, right? You've got where does AI make sense and where does AI not make sense? I think the companies that ultimately will win the day are the companies that rewrite business processes, and use AI to fundamentally transform the way they go to market. It's not about taking a bad process and putting AI on top of it. It's about completely rewriting business rules and moving into the next phase of growth. I think it's starting now. i think it's starting now How fast it builds is hard to say. how fast it builds is hard to say I think the latest thing as we all learn our way through AI is, I think the phraseology is tokenomics, right? i think the latest thing as we all learn our way through ai is i think the phraseology is tokenomics right You've got where does AI make sense and where does AI not make sense? you've got where does ai make sense and where does ai not make sense I think the companies that ultimately will win the day are the companies that rewrite business processes, and use AI to fundamentally transform the way they go to market. i think the companies that ultimately will win the day are the companies that rewrite business processes and use ai to fundamentally transform the way they go to market It's not about taking a bad process and putting AI on top of it. it's not about taking a bad process and putting ai on top of it It's about completely rewriting business rules and moving into the next phase of growth. it's about completely rewriting business rules and moving into the next phase of growth

Speaker 2: While inference will be a huge opportunity, a higher margin perhaps, lower CapEx since a lot of the conduit's in the ground. On the flip side, a lot of inference will be done perhaps in the availability zones where there's other fiber providers. Do you see more competition? Do you see pricing risk because you'll be going up against? While inference will be a huge opportunity, a higher margin perhaps, lower CapEx since a lot of the conduit's in the ground. while inference will be a huge opportunity a higher margin perhaps lower capex since a lot of the conduit's in the ground On the flip side, a lot of inference will be done perhaps in the availability zones where there's other fiber providers. on the flip side a lot of inference will be done perhaps in the availability zones where there's other fiber providers Do you see more competition? do you see more competition Do you see pricing risk because you'll be going up against? do you see pricing risk because you'll be going up against

Speaker 1: I don't. Let's break it down a little bit. Historically, legacy telco, enterprise telco has been focused only on north-south traffic. North-south is defined as premise to somewhere. It can be another premise, it could be a DC, it could be a cloud. That market in the U.S. is about a $12 billion market, and its TAM is growing at 1%. Okay? The amount of data growing every year in that is much, much greater than that. What is that? That's price compression. That is the cloud that has hung over legacy telco's head forever, is you sell to the procurement department, and it's a race to the bottom on who's going to have the lowest price the next time that the contract comes up for renewal. East-west traffic is what changes all of that because it's about the movement of data between clouds, between DCs. I don't. i don't Let's break it down a little bit. let's break it down a little bit Historically, legacy telco, enterprise telco has been focused only on north-south traffic. historically legacy telco enterprise telco has been focused only on north-south traffic North-south is defined as premise to somewhere. north-south is defined as premise to somewhere It can be another premise, it could be a DC, it could be a cloud. it can be another premise it could be a dc it could be a cloud That market in the U.S. is about a $12 billion market, and its TAM is growing at 1%. that market in the u.s is about a $12 billion market and its tam is growing at 1% Okay? okay The amount of data growing every year in that is much, much greater than that. the amount of data growing every year in that is much much greater than that What is that? what is that That's price compression. that's price compression That is the cloud that has hung over legacy telco's head forever, is you sell to the procurement department, and it's a race to the bottom on who's going to have the lowest price the next time that the contract comes up for renewal. that is the cloud that has hung over legacy telco's head forever is you sell to the procurement department and it's a race to the bottom on who's going to have the lowest price the next time that the contract comes up for renewal East-west traffic is what changes all of that because it's about the movement of data between clouds, between DCs. east-west traffic is what changes all of that because it's about the movement of data between clouds between dcs It never touches the prem. That TAM is a global TAM because you don't need to own the network. If you think about what happens with the closure of the Alkira deal, we will be the first telco on the planet that has married north-south traffic and east-west traffic together. The point of intersection is Multi-Cloud Gateway. It will work on-net or off-net in a very programmable way, meaning through one pane of glass, I want to move data from here to here right now. You design your own network, you push go. It works. There is no one else who's doing that. That is what is absolutely critical in terms of giving enterprise the ability to reduce their total cost of ownership, because networking has only been thought of in a very static way. It never touches the prem. it never touches the prem That TAM is a global TAM because you don't need to own the network. If you think about what happens with the closure of the Alkira deal, we will be the first telco on the planet that has married north-south traffic and east-west traffic together. that tam is a global tam because you don't need to own the network. if you think about what happens with the closure of the alkira deal we will be the first telco on the planet that has married north-south traffic and east-west traffic together The point of intersection is Multi-Cloud Gateway. the point of intersection is multi-cloud gateway It will work on-net or off-net in a very programmable way, meaning through one pane of glass, I want to move data from here to here right now. it will work on-net or off-net in a very programmable way meaning through one pane of glass i want to move data from here to here right now You design your own network, you push go. you design your own network you push go It works. it works There is no one else who's doing that. there is no one else who's doing that That is what is absolutely critical in terms of giving enterprise the ability to reduce their total cost of ownership, because networking has only been thought of in a very static way. that is what is absolutely critical in terms of giving enterprise the ability to reduce their total cost of ownership because networking has only been thought of in a very static way This turns it into a very dynamic asset, and that's where we see we can win. This turns it into a very dynamic asset, and that's where we see we can win. this turns it into a very dynamic asset and that's where we see we can win

Speaker 2: With Alkira, since you brought it up, it's nice to see Lumen back on the acquisition path again. With Alkira, since you brought it up, it's nice to see Lumen back on the acquisition path again. with alkira since you brought it up it's nice to see lumen back on the acquisition path again

Speaker 1: Yeah. Yeah. yeah

Speaker 2: It's a healthy sign. You acquired them for $475 million. Can you just provide, you just already did a little bit, for real-world examples, like the enterprises have a pane of glass? It's a healthy sign. it's a healthy sign You acquired them for $475 million. you acquired them for $475 million Can you just provide, you just already did a little bit, for real-world examples, like the enterprises have a pane of glass? can you just provide you just already did a little bit for real-world examples like the enterprises have a pane of glass

Speaker 1: Yeah Yeah yeah

Speaker 2: in dynamic capacity. A lot of it could be off-net as well as on-net. in dynamic capacity. in dynamic capacity A lot of it could be off-net as well as on-net. a lot of it could be off-net as well as on-net

Speaker 1: Exactly. Exactly. exactly

Speaker 2: You have SLAs, so you'll depend on other carriers. Do they bring you on broadband here? You have SLAs, so you'll depend on other carriers. you have slas so you'll depend on other carriers Do they bring you on broadband here? do they bring you on broadband here

Speaker 1: If you think about a global solution, think about a large multinational bank. We could license this technology to a provider in Europe, to a provider in Asia with standards. Part of what the value is of marrying that incredibly powerful software layer with our network is the privacy of our network. A lot of what gets moved around for enterprise today is done over the public internet. More network hops, slower, less secure and that privacy element is critical from a security standpoint. If we can find partners who will provide that same level of privacy on their footprint where they have it, the orchestration layer is what Alkira brings, and that's ultimately what gets monetized. I think ultimately you will continue to see Lumen invest in fiber where it makes economic sense to invest in fiber. If you think about a global solution, think about a large multinational bank. if you think about a global solution think about a large multinational bank We could license this technology to a provider in Europe, to a provider in Asia with standards. we could license this technology to a provider in europe to a provider in asia with standards Part of what the value is of marrying that incredibly powerful software layer with our network is the privacy of our network. part of what the value is of marrying that incredibly powerful software layer with our network is the privacy of our network A lot of what gets moved around for enterprise today is done over the public internet. a lot of what gets moved around for enterprise today is done over the public internet More network hops, slower, less secure and that privacy element is critical from a security standpoint. more network hops slower less secure and that privacy element is critical from a security standpoint If we can find partners who will provide that same level of privacy on their footprint where they have it, the orchestration layer is what Alkira brings, and that's ultimately what gets monetized. if we can find partners who will provide that same level of privacy on their footprint where they have it the orchestration layer is what alkira brings and that's ultimately what gets monetized I think ultimately you will continue to see Lumen invest in fiber where it makes economic sense to invest in fiber. i think ultimately you will continue to see lumen invest in fiber where it makes economic sense to invest in fiber The reality is we don't have to lay one more foot of fiber to have a global footprint that allows the complete orchestration of AI networking needs. The reality is we don't have to lay one more foot of fiber to have a global footprint that allows the complete orchestration of AI networking needs. the reality is we don't have to lay one more foot of fiber to have a global footprint that allows the complete orchestration of ai networking needs

Speaker 2: The deal rationale is, I feel like you needed to do or build an orchestration platform anyway. The deal rationale is, I feel like you needed to do or build an orchestration platform anyway. the deal rationale is i feel like you needed to do or build an orchestration platform anyway

Speaker 1: Correct. Correct. correct

Speaker 2: Maybe this is going to cost you a little bit more, but you're ready day one. Is that the right way? Maybe this is going to cost you a little bit more, but you're ready day one. maybe this is going to cost you a little bit more but you're ready day one Is that the right way? is that the right way

Speaker 1: Yeah. Our estimates are we were going to spend, in the next couple of years, $100 million-$200 million to build a lot of what Alkira brings. It's ready effectively day one. Our technical team would say that this builds the entirety of the foundation that we need. It integrates very easily, then we can innovate from here. There's already a lot of innovation that has happened with things like direct cloud on-ramps, Multi-Cloud Gateways, the plumbing that's required to move these big workloads around. The orchestration layer now makes that very programmable through one pane of glass. Look, what do I mean by programmable? Because this is really important. The math that matters isn't the cost of a wave. That is no longer a point of conversation. What matters is the total cost of ownership. Yeah. yeah Our estimates are we were going to spend, in the next couple of years, $100 million-$200 million to build a lot of what Alkira brings. our estimates are we were going to spend in the next couple of years $100 million-$200 million to build a lot of what alkira brings It's ready effectively day one. it's ready effectively day one Our technical team would say that this builds the entirety of the foundation that we need. our technical team would say that this builds the entirety of the foundation that we need It integrates very easily, then we can innovate from here. it integrates very easily then we can innovate from here There's already a lot of innovation that has happened with things like direct cloud on-ramps, Multi-Cloud Gateways, the plumbing that's required to move these big workloads around. there's already a lot of innovation that has happened with things like direct cloud on-ramps multi-cloud gateways the plumbing that's required to move these big workloads around The orchestration layer now makes that very programmable through one pane of glass. the orchestration layer now makes that very programmable through one pane of glass Look, what do I mean by programmable? look what do i mean by programmable Because this is really important. because this is really important The math that matters isn't the cost of a wave. the math that matters isn't the cost of a wave That is no longer a point of conversation. that is no longer a point of conversation What matters is the total cost of ownership. what matters is the total cost of ownership I need to move petabytes of data from clouds into GPU clusters to be processed. The math that matters is the cost of a GPU cluster, $2,000 an hour. If I've got 10 gig connectivity and it's slow and it's clunky, or I've got 400 gig connectivity, it doesn't matter what that cost of that wave is. It matters how long it's going to take me to transport that data. I need to move petabytes of data from clouds into GPU clusters to be processed. i need to move petabytes of data from clouds into gpu clusters to be processed The math that matters is the cost of a GPU cluster, $2,000 an hour. the math that matters is the cost of a gpu cluster $2,000 an hour If I've got 10 gig connectivity and it's slow and it's clunky, or I've got 400 gig connectivity, it doesn't matter what that cost of that wave is. if i've got 10 gig connectivity and it's slow and it's clunky or i've got 400 gig connectivity it doesn't matter what that cost of that wave is It matters how long it's going to take me to transport that data. it matters how long it's going to take me to transport that data

Speaker 2: Yeah. Yeah. yeah

Speaker 1: We're talking hundreds of thousands of dollars in terms of cost differential for a petabyte of data over 400 gigs versus 10 gigs. We're talking hundreds of thousands of dollars in terms of cost differential for a petabyte of data over 400 gigs versus 10 gigs. we're talking hundreds of thousands of dollars in terms of cost differential for a petabyte of data over 400 gigs versus 10 gigs

Speaker 2: Right. The network cost is so small compared to the cost- Right. right The network cost is so small compared to the cost- the network cost is so small compared to the cost-

Speaker 1: It's so small. It's so small. it's so small

Speaker 2: of just flood. of just flood. of just flood

Speaker 1: When we talk about a programmable network, think about a situation where data is trying to get into a region of the country to be processed by GPU clusters, and it's reached a capacity limit. It's reached a capacity limit either because the GPUs are already running at capacity or because there's an energy cap. When we talk about a programmable network, think about a situation where data is trying to get into a region of the country to be processed by GPU clusters, and it's reached a capacity limit. when we talk about a programmable network think about a situation where data is trying to get into a region of the country to be processed by gpu clusters and it's reached a capacity limit It's reached a capacity limit either because the GPUs are already running at capacity or because there's an energy cap. it's reached a capacity limit either because the gpus are already running at capacity or because there's an energy cap The local providers are putting a cap on how many of those GPUs can be running. The local providers are putting a cap on how many of those GPUs can be running. the local providers are putting a cap on how many of those gpus can be running

Speaker 2: You route that traffic somewhere else. You route that traffic somewhere else. you route that traffic somewhere else

Speaker 1: What does a programmable network do? It automatically reroutes it where there's capacity. You don't have to have a telco go out and dig a trench and build connectivity from A to B. You literally log into a screen, you move the workloads, or the network does it for you. That's what we're talking about, that's the power that we unlock with Alkira and Lumen married together. What does a programmable network do? what does a programmable network do It automatically reroutes it where there's capacity. it automatically reroutes it where there's capacity You don't have to have a telco go out and dig a trench and build connectivity from A to B. you don't have to have a telco go out and dig a trench and build connectivity from a to b You literally log into a screen, you move the workloads, or the network does it for you. you literally log into a screen you move the workloads or the network does it for you That's what we're talking about, that's the power that we unlock with Alkira and Lumen married together. that's what we're talking about that's the power that we unlock with alkira and lumen married together

Speaker 2: Got it. The network topology and where data goes is a great segue to my next question, which is the edge. We recently got back from Connect (X) a few weeks ago, and the edge, or the topic of the edge was all the rage. It felt like the 5G edge all over again. Got it. got it The network topology and where data goes is a great segue to my next question, which is the edge. the network topology and where data goes is a great segue to my next question which is the edge We recently got back from Connect (X) a few weeks ago, and the edge, or the topic of the edge was all the rage. we recently got back from connect (x) a few weeks ago and the edge or the topic of the edge was all the rage It felt like the 5G edge all over again. it felt like the 5g edge all over again

Speaker 1: Yeah Yeah yeah

Speaker 2: eight years ago. eight years ago. eight years ago Lumen could stand to win big because I remember in the older days of Lumen, they had a lot of edge connections, a certain amount of milliseconds to every customer. Lumen could stand to win big because I remember in the older days of Lumen, they had a lot of edge connections, a certain amount of milliseconds to every customer. lumen could stand to win big because i remember in the older days of lumen they had a lot of edge connections a certain amount of milliseconds to every customer Investors were naturally skeptical. Why spend the extra $ millions just to shave off a couple milliseconds? Just curious to hear your thoughts. It seems like there's some validation, even yesterday when I Squared bought some of these smaller edge data centers from Cogent. Investors were naturally skeptical. investors were naturally skeptical Why spend the extra $ millions just to shave off a couple milliseconds? why spend the extra $ millions just to shave off a couple milliseconds Just curious to hear your thoughts. just curious to hear your thoughts It seems like there's some validation, even yesterday when I Squared bought some of these smaller edge data centers from Cogent. it seems like there's some validation even yesterday when i squared bought some of these smaller edge data centers from cogent Just curious to hear your thoughts of where the edge is going to go and where data gravity is going to go with AI? Just curious to hear your thoughts of where the edge is going to go and where data gravity is going to go with AI? just curious to hear your thoughts of where the edge is going to go and where data gravity is going to go with ai

Speaker 1: Edge will continue to grow because again, think about east-west traffic, where you've got data sitting in multiple cloud environments, and you need to do API development. You can pull that data down to the edge, manipulate what needs to be done, and send it back wherever it needs to go, the data, wherever it needs to go, rather than trying to pull it all onto a campus somewhere and do it yourself. It's that proximity matters, and latency really matters in a world of AI. I can't think of a better example than, say, a smart factory. How about a customer service agent where you are engaging with a voice agent or a chat agent? What happens if it takes 90 seconds for it to respond, right? Edge will continue to grow because again, think about east-west traffic, where you've got data sitting in multiple cloud environments, and you need to do API development. edge will continue to grow because again think about east-west traffic where you've got data sitting in multiple cloud environments and you need to do api development You can pull that data down to the edge, manipulate what needs to be done, and send it back wherever it needs to go, the data, wherever it needs to go, rather than trying to pull it all onto a campus somewhere and do it yourself. you can pull that data down to the edge manipulate what needs to be done and send it back wherever it needs to go the data wherever it needs to go rather than trying to pull it all onto a campus somewhere and do it yourself It's that proximity matters, and latency really matters in a world of AI. it's that proximity matters and latency really matters in a world of ai I can't think of a better example than, say, a smart factory. i can't think of a better example than say a smart factory How about a customer service agent where you are engaging with a voice agent or a chat agent? how about a customer service agent where you are engaging with a voice agent or a chat agent What happens if it takes 90 seconds for it to respond, right? what happens if it takes 90 seconds for it to respond right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Versus if it's responding instantaneously as it sources data from everywhere to answer your question. Versus if it's responding instantaneously as it sources data from everywhere to answer your question. versus if it's responding instantaneously as it sources data from everywhere to answer your question

Speaker 2: Yep. Yep. yep

Speaker 1: That matters. Latency is a huge issue for AI. It ultimately limits AI's capacity. We talk about our network being within 95% of U.S. businesses within under five milliseconds. That matters. that matters Latency is a huge issue for AI. latency is a huge issue for ai It ultimately limits AI's capacity. it ultimately limits ai's capacity We talk about our network being within 95% of U.S. businesses within under five milliseconds. we talk about our network being within 95% of u.s businesses within under five milliseconds That benchmark needs to continue to tighten. That benchmark needs to continue to tighten. that benchmark needs to continue to tighten

Speaker 2: I want to talk about the NaaS and digital revenue that you spoke of. Your digital revenue was, I think, $37 million. I want to talk about the NaaS and digital revenue that you spoke of. i want to talk about the naas and digital revenue that you spoke of Your digital revenue was, I think, $37 million. your digital revenue was i think $37 million Route to the $500 million-$600 million target. Route to the $500 million-$600 million target. route to the $500 million-$600 million target

Speaker 1: That was just in the quarter, yeah. That was just in the quarter, yeah. that was just in the quarter yeah

Speaker 2: Yep, just in the quarter alone. Yep, just in the quarter alone. yep just in the quarter alone

Speaker 1: Yeah. Yeah. yeah

Speaker 2: You're assuming a linear ramp in your projections, but you actually think it might be more of a J curve? You're assuming a linear ramp in your projections, but you actually think it might be more of a J curve? you're assuming a linear ramp in your projections but you actually think it might be more of a j curve

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Help us envision the scenario and rationale for this J-curve adoption. Is it one of these situations where a couple companies do a proof of concept and they see it, and then the adoption skyrockets? Can you help us time the J-curve? Any insight there would be helpful. Help us envision the scenario and rationale for this J-curve adoption. help us envision the scenario and rationale for this j-curve adoption Is it one of these situations where a couple companies do a proof of concept and they see it, and then the adoption skyrockets? is it one of these situations where a couple companies do a proof of concept and they see it and then the adoption skyrockets Can you help us time the J-curve? can you help us time the j-curve Any insight there would be helpful. any insight there would be helpful

Speaker 1: I would love to time the J-curve, it's a hard one to call. Look, we're developing a new category. I think the best reference point that we have is what happened in cloud. If you think about cloud adoption, when cloud companies came into existence, what did enterprise say? Well, I don't need that. I've got my on-prem data centers. What ended up happening is over time, people realized, hey, wait a minute. The variable nature of that capability, the ability to provision, compute, and storage on demand all of a sudden it exploded. That was the J-curve. We think that's ultimately what happens here. Alkira could be a J-curve moment. We'll see. I can tell you this, we're doing everything we can to make it a J-curve moment. I would love to time the J-curve, it's a hard one to call. i would love to time the j-curve it's a hard one to call Look, we're developing a new category. look we're developing a new category I think the best reference point that we have is what happened in cloud. i think the best reference point that we have is what happened in cloud If you think about cloud adoption, when cloud companies came into existence, what did enterprise say? if you think about cloud adoption when cloud companies came into existence what did enterprise say Well, I don't need that. well i don't need that I've got my on-prem data centers. i've got my on-prem data centers What ended up happening is over time, people realized, hey, wait a minute. what ended up happening is over time people realized hey wait a minute The variable nature of that capability, the ability to provision, compute, and storage on demand all of a sudden it exploded. the variable nature of that capability the ability to provision compute and storage on demand all of a sudden it exploded That was the J-curve. that was the j-curve We think that's ultimately what happens here. we think that's ultimately what happens here Alkira could be a J-curve moment. alkira could be a j-curve moment We'll see. we'll see I can tell you this, we're doing everything we can to make it a J-curve moment. i can tell you this we're doing everything we can to make it a j-curve moment We've got to obviously close the deal, but we're already thinking about the types of engagements that we can have with customers. We obviously can't do much until the deal closes. At that point, we will have a target of companies in various industries that we want to go into and use as use cases that we can then share with other customers. The selling motion is very different, we're changing the inside of enterprise as we go and sell these solutions. Again, today, you sell to procurement departments and network engineers. What do procurement departments and network engineers not want to happen? They don't want you to move their cheese. They don't want you to say, "You know what? We don't need you guys doing this anymore. We don't need you to figure out how to cobble together a network solution to move data everywhere. We've got to obviously close the deal, but we're already thinking about the types of engagements that we can have with customers. we've got to obviously close the deal but we're already thinking about the types of engagements that we can have with customers We obviously can't do much until the deal closes. we obviously can't do much until the deal closes At that point, we will have a target of companies in various industries that we want to go into and use as use cases that we can then share with other customers. at that point we will have a target of companies in various industries that we want to go into and use as use cases that we can then share with other customers The selling motion is very different, we're changing the inside of enterprise as we go and sell these solutions. the selling motion is very different we're changing the inside of enterprise as we go and sell these solutions Again, today, you sell to procurement departments and network engineers. again today you sell to procurement departments and network engineers What do procurement departments and network engineers not want to happen? what do procurement departments and network engineers not want to happen They don't want you to move their cheese. they don't want you to move their cheese They don't want you to say, "You know what? they don't want you to say "you know what We don't need you guys doing this anymore. we don't need you guys doing this anymore We don't need you to figure out how to cobble together a network solution to move data everywhere. we don't need you to figure out how to cobble together a network solution to move data everywhere We don't need you to figure out if you can get a lower cost on a wave." It's a very different selling process. We don't need you to figure out if you can get a lower cost on a wave." It's a very different selling process. we don't need you to figure out if you can get a lower cost on a wave." it's a very different selling process

Speaker 2: Yeah, you have to evangelize it. Yeah, you have to evangelize it. yeah you have to evangelize it

Speaker 1: It's C-suite driven. When we talk to CTOs about the capabilities that we're bringing, they're like, "Wait, what? You can do this when. This changes everything." They will rewire the inside of their organizations to adapt to the capabilities that we can bring. The way the network works today, the network architecture never envisioned AI. The way companies access cloud data today, through neutral third-party facilities with cross-connect fees and slower speeds, that doesn't serve AI, and it's expensive. It's slower, it's expensive, it's less secure. Our belief is we come with a solution that addresses all of that, and they start to rewrite the way they buy and manage network services inside of their company. It's very much going to be a C-suite sale. It's C-suite driven. it's c-suite driven When we talk to CTOs about the capabilities that we're bringing, they're like, "Wait, what? when we talk to ctos about the capabilities that we're bringing they're like "wait what You can do this when. you can do this when This changes everything." They will rewire the inside of their organizations to adapt to the capabilities that we can bring. this changes everything." they will rewire the inside of their organizations to adapt to the capabilities that we can bring The way the network works today, the network architecture never envisioned AI. the way the network works today the network architecture never envisioned ai The way companies access cloud data today, through neutral third-party facilities with cross-connect fees and slower speeds, that doesn't serve AI, and it's expensive. the way companies access cloud data today through neutral third-party facilities with cross-connect fees and slower speeds that doesn't serve ai and it's expensive It's slower, it's expensive, it's less secure. it's slower it's expensive it's less secure Our belief is we come with a solution that addresses all of that, and they start to rewrite the way they buy and manage network services inside of their company. our belief is we come with a solution that addresses all of that and they start to rewrite the way they buy and manage network services inside of their company It's very much going to be a C-suite sale. it's very much going to be a c-suite sale

Speaker 2: Right. You mentioned cross-connects are expensive on the on-ramps and the meet room. Right. right You mentioned cross-connects are expensive on the on-ramps and the meet room. you mentioned cross-connects are expensive on the on-ramps and the meet room Speaking of expensive or not expensive, how are you envisioning pricing the NaaS services then? Speaking of expensive or not expensive, how are you envisioning pricing the NaaS services then? speaking of expensive or not expensive how are you envisioning pricing the naas services then

Speaker 1: I think it's going to look very much like the way cloud prices. You will, depending on what your commit level is, you'll get varying degrees of price discount. I think it's going to look very much like the way cloud prices. i think it's going to look very much like the way cloud prices You will, depending on what your commit level is, you'll get varying degrees of price discount. you will depending on what your commit level is you'll get varying degrees of price discount

Speaker 2: Based on data, like per volume. Based on data, like per volume. based on data like per volume

Speaker 1: Based on volumes. Based on volumes. based on volumes

Speaker 2: volume to your structure. volume to your structure. volume to your structure

Speaker 1: Exactly. By the way, that's not just connectivity because there's other services that we'll continue to bring to the market that can be delivered digitally through this motion. That'll be a primary component, but again, one of the beauties of what we have available is the ability to turn up and turn down capacity on demand as you need it. There'll be base levels of volume that every enterprise needs, but there's also going to be those peak moments. You don't have to buy to peak anymore. You can scale up, you can scale down. Our belief is because of that flexibility, that as we do more east-west volume with corporations and fix their networking problems, we actually start to take share in north-south. Exactly. exactly By the way, that's not just connectivity because there's other services that we'll continue to bring to the market that can be delivered digitally through this motion. by the way that's not just connectivity because there's other services that we'll continue to bring to the market that can be delivered digitally through this motion That'll be a primary component, but again, one of the beauties of what we have available is the ability to turn up and turn down capacity on demand as you need it. that'll be a primary component but again one of the beauties of what we have available is the ability to turn up and turn down capacity on demand as you need it There'll be base levels of volume that every enterprise needs, but there's also going to be those peak moments. there'll be base levels of volume that every enterprise needs but there's also going to be those peak moments You don't have to buy to peak anymore. you don't have to buy to peak anymore You can scale up, you can scale down. you can scale up you can scale down Our belief is because of that flexibility, that as we do more east-west volume with corporations and fix their networking problems, we actually start to take share in north-south. our belief is because of that flexibility that as we do more east-west volume with corporations and fix their networking problems we actually start to take share in north-south

Speaker 2: On Analyst Day, you talked about the P times Q scenarios. On Analyst Day, you talked about the P times Q scenarios. on analyst day you talked about the p times q scenarios

Speaker 1: Yeah. Yeah. yeah

Speaker 2: I think your balanced view was like $1,400 per port. Is that where we are today? I'm just trying to understand. I think your balanced view was like $1,400 per port. i think your balanced view was like $1,400 per port Is that where we are today? is that where we are today I'm just trying to understand. i'm just trying to understand

Speaker 1: We haven't disclosed that. What we've said is, look, if you really think about the full use case of NaaS and the combination of north-south traffic and east-west traffic, we were talking about as much as $5,000 a port. We're obviously at the very early stages, but again, Alkira accelerates a lot of that. The answer is we don't know. I wish we did know. I wish I could give you better modeling information today. What I can share is that as we talk to more enterprises about the capabilities we will have once the deal closes in the second half of the year, they're very excited about the kind of problem-solving we can bring to their enterprise. We haven't disclosed that. we haven't disclosed that What we've said is, look, if you really think about the full use case of NaaS and the combination of north-south traffic and east-west traffic, we were talking about as much as $5,000 a port. what we've said is look if you really think about the full use case of naas and the combination of north-south traffic and east-west traffic we were talking about as much as $5,000 a port We're obviously at the very early stages, but again, Alkira accelerates a lot of that. we're obviously at the very early stages but again alkira accelerates a lot of that The answer is we don't know. the answer is we don't know I wish we did know. i wish we did know I wish I could give you better modeling information today. i wish i could give you better modeling information today What I can share is that as we talk to more enterprises about the capabilities we will have once the deal closes in the second half of the year, they're very excited about the kind of problem-solving we can bring to their enterprise. what i can share is that as we talk to more enterprises about the capabilities we will have once the deal closes in the second half of the year they're very excited about the kind of problem-solving we can bring to their enterprise

Speaker 2: What's the margin profile versus traditional telco margins on these services? What's the margin profile versus traditional telco margins on these services? what's the margin profile versus traditional telco margins on these services

Speaker 1: It's much higher. If you think about traditional telco, one of the reasons why there's really been a lack of innovation in the space is everything is infrastructure based. Every service required its own infrastructure layer, its own set of ports, people driving around in trucks plugging in the next thing. Because that was so capital intensive and expensive, it really thwarted innovation. What we're bringing to market is software based. As Alkira is a software layer that will be able to talk to multiple ports. As we install more NaaS ports for connectivity into Lumen's network, those ports can receive more services. Those services get delivered digitally. No more truck rolls. No more infrastructure layers every time you come out with a new service. It's a very scalable model. It's much higher. it's much higher If you think about traditional telco, one of the reasons why there's really been a lack of innovation in the space is everything is infrastructure based. if you think about traditional telco one of the reasons why there's really been a lack of innovation in the space is everything is infrastructure based Every service required its own infrastructure layer, its own set of ports, people driving around in trucks plugging in the next thing. every service required its own infrastructure layer its own set of ports people driving around in trucks plugging in the next thing Because that was so capital intensive and expensive, it really thwarted innovation. because that was so capital intensive and expensive it really thwarted innovation What we're bringing to market is software based. what we're bringing to market is software based As Alkira is a software layer that will be able to talk to multiple ports. as alkira is a software layer that will be able to talk to multiple ports As we install more NaaS ports for connectivity into Lumen's network, those ports can receive more services. as we install more naas ports for connectivity into lumen's network those ports can receive more services Those services get delivered digitally. those services get delivered digitally No more truck rolls. no more truck rolls No more infrastructure layers every time you come out with a new service. no more infrastructure layers every time you come out with a new service It's a very scalable model. it's a very scalable model What you will see over time, and we committed to this in Investor Day, I think Alkira only furthers that, is significant margin growth in the coming years, as well as much lower capital intensity. What you will see over time, and we committed to this in Investor Day, I think Alkira only furthers that, is significant margin growth in the coming years, as well as much lower capital intensity. what you will see over time and we committed to this in investor day i think alkira only furthers that is significant margin growth in the coming years as well as much lower capital intensity

Speaker 2: Do you see competition flowing to the NaaS market? Who's your competition? I feel like it could be like a Megaport, but they don't have the network, or the telcos, but they're doing Fiber to the Home and wireless. Do you see competition flowing to the NaaS market? do you see competition flowing to the naas market Who's your competition? who's your competition I feel like it could be like a Megaport, but they don't have the network, or the telcos, but they're doing Fiber to the Home and wireless. i feel like it could be like a megaport but they don't have the network or the telcos but they're doing fiber to the home and wireless

Speaker 1: It's a good question, and it's one that is always difficult for us to answer because we don't mean this in any kind of an arrogant way. There isn't a pure play competitor. There is no other competitor that owns the network and has the software connectivity. Megaport is a good example of a provider that can bring a software layer to a company, but it's limited in a couple of ways. Their ability to scale is driven by how much network they have to buy to support the customer, because they don't own the network. The second piece of it is that they can't deliver services deep in the network. You can only deliver it at the highest levels of the network. Think about all the layers of the network. It's a good question, and it's one that is always difficult for us to answer because we don't mean this in any kind of an arrogant way. it's a good question and it's one that is always difficult for us to answer because we don't mean this in any kind of an arrogant way There isn't a pure play competitor. there isn't a pure play competitor There is no other competitor that owns the network and has the software connectivity. there is no other competitor that owns the network and has the software connectivity Megaport is a good example of a provider that can bring a software layer to a company, but it's limited in a couple of ways. megaport is a good example of a provider that can bring a software layer to a company but it's limited in a couple of ways Their ability to scale is driven by how much network they have to buy to support the customer, because they don't own the network. their ability to scale is driven by how much network they have to buy to support the customer because they don't own the network The second piece of it is that they can't deliver services deep in the network. the second piece of it is that they can't deliver services deep in the network You can only deliver it at the highest levels of the network. you can only deliver it at the highest levels of the network Think about all the layers of the network. think about all the layers of the network Our ability to digitally bring services over time to every layer of that network architecture is meaningfully different. It's really the marriage of the two that makes this incredibly powerful. Our ability to digitally bring services over time to every layer of that network architecture is meaningfully different. our ability to digitally bring services over time to every layer of that network architecture is meaningfully different It's really the marriage of the two that makes this incredibly powerful. it's really the marriage of the two that makes this incredibly powerful

Speaker 2: Got it. Want to switch gears and talk about some finance stuff to the CFO of the company. The cost savings plan, for one. You went from $400 million of savings at year-end. I think the goal is $700 million by the end of this year- Got it. got it Want to switch gears and talk about some finance stuff to the CFO of the company. want to switch gears and talk about some finance stuff to the cfo of the company The cost savings plan, for one. the cost savings plan for one You went from $400 million of savings at year-end. you went from $400 million of savings at year-end I think the goal is $700 million by the end of this year- i think the goal is $700 million by the end of this year-

Speaker 1: Yeah Yeah yeah

Speaker 2: $1 billion by year-end 2027. Can you elaborate on the efforts, what you've done so far? I think you've flattened the network and the systems. What's in store over the next balance from there? $1 billion by year-end 2027. $1 billion by year-end 2027 Can you elaborate on the efforts, what you've done so far? can you elaborate on the efforts what you've done so far I think you've flattened the network and the systems. i think you've flattened the network and the systems What's in store over the next balance from there? what's in store over the next balance from there

Speaker 1: It's really more of the same. Again, like a lot of others that have been in the historical space, the way these companies grew was through acquisition. There's an enormous amount of tech debt. There's things that were never addressed. The efficiency of any kind of M&A activity historically has really been limited to spans and layers. It's not about fixing the underlying problem, and we're dealing with that. We've just completed our ERP. We went from over 30 GLs to one. We went from multiple procurement systems to one. There's efficiency that comes with that. We still have work to do on things like CRM, as an example, that will allow us to unify order entry systems. That work will continue, but ultimately what we're doing is all of the digital products are being built in go-forward systems, one system. It's really more of the same. it's really more of the same Again, like a lot of others that have been in the historical space, the way these companies grew was through acquisition. again like a lot of others that have been in the historical space the way these companies grew was through acquisition There's an enormous amount of tech debt. there's an enormous amount of tech debt There's things that were never addressed. there's things that were never addressed The efficiency of any kind of M&A activity historically has really been limited to spans and layers. the efficiency of any kind of m&a activity historically has really been limited to spans and layers It's not about fixing the underlying problem, and we're dealing with that. it's not about fixing the underlying problem and we're dealing with that We've just completed our ERP. we've just completed our erp We went from over 30 GLs to one. we went from over 30 gls to one We went from multiple procurement systems to one. we went from multiple procurement systems to one There's efficiency that comes with that. there's efficiency that comes with that We still have work to do on things like CRM, as an example, that will allow us to unify order entry systems. we still have work to do on things like crm as an example that will allow us to unify order entry systems That work will continue, but ultimately what we're doing is all of the digital products are being built in go-forward systems, one system. that work will continue but ultimately what we're doing is all of the digital products are being built in go-forward systems one system The old stuff, we're not going to try to lift and shift. It's just too much work for too little benefit. We're going to slowly retire those products, and as those products retire and convert to a digital product, the IT systems retire with it. A lot of the work is really around that. Again, just driving more efficiency. The remaining copper assets in consumer are being managed by the same operations team that manages enterprise. There's a lot of efficiency there. There's copper mining, there's a number of activities. It's really across the board. The old stuff, we're not going to try to lift and shift. the old stuff we're not going to try to lift and shift It's just too much work for too little benefit. it's just too much work for too little benefit We're going to slowly retire those products, and as those products retire and convert to a digital product, the IT systems retire with it. we're going to slowly retire those products and as those products retire and convert to a digital product the it systems retire with it A lot of the work is really around that. a lot of the work is really around that Again, just driving more efficiency. again just driving more efficiency The remaining copper assets in consumer are being managed by the same operations team that manages enterprise. the remaining copper assets in consumer are being managed by the same operations team that manages enterprise There's a lot of efficiency there. there's a lot of efficiency there There's copper mining, there's a number of activities. there's copper mining there's a number of activities It's really across the board. it's really across the board

Speaker 2: copper decommissioning, that's not part of the plan? copper decommissioning, that's not part of the plan? copper decommissioning that's not part of the plan

Speaker 1: It's part of the plan. It's part of the plan. it's part of the plan

Speaker 2: It's part of the plan. It's part of the plan. it's part of the plan

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Any updates to sizing that savings in particular, or even the timing of that? Any updates to sizing that savings in particular, or even the timing of that? any updates to sizing that savings in particular or even the timing of that

Speaker 1: No, we haven't. It's small today. Over time, I think it will take us well into the future and therefore isn't contemplated completely in the billion, because that decommissioning is going to take place over many, many years. No, we haven't. no we haven't It's small today. it's small today Over time, I think it will take us well into the future and therefore isn't contemplated completely in the billion, because that decommissioning is going to take place over many, many years. over time i think it will take us well into the future and therefore isn't contemplated completely in the billion because that decommissioning is going to take place over many many years

Speaker 2: Right. Well, interestingly, would LEO threats actually accelerate copper decommissioning and then fix wireless, too? Right. right Well, interestingly, would LEO threats actually accelerate copper decommissioning and then fix wireless, too? well interestingly would leo threats actually accelerate copper decommissioning and then fix wireless too

Speaker 1: I don't know. The reality is, I think on the copper side, barring something completely unforeseen, I think we're going to continue to see that business kind of attrit at the levels that it has been. It's just a long, slow decline. One of the things that we continue to look at is are there opportunities to more aggressively create that churn by converting customers to a digital product that we can deliver in a much more efficient way? We would love nothing more than to not have those customers attrit, but to cannibalize them ourselves and have them stay in the family and be able to consume other services from us longer term. As we go forward, we may do some things very intentionally to take some of that legacy business and convert it, but we'll obviously communicate that if and when we do that. I don't know. i don't know The reality is, I think on the copper side, barring something completely unforeseen, I think we're going to continue to see that business kind of attrit at the levels that it has been. the reality is i think on the copper side barring something completely unforeseen i think we're going to continue to see that business kind of attrit at the levels that it has been It's just a long, slow decline. it's just a long slow decline One of the things that we continue to look at is are there opportunities to more aggressively create that churn by converting customers to a digital product that we can deliver in a much more efficient way? one of the things that we continue to look at is are there opportunities to more aggressively create that churn by converting customers to a digital product that we can deliver in a much more efficient way We would love nothing more than to not have those customers attrit, but to cannibalize them ourselves and have them stay in the family and be able to consume other services from us longer term. we would love nothing more than to not have those customers attrit but to cannibalize them ourselves and have them stay in the family and be able to consume other services from us longer term As we go forward, we may do some things very intentionally to take some of that legacy business and convert it, but we'll obviously communicate that if and when we do that. as we go forward we may do some things very intentionally to take some of that legacy business and convert it but we'll obviously communicate that if and when we do that

Speaker 2: Got it. I want to talk about the EBITDA cadence for the year. You easily beat EBITDA in the first quarter, but you had the help of the $32 million sort of one-time PCF help. 2Q is typically flattish, but then again, in the first quarter, you had a month of Fiber to the Home. Got it. got it I want to talk about the EBITDA cadence for the year. i want to talk about the ebitda cadence for the year You easily beat EBITDA in the first quarter, but you had the help of the $32 million sort of one-time PCF help. 2Q is typically flattish, but then again, in the first quarter, you had a month of Fiber to the Home. you easily beat ebitda in the first quarter but you had the help of the $32 million sort of one-time pcf help 2q is typically flattish but then again in the first quarter you had a month of fiber to the home

Speaker 1: Yeah. Yeah. yeah

Speaker 2: A lot of moving parts here. A lot of moving parts here. a lot of moving parts here

Speaker 1: A lot of moving parts. A lot of moving parts. a lot of moving parts

Speaker 2: Third quarter is typically higher spend, maintenance. Third quarter is typically higher spend, maintenance. third quarter is typically higher spend maintenance

Speaker 1: Yeah Yeah yeah

Speaker 2: OpEx. The fourth quarter is usually that large step up. You have cost savings coming through this whole entire. OpEx. opex The fourth quarter is usually that large step up. the fourth quarter is usually that large step up You have cost savings coming through this whole entire. you have cost savings coming through this whole entire

Speaker 1: Yeah Yeah yeah

Speaker 2: balance of the year. Just layer that on top of it. Just with all that said, help us with the general puts and takes as we think about the balance of the year. balance of the year. balance of the year Just layer that on top of it. just layer that on top of it Just with all that said, help us with the general puts and takes as we think about the balance of the year. just with all that said help us with the general puts and takes as we think about the balance of the year

Speaker 1: Yeah. In the first quarter, I think it would be a mistake to model the first quarter and forward by just seasonally adjusting it. Because between the one-time nature of some PCF revenue, as well as the consumer business, between those two things, you're talking between $60 million and $70 million of really kind of high margin revenue. We also had, and I'm not prepared to call this as an ongoing benefit, a little better performance in legacy than we thought. What we think is going on there is that as customers are buying more digital services, they're keeping the old for a little while to make sure everything's working the way they want it to. I mean, again, we'll take that. That's a nice tailwind, but I don't think that's a trend line change. We've also, we're seeing some higher medical costs like everybody else is. Yeah. yeah In the first quarter, I think it would be a mistake to model the first quarter and forward by just seasonally adjusting it. in the first quarter i think it would be a mistake to model the first quarter and forward by just seasonally adjusting it Because between the one-time nature of some PCF revenue, as well as the consumer business, between those two things, you're talking between $60 million and $70 million of really kind of high margin revenue. because between the one-time nature of some pcf revenue as well as the consumer business between those two things you're talking between $60 million and $70 million of really kind of high margin revenue We also had, and I'm not prepared to call this as an ongoing benefit, a little better performance in legacy than we thought. we also had and i'm not prepared to call this as an ongoing benefit a little better performance in legacy than we thought What we think is going on there is that as customers are buying more digital services, they're keeping the old for a little while to make sure everything's working the way they want it to. what we think is going on there is that as customers are buying more digital services they're keeping the old for a little while to make sure everything's working the way they want it to I mean, again, we'll take that. i mean again we'll take that That's a nice tailwind, but I don't think that's a trend line change. that's a nice tailwind but i don't think that's a trend line change We've also, we're seeing some higher medical costs like everybody else is. we've also we're seeing some higher medical costs like everybody else is I think you need to adjust first quarter pretty heavily. Where we see it is we will inflect EBITDA this year. We said it wasn't going to be a significant inflection. Next year's where we start to see, I think, a more significant build in the EBITDA, and that's our guidance. We feel good about the guidance for the year. I think you need to adjust first quarter pretty heavily. i think you need to adjust first quarter pretty heavily Where we see it is we will inflect EBITDA this year. where we see it is we will inflect ebitda this year We said it wasn't going to be a significant inflection. we said it wasn't going to be a significant inflection Next year's where we start to see, I think, a more significant build in the EBITDA, and that's our guidance. next year's where we start to see i think a more significant build in the ebitda and that's our guidance We feel good about the guidance for the year. we feel good about the guidance for the year

Speaker 2: Got it. You did mention input costs are up, the cost of resin is up, optical equipment and DRAM within that is up, I think as much as 70%. Cost of fiber, we've seen reports up to 75%. Your deal with Corning is proving out excellent. Got it. got it You did mention input costs are up, the cost of resin is up, optical equipment and DRAM within that is up, I think as much as 70%. you did mention input costs are up the cost of resin is up optical equipment and dram within that is up i think as much as 70% Cost of fiber, we've seen reports up to 75%. cost of fiber we've seen reports up to 75% Your deal with Corning is proving out excellent. your deal with corning is proving out excellent

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Could we see higher input costs or costs pressuring the operations at this point? Could we see higher input costs or costs pressuring the operations at this point? could we see higher input costs or costs pressuring the operations at this point

Speaker 1: I mean, yeah. Again, a lot of that we're able to pass to customers where it truly exists, and we'll do that where we can. I'm not as concerned about input costs, as we are really about making sure we drive the inflection in revenue. That's the key focus. I mean, yeah. i mean yeah Again, a lot of that we're able to pass to customers where it truly exists, and we'll do that where we can. again a lot of that we're able to pass to customers where it truly exists and we'll do that where we can I'm not as concerned about input costs, as we are really about making sure we drive the inflection in revenue. i'm not as concerned about input costs as we are really about making sure we drive the inflection in revenue That's the key focus. that's the key focus

Speaker 2: How about labor? I mean, how much of is it insourced versus outsourced? How about labor? how about labor I mean, how much of is it insourced versus outsourced? i mean how much of is it insourced versus outsourced

Speaker 1: A lot of the labor's outsourced, and we've got great partners. Two of them are publicly available. They've been very public about what they do, but it's really a west, central, and east. They kind of meet each other, where those boundaries touch, as we're building these networks for ourselves and for others. And they've been fantastic partners. They've really helped us keep things on time and on schedule. A lot of the labor's outsourced, and we've got great partners. a lot of the labor's outsourced and we've got great partners Two of them are publicly available. two of them are publicly available They've been very public about what they do, but it's really a west, central, and east. they've been very public about what they do but it's really a west central and east They kind of meet each other, where those boundaries touch, as we're building these networks for ourselves and for others. they kind of meet each other where those boundaries touch as we're building these networks for ourselves and for others And they've been fantastic partners. and they've been fantastic partners They've really helped us keep things on time and on schedule. they've really helped us keep things on time and on schedule

Speaker 2: Just moving to the balance sheet, you've done a tremendous job on the balance sheet. You paid down the super priorities as promised. I think pro forma leverage is now below four times. Just moving to the balance sheet, you've done a tremendous job on the balance sheet. just moving to the balance sheet you've done a tremendous job on the balance sheet You paid down the super priorities as promised. you paid down the super priorities as promised I think pro forma leverage is now below four times. i think pro forma leverage is now below four times

Speaker 1: Yeah. Yeah. yeah

Speaker 2: What's next? Are there any other balance sheet initiatives from here? What's next? what's next Are there any other balance sheet initiatives from here? are there any other balance sheet initiatives from here

Speaker 1: The big one is, it's publicly, it's out there right now, there's a few things that we needed to do on our capital structure. The first is reduce the quantum of debt. That's happened. We've gone from $20 billion in debt to under $13 billion. The second is fix the maturity curve, right? 50% of our debt due in one year, a few years ago, 2027 is what it was. Now we've got a maturity curve that looks normal and boring, and quite frankly, we really don't have anything to do for the next number of years. The last thing was to simplify the structure and not have three borrowing entities. When we close Q2 with the debt exchange that we're doing right now, we will have one reported entity. Equity investors, credit investors, management, everybody's going to be looking at one balance sheet and one P&L. The big one is, it's publicly, it's out there right now, there's a few things that we needed to do on our capital structure. the big one is it's publicly it's out there right now there's a few things that we needed to do on our capital structure The first is reduce the quantum of debt. the first is reduce the quantum of debt That's happened. that's happened We've gone from $20 billion in debt to under $13 billion. we've gone from $20 billion in debt to under $13 billion The second is fix the maturity curve, right? 50% of our debt due in one year, a few years ago, 2027 is what it was. the second is fix the maturity curve right 50% of our debt due in one year a few years ago 2027 is what it was Now we've got a maturity curve that looks normal and boring, and quite frankly, we really don't have anything to do for the next number of years. now we've got a maturity curve that looks normal and boring and quite frankly we really don't have anything to do for the next number of years The last thing was to simplify the structure and not have three borrowing entities. the last thing was to simplify the structure and not have three borrowing entities When we close Q2 with the debt exchange that we're doing right now, we will have one reported entity. when we close q2 with the debt exchange that we're doing right now we will have one reported entity Equity investors, credit investors, management, everybody's going to be looking at one balance sheet and one P&L. equity investors credit investors management everybody's going to be looking at one balance sheet and one p&l Beyond that, I think it's just more regular course of business. It's nice to be here. It's been a lot of hard work, but the focus is on growth. Beyond that, I think it's just more regular course of business. beyond that i think it's just more regular course of business It's nice to be here. it's nice to be here It's been a lot of hard work, but the focus is on growth. it's been a lot of hard work but the focus is on growth

Speaker 2: Got it. In the last minute we have, I just want to bring it all together. When I think about Lumen a few years from now, when the PCF dust settles, and then your revenue does inflect in 2029. When I look at your long-term targets from analyst day, I'm trying to put them together and extrapolate from what I saw. It seems like you'd be like a $500 million free cash flow company, and there's a lot of numbers here, but EBITDA maybe $3.6. There's some $400 million in non-cash EBITDA in those slides. $2 billion in CapEx, $700 million in interest. Is that directionally correct? Got it. got it In the last minute we have, I just want to bring it all together. in the last minute we have i just want to bring it all together When I think about Lumen a few years from now, when the PCF dust settles, and then your revenue does inflect in 2029. when i think about lumen a few years from now when the pcf dust settles and then your revenue does inflect in 2029 When I look at your long-term targets from analyst day, I'm trying to put them together and extrapolate from what I saw. when i look at your long-term targets from analyst day i'm trying to put them together and extrapolate from what i saw It seems like you'd be like a $500 million free cash flow company, and there's a lot of numbers here, but EBITDA maybe $3.6. it seems like you'd be like a $500 million free cash flow company and there's a lot of numbers here but ebitda maybe $3.6 There's some $400 million in non-cash EBITDA in those slides. $2 billion in CapEx, $700 million in interest. there's some $400 million in non-cash ebitda in those slides $2 billion in capex $700 million in interest Is that directionally correct? is that directionally correct

Speaker 1: Yeah, let me answer it this way. first of all, what we said at Investor Day was business revenue growth in 2028. Yeah, let me answer it this way. first of all, what we said at Investor Day was business revenue growth in 2028. yeah let me answer it this way first of all what we said at investor day was business revenue growth in 2028

Speaker 2: 20 total. 20 total. 20 total

Speaker 1: Total Lumen in 2029. Again, we'll see how much Alkira can pull that forward. We'll get back to the market on that after we close. Total Lumen in 2029. total lumen in 2029 Again, we'll see how much Alkira can pull that forward. again we'll see how much alkira can pull that forward We'll get back to the market on that after we close. we'll get back to the market on that after we close What the model showed us at Investor Day was that, even if you strip out PCF, the investments we need to make are fully funded. We would hit, at the end of a five-year window, a leverage target of three and a quarter, and we'd have extra cash flow beyond that. We're in a very healthy spot where we are generating great free cash flow. EBITDA inflects this year. Now it's a question as to how fast we can inflect revenue, and it's happening. I mean, just look at the rates of decline on revenue. Obviously, just saying that out loud has a negative connotation, but look at those rates of decline vis-à-vis others in the space. We are way ahead because our business mix is already over half of that in growth buckets versus legacy declining buckets, and nobody else can say that. What the model showed us at Investor Day was that, even if you strip out PCF, the investments we need to make are fully funded. what the model showed us at investor day was that even if you strip out pcf the investments we need to make are fully funded We would hit, at the end of a five-year window, a leverage target of three and a quarter, and we'd have extra cash flow beyond that. we would hit at the end of a five-year window a leverage target of three and a quarter and we'd have extra cash flow beyond that We're in a very healthy spot where we are generating great free cash flow. we're in a very healthy spot where we are generating great free cash flow EBITDA inflects this year. ebitda inflects this year Now it's a question as to how fast we can inflect revenue, and it's happening. now it's a question as to how fast we can inflect revenue and it's happening I mean, just look at the rates of decline on revenue. i mean just look at the rates of decline on revenue Obviously, just saying that out loud has a negative connotation, but look at those rates of decline vis-à-vis others in the space. obviously just saying that out loud has a negative connotation but look at those rates of decline vis-à-vis others in the space We are way ahead because our business mix is already over half of that in growth buckets versus legacy declining buckets, and nobody else can say that. we are way ahead because our business mix is already over half of that in growth buckets versus legacy declining buckets and nobody else can say that

Speaker 2: Right, the 51% mix is growth. Right, the 51% mix is growth. right the 51% mix is growth

Speaker 1: Yeah. We're not looking back on that. Yeah. yeah We're not looking back on that. we're not looking back on that

Speaker 2: Great. With that, we're out of time. Thanks, Chris. Great. great With that, we're out of time. with that we're out of time Thanks, Chris. thanks chris

Speaker 1: Great. Thanks a lot. Great. great Thanks a lot. thanks a lot