Lumen Technologies, Inc. — Call Transcript 2026

Good morning, everyone. I'm Sebastiano Petti, and I cover the telecom cable and satellite space for JPMorgan. I want to welcome Chris Stansbury, President and CFO of Lumen. Chris, thanks for joining us this morning. Oh, great to be here. I think you have a safe harbor, perhaps? We do have a safe harbor. It's on our website. I'm not going to try to recite it from memory. Take a look. Obviously, you know, we'll have a good conversation today. I'm not making any comments on, you know, forward-looking stuff. Good. I don't want Jim to get mad, so I just want to make sure. Exactly. Thank you for that reminder. Yes. 'Cause I always forget, and he does get angry at me. Yeah. Lumen has had a busy start to the year. You closed on the fiber to the home sale to AT&T, just a couple weeks ago announced the acquisition of Alkira. Let's start at the top. As you look at the rest of the year, what are your biggest priorities? How do you see those priorities fitting together to set up Lumen for success long term? Yeah. As we gave our annual guidance, we said this is the year that we're gonna inflect EBITDA, and we are going to do that. We remain committed to that. It's a big step forward for us, ultimately that leads to revenue inflection in the next couple of years and growth thereafter. We feel very good about that. The sale of the fiber to the home business to AT&T was very strategic for us. I mean, it's a space where convergence is real, and it's a space where others are much better suited to grow that business. When you look at, you know, the Alkira announcement, I think that really speaks to where we have a right to win and where we have an advantage. Alkira, once we close that deal, marrying that with the physical network we have really opens up enterprise networking in a way that has never existed before. We're seeing a lot of interest and traction from customers because it allows us to deliver what is a fully programmable enterprise network. It's not about just the fiber anymore. It's not about point to point. It's about the ability to program movement from anywhere to anywhere, and we're gonna be able to do that in short order. Great. I guess just thinking about the digital transformation and, you know, NaaS adoption. At the Investor Day, you talked about expecting linear digital revenue growth, but also, you know, again, leaving the door open or to a potential J-curve. With port growth running around 35%, what are the real world signals that you're watching that tell you the J-curve is actually starting? I guess what do you need to have in place operationally so that the growth doesn't outpace? Yeah. Good questions. Again, what we said at Investor Day is we're gonna plan linear. Yeah Because we don't know any better. We did expect there to be a J-curve moment. We're not calling that now, but I would say that certainly the quarter-on-quarter growth we're seeing in customers' ports and services per port in that 30% range is very encouraging. To your question on operationalizing that, there's an enormous amount of effort going on inside the company to shift resources from the old to the new. The ops team is all over it. We continue to ask them to plan for more so that we are ready, and we don't delay the adoption of those NaaS ports any longer than we have to. We're very encouraged by that. That again, if you think about networking in network language, right? A lot of that is north-south, right? Think of that as premise to a location, right? It could be another on-prem location, it could be to a DC, it could be to a cloud. What Alkira brings is the east-west traffic. That's where the vast majority of the TAM is. The north-south traffic is very commoditized, and it's important, but it's not where the growth is in dollars. The growth in dollars is the east-west, the ability to move data between clouds, between DCs, never have it touch a premise, and do that in a fully programmatic way in the power of your own hands. When you bring our strength in north-south and those NaaS ports to the east-west, with Alkira, and the connection point really is our Multi-Cloud Gateway that we've announced, that's where we really unlock this. Great. I think you described Alkira as accelerating the consumption flywheel. Yeah Which you kind of alluded to, and meaningfully completing the architecture for, you know, where you want to take the platform. How should we think about maybe the integration timeline? What gets integrated first? Are there investments required? I guess when should we see these benefits showing up in revenue in a material way? Obviously we gotta close the deal first. We think that'll be sometime in the third quarter. You know, as you just said, the reality is the bulk of what has to be built to enable this is already built. It's gonna be integration light. We're actually very focused on making sure that the innovation engine that exists at Alkira is preserved. You know, that makes the upfront a lot easier. It's really about integrating with the sales force and how we approach customers. Part of what we're dealing with here is we're building something that hasn't been done in networking before. As we spend more time in the C-suite, and they realize the capabilities that we have, or will have, and our ability to execute against that quickly, there's enormous excitement. The shift that is going on, I mean, I think if you look at enterprise networking historically, it's gotten a bad rap because it's been very kind of telco-centric, declining price per bit. You're selling to the procurement department. Those days are quickly coming to an end, and the reason it's shifting is AI will not work with latency, and it's not about the cost of the wave. It's about the total cost of ownership, and when you're running GPU clusters that cost $2,000 an hour to operate, that's what matters. Your ability to move data from anywhere to anywhere to keep those GPUs spinning, to allow your AI agents to communicate with a customer in real time by sourcing information that is getting more and more dispersed, that's the math that matters. The big piece is really gonna be the education at the C-suite that's already underway, and I think that's probably the toughest leg of the journey, but we feel good about the plans that we've got around that. Great. Then one of the other things I think you brought up was about, you know, $100 million-$200 million of CapEx savings. Yeah. I guess just I mean, where does that come from, I guess, in practice? I guess maybe just help us think about timeline there. When we did our Investor Day, inherent in the CapEx estimate that we had was development work to build the software platform that Alkira frankly has already built. In acquiring Alkira, we estimate that we'll save $150 million-$200 million in total over the next few years. What Alkira does is accelerates that software delivery, the ability to truly have single pane of glass that you can control all of your network flows from anywhere to anywhere, literally every cloud, one network. It's carrier-agnostic globally, it'll allow us to do that day one. This is an acceleration of a couple years. All right. Just sticking with east-west for a minute here. Zooming out, I guess, to the market, you previously sized the east-west opportunity, I think, at about $11 billion, right? Yeah. After Alkira, you see that TAM grow as, you know, maybe I think $58 billion. 58. Growing at about 20% compound annually. I guess, who do you view as the real competitors in that market? I guess what gives you confidence in your ability to kinda take, you know, take share and, you know, participating in the growth there? There are competitors at different points in, you know, in that total cycle of data movement. There's no one pure play competitor. I won't name them, but there are companies that provide network access overlays. It's a screen of glass. What they don't have the ability to do is provide a level of service as deep into the network as a company that owns the network, right? When you take Alkira's capabilities, you take our Multi-Cloud Gateway, which is what? It's the ability to literally connect. We have direct cloud on-ramps, others have them too, into all the major clouds. Multi-Cloud Gateway, though, allows you to move data between those cloud environments and between DCs. It's extraordinarily powerful. There is no pure play competitor. I think the beauty of where we are is you've got this really unparalleled physical network in North America. We can partner with people globally who can provide that kind of service in other areas of the world. If somebody wanted to be a pure play competitor in North America, it would take a long, long time because, one, they'd need to build a physical network that has the depth that ours has. I think what we've seen over the last couple of years in terms of the differentiation of Lumen's network, that's really exemplified by the PCF deals. No one's been able to keep pace. Yes, there are other people building now, but no one has been able to keep pace with what we've done because we have capacity that no one else has. You take that footprint, you digitize it, and Alkira is a big piece of that, and you've got something, frankly, that doesn't exist anywhere else. Sticking with PCF for a minute here. I think you've said you've signed $13 billion or nearly $13 billion in deals so far. Yeah. You've noted that your hyperscale partners aren't talking about a bubble. They're talking about, you know, they're asking for more capacity faster. In many cases, the contracts include incentives, I think, tied to speed, right? Yeah. Speed to market. From where you sit, how much incremental opportunity is there beyond what's already been signed? There's definitely more opportunity there. I don't wanna size it. I would say that it's actually, it's something that as time goes on, we're going to be really thoughtful about, right? Because the conduit that's in the ground has a lot of value because it's, it provides customers with the ability to deploy faster than constructing from new. We can sell a resource that the one resource they don't have, which is time. That obviously doesn't last forever, so we wanna be really thoughtful about that. I think what's interesting is when you think about the strategic growth opportunities here. We actually don't have to lay one more mile of fiber to grow in a really explosive way because Alkira unlocks all of that. Will we build fiber? Yes, of course, we will, but we're gonna do it in a way that makes economic sense for our investors, because the objective isn't fiber anymore. That's old telco. The objective is single pane of glass, complete control, the ability to move data from anywhere to anywhere, and we will have that with the closure of Alkira. An interesting topic, and I spoke with, you know, your Chief Technology & Product Officer, Jim Fowler, recently. I think he made a comment to the effect of in some of your deal conversations around PCF, you guys say no more than you say yes. Yeah To deals, which I thought was interesting. Are you seeing deal structures evolve or conversations around economics evolve at all? 'Cause one of the points you've always made, and Jim also made, was economics is what drives a lot of the PCF considerations, right? Maybe help us think about, you know, how those conversations have evolved recently. I would say structurally, the deals haven't changed. you know, I think the value of a specific route can change depending on what capacity looks like. The underlying conversations haven't changed. If anything, that makes it easier, frankly, because there's a lot of time, you know, in legal, if you will, getting the contracts right on both sides of those agreements. Now they've become more regular course. I think today the conversations that I'm involved in are really focused on execution and how quickly can we go. I mean, this is, you said it really well. This isn't about an AI bubble when you talk to these customers. It's about what's coming. The demand is real. Again, they're building to a demand signal that's two and three years from now. Today they're asking us to go faster. I think that speaks to where the demand will be as we go forward. Got it. Any update, as we think about from a proprietary route perspective, you know, still again, a lot of the same considerations, I guess? It's nothing new to kind of call out there. No, nothing new. I mean, we obviously announced a new, a new route, from Minneapolis, to Seattle. That's a corridor that, as you can imagine, has a lot of demand. That's something that, we've been working on for a while now. It's been part of our capital plans. There are others that we're working on as well. We keep that close to the vest. Okay. That gives us the opportunity to sell into those as well. Again, those are good examples of high density, meaningful routes that we can monetize in a very favorable way for our investors. We'll build those routes. We're not gonna build routes so that we can try to drive the price of Waves to the bottom. We'll leave that for others. The other thing that's interesting is as we focus more on the east-west traffic flows, because that really is where all the value is, because customers are gonna be able to consume that through one pane of glass, our belief is that we will very likely take share in the north-south, that more commoditized space, because we're gonna be really easy to do business with. It'll truly be point, click, I need connectivity from here to here. Okay, I have it. It'll be up and running in a very short period of time. We'll see how that plays out, but that's certainly our hypothesis. I guess just sticking with Waves, for a sec here. There was a clear call out that strategic Waves, I think you know, what you defined as 100 Gb or greater. Yeah Were a standout driver in the quarter. There was also a mention of material uptick in RapidRoutes adoption. Yeah. Yeah. I mean, what's changed in terms of customer demand or in your product that's driving that, you know, momentum? Two things. I think on the, on the supply side, we've now been talking about it for over a year. As we've been deploying these large fiber networks for hyperscalers, we're also pulling fiber for ourselves. In two specific areas that we've highlighted are RapidRoutes. These are clusters of 16 markets at a time, and it's basically on-demand 400 Gb connectivity so that customers can be up and running really quickly. We've got the first two clusters done. The third one, I think is close to being done. We've also done a metro expansion so that in the dense metros, there's more capability there. That's the supply side. The demand side is that, again, I think we're starting to see the early stages of inference where enterprises is starting to consume AI in a more meaningful way. Again, latency matters. The example that I share is just think about it. All of us have, in one way or another, already had some kind of an interaction with a customer care agent. What would that experience be like if it took 30 seconds for that agent to respond, right? either through chat or voice. It would be horrendous. Remember, that agent is answering questions by going and looking for data, and that data could be anywhere. It could be in Texas, it could be in Virginia, it could be in North Dakota. It could be in all of those places. It's putting together its response in real time so that that customer experience is a good experience. We have that today where customers can get information on inventory or on an outage. Outage is a really good example, right? Outage just happened. That agent is trying to answer that question with real-time data, and we don't know where that data is. We know it sits in a cloud, but I couldn't tell you physically where it is. The latency is what matters and that's why I think we're starting to see an uptick in the demand for these in these kinds of connectivity. All right. Maybe, you know, touching on some other areas here. I think one of the more interesting points from 1Q was, you know, was the call-out on, you know, cannibalization. Yeah, I think you said that NaaS adoption is not cannibalizing the legacy- Yeah revenue as much as expected. I think over 60% of existing customers, existing customer NaaS customers are choosing to expand rather than simply just migrate. I guess what's driving that behavior from either a product packaging, sales motion, you know, customer economics perspective? Yeah Do you think it's durable? It's a really good question. I think there's more hypothesis there than fact 'cause we're at early stages. I think our running hypothesis is customers wanna make sure that they're comfortable with the new before they let go of the old. Do we think that it's permanent? No. I think that's foolish, and frankly, we don't want it to be. We want people to adopt the new as fast as possible. We'll take the fact that they're gonna run the old with the new for a while. That's a great problem to have. I don't think it is durable over time. I think you'll start to see customers as they experience NaaS wanna run with it more permanently. The flip side of that is that in consuming NaaS, they will be consuming more services. We're seeing that service growth. Again, remember, what is a NaaS port? It is a port that allows us to deliver all future services digitally. No more truck rolls, right? No more fixed infrastructure. It's delivered as software. The faster that they start to consume those ports as their daily motion, the more likely it is that they'll start to consume more and more services on top of that's the scalability that we've been looking for. Got it. Then just closing the loop on Alkira. As you think about, does it help you sell more into the same customers? Does it help you expand into new segments? Is it about improving retention, wallet share, all of the above? It's all of the above. I mean, look, Alkira, as we said earlier, it really, once we close, is the fast path to where we ultimately want it to be. There's more innovation, though, that can come behind that. Again, we can use fancy words like programmable network, but let's just talk about what that means for a second and why it's important. Networking has always been just the necessary evil, right? The reality is, in today's world, it starts to become a vehicle by which you can unlock additional value. Think about energy, right? There's a lot of conversation around energy. Well, if you've got a bunch of data that's headed to Virginia to be processed, and again, GPU cluster, $2,000 an hour, and you reach an energy limitation in Virginia, and that data is just sitting in a parking lot waiting to be processed, that's huge cost. What happens in a world where you've got GPU capacity and energy capacity in North Dakota or Texas or somewhere yet to be determined because people continue to build data centers? What happen if the network could automatically repair itself and reroute those workloads to where there is energy and GPU capacity? That's an enormous unlock for enterprise. That's the network that we're building. That's the network that Alkira will help us deliver faster, and that's the network nobody else has today. That is huge, huge unlock, that's why we're so jazzed about this. Great. Shifting gears to 2026 guidance expectations and EBITDA. I wanna get a little bit more color, I guess, on some of the puts and takes around the, you know, EBITDA guidance for the year, which you reaffirmed. Yeah. The first quarter was stronger than anticipated, which implies a, you know, pretty big step back or step down in the back half of the year. Just help us think about the puts and takes that we should be considering, you know, to help understand the EBITDA trajectory for the balance of the year. Yeah. It's, we've had this question a lot since earnings. Remember, in first quarter, a few things that you need to adjust for. We sold the fiber to the home business halfway through the quarter. We also had one-time revenue, high EBITDA for publicly disclosed state of California that doesn't repeat itself. Those two things combined are about $60 million. You've got this legacy thing that we just talked about, where legacy ran a little hotter. It's certainly not something we're gonna plan for. I really think you've got to adjust down Q1 for those kind of items, and I think you get to a number that's a lot more reasonable in terms of run rate, you know, the 770, 780 kind of run rate. I think that's what we'd see as baseline as we go forward. Now, what we don't know yet, and we haven't changed our annual guidance as a result, is when will Alkira close and how quickly can we start to monetize that? That's what we're working on right now. I think there's also some seasonality we need to kind of keep in mind, right, in the third quarter. Absolutely. Right? Okay. Yeah, yeah. There's a lot of construction work and whatnot that's done in the third quarter because of weather and whatnot. Got it. You know, underlying a lot of this is your cost transformation program, right? You hit $400 million run rate in 2025, exiting 2025 rather, and you're targeting, I think it's $700 million exiting 2026, and then ultimately getting to the $1 billion level in 2027. Maybe help us think about what are the next major cost takeout, you know, cost work streams that are coming out, I guess, and where do you see the biggest incremental savings coming from within the program? It's really, it's across the whole company. I would say that, you know, again, we have, as a lot of folks in the space have a lot of old IT systems. We actually just launched the final phase of our ERP, which is huge to have behind us. Team did a tremendous job with that. Ultimately that allowed us to turn off, I think, what was in the neighborhood of 30-35 different GLs. The second phase now, that was first phase. The second phase is procure-to-pay, which will unlock more value, right, as we go forward. We still have work to do around, you know, CRM and whatnot, so there'll be savings in that. Operationally, we continue to drive savings. With the sale of the fiber-to-the-home business, the remaining consumer business that we're managing for cash is being absorbed into our enterprise ops team. One management structure there. More savings there. You'll continue to see efficiency across the network itself as really being the core driver, and that's everything from, you know, real estate and utilities and whatnot. It's also gonna be labor efficiencies as we get better at what we do. Got it. You know, is there a credible path to exceed the billion-dollar target? Is the focus more on execution certainty rather than trying to stretch that headline number? We, we are very confident in the $1 billion. We'll see if we can go further. The answer is go faster, go bigger if we can. There's a lot of focus on that. Okay. That's great. On free cash flow, you raised the 2026 guidance to $1.9 billion-$2.1 billion. There's about $729 million of, you know, fiber to the home proceeds that float. Yeah Into OCF. If we strip that out though, how should we think about the organic free cash flow growth in 2026? I guess, what's the shape of that trajectory, you know, as we maybe look out? It's. Yeah. It's still gonna be spiky because of the PCF flows that move around quarter-to-quarter. I mean, again, the headline messages are that all in we're generating, to your point, organically some great cash flow this year. Over the next five years, the financials we laid out at Investor Day, which were pre-Alkira, were fully funded. We should see leverage over the next five years come down into the, you know, low to mid threes. A lot of that at this point is gonna be driven by, frankly, EBITDA growth versus absolute debt reduction. The capital stack is in great shape. We're just finalizing a few things now, the reality is that should largely be behind us by the time we close this quarter. Okay. That's great transition. As we at the Analyst Day, you also talked about, you know, organic growth first, then inorganic, then debt reduction, and then finally buybacks. Yeah As your capital allocation priorities. as you just said, you know, now that you're, quote, "fully funded," I guess, what are the milestones you wanna hit or what we should be thinking about from a outside looking in perspective, what should we be thinking about before capital returns begin? I guess how should shareholders think about potential timing? Yeah. I think back to those priorities, I think we actually just did that with Alkira, right? We paid cash for that. Again, when you look at the CapEx that's avoided, we think that acquisition cost us on a net basis somewhere, call it, $275 million-$300 million all paid for with cash. The jobs number one, two, three, and four are get to revenue growth. Again, what you're seeing inside of Lumen today and what you're seeing in our results is a revenue performance that is still declining but dramatically better than our competitive set. Everything that we can do to accelerate that return to growth is what we're doing first. To try to give an estimate on time in terms of when we would start to return capital because we, you know, we think we've exhausted those growth avenues, it's just too early to call that, especially with Alkira in the mix. I think if anything, our opportunity right now is to hopefully pull in that point of inflection on revenue sooner. You know, when that is, hard to say at this point. We had said that revenue would inflect on the enterprise business in 2028 and total Lumen in 2029. You know, once we close, we'll try to give a perspective on what we think that is. All of our energy right now is on how we can light that up as quickly as possible as soon as the deal closes. Maybe on the other side of Alkira, we could get a revision or maybe updated viewpoint in how you're thinking about the revenue trajectory? Yeah, and yes. The answer, yes, but we're also gonna learn as we go. I mean, again, we're creating something that hasn't been created before. The good news is I think we can look to some of the growth curves of things like cloud as a reference point. We'll continue to update the market as we move along this journey. I mean, it's super exciting. I think if anything, we are shielding some of our enthusiasm for this because, you know, we don't know how quick it'll go, but there's a lot of internal excitement about this being big for Lumen, and so we're gonna try to make that happen. Do you have well, do you have a preference for the method of capital returns? If we got to that point, it would be, I think share repurchases likely. Look, we've made the tough decisions around things like a dividend. I don't think you're gonna see us return to that, you know, at the first possible chance, because the reality is, this is an area, in terms of, you know, networking in an AI world that continues to evolve. Until we've exhausted the investment opportunities that we think drive a differentiated return for shareholders, it's way too early to make that call. Yep. Candidly, we don't even know what all those pathways are gonna be yet. I guess from, you know, great segue, just thinking about Alkira opportunity, right, kind of availed itself. It could be interesting, but there could be multiple paths here. How are you thinking about potential M&A going forward? I mean, you've emphasized in the past, you know, discipline and reasonable valuations, Alkira, you know, fits that framework. As you look ahead, how should we think about your appetite for additional acquisitions? You know, what could be strategic? What could be compelling? Yeah. I think it would be more things like Alkira, things that further the digitization of the network. Those would certainly be our priority. Again, with Alkira, we're not just buying software. The management team, and quite frankly, deep below the management team, on the Alkira side, are super excited about this transaction because it has the ability to bring their dreams to life. There's an innovation pipeline that exists. There are other ideas that exist inside of Alkira. I think it's highly likely you'll see more coming from that, and it just gives us more organic pathways to grow as well. Look, if there's something else that would further the strategic agenda, we'll look at it. And time will tell. Nothing on the books right now. All right. Well, nothing to announce here today, unfortunately. Exactly. Nothing to announce here today. Well- Other than the fact that we're super excited, and we think this is gonna be big. Well, Chris, thank you, as always for joining us, and thanks everybody. I think that's a great place to end it, and everybody enjoy the rest of your day. Thank you.

Speaker 2: Good morning, everyone. I'm Sebastiano Petti, and I cover the telecom cable and satellite space for JPMorgan. I want to welcome Chris Stansbury, President and CFO of Lumen. Chris, thanks for joining us this morning. Good morning, everyone. good morning everyone I'm Sebastiano Petti, and I cover the telecom cable and satellite space for JP Morgan. i'm sebastiano petti and i cover the telecom cable and satellite space for jp morgan I want to welcome Chris Stansbury, President and CFO of Lumen. i want to welcome chris stansbury president and cfo of lumen Chris, thanks for joining us this morning. chris thanks for joining us this morning

Speaker 1: Oh, great to be here. Oh, great to be here. oh great to be here

Speaker 2: I think you have a safe harbor, perhaps? I think you have a safe harbor, perhaps? i think you have a safe harbor perhaps

Speaker 1: We do have a safe harbor. It's on our website. I'm not going to try to recite it from memory. Take a look. Obviously, you know, we'll have a good conversation today. I'm not making any comments on, you know, forward-looking stuff. We do have a safe harbor. we do have a safe harbor It's on our website. it's on our website I'm not going to try to recite it from memory. i'm not going to try to recite it from memory Take a look. take a look Obviously, you know, we'll have a good conversation today. obviously you know we'll have a good conversation today I'm not making any comments on, you know, forward-looking stuff. i'm not making any comments on you know forward-looking stuff

Speaker 2: Good. I don't want Jim to get mad, so I just want to make sure. Good. good I don't want Jim to get mad, so I just want to make sure. i don't want jim to get mad so i just want to make sure

Speaker 1: Exactly. Thank you for that reminder. Exactly. exactly Thank you for that reminder. thank you for that reminder

Speaker 2: Yes. Yes. yes

Speaker 1: 'Cause I always forget, and he does get angry at me. Yeah. 'Cause I always forget, and he does get angry at me. 'cause i always forget and he does get angry at me Yeah. yeah

Speaker 2: Lumen has had a busy start to the year. You closed on the fiber to the home sale to AT&T, just a couple weeks ago announced the acquisition of Alkira. Let's start at the top. As you look at the rest of the year, what are your biggest priorities? How do you see those priorities fitting together to set up Lumen for success long term? Lumen has had a busy start to the year. lumen has had a busy start to the year You closed on the fiber to the home sale to AT&T, just a couple weeks ago announced the acquisition of Alkira. you closed on the fiber to the home sale to at&t just a couple weeks ago announced the acquisition of alkira Let's start at the top. let's start at the top As you look at the rest of the year, what are your biggest priorities? as you look at the rest of the year what are your biggest priorities How do you see those priorities fitting together to set up Lumen for success long term? how do you see those priorities fitting together to set up lumen for success long term

Speaker 1: Yeah. As we gave our annual guidance, we said this is the year that we're gonna inflect EBITDA, and we are going to do that. We remain committed to that. It's a big step forward for us, ultimately that leads to revenue inflection in the next couple of years and growth thereafter. We feel very good about that. The sale of the fiber to the home business to AT&T was very strategic for us. I mean, it's a space where convergence is real, and it's a space where others are much better suited to grow that business. When you look at, you know, the Alkira announcement, I think that really speaks to where we have a right to win and where we have an advantage. Yeah. yeah As we gave our annual guidance, we said this is the year that we're gonna inflect EBITDA, and we are going to do that. as we gave our annual guidance we said this is the year that we're gonna inflect ebitda and we are going to do that We remain committed to that. we remain committed to that It's a big step forward for us, ultimately that leads to revenue inflection in the next couple of years and growth thereafter. it's a big step forward for us ultimately that leads to revenue inflection in the next couple of years and growth thereafter We feel very good about that. we feel very good about that The sale of the fiber to the home business to AT&T was very strategic for us. the sale of the fiber to the home business to at&t was very strategic for us I mean, it's a space where convergence is real, and it's a space where others are much better suited to grow that business. i mean it's a space where convergence is real and it's a space where others are much better suited to grow that business When you look at, you know, the Alkira announcement, I think that really speaks to where we have a right to win and where we have an advantage. when you look at you know the alkira announcement i think that really speaks to where we have a right to win and where we have an advantage Alkira, once we close that deal, marrying that with the physical network we have really opens up enterprise networking in a way that has never existed before. We're seeing a lot of interest and traction from customers because it allows us to deliver what is a fully programmable enterprise network. It's not about just the fiber anymore. It's not about point to point. It's about the ability to program movement from anywhere to anywhere, and we're gonna be able to do that in short order. Alkira, once we close that deal, marrying that with the physical network we have really opens up enterprise networking in a way that has never existed before. alkira once we close that deal marrying that with the physical network we have really opens up enterprise networking in a way that has never existed before We're seeing a lot of interest and traction from customers because it allows us to deliver what is a fully programmable enterprise network. we're seeing a lot of interest and traction from customers because it allows us to deliver what is a fully programmable enterprise network It's not about just the fiber anymore. it's not about just the fiber anymore It's not about point to point. it's not about point to point It's about the ability to program movement from anywhere to anywhere, and we're gonna be able to do that in short order. it's about the ability to program movement from anywhere to anywhere and we're gonna be able to do that in short order

Speaker 2: Great. I guess just thinking about the digital transformation and, you know, NaaS adoption. At the Investor Day, you talked about expecting linear digital revenue growth, but also, you know, again, leaving the door open or to a potential J-curve. With port growth running around 35%, what are the real world signals that you're watching that tell you the J-curve is actually starting? I guess what do you need to have in place operationally so that the growth doesn't outpace? Great. great I guess just thinking about the digital transformation and, you know, NaaS adoption. i guess just thinking about the digital transformation and you know naas adoption At the Investor Day, you talked about expecting linear digital revenue growth, but also, you know, again, leaving the door open or to a potential J-curve. at the investor day you talked about expecting linear digital revenue growth but also you know again leaving the door open or to a potential j-curve With port growth running around 35%, what are the real world signals that you're watching that tell you the J-curve is actually starting? with port growth running around 35% what are the real world signals that you're watching that tell you the j-curve is actually starting I guess what do you need to have in place operationally so that the growth doesn't outpace? i guess what do you need to have in place operationally so that the growth doesn't outpace

Speaker 1: Yeah. Good questions. Again, what we said at Investor Day is we're gonna plan linear. Yeah. yeah Good questions. good questions Again, what we said at Investor Day is we're gonna plan linear. again what we said at investor day is we're gonna plan linear

Speaker 2: Yeah Yeah yeah

Speaker 1: Because we don't know any better. We did expect there to be a J-curve moment. We're not calling that now, but I would say that certainly the quarter-on-quarter growth we're seeing in customers' ports and services per port in that 30% range is very encouraging. To your question on operationalizing that, there's an enormous amount of effort going on inside the company to shift resources from the old to the new. The ops team is all over it. We continue to ask them to plan for more so that we are ready, and we don't delay the adoption of those NaaS ports any longer than we have to. We're very encouraged by that. That again, if you think about networking in network language, right? Because we don't know any better. because we don't know any better We did expect there to be a J-curve moment. we did expect there to be a j-curve moment We're not calling that now, but I would say that certainly the quarter-on-quarter growth we're seeing in customers' ports and services per port in that 30% range is very encouraging. we're not calling that now but i would say that certainly the quarter-on-quarter growth we're seeing in customers' ports and services per port in that 30% range is very encouraging To your question on operationalizing that, there's an enormous amount of effort going on inside the company to shift resources from the old to the new. to your question on operationalizing that there's an enormous amount of effort going on inside the company to shift resources from the old to the new The ops team is all over it. the ops team is all over it We continue to ask them to plan for more so that we are ready, and we don't delay the adoption of those NaaS ports any longer than we have to. we continue to ask them to plan for more so that we are ready and we don't delay the adoption of those naas ports any longer than we have to We're very encouraged by that. we're very encouraged by that That again, if you think about networking in network language, right? that again if you think about networking in network language right A lot of that is north-south, right? Think of that as premise to a location, right? It could be another on-prem location, it could be to a DC, it could be to a cloud. What Alkira brings is the east-west traffic. That's where the vast majority of the TAM is. The north-south traffic is very commoditized, and it's important, but it's not where the growth is in dollars. The growth in dollars is the east-west, the ability to move data between clouds, between DCs, never have it touch a premise, and do that in a fully programmatic way in the power of your own hands. A lot of that is north-south, right? a lot of that is north-south right Think of that as premise to a location, right? think of that as premise to a location right It could be another on-prem location, it could be to a DC, it could be to a cloud. it could be another on-prem location it could be to a dc it could be to a cloud What Alkira brings is the east-west traffic. what alkira brings is the east-west traffic That's where the vast majority of the TAM is. that's where the vast majority of the tam is The north-south traffic is very commoditized, and it's important, but it's not where the growth is in dollars. the north-south traffic is very commoditized and it's important but it's not where the growth is in dollars The growth in dollars is the east-west, the ability to move data between clouds, between DCs, never have it touch a premise, and do that in a fully programmatic way in the power of your own hands. the growth in dollars is the east-west the ability to move data between clouds between dcs never have it touch a premise and do that in a fully programmatic way in the power of your own hands When you bring our strength in north-south and those NaaS ports to the east-west, with Alkira, and the connection point really is our Multi-Cloud Gateway that we've announced, that's where we really unlock this. When you bring our strength in north-south and those NaaS ports to the east-west, with Alkira, and the connection point really is our Multi-Cloud Gateway that we've announced, that's where we really unlock this. when you bring our strength in north-south and those naas ports to the east-west with alkira and the connection point really is our multi-cloud gateway that we've announced that's where we really unlock this

Speaker 2: Great. I think you described Alkira as accelerating the consumption flywheel. Great. great I think you described Alkira as accelerating the consumption flywheel. i think you described alkira as accelerating the consumption flywheel

Speaker 1: Yeah Yeah yeah

Speaker 2: Which you kind of alluded to, and meaningfully completing the architecture for, you know, where you want to take the platform. How should we think about maybe the integration timeline? What gets integrated first? Are there investments required? I guess when should we see these benefits showing up in revenue in a material way? Which you kind of alluded to, and meaningfully completing the architecture for, you know, where you want to take the platform. which you kind of alluded to and meaningfully completing the architecture for you know where you want to take the platform How should we think about maybe the integration timeline? how should we think about maybe the integration timeline What gets integrated first? what gets integrated first Are there investments required? are there investments required I guess when should we see these benefits showing up in revenue in a material way? i guess when should we see these benefits showing up in revenue in a material way

Speaker 1: Obviously we gotta close the deal first. We think that'll be sometime in the third quarter. You know, as you just said, the reality is the bulk of what has to be built to enable this is already built. It's gonna be integration light. We're actually very focused on making sure that the innovation engine that exists at Alkira is preserved. You know, that makes the upfront a lot easier. It's really about integrating with the sales force and how we approach customers. Part of what we're dealing with here is we're building something that hasn't been done in networking before. Obviously we gotta close the deal first. obviously we gotta close the deal first We think that'll be sometime in the third quarter. we think that'll be sometime in the third quarter You know, as you just said, the reality is the bulk of what has to be built to enable this is already built. you know as you just said the reality is the bulk of what has to be built to enable this is already built It's gonna be integration light. it's gonna be integration light We're actually very focused on making sure that the innovation engine that exists at Alkira is preserved. we're actually very focused on making sure that the innovation engine that exists at alkira is preserved You know, that makes the upfront a lot easier. you know that makes the upfront a lot easier It's really about integrating with the sales force and how we approach customers. it's really about integrating with the sales force and how we approach customers Part of what we're dealing with here is we're building something that hasn't been done in networking before. part of what we're dealing with here is we're building something that hasn't been done in networking before As we spend more time in the C-suite, and they realize the capabilities that we have, or will have, and our ability to execute against that quickly, there's enormous excitement. The shift that is going on, I mean, I think if you look at enterprise networking historically, it's gotten a bad rap because it's been very kind of telco-centric, declining price per bit. You're selling to the procurement department. Those days are quickly coming to an end, and the reason it's shifting is AI will not work with latency, and it's not about the cost of the wave. It's about the total cost of ownership, and when you're running GPU clusters that cost $2,000 an hour to operate, that's what matters. As we spend more time in the C-suite, and they realize the capabilities that we have, or will have, and our ability to execute against that quickly, there's enormous excitement. as we spend more time in the c-suite and they realize the capabilities that we have or will have and our ability to execute against that quickly there's enormous excitement The shift that is going on, I mean, I think if you look at enterprise networking historically, it's gotten a bad rap because it's been very kind of telco-centric, declining price per bit. the shift that is going on, i mean i think if you look at enterprise networking historically it's gotten a bad rap because it's been very kind of telco-centric declining price per bit You're selling to the procurement department. you're selling to the procurement department Those days are quickly coming to an end, and the reason it's shifting is AI will not work with latency, and it's not about the cost of the wave. those days are quickly coming to an end and the reason it's shifting is ai will not work with latency and it's not about the cost of the wave It's about the total cost of ownership, and when you're running GPU clusters that cost $2,000 an hour to operate, that's what matters. it's about the total cost of ownership and when you're running gpu clusters that cost $2,000 an hour to operate that's what matters Your ability to move data from anywhere to anywhere to keep those GPUs spinning, to allow your AI agents to communicate with a customer in real time by sourcing information that is getting more and more dispersed, that's the math that matters. The big piece is really gonna be the education at the C-suite that's already underway, and I think that's probably the toughest leg of the journey, but we feel good about the plans that we've got around that. Your ability to move data from anywhere to anywhere to keep those GPUs spinning, to allow your AI agents to communicate with a customer in real time by sourcing information that is getting more and more dispersed, that's the math that matters. your ability to move data from anywhere to anywhere to keep those gpus spinning to allow your ai agents to communicate with a customer in real time by sourcing information that is getting more and more dispersed that's the math that matters The big piece is really gonna be the education at the C-suite that's already underway, and I think that's probably the toughest leg of the journey, but we feel good about the plans that we've got around that. the big piece is really gonna be the education at the c-suite that's already underway and i think that's probably the toughest leg of the journey but we feel good about the plans that we've got around that

Speaker 2: Great. Then one of the other things I think you brought up was about, you know, $100 million-$200 million of CapEx savings. Great. great Then one of the other things I think you brought up was about, you know, $100 million-$200 million of CapEx savings. then one of the other things i think you brought up was about you know $100 million-$200 million of capex savings

Speaker 1: Yeah. Yeah. yeah

Speaker 2: I guess just I mean, where does that come from, I guess, in practice? I guess maybe just help us think about timeline there. I guess just I mean, where does that come from, I guess, in practice? i guess just i mean where does that come from i guess in practice I guess maybe just help us think about timeline there. i guess maybe just help us think about timeline there

Speaker 1: When we did our Investor Day, inherent in the CapEx estimate that we had was development work to build the software platform that Alkira frankly has already built. In acquiring Alkira, we estimate that we'll save $150 million-$200 million in total over the next few years. What Alkira does is accelerates that software delivery, the ability to truly have single pane of glass that you can control all of your network flows from anywhere to anywhere, literally every cloud, one network. It's carrier-agnostic globally, it'll allow us to do that day one. This is an acceleration of a couple years. When we did our Investor Day, inherent in the CapEx estimate that we had was development work to build the software platform that Alkira frankly has already built. when we did our investor day inherent in the capex estimate that we had was development work to build the software platform that alkira frankly has already built In acquiring Alkira, we estimate that we'll save $150 million-$200 million in total over the next few years. in acquiring alkira we estimate that we'll save $150 million-$200 million in total over the next few years What Alkira does is accelerates that software delivery, the ability to truly have single pane of glass that you can control all of your network flows from anywhere to anywhere, literally every cloud, one network. what alkira does is accelerates that software delivery the ability to truly have single pane of glass that you can control all of your network flows from anywhere to anywhere literally every cloud one network It's carrier-agnostic globally, it'll allow us to do that day one. it's carrier-agnostic globally it'll allow us to do that day one This is an acceleration of a couple years. this is an acceleration of a couple years

Speaker 2: All right. Just sticking with east-west for a minute here. Zooming out, I guess, to the market, you previously sized the east-west opportunity, I think, at about $11 billion, right? All right. all right Just sticking with east-west for a minute here. just sticking with east-west for a minute here Zooming out, I guess, to the market, you previously sized the east-west opportunity, I think, at about $11 billion, right? zooming out i guess to the market you previously sized the east-west opportunity i think at about $11 billion right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: After Alkira, you see that TAM grow as, you know, maybe I think $58 billion. After Alkira, you see that TAM grow as, you know, maybe I think $58 billion. after alkira you see that tam grow as you know maybe i think $58 billion

Speaker 1: 58. 58. 58

Speaker 2: Growing at about 20% compound annually. I guess, who do you view as the real competitors in that market? I guess what gives you confidence in your ability to kinda take, you know, take share and, you know, participating in the growth there? Growing at about 20% compound annually. growing at about 20% compound annually I guess, who do you view as the real competitors in that market? i guess who do you view as the real competitors in that market I guess what gives you confidence in your ability to kinda take, you know, take share and, you know, participating in the growth there? i guess what gives you confidence in your ability to kinda take you know take share and you know participating in the growth there

Speaker 1: There are competitors at different points in, you know, in that total cycle of data movement. There's no one pure play competitor. I won't name them, but there are companies that provide network access overlays. It's a screen of glass. What they don't have the ability to do is provide a level of service as deep into the network as a company that owns the network, right? When you take Alkira's capabilities, you take our Multi-Cloud Gateway, which is what? It's the ability to literally connect. We have direct cloud on-ramps, others have them too, into all the major clouds. Multi-Cloud Gateway, though, allows you to move data between those cloud environments and between DCs. It's extraordinarily powerful. There is no pure play competitor. There are competitors at different points in, you know, in that total cycle of data movement. there are competitors at different points in you know in that total cycle of data movement There's no one pure play competitor. there's no one pure play competitor I won't name them, but there are companies that provide network access overlays. i won't name them but there are companies that provide network access overlays It's a screen of glass. it's a screen of glass What they don't have the ability to do is provide a level of service as deep into the network as a company that owns the network, right? what they don't have the ability to do is provide a level of service as deep into the network as a company that owns the network right When you take Alkira's capabilities, you take our Multi-Cloud Gateway, which is what? when you take alkira's capabilities you take our multi-cloud gateway which is what It's the ability to literally connect. it's the ability to literally connect We have direct cloud on-ramps, others have them too, into all the major clouds. we have direct cloud on-ramps others have them too into all the major clouds Multi-Cloud Gateway, though, allows you to move data between those cloud environments and between DCs. multi-cloud gateway though allows you to move data between those cloud environments and between dcs It's extraordinarily powerful. it's extraordinarily powerful There is no pure play competitor. there is no pure play competitor I think the beauty of where we are is you've got this really unparalleled physical network in North America. We can partner with people globally who can provide that kind of service in other areas of the world. If somebody wanted to be a pure play competitor in North America, it would take a long, long time because, one, they'd need to build a physical network that has the depth that ours has. I think what we've seen over the last couple of years in terms of the differentiation of Lumen's network, that's really exemplified by the PCF deals. No one's been able to keep pace. Yes, there are other people building now, but no one has been able to keep pace with what we've done because we have capacity that no one else has. I think the beauty of where we are is you've got this really unparalleled physical network in North America. i think the beauty of where we are is you've got this really unparalleled physical network in north america We can partner with people globally who can provide that kind of service in other areas of the world. we can partner with people globally who can provide that kind of service in other areas of the world If somebody wanted to be a pure play competitor in North America, it would take a long, long time because, one, they'd need to build a physical network that has the depth that ours has. if somebody wanted to be a pure play competitor in north america it would take a long long time because one they'd need to build a physical network that has the depth that ours has I think what we've seen over the last couple of years in terms of the differentiation of Lumen's network, that's really exemplified by the PCF deals. i think what we've seen over the last couple of years in terms of the differentiation of lumen's network that's really exemplified by the pcf deals No one's been able to keep pace. no one's been able to keep pace Yes, there are other people building now, but no one has been able to keep pace with what we've done because we have capacity that no one else has. yes there are other people building now but no one has been able to keep pace with what we've done because we have capacity that no one else has You take that footprint, you digitize it, and Alkira is a big piece of that, and you've got something, frankly, that doesn't exist anywhere else. You take that footprint, you digitize it, and Alkira is a big piece of that, and you've got something, frankly, that doesn't exist anywhere else. you take that footprint you digitize it and alkira is a big piece of that and you've got something frankly that doesn't exist anywhere else

Speaker 2: Sticking with PCF for a minute here. I think you've said you've signed $13 billion or nearly $13 billion in deals so far. Sticking with PCF for a minute here. sticking with pcf for a minute here I think you've said you've signed $13 billion or nearly $13 billion in deals so far. i think you've said you've signed $13 billion or nearly $13 billion in deals so far

Speaker 1: Yeah. Yeah. yeah

Speaker 2: You've noted that your hyperscale partners aren't talking about a bubble. They're talking about, you know, they're asking for more capacity faster. In many cases, the contracts include incentives, I think, tied to speed, right? You've noted that your hyperscale partners aren't talking about a bubble. you've noted that your hyperscale partners aren't talking about a bubble They're talking about, you know, they're asking for more capacity faster. they're talking about you know they're asking for more capacity faster In many cases, the contracts include incentives, I think, tied to speed, right? in many cases the contracts include incentives i think tied to speed right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Speed to market. From where you sit, how much incremental opportunity is there beyond what's already been signed? Speed to market. speed to market From where you sit, how much incremental opportunity is there beyond what's already been signed? from where you sit how much incremental opportunity is there beyond what's already been signed

Speaker 1: There's definitely more opportunity there. I don't wanna size it. I would say that it's actually, it's something that as time goes on, we're going to be really thoughtful about, right? Because the conduit that's in the ground has a lot of value because it's, it provides customers with the ability to deploy faster than constructing from new. We can sell a resource that the one resource they don't have, which is time. That obviously doesn't last forever, so we wanna be really thoughtful about that. I think what's interesting is when you think about the strategic growth opportunities here. We actually don't have to lay one more mile of fiber to grow in a really explosive way because Alkira unlocks all of that. Will we build fiber? There's definitely more opportunity there. there's definitely more opportunity there I don't wanna size it. i don't wanna size it I would say that it's actually, it's something that as time goes on, we're going to be really thoughtful about, right? i would say that it's actually it's something that as time goes on we're going to be really thoughtful about right Because the conduit that's in the ground has a lot of value because it's, it provides customers with the ability to deploy faster than constructing from new. because the conduit that's in the ground has a lot of value because it's it provides customers with the ability to deploy faster than constructing from new We can sell a resource that the one resource they don't have, which is time. we can sell a resource that the one resource they don't have which is time That obviously doesn't last forever, so we wanna be really thoughtful about that. that obviously doesn't last forever so we wanna be really thoughtful about that I think what's interesting is when you think about the strategic growth opportunities here. We actually don't have to lay one more mile of fiber to grow in a really explosive way because Alkira unlocks all of that. i think what's interesting is when you think about the strategic growth opportunities here. we actually don't have to lay one more mile of fiber to grow in a really explosive way because alkira unlocks all of that Will we build fiber? will we build fiber Yes, of course, we will, but we're gonna do it in a way that makes economic sense for our investors, because the objective isn't fiber anymore. That's old telco. The objective is single pane of glass, complete control, the ability to move data from anywhere to anywhere, and we will have that with the closure of Alkira. Yes, of course, we will, but we're gonna do it in a way that makes economic sense for our investors, because the objective isn't fiber anymore. yes of course we will but we're gonna do it in a way that makes economic sense for our investors because the objective isn't fiber anymore That's old telco. that's old telco The objective is single pane of glass, complete control, the ability to move data from anywhere to anywhere, and we will have that with the closure of Alkira. the objective is single pane of glass complete control the ability to move data from anywhere to anywhere and we will have that with the closure of alkira

Speaker 2: An interesting topic, and I spoke with, you know, your Chief Technology & Product Officer, Jim Fowler, recently. I think he made a comment to the effect of in some of your deal conversations around PCF, you guys say no more than you say yes. An interesting topic, and I spoke with, you know, your Chief Technology & Product Officer, Jim Fowler, recently. an interesting topic and i spoke with you know your chief technology & product officer jim fowler recently I think he made a comment to the effect of in some of your deal conversations around PCF, you guys say no more than you say yes. i think he made a comment to the effect of in some of your deal conversations around pcf you guys say no more than you say yes

Speaker 1: Yeah Yeah yeah

Speaker 2: To deals, which I thought was interesting. Are you seeing deal structures evolve or conversations around economics evolve at all? 'Cause one of the points you've always made, and Jim also made, was economics is what drives a lot of the PCF considerations, right? Maybe help us think about, you know, how those conversations have evolved recently. To deals, which I thought was interesting. to deals which i thought was interesting Are you seeing deal structures evolve or conversations around economics evolve at all? 'Cause one of the points you've always made, and Jim also made, was economics is what drives a lot of the PCF considerations, right? are you seeing deal structures evolve or conversations around economics evolve at all 'cause one of the points you've always made and jim also made was economics is what drives a lot of the pcf considerations right Maybe help us think about, you know, how those conversations have evolved recently. maybe help us think about you know how those conversations have evolved recently

Speaker 1: I would say structurally, the deals haven't changed. you know, I think the value of a specific route can change depending on what capacity looks like. The underlying conversations haven't changed. If anything, that makes it easier, frankly, because there's a lot of time, you know, in legal, if you will, getting the contracts right on both sides of those agreements. Now they've become more regular course. I think today the conversations that I'm involved in are really focused on execution and how quickly can we go. I mean, this is, you said it really well. This isn't about an AI bubble when you talk to these customers. It's about what's coming. The demand is real. I would say structurally, the deals haven't changed. you know, I think the value of a specific route can change depending on what capacity looks like. i would say structurally the deals haven't changed you know i think the value of a specific route can change depending on what capacity looks like The underlying conversations haven't changed. the underlying conversations haven't changed If anything, that makes it easier, frankly, because there's a lot of time, you know, in legal, if you will, getting the contracts right on both sides of those agreements. if anything that makes it easier frankly because there's a lot of time you know in legal if you will getting the contracts right on both sides of those agreements Now they've become more regular course. now they've become more regular course I think today the conversations that I'm involved in are really focused on execution and how quickly can we go. i think today the conversations that i'm involved in are really focused on execution and how quickly can we go I mean, this is, you said it really well. i mean this is you said it really well This isn't about an AI bubble when you talk to these customers. this isn't about an ai bubble when you talk to these customers It's about what's coming. it's about what's coming The demand is real. the demand is real Again, they're building to a demand signal that's two and three years from now. Today they're asking us to go faster. I think that speaks to where the demand will be as we go forward. Again, they're building to a demand signal that's two and three years from now. again they're building to a demand signal that's two and three years from now Today they're asking us to go faster. today they're asking us to go faster I think that speaks to where the demand will be as we go forward. i think that speaks to where the demand will be as we go forward

Speaker 2: Got it. Any update, as we think about from a proprietary route perspective, you know, still again, a lot of the same considerations, I guess? It's nothing new to kind of call out there. Got it. got it Any update, as we think about from a proprietary route perspective, you know, still again, a lot of the same considerations, I guess? any update as we think about from a proprietary route perspective you know still again a lot of the same considerations i guess It's nothing new to kind of call out there. it's nothing new to kind of call out there

Speaker 1: No, nothing new. I mean, we obviously announced a new, a new route, from Minneapolis, to Seattle. That's a corridor that, as you can imagine, has a lot of demand. That's something that, we've been working on for a while now. It's been part of our capital plans. There are others that we're working on as well. We keep that close to the vest. No, nothing new. no nothing new I mean, we obviously announced a new, a new route, from Minneapolis, to Seattle. i mean we obviously announced a new a new route from minneapolis to seattle That's a corridor that, as you can imagine, has a lot of demand. that's a corridor that as you can imagine has a lot of demand That's something that, we've been working on for a while now. that's something that we've been working on for a while now It's been part of our capital plans. it's been part of our capital plans There are others that we're working on as well. there are others that we're working on as well We keep that close to the vest. we keep that close to the vest

Speaker 2: Okay. Okay. okay

Speaker 1: That gives us the opportunity to sell into those as well. Again, those are good examples of high density, meaningful routes that we can monetize in a very favorable way for our investors. We'll build those routes. We're not gonna build routes so that we can try to drive the price of Waves to the bottom. We'll leave that for others. The other thing that's interesting is as we focus more on the east-west traffic flows, because that really is where all the value is, because customers are gonna be able to consume that through one pane of glass, our belief is that we will very likely take share in the north-south, that more commoditized space, because we're gonna be really easy to do business with. That gives us the opportunity to sell into those as well. that gives us the opportunity to sell into those as well Again, those are good examples of high density, meaningful routes that we can monetize in a very favorable way for our investors. again those are good examples of high density meaningful routes that we can monetize in a very favorable way for our investors We'll build those routes. we'll build those routes We're not gonna build routes so that we can try to drive the price of Waves to the bottom. we're not gonna build routes so that we can try to drive the price of waves to the bottom We'll leave that for others. we'll leave that for others The other thing that's interesting is as we focus more on the east-west traffic flows, because that really is where all the value is, because customers are gonna be able to consume that through one pane of glass, our belief is that we will very likely take share in the north-south, that more commoditized space, because we're gonna be really easy to do business with. the other thing that's interesting is as we focus more on the east-west traffic flows because that really is where all the value is because customers are gonna be able to consume that through one pane of glass our belief is that we will very likely take share in the north-south that more commoditized space because we're gonna be really easy to do business with It'll truly be point, click, I need connectivity from here to here. Okay, I have it. It'll be up and running in a very short period of time. We'll see how that plays out, but that's certainly our hypothesis. It'll truly be point, click, I need connectivity from here to here. it'll truly be point click i need connectivity from here to here Okay, I have it. okay i have it It'll be up and running in a very short period of time. it'll be up and running in a very short period of time We'll see how that plays out, but that's certainly our hypothesis. we'll see how that plays out but that's certainly our hypothesis

Speaker 2: I guess just sticking with Waves, for a sec here. There was a clear call out that strategic Waves, I think you know, what you defined as 100 Gb or greater. I guess just sticking with Waves, for a sec here. i guess just sticking with waves for a sec here There was a clear call out that strategic Waves, I think you know, what you defined as 100 Gb or greater. there was a clear call out that strategic waves i think you know what you defined as 100 gb or greater

Speaker 1: Yeah Yeah yeah

Speaker 2: Were a standout driver in the quarter. There was also a mention of material uptick in RapidRoutes adoption. Were a standout driver in the quarter. were a standout driver in the quarter There was also a mention of material uptick in RapidRoutes adoption. there was also a mention of material uptick in rapidroutes adoption

Speaker 1: Yeah. Yeah. Yeah. yeah Yeah. yeah

Speaker 2: I mean, what's changed in terms of customer demand or in your product that's driving that, you know, momentum? I mean, what's changed in terms of customer demand or in your product that's driving that, you know, momentum? i mean what's changed in terms of customer demand or in your product that's driving that you know momentum

Speaker 1: Two things. I think on the, on the supply side, we've now been talking about it for over a year. As we've been deploying these large fiber networks for hyperscalers, we're also pulling fiber for ourselves. In two specific areas that we've highlighted are RapidRoutes. These are clusters of 16 markets at a time, and it's basically on-demand 400 Gb connectivity so that customers can be up and running really quickly. We've got the first two clusters done. The third one, I think is close to being done. We've also done a metro expansion so that in the dense metros, there's more capability there. That's the supply side. Two things. two things I think on the, on the supply side, we've now been talking about it for over a year. i think on the on the supply side we've now been talking about it for over a year As we've been deploying these large fiber networks for hyperscalers, we're also pulling fiber for ourselves. as we've been deploying these large fiber networks for hyperscalers we're also pulling fiber for ourselves In two specific areas that we've highlighted are RapidRoutes. in two specific areas that we've highlighted are rapidroutes These are clusters of 16 markets at a time, and it's basically on-demand 400 Gb connectivity so that customers can be up and running really quickly. these are clusters of 16 markets at a time and it's basically on-demand 400 gb connectivity so that customers can be up and running really quickly We've got the first two clusters done. we've got the first two clusters done The third one, I think is close to being done. the third one i think is close to being done We've also done a metro expansion so that in the dense metros, there's more capability there. we've also done a metro expansion so that in the dense metros there's more capability there That's the supply side. that's the supply side The demand side is that, again, I think we're starting to see the early stages of inference where enterprises is starting to consume AI in a more meaningful way. Again, latency matters. The example that I share is just think about it. All of us have, in one way or another, already had some kind of an interaction with a customer care agent. What would that experience be like if it took 30 seconds for that agent to respond, right? either through chat or voice. It would be horrendous. Remember, that agent is answering questions by going and looking for data, and that data could be anywhere. It could be in Texas, it could be in Virginia, it could be in North Dakota. It could be in all of those places. The demand side is that, again, I think we're starting to see the early stages of inference where enterprises is starting to consume AI in a more meaningful way. the demand side is that again i think we're starting to see the early stages of inference where enterprises is starting to consume ai in a more meaningful way Again, latency matters. again latency matters The example that I share is just think about it. the example that i share is just think about it All of us have, in one way or another, already had some kind of an interaction with a customer care agent. all of us have in one way or another already had some kind of an interaction with a customer care agent What would that experience be like if it took 30 seconds for that agent to respond, right? either through chat or voice. what would that experience be like if it took 30 seconds for that agent to respond right either through chat or voice It would be horrendous. it would be horrendous Remember, that agent is answering questions by going and looking for data, and that data could be anywhere. remember that agent is answering questions by going and looking for data and that data could be anywhere It could be in Texas, it could be in Virginia, it could be in North Dakota. it could be in texas it could be in virginia it could be in north dakota It could be in all of those places. it could be in all of those places It's putting together its response in real time so that that customer experience is a good experience. We have that today where customers can get information on inventory or on an outage. Outage is a really good example, right? Outage just happened. That agent is trying to answer that question with real-time data, and we don't know where that data is. We know it sits in a cloud, but I couldn't tell you physically where it is. The latency is what matters and that's why I think we're starting to see an uptick in the demand for these in these kinds of connectivity. It's putting together its response in real time so that that customer experience is a good experience. We have that today where customers can get information on inventory or on an outage. it's putting together its response in real time so that that customer experience is a good experience. we have that today where customers can get information on inventory or on an outage Outage is a really good example, right? outage is a really good example right Outage just happened. outage just happened That agent is trying to answer that question with real-time data, and we don't know where that data is. that agent is trying to answer that question with real-time data and we don't know where that data is We know it sits in a cloud, but I couldn't tell you physically where it is. we know it sits in a cloud but i couldn't tell you physically where it is The latency is what matters and that's why I think we're starting to see an uptick in the demand for these in these kinds of connectivity. the latency is what matters and that's why i think we're starting to see an uptick in the demand for these in these kinds of connectivity

Speaker 2: All right. Maybe, you know, touching on some other areas here. I think one of the more interesting points from 1Q was, you know, was the call-out on, you know, cannibalization. Yeah, I think you said that NaaS adoption is not cannibalizing the legacy- All right. all right Maybe, you know, touching on some other areas here. maybe you know touching on some other areas here I think one of the more interesting points from 1Q was, you know, was the call-out on, you know, cannibalization. i think one of the more interesting points from 1q was you know was the call-out on you know cannibalization Yeah, I think you said that NaaS adoption is not cannibalizing the legacy- yeah i think you said that naas adoption is not cannibalizing the legacy-

Speaker 1: Yeah Yeah yeah

Speaker 2: revenue as much as expected. I think over 60% of existing customers, existing customer NaaS customers are choosing to expand rather than simply just migrate. I guess what's driving that behavior from either a product packaging, sales motion, you know, customer economics perspective? revenue as much as expected. revenue as much as expected I think over 60% of existing customers, existing customer NaaS customers are choosing to expand rather than simply just migrate. i think over 60% of existing customers existing customer naas customers are choosing to expand rather than simply just migrate I guess what's driving that behavior from either a product packaging, sales motion, you know, customer economics perspective? i guess what's driving that behavior from either a product packaging sales motion you know customer economics perspective

Speaker 1: Yeah Yeah yeah

Speaker 2: Do you think it's durable? Do you think it's durable? do you think it's durable

Speaker 1: It's a really good question. I think there's more hypothesis there than fact 'cause we're at early stages. I think our running hypothesis is customers wanna make sure that they're comfortable with the new before they let go of the old. Do we think that it's permanent? No. I think that's foolish, and frankly, we don't want it to be. We want people to adopt the new as fast as possible. We'll take the fact that they're gonna run the old with the new for a while. That's a great problem to have. I don't think it is durable over time. I think you'll start to see customers as they experience NaaS wanna run with it more permanently. It's a really good question. it's a really good question I think there's more hypothesis there than fact 'cause we're at early stages. i think there's more hypothesis there than fact 'cause we're at early stages I think our running hypothesis is customers wanna make sure that they're comfortable with the new before they let go of the old. i think our running hypothesis is customers wanna make sure that they're comfortable with the new before they let go of the old Do we think that it's permanent? do we think that it's permanent No. no I think that's foolish, and frankly, we don't want it to be. i think that's foolish and frankly we don't want it to be We want people to adopt the new as fast as possible. we want people to adopt the new as fast as possible We'll take the fact that they're gonna run the old with the new for a while. we'll take the fact that they're gonna run the old with the new for a while That's a great problem to have. that's a great problem to have I don't think it is durable over time. i don't think it is durable over time I think you'll start to see customers as they experience NaaS wanna run with it more permanently. i think you'll start to see customers as they experience naas wanna run with it more permanently The flip side of that is that in consuming NaaS, they will be consuming more services. We're seeing that service growth. Again, remember, what is a NaaS port? It is a port that allows us to deliver all future services digitally. No more truck rolls, right? No more fixed infrastructure. It's delivered as software. The faster that they start to consume those ports as their daily motion, the more likely it is that they'll start to consume more and more services on top of that's the scalability that we've been looking for. The flip side of that is that in consuming NaaS, they will be consuming more services. the flip side of that is that in consuming naas they will be consuming more services We're seeing that service growth. we're seeing that service growth Again, remember, what is a NaaS port? again remember what is a naas port It is a port that allows us to deliver all future services digitally. it is a port that allows us to deliver all future services digitally No more truck rolls, right? no more truck rolls right No more fixed infrastructure. no more fixed infrastructure It's delivered as software. it's delivered as software The faster that they start to consume those ports as their daily motion, the more likely it is that they'll start to consume more and more services on top of that's the scalability that we've been looking for. the faster that they start to consume those ports as their daily motion the more likely it is that they'll start to consume more and more services on top of that's the scalability that we've been looking for

Speaker 2: Got it. Then just closing the loop on Alkira. As you think about, does it help you sell more into the same customers? Does it help you expand into new segments? Is it about improving retention, wallet share, all of the above? Got it. got it Then just closing the loop on Alkira. then just closing the loop on alkira As you think about, does it help you sell more into the same customers? as you think about does it help you sell more into the same customers Does it help you expand into new segments? does it help you expand into new segments Is it about improving retention, wallet share, all of the above? is it about improving retention wallet share all of the above

Speaker 1: It's all of the above. I mean, look, Alkira, as we said earlier, it really, once we close, is the fast path to where we ultimately want it to be. There's more innovation, though, that can come behind that. Again, we can use fancy words like programmable network, but let's just talk about what that means for a second and why it's important. Networking has always been just the necessary evil, right? The reality is, in today's world, it starts to become a vehicle by which you can unlock additional value. Think about energy, right? There's a lot of conversation around energy. It's all of the above. it's all of the above I mean, look, Alkira, as we said earlier, it really, once we close, is the fast path to where we ultimately want it to be. i mean look alkira as we said earlier it really once we close is the fast path to where we ultimately want it to be There's more innovation, though, that can come behind that. there's more innovation though that can come behind that Again, we can use fancy words like programmable network, but let's just talk about what that means for a second and why it's important. again we can use fancy words like programmable network but let's just talk about what that means for a second and why it's important Networking has always been just the necessary evil, right? networking has always been just the necessary evil right The reality is, in today's world, it starts to become a vehicle by which you can unlock additional value. the reality is in today's world it starts to become a vehicle by which you can unlock additional value Think about energy, right? think about energy right There's a lot of conversation around energy. there's a lot of conversation around energy Well, if you've got a bunch of data that's headed to Virginia to be processed, and again, GPU cluster, $2,000 an hour, and you reach an energy limitation in Virginia, and that data is just sitting in a parking lot waiting to be processed, that's huge cost. What happens in a world where you've got GPU capacity and energy capacity in North Dakota or Texas or somewhere yet to be determined because people continue to build data centers? What happen if the network could automatically repair itself and reroute those workloads to where there is energy and GPU capacity? That's an enormous unlock for enterprise. That's the network that we're building. That's the network that Alkira will help us deliver faster, and that's the network nobody else has today. That is huge, huge unlock, that's why we're so jazzed about this. Well, if you've got a bunch of data that's headed to Virginia to be processed, and again, GPU cluster, $2,000 an hour, and you reach an energy limitation in Virginia, and that data is just sitting in a parking lot waiting to be processed, that's huge cost. well if you've got a bunch of data that's headed to virginia to be processed and again gpu cluster $2,000 an hour and you reach an energy limitation in virginia and that data is just sitting in a parking lot waiting to be processed that's huge cost What happens in a world where you've got GPU capacity and energy capacity in North Dakota or Texas or somewhere yet to be determined because people continue to build data centers? what happens in a world where you've got gpu capacity and energy capacity in north dakota or texas or somewhere yet to be determined because people continue to build data centers What happen if the network could automatically repair itself and reroute those workloads to where there is energy and GPU capacity? what happen if the network could automatically repair itself and reroute those workloads to where there is energy and gpu capacity That's an enormous unlock for enterprise. that's an enormous unlock for enterprise That's the network that we're building. that's the network that we're building That's the network that Alkira will help us deliver faster, and that's the network nobody else has today. that's the network that alkira will help us deliver faster and that's the network nobody else has today That is huge, huge unlock, that's why we're so jazzed about this. that is huge huge unlock that's why we're so jazzed about this

Speaker 2: Great. Shifting gears to 2026 guidance expectations and EBITDA. I wanna get a little bit more color, I guess, on some of the puts and takes around the, you know, EBITDA guidance for the year, which you reaffirmed. Great. great Shifting gears to 2026 guidance expectations and EBITDA. shifting gears to 2026 guidance expectations and ebitda I wanna get a little bit more color, I guess, on some of the puts and takes around the, you know, EBITDA guidance for the year, which you reaffirmed. i wanna get a little bit more color i guess on some of the puts and takes around the you know ebitda guidance for the year which you reaffirmed

Speaker 1: Yeah. Yeah. yeah

Speaker 2: The first quarter was stronger than anticipated, which implies a, you know, pretty big step back or step down in the back half of the year. Just help us think about the puts and takes that we should be considering, you know, to help understand the EBITDA trajectory for the balance of the year. The first quarter was stronger than anticipated, which implies a, you know, pretty big step back or step down in the back half of the year. the first quarter was stronger than anticipated which implies a you know pretty big step back or step down in the back half of the year Just help us think about the puts and takes that we should be considering, you know, to help understand the EBITDA trajectory for the balance of the year. just help us think about the puts and takes that we should be considering you know to help understand the ebitda trajectory for the balance of the year

Speaker 1: Yeah. It's, we've had this question a lot since earnings. Remember, in first quarter, a few things that you need to adjust for. We sold the fiber to the home business halfway through the quarter. We also had one-time revenue, high EBITDA for publicly disclosed state of California that doesn't repeat itself. Those two things combined are about $60 million. You've got this legacy thing that we just talked about, where legacy ran a little hotter. It's certainly not something we're gonna plan for. Yeah. yeah It's, we've had this question a lot since earnings. it's we've had this question a lot since earnings Remember, in first quarter, a few things that you need to adjust for. remember in first quarter a few things that you need to adjust for We sold the fiber to the home business halfway through the quarter. we sold the fiber to the home business halfway through the quarter We also had one-time revenue, high EBITDA for publicly disclosed state of California that doesn't repeat itself. we also had one-time revenue high ebitda for publicly disclosed state of california that doesn't repeat itself Those two things combined are about $60 million. those two things combined are about $60 million You've got this legacy thing that we just talked about, where legacy ran a little hotter. you've got this legacy thing that we just talked about where legacy ran a little hotter It's certainly not something we're gonna plan for. it's certainly not something we're gonna plan for I really think you've got to adjust down Q1 for those kind of items, and I think you get to a number that's a lot more reasonable in terms of run rate, you know, the 770, 780 kind of run rate. I think that's what we'd see as baseline as we go forward. Now, what we don't know yet, and we haven't changed our annual guidance as a result, is when will Alkira close and how quickly can we start to monetize that? That's what we're working on right now. I really think you've got to adjust down Q1 for those kind of items, and I think you get to a number that's a lot more reasonable in terms of run rate, you know, the 770, 780 kind of run rate. i really think you've got to adjust down q1 for those kind of items and i think you get to a number that's a lot more reasonable in terms of run rate you know the 770 780 kind of run rate I think that's what we'd see as baseline as we go forward. i think that's what we'd see as baseline as we go forward Now, what we don't know yet, and we haven't changed our annual guidance as a result, is when will Alkira close and how quickly can we start to monetize that? now what we don't know yet and we haven't changed our annual guidance as a result is when will alkira close and how quickly can we start to monetize that That's what we're working on right now. that's what we're working on right now

Speaker 2: I think there's also some seasonality we need to kind of keep in mind, right, in the third quarter. I think there's also some seasonality we need to kind of keep in mind, right, in the third quarter. i think there's also some seasonality we need to kind of keep in mind right in the third quarter

Speaker 1: Absolutely. Absolutely. absolutely

Speaker 2: Right? Okay. Right? right Okay. okay

Speaker 1: Yeah, yeah. There's a lot of construction work and whatnot that's done in the third quarter because of weather and whatnot. Yeah, yeah. yeah yeah There's a lot of construction work and whatnot that's done in the third quarter because of weather and whatnot. there's a lot of construction work and whatnot that's done in the third quarter because of weather and whatnot

Speaker 2: Got it. You know, underlying a lot of this is your cost transformation program, right? You hit $400 million run rate in 2025, exiting 2025 rather, and you're targeting, I think it's $700 million exiting 2026, and then ultimately getting to the $1 billion level in 2027. Maybe help us think about what are the next major cost takeout, you know, cost work streams that are coming out, I guess, and where do you see the biggest incremental savings coming from within the program? Got it. got it You know, underlying a lot of this is your cost transformation program, right? you know underlying a lot of this is your cost transformation program right You hit $400 million run rate in 2025, exiting 2025 rather, and you're targeting, I think it's $700 million exiting 2026, and then ultimately getting to the $1 billion level in 2027. you hit $400 million run rate in 2025 exiting 2025 rather and you're targeting i think it's $700 million exiting 2026 and then ultimately getting to the $1 billion level in 2027 Maybe help us think about what are the next major cost takeout, you know, cost work streams that are coming out, I guess, and where do you see the biggest incremental savings coming from within the program? maybe help us think about what are the next major cost takeout you know cost work streams that are coming out i guess and where do you see the biggest incremental savings coming from within the program

Speaker 1: It's really, it's across the whole company. I would say that, you know, again, we have, as a lot of folks in the space have a lot of old IT systems. We actually just launched the final phase of our ERP, which is huge to have behind us. Team did a tremendous job with that. Ultimately that allowed us to turn off, I think, what was in the neighborhood of 30-35 different GLs. The second phase now, that was first phase. The second phase is procure-to-pay, which will unlock more value, right, as we go forward. We still have work to do around, you know, CRM and whatnot, so there'll be savings in that. Operationally, we continue to drive savings. It's really, it's across the whole company. it's really it's across the whole company I would say that, you know, again, we have, as a lot of folks in the space have a lot of old IT systems. i would say that you know again we have as a lot of folks in the space have a lot of old it systems We actually just launched the final phase of our ERP, which is huge to have behind us. we actually just launched the final phase of our erp which is huge to have behind us Team did a tremendous job with that. team did a tremendous job with that Ultimately that allowed us to turn off, I think, what was in the neighborhood of 30 - 35 different GLs. ultimately that allowed us to turn off i think what was in the neighborhood of 30 - 35 different gls The second phase now, that was first phase. the second phase now that was first phase The second phase is procure-to-pay, which will unlock more value, right, as we go forward. the second phase is procure-to-pay which will unlock more value right as we go forward We still have work to do around, you know, CRM and whatnot, so there'll be savings in that. we still have work to do around you know crm and whatnot so there'll be savings in that Operationally, we continue to drive savings. operationally we continue to drive savings With the sale of the fiber-to-the-home business, the remaining consumer business that we're managing for cash is being absorbed into our enterprise ops team. One management structure there. More savings there. You'll continue to see efficiency across the network itself as really being the core driver, and that's everything from, you know, real estate and utilities and whatnot. It's also gonna be labor efficiencies as we get better at what we do. With the sale of the fiber-to-the-home business, the remaining consumer business that we're managing for cash is being absorbed into our enterprise ops team. with the sale of the fiber-to-the-home business the remaining consumer business that we're managing for cash is being absorbed into our enterprise ops team One management structure there. one management structure there More savings there. more savings there You'll continue to see efficiency across the network itself as really being the core driver, and that's everything from, you know, real estate and utilities and whatnot. you'll continue to see efficiency across the network itself as really being the core driver and that's everything from you know real estate and utilities and whatnot It's also gonna be labor efficiencies as we get better at what we do. it's also gonna be labor efficiencies as we get better at what we do

Speaker 2: Got it. You know, is there a credible path to exceed the billion-dollar target? Is the focus more on execution certainty rather than trying to stretch that headline number? Got it. got it You know, is there a credible path to exceed the billion-dollar target? you know is there a credible path to exceed the billion-dollar target Is the focus more on execution certainty rather than trying to stretch that headline number? is the focus more on execution certainty rather than trying to stretch that headline number

Speaker 1: We, we are very confident in the $1 billion. We'll see if we can go further. The answer is go faster, go bigger if we can. There's a lot of focus on that. We, we are very confident in the $1 billion. we we are very confident in the $1 billion We'll see if we can go further. we'll see if we can go further The answer is go faster, go bigger if we can. the answer is go faster go bigger if we can There's a lot of focus on that. there's a lot of focus on that

Speaker 2: Okay. That's great. On free cash flow, you raised the 2026 guidance to $1.9 billion-$2.1 billion. There's about $729 million of, you know, fiber to the home proceeds that float. Okay. okay That's great. that's great On free cash flow, you raised the 2026 guidance to $1.9 billion-$2.1 billion. on free cash flow you raised the 2026 guidance to $1.9 billion-$2.1 billion There's about $729 million of, you know, fiber to the home proceeds that float. there's about $729 million of you know fiber to the home proceeds that float

Speaker 1: Yeah Yeah yeah

Speaker 2: Into OCF. If we strip that out though, how should we think about the organic free cash flow growth in 2026? I guess, what's the shape of that trajectory, you know, as we maybe look out? Into OCF. into ocf If we strip that out though, how should we think about the organic free cash flow growth in 2026? if we strip that out though how should we think about the organic free cash flow growth in 2026 I guess, what's the shape of that trajectory, you know, as we maybe look out? i guess what's the shape of that trajectory you know as we maybe look out

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

Speaker 2: Yeah. Yeah. yeah

Speaker 1: It's still gonna be spiky because of the PCF flows that move around quarter-to-quarter. I mean, again, the headline messages are that all in we're generating, to your point, organically some great cash flow this year. Over the next five years, the financials we laid out at Investor Day, which were pre-Alkira, were fully funded. We should see leverage over the next five years come down into the, you know, low to mid threes. A lot of that at this point is gonna be driven by, frankly, EBITDA growth versus absolute debt reduction. The capital stack is in great shape. We're just finalizing a few things now, the reality is that should largely be behind us by the time we close this quarter. It's still gonna be spiky because of the PCF flows that move around quarter- to- quarter. it's still gonna be spiky because of the pcf flows that move around quarter- to- quarter I mean, again, the headline messages are that all in we're generating, to your point, organically some great cash flow this year. i mean again the headline messages are that all in we're generating to your point organically some great cash flow this year Over the next five years, the financials we laid out at Investor Day, which were pre-Alkira, were fully funded. over the next five years the financials we laid out at investor day which were pre-alkira were fully funded We should see leverage over the next five years come down into the, you know, low to mid threes. we should see leverage over the next five years come down into the you know low to mid threes A lot of that at this point is gonna be driven by, frankly, EBITDA growth versus absolute debt reduction. a lot of that at this point is gonna be driven by frankly ebitda growth versus absolute debt reduction The capital stack is in great shape. the capital stack is in great shape We're just finalizing a few things now, the reality is that should largely be behind us by the time we close this quarter. we're just finalizing a few things now the reality is that should largely be behind us by the time we close this quarter

Speaker 2: Okay. That's great transition. As we at the Analyst Day, you also talked about, you know, organic growth first, then inorganic, then debt reduction, and then finally buybacks. Okay. okay That's great transition. that's great transition As we at the Analyst Day, you also talked about, you know, organic growth first, then inorganic, then debt reduction, and then finally buybacks. as we at the analyst day you also talked about you know organic growth first then inorganic then debt reduction and then finally buybacks

Speaker 1: Yeah Yeah yeah

Speaker 2: As your capital allocation priorities. as you just said, you know, now that you're, quote, "fully funded," I guess, what are the milestones you wanna hit or what we should be thinking about from a outside looking in perspective, what should we be thinking about before capital returns begin? I guess how should shareholders think about potential timing? As your capital allocation priorities. as you just said, you know, now that you're, quote, "fully funded," I guess, what are the milestones you wanna hit or what we should be thinking about from a outside looking in perspective, what should we be thinking about before capital returns begin? as your capital allocation priorities as you just said you know now that you're quote "fully funded," i guess what are the milestones you wanna hit or what we should be thinking about from a outside looking in perspective what should we be thinking about before capital returns begin I guess how should shareholders think about potential timing ? i guess how should shareholders think about potential timing

Speaker 1: Yeah. I think back to those priorities, I think we actually just did that with Alkira, right? We paid cash for that. Again, when you look at the CapEx that's avoided, we think that acquisition cost us on a net basis somewhere, call it, $275 million-$300 million all paid for with cash. The jobs number one, two, three, and four are get to revenue growth. Again, what you're seeing inside of Lumen today and what you're seeing in our results is a revenue performance that is still declining but dramatically better than our competitive set. Everything that we can do to accelerate that return to growth is what we're doing first. Yeah. yeah I think back to those priorities, I think we actually just did that with Alkira, right? i think back to those priorities i think we actually just did that with alkira right We paid cash for that. we paid cash for that Again, when you look at the CapEx that's avoided, we think that acquisition cost us on a net basis somewhere, call it, $275 million - $300 million all paid for with cash. again when you look at the capex that's avoided we think that acquisition cost us on a net basis somewhere call it $275 million - $300 million all paid for with cash The jobs number one, two, three, and four are get to revenue growth. the jobs number one two three and four are get to revenue growth Again, what you're seeing inside of Lumen today and what you're seeing in our results is a revenue performance that is still declining but dramatically better than our competitive set. again what you're seeing inside of lumen today and what you're seeing in our results is a revenue performance that is still declining but dramatically better than our competitive set Everything that we can do to accelerate that return to growth is what we're doing first. everything that we can do to accelerate that return to growth is what we're doing first To try to give an estimate on time in terms of when we would start to return capital because we, you know, we think we've exhausted those growth avenues, it's just too early to call that, especially with Alkira in the mix. I think if anything, our opportunity right now is to hopefully pull in that point of inflection on revenue sooner. You know, when that is, hard to say at this point. We had said that revenue would inflect on the enterprise business in 2028 and total Lumen in 2029. You know, once we close, we'll try to give a perspective on what we think that is. All of our energy right now is on how we can light that up as quickly as possible as soon as the deal closes. To try to give an estimate on time in terms of when we would start to return capital because we, you know, we think we've exhausted those growth avenues, it's just too early to call that, especially with Alkira in the mix. to try to give an estimate on time in terms of when we would start to return capital because we you know we think we've exhausted those growth avenues it's just too early to call that especially with alkira in the mix I think if anything, our opportunity right now is to hopefully pull in that point of inflection on revenue sooner. i think if anything our opportunity right now is to hopefully pull in that point of inflection on revenue sooner You know, when that is, hard to say at this point. you know when that is hard to say at this point We had said that revenue would inflect on the enterprise business in 2028 and total Lumen in 2029. we had said that revenue would inflect on the enterprise business in 2028 and total lumen in 2029 You know, once we close, we'll try to give a perspective on what we think that is. you know once we close we'll try to give a perspective on what we think that is All of our energy right now is on how we can light that up as quickly as possible as soon as the deal closes. all of our energy right now is on how we can light that up as quickly as possible as soon as the deal closes

Speaker 2: Maybe on the other side of Alkira, we could get a revision or maybe updated viewpoint in how you're thinking about the revenue trajectory? Maybe on the other side of Alkira, we could get a revision or maybe updated viewpoint in how you're thinking about the revenue trajectory? maybe on the other side of alkira we could get a revision or maybe updated viewpoint in how you're thinking about the revenue trajectory

Speaker 1: Yeah, and yes. The answer, yes, but we're also gonna learn as we go. I mean, again, we're creating something that hasn't been created before. The good news is I think we can look to some of the growth curves of things like cloud as a reference point. We'll continue to update the market as we move along this journey. I mean, it's super exciting. I think if anything, we are shielding some of our enthusiasm for this because, you know, we don't know how quick it'll go, but there's a lot of internal excitement about this being big for Lumen, and so we're gonna try to make that happen. Yeah, and yes. yeah and yes The answer, yes, but we're also gonna learn as we go. the answer yes but we're also gonna learn as we go I mean, again, we're creating something that hasn't been created before. i mean again we're creating something that hasn't been created before The good news is I think we can look to some of the growth curves of things like cloud as a reference point. the good news is i think we can look to some of the growth curves of things like cloud as a reference point We'll continue to update the market as we move along this journey. we'll continue to update the market as we move along this journey I mean, it's super exciting. i mean it's super exciting I think if anything, we are shielding some of our enthusiasm for this because, you know, we don't know how quick it'll go, but there's a lot of internal excitement about this being big for Lumen, and so we're gonna try to make that happen. i think if anything we are shielding some of our enthusiasm for this because you know we don't know how quick it'll go but there's a lot of internal excitement about this being big for lumen and so we're gonna try to make that happen

Speaker 2: Do you have well, do you have a preference for the method of capital returns? Do you have well, do you have a preference for the method of capital returns? do you have well do you have a preference for the method of capital returns

Speaker 1: If we got to that point, it would be, I think share repurchases likely. Look, we've made the tough decisions around things like a dividend. I don't think you're gonna see us return to that, you know, at the first possible chance, because the reality is, this is an area, in terms of, you know, networking in an AI world that continues to evolve. Until we've exhausted the investment opportunities that we think drive a differentiated return for shareholders, it's way too early to make that call. If we got to that point, it would be, I think share repurchases likely. if we got to that point it would be i think share repurchases likely Look, we've made the tough decisions around things like a dividend. look we've made the tough decisions around things like a dividend I don't think you're gonna see us return to that, you know, at the first possible chance, because the reality is, this is an area, in terms of, you know, networking in an AI world that continues to evolve. i don't think you're gonna see us return to that you know at the first possible chance because the reality is this is an area in terms of you know networking in an ai world that continues to evolve Until we've exhausted the investment opportunities that we think drive a differentiated return for shareholders, it's way too early to make that call. until we've exhausted the investment opportunities that we think drive a differentiated return for shareholders it's way too early to make that call

Speaker 2: Yep. Yep. yep

Speaker 1: Candidly, we don't even know what all those pathways are gonna be yet. Candidly, we don't even know what all those pathways are gonna be yet. candidly we don't even know what all those pathways are gonna be yet

Speaker 2: I guess from, you know, great segue, just thinking about Alkira opportunity, right, kind of availed itself. It could be interesting, but there could be multiple paths here. How are you thinking about potential M&A going forward? I mean, you've emphasized in the past, you know, discipline and reasonable valuations, Alkira, you know, fits that framework. As you look ahead, how should we think about your appetite for additional acquisitions? You know, what could be strategic? What could be compelling? I guess from, you know, great segue, just thinking about Alkira opportunity, right, kind of availed itself. i guess from you know great segue just thinking about alkira opportunity right kind of availed itself It could be interesting, but there could be multiple paths here. it could be interesting but there could be multiple paths here How are you thinking about potential M&A going forward? how are you thinking about potential m&a going forward I mean, you've emphasized in the past, you know, discipline and reasonable valuations, Alkira, you know, fits that framework. i mean you've emphasized in the past you know discipline and reasonable valuations alkira you know fits that framework As you look ahead, how should we think about your appetite for additional acquisitions? as you look ahead how should we think about your appetite for additional acquisitions You know, what could be strategic? you know what could be strategic What could be compelling? what could be compelling

Speaker 1: Yeah. I think it would be more things like Alkira, things that further the digitization of the network. Those would certainly be our priority. Again, with Alkira, we're not just buying software. The management team, and quite frankly, deep below the management team, on the Alkira side, are super excited about this transaction because it has the ability to bring their dreams to life. There's an innovation pipeline that exists. There are other ideas that exist inside of Alkira. I think it's highly likely you'll see more coming from that, and it just gives us more organic pathways to grow as well. Look, if there's something else that would further the strategic agenda, we'll look at it. And time will tell. Yeah. yeah I think it would be more things like Alkira, things that further the digitization of the network. i think it would be more things like alkira things that further the digitization of the network Those would certainly be our priority. those would certainly be our priority Again, with Alkira, we're not just buying software. again with alkira we're not just buying software The management team, and quite frankly, deep below the management team, on the Alkira side, are super excited about this transaction because it has the ability to bring their dreams to life. the management team and quite frankly deep below the management team on the alkira side are super excited about this transaction because it has the ability to bring their dreams to life There's an innovation pipeline that exists. there's an innovation pipeline that exists There are other ideas that exist inside of Alkira. there are other ideas that exist inside of alkira I think it's highly likely you'll see more coming from that, and it just gives us more organic pathways to grow as well. i think it's highly likely you'll see more coming from that and it just gives us more organic pathways to grow as well Look, if there's something else that would further the strategic agenda, we'll look at it. look if there's something else that would further the strategic agenda we'll look at it And time will tell. and time will tell Nothing on the books right now. Nothing on the books right now. nothing on the books right now

Speaker 2: All right. Well, nothing to announce here today, unfortunately. All right. all right Well, nothing to announce here today, unfortunately. well nothing to announce here today unfortunately

Speaker 1: Exactly. Nothing to announce here today. Exactly. exactly Nothing to announce here today. nothing to announce here today

Speaker 2: Well- Well- well-

Speaker 1: Other than the fact that we're super excited, and we think this is gonna be big. Other than the fact that we're super excited, and we think this is gonna be big. other than the fact that we're super excited and we think this is gonna be big

Speaker 2: Well, Chris, thank you, as always for joining us, and thanks everybody. I think that's a great place to end it, and everybody enjoy the rest of your day. Well, Chris, thank you, as always for joining us, and thanks everybody. well chris thank you as always for joining us and thanks everybody I think that's a great place to end it, and everybody enjoy the rest of your day. i think that's a great place to end it and everybody enjoy the rest of your day

Speaker 1: Thank you. Thank you. thank you