00:00Chris, I want to kick it off with you, if we may, and get this going.
00:03You did just close this acquisition of Alkira, and forgive me if I am mispronouncing.
00:08Tell us, what's the rationale for this transaction?
00:11What does it give you?
00:12Yeah, and you got the pronunciation right.
00:15It's really revolutionary in the networking space.
00:19If you think about historical enterprise networking, it was point-to-point connectivity.
00:25It was very commoditized and, frankly, very clunky and hard to consume.
00:31And when you think about an AI-driven world, it's not just about connectivity from your company to the cloud.
00:39That's what we would call north-south traffic.
00:42It's really now rapidly becoming the need to move traffic and workloads between clouds, or what we would refer to
00:51as east-west traffic.
00:52That's where the problem exists for enterprise today.
00:56And what Alkira brings us day one today is really the marriage of that cloud-to-cloud east-west traffic
01:04with the company-to-cloud north-south traffic that Lumen already had.
01:09So it's really creating a new category at the right time.
01:14Thanks, Chris, for joining us.
01:15I'm curious, could you talk a little bit about how this could impact your outlook as a business?
01:20I know that you spoke to investors earlier this year and provided projections for this year.
01:25How does Alkira change the business case for you as Lumen?
01:29Yeah, it really changes it tremendously for a couple of reasons.
01:34When we laid out our financial projections at Investor Day earlier this year,
01:39we were planning on building that east-west capability, that cloud-to-cloud capability,
01:45which was going to take a couple of years and a couple hundred million dollars to do so.
01:51When we saw what Alkira had to offer, which was that and more,
01:57we moved very quickly to acquire them because it brings us that capability today.
02:02So what we're doing right now is actually just on a meeting before this is looking at the roadmaps,
02:11how quickly sales plays can be developed.
02:14And over the course of the balance of this year, we're going to be going hard at how we can
02:22accelerate our revenue.
02:23Now, a couple of just data points below that.
02:27What that means is we're not a telco anymore, right?
02:30We are not focusing on the legacy business.
02:33We'll have solutions for customers who use voice products.
02:36But that is being de-emphasized.
02:38The full energy of Lumen is going into the digitization of networking.
02:43The second thing is that since closing the deal, where we can get teams in rooms,
02:49the early read is that what we've acquired is even more special than we thought.
02:56And so we're going to do everything we can to bring value to shareholders as fast as possible.
03:03Your share price is down about 12% since the beginning of the year.
03:07What does that tell you?
03:08What's behind that drop?
03:09And how concerned are you also with investor concerns more broadly about AI frothiness?
03:16Do you expect to be hit by that?
03:18Yeah.
03:19So I think there's a couple of things.
03:22We're still valued like a telco that's underperforming.
03:26I don't think the market has really looked at the fact or realized the fact that over half of our
03:31revenue is in this growth area.
03:34And Alkira only supercharges that.
03:36So I think, you know, with time and education, that fixes itself.
03:40As it relates to the AI volatility, you know, there's a lot of talk about a bubble.
03:46And candidly, we're just not seeing it.
03:49If you go back in time when the predecessors of Lumen, Level 3, for example, built these big networks,
03:59they were building them at the time the Internet was coming about.
04:03And really, that was a solution looking for a problem.
04:07This is the exact opposite.
04:09The problem is real, where data volumes are exploding.
04:15The data is getting further and further away from where companies need to access it.
04:19They need to quickly move that data to where workloads can be processed on GPUs.
04:25And, oh, yeah, throw in energy constraints, which only make that more complicated.
04:30Am I sending the data to the right place?
04:32What we have in Alkira now is the nervous system, if you will, of AI.
04:41And that's needed by whoever the winners are going to be.
04:45So who the winners and losers are is less important to us.
04:49We are deeply ingrained in a lot of the AI infrastructure that exists today.
04:56And the capabilities that we now bring to market allow enterprise to, in a programmatic way, manage their networks,
05:06which has never been able to happen before.
05:10This is going to turn networking upside down.
05:13So, Chris, you mentioned AI.
05:15When do your AI investments start translating into earnings growth?
05:18Because your valuation has rebounded, but your EBITDA is still expected to decline this year.
05:24Yeah.
05:24Actually, our EBITDA will inflect this year.
05:28That's a commitment that we've made to the street.
05:30It's not a huge inflection because we are still managing that legacy base.
05:35But it will grow from there.
05:37And we expected, at the time of our Investor Day, revenue to inflect in 2028.
05:43Again, the work that we're doing right now between now and the end of the year to accelerate that will
05:49inform, you know,
05:51if we can pull that forward or not.
05:52But the early indications are we can.
05:55So it's starting to show up.
05:57The big, big builds that we did with the hyperscalers are 20-year agreements.
06:03So that revenue is slow to move in.
06:05Those projects are on time, well underway, and bring great margin to Lumen.
06:11The thing that we're not going to chase is a bunch of new build-it-and-they-will-come builds
06:17because there's just no return in that.
06:19Our focus is really on monetizing the soon-to-be 58 million fiber miles that we have in the ground
06:27from 12 just a few years ago,
06:30and really unlocking the network in the cloud, bringing things like firewalls and zero threat and load provisioning in the
06:44network fabric itself.
06:45So the opportunity here is for enterprise to really have the easy button for network consumption
06:53and not have to engage in co-location facilities and firewalls and a whole bunch of complex equipment wired together
07:02to make networking work.
07:03That's where this goes from here.
07:05Thank you, Chris.
07:06Just wondering, you also, of course, closed an acquisition sale earlier this year to AT&T.
07:13You brought in over $5 billion, selling your consumer business to them.
07:17You improved your finances quite a bit since then.
07:20You restructured debt earlier, but you also at the time axed your dividend.
07:25What's your message to investors with regards to the dividend going forward?
07:29Yeah, really the message is this is about growth, and every resource that we have is focused on growth right
07:36now,
07:36and we see lots of opportunity to invest those funds in an ROIC manner that is very accretive to shareholders.
07:46So that's our focus.
07:47But again, I want to just touch on what you just said.
07:52What allowed us to acquire Alkira and really revolutionize enterprise networking is all of that restructuring,
08:00selling non-strategic assets, recapitalizing the company, fixing the maturity curve, going from three credit entities to one,
08:08so we have alignment across all of our investor base.
08:11It's been an enormous amount of work, and Alkira was really that, as well as the adoption of our network
08:18as a service product,
08:19are really the first indicators of where we're going, and we're just getting started.
08:23So we've moved from defense to offense, and here we go.
08:28Chris just got about 45 seconds left here.
08:30I want to go back to where we started, talking about the closing of Alkira.
08:34You also closed the sale of your consumer business to AT&T.
08:37So any other deal-making to further build out what you call the nervous system of AI?
08:43And again, just got about 45 seconds.
08:45Yeah, we've got a lot to work with Alkira already, and again, as I said, we're finding more and more
08:51in that,
08:52but we will certainly look for things that expand that footprint and keep our lead in place.
08:59We'll also look at options around the legacy business and continue to do that.
09:03We have been doing it, but as I said, we're de-emphasizing that.
09:07We're really focused on the new way of networking.
