Lumen CEO Jeff Storey: We’re ‘Revving Up’ Our Growth Engine

‘We’re deeply excited about our enterprise business as we continue to invest aggressively in edge compute, storage, SASE and our security products,” said Lumen CEO Jeff Storey during the company’s fourth-quarter 2021 earnings call.

Returning To Growth

Lumen Technologies, formerly CenturyLink, has struggled to remain profitable in recent quarters as the COVID-19 pandemic slowed enterprise spending, but the company is on the upswing, Jeff Storey, Lumen’s president and CEO, said during the company’s fourth-quarter 2021 earnings call Wednesday evening.

Monroe, La.-based Lumen is slowly returning to growth thanks to two strategies. The first is the company’s investment in the next-generation IT solutions that enterprises are clamoring for, such as edge computing, storage, security and managed services. Lumen is also working to lose some dead weight in the form of strategic divestitures that the company announced in 2021. The two major divestitures are worth more than $10 billion collectively and will help the company prioritize strategic fiber investments, namely, its Quantum fiber offering around which Lumen is “revving up” its growth engine, Storey said, as well as growing its enterprise segment, the company said.

Lumen isn’t expecting “straight line” revenue growth. However, Storey remains confident the company will hit its goals and said the sales funnel is back to pre-pandemic levels as enterprises adjust to hybrid work and search for strategic IT services to move them into the future.

From its business segment earnings to its divestures and fourth-quarter 2021 financial results, here are five things you should know about Lumen Technologies right now.

Next-Gen Services Focus

For its all-important enterprise segment, Lumen will continue to heavily invest in strategic IT offerings, such as edge computing and storage, security and secure access service edge (SASE), and managed services, Storey said.

“We’re deeply excited about our enterprise business as we continue to invest aggressively in edge compute, storage, SASE and our security products. Our customers’ digital experience across our core networking services is unique and drives success with a customer-first posture,” he said.

The carrier also plans to “aggressively” grow its Quantum fiber footprint, its premier fiber-based connectivity option, by tapping into the large, addressable market opportunity of 12 million locations. Lumen said it expects to target new and existing customers with its “superior” Quantum offering. In the fourth quarter, the company had 2.6 million-enabled locations within its 16-state footprint.

“Quantum will help drive revenue growth and lower the operating costs for our mass markets segment,” Storey said.

Lumen last year renamed its consumer segment “mass markets.”

Business Services Results

Lumen generated 72 percent of its revenue from business services in fourth-quarter 2021, a segment that had been stressed in recent quarters because of Lumen’s struggling—and now offloaded—SMB segment and the impact of the COVID-19 pandemic on business buying trends.

Lumen’s large enterprise segment dipped 1 percent to $922 million during the quarter compared with revenue of $932 million a year ago. The midmarket segment remained flat at $665 million in the fourth quarter. The service provider eliminated its SMB reporting segment during the first quarter of 2021.

Overall, Lumen’s total business segment revenue stayed flat, totaling $3.49 billion in the fourth quarter.

The mass markets segment brought in 28 percent of the company’s revenue. Wholesale revenue continued to slump during the quarter, falling 2 percent to $1.35 million from $1.46 million in the year-ago quarter.

Supply streams are still stressed and Lumen has been working with its diverse suppliers to mitigate shortages. The company doesn’t expect pricing pressures to impede its growth, Storey said.

Growing Through Divestiture

The service provider in August confirmed plans to divest two parts of its business as it faced financial headwinds. Lumen said it would sell its incumbent local exchange carrier (ILEC) business, which includes its consumer, small business, wholesale and mostly copper-served enterprise customers and assets in 20 states to investment management firm Apollo Global Management in a $7.5 billion deal. Lumen is holding onto its ILEC assets in 16 states, as well as its national fiber routes and its competitive LEC networks. The company expects the deal to close during the first half of 2022.

Lumen in July also revealed plans to divest its Latin American business to investment firm Stonepeak for $2.7 billion in another deal that the company said will help it return to revenue growth and leave room for it to invest in strategic business services. That deal is also still expected to close during the second half of 2022.

Fourth-Quarter Results

For the fourth quarter ended Dec. 31, Lumen reported net income of $508 million compared with $2.29 billion in the same quarter a year ago. The company reported total revenue of $4.85 billion and diluted earnings per share of 50 cents, a 1 percent decline compared with $4.89 billion and ($2.21) per share in fourth-quarter 2020.

Full-Year 2021 Results

For the full 2021 year, Lumen posted total operating revenue of $19.69 billion, down 4.9 percent from $20.71 billion in 2020. Lumen reported diluted earnings per share for 2021 of $1.91. The company’s net income was $2.03 billion for the year.