Lumen Technologies’ ‘Turnaround’ Progress Includes Investment In Fiber, SASE And UC

‘We have a new mission for Lumen — to digitally connect people, data and applications, quickly, securely and effortlessly … In addition to improved revenues this quarter, we’re seeing green shoots of progress in several areas,’ the telecom’s president and CEO Kate Johnson said during Lumen’s Q1 2023 earnings call.

Telecom giant Lumen Technologies, formerly CenturyLink, has begun to see traction in new growth areas, but the company’s executives say it’s still very early in Lumen’s two-year “turnaround” story.

“We have a new mission for Lumen — to digitally connect people, data and applications, quickly, securely and effortlessly … In addition to improved revenues this quarter, we’re seeing green shoots of progress in several areas,” Lumen’s president and CEO, Kate Johnson, told investors on Tuesday evening.

Johnson during the company’s first earnings call of 2023 in February said that she saw this year as a “reset year” as the company, which has struggled to gain financial footing over the last couple years, makes ambitious moves to grow by divestiture while making internal investments in high-growth areas such as managed security, secure access service edge (SASE) and unified communications (UC) and collaboration.

The company during its first fiscal quarter of 2023 saw an increase in Lumen’s “Grow” business product revenue category on a quarter-over-quarter basis. The Grow category pulled in $1.13 billion in Q1 2023 compared to Grow revenue of $1.09 billion in Q4 2022. Lumen said these results demonstrate a “significant improvement” when compared to the first quarter 2022 when considering the impacts of Lumen’s divested businesses.

The company also increased its Quantum Fiber-enabled location pacing, deploying approximately 120 thousand fiber locations during 2023’s first quarter. Johnson called Quantum “core” to Lumen’s growth agenda.

[Related: Lumen’s Exec Team Taking The Provider From ‘Channel-Friendly’ To ‘Channel-Focused’]

The company in November announced an exclusive arrangement for the proposed sale of its EMEA business to Colt Technology Services for $1.8 billion. Lumen in October finalized the $7.5 billion sale of its incumbent local exchange carrier (ILEC) business, which included its consumer, small business, wholesale and mostly copper-served enterprise customers and assets in 20 states to Brightspeed, a brand new company that launched its operations last Fall. Two months earlier, Lumen closed the sale of its Latin American Business to investment firm Stonepeak for $2.7 billion.

Lumen’s financial results reflected the impacts from the company’s two recently closed divestitures, according to Lumen.

Lumen’s large enterprise segment, which contributed to 79.1 percent of the company’s revenue during the quarter, dipped 17 percent to $1.19 billion during the quarter compared with revenues of $1.44 billion a year ago. The midmarket enterprise segment declined 10 percent to $515 million in the first quarter compared to $573 million in Q1 2022. The service provider eliminated its SMB reporting segment last year. Enterprise Channels, a relatively new reporting segment for the service provider, fell 14 percent to $2.14 billion from $2.49 billion a year prior.

Strength in emerging IT areas for Lumen, including UC and collaboration, helped to stave off legacy voice and technology declines for the company, said Chris Stansbury, Lumen’s CFO.

Overall, Lumen’s total business segment revenue slipped 12.9 percent, totaling $2.96 billion in the first quarter compared to $3.40 billion a year ago. The mass markets segment, which accounted for about 20 percent of Lumen’s business during the quarter, slipped 38.7 percent to $782 million from $1.28 billion in Q1 2022. Wholesale revenue slumped down 9.9 percent during the quarter to $817 million from $907 million in the year-ago quarter.

For the first quarter of 2023 that ended March 31, Lumen reported total revenue of $3.74 billion, beating Wall Street’s expectations and representing a decline of 20 percent compared to $4.68 billion in the year-ago period. The company reported diluted earnings per share of 52 cents, a 11.8 percent decline compared with 59 cents per share in Q1 2022. Net income was $511 million for the first quarter 2023, compared to $599 million for the first quarter last year.

Lumen in February announced changes to its executive leadership team. The company brought on tech veterans Sham Chotai as executive vice president of product and technology and Jay Barrows as executive vice president of enterprise sales and public sector. Lumen said the changes will better position it for growth and to place more of an emphasis on customer experience.