All right. Good afternoon, everybody. Thanks again for joining us here this year. It's my great pleasure to welcome Chris Stansbury, CFO of Lumen. Welcome to San Francisco. Before we get started, please note for important disclosures, see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. Chris, it's just coming up on a year since you joined Lumen. It's a little bit of a whirlwind ride. Kate joined in November. You know, for people who've been, less connected to the story, perhaps just take us through, you know, what's been going on over the past year and where we are today. Yeah, a lot of change, really. If you look at the last year, Lumen divested of two major businesses. Those closed last year. We sold our 20-state ILEC business to Apollo. Brightspeed is the new company. Then we sold our LatAm business. Cirion is the new company there. Really helped establish two new companies. A lot of heavy lifting in that. Really with the closure of the sale to Apollo, the board kind of reevaluated where we were. With the lower EBITDA that came from that, we paid down a lot of debt, then we changed our capital allocation priorities. We eliminated the dividend and really started to drive the change towards a pivot to growth. I was hired a year ago with some growth experience. It's why I came. I see a real opportunity here. Kate joined, and very much a growth orientation. As we came into this year, we hit reset. We're investing in the company to drive change quickly that we believe will get us back to revenue and EBITDA stability by the end of next year, and then growth thereafter. Very different mindset as we go forward. Great. That's helpful. Take us back a year ago, you come in, what are the things that, you know, surprised you, both positive and negative? 'Cause you'd been on the electronic side of things, distribution side. Yeah. I was in electronics distribution. There was also enterprise product distribution in that, so some overlay, but not a lot. I think, you know, as it relates to Lumen itself, there's an incredible asset that sits there that I think is really yet to be monetized. If you look at what is Lumen's network, our core DNA, it's the largest ultra-low-loss fiber network in the world, and we're gonna double the size of that footprint in the coming years. In terms of the ability to deliver connectivity at scale and efficiently, it's unparalleled. The challenge is how do you monetize that? That's a space that just on its own will become increasingly commoditized. Lumen has a lot of product that exists today, as well as opportunity for future product that very near in we should own really around beyond connectivity, things like security, edge computing, where we have edge built and it's, you know, latency- slaying power. Really solutions integration. How do you bring in a partner network that should be consuming our network to deliver it? I think the biggest surprise is coming from outside of telecom is really the telecom mindset around what is winning. It's very foreign to me because winning is playing to not lose. Winning is, you know, recognizing an industry that tends to move down and to the right over time. I seem to be, like, getting some feedback here. Trying to figure out how to do that more slowly than the guys that you're standing next to. That's very different than a growth mindset and a growth orientation. I think there's an enormous opportunity for Lumen to unlock that first in this space. As a result, winning is defined as growing. That's what we're here to do. Great. You started to unpack that when you came on board with this segment analysis, grow, harvest, nurture, et cetera. Help us understand that path to stability and how your strategic priorities, you know, unfold in 2023. Sure. We've done a lot of work, to your point, around providing more visibility for the broader investor community into what is Lumen. It was a bit of a black box before. Grow, nurture, and harvest really had two functions. One was disclosure. Really the key to that was that you know, our belief is that if you took the space in general, you know, Lumen and its competitors, we're actually starting in a pretty good place, where our reliance on legacy, while still high, we believe is less than the competition, because there was some good work that was done that we can leverage. The second reason was to really drive more focus internally on resource allocation. When I came to Lumen, because of the need to grow, everybody was trying to grow, and it didn't matter if they were in a new product or a legacy product. It didn't matter if they were number one or two in the space or number five or six in the space. Grow, nurture, and harvest put a lot of structure around internal resource allocation, where things that weren't gonna hunt long term, no longer get the kind of resources that the growth products do. That's allowed us to focus, you know, more acutely on where we need to grow. Great. Does that mean there's a new, like, capital committee or what's the organizational structure to make sure that that happens? It's not a new org structure. It's really, as we went into to 2023, the budgeting process included that thinking. you know, from a product standpoint, very clearly people know, you know, which resources they're gonna get and what their role is. I think the other thing is culturally, you know, you think about grow, nurture, harvest, I think the natural human response is, "Oh, if I'm harvest, then, you know, I'm not here for the long term." That couldn't be further from the truth. Product lifecycle management is something that technology companies do all day long, right? They manage products through the lifecycle. There's different resource allocation. There's different pricing decisions, through that lifecycle. What is grow today, down the road, will become nurture and then become harvest. This will be a perpetual motion at Lumen. As a result, we're building the muscle memory in each of those groups to do what we need to do, depending on what those product sets require at that point in the lifecycle. Great. Talk us through 2023 and 2024. You just mentioned the goal for stabilization and then growth at the end of 2024. I think the guidance on EBITDA and free cash was maybe below what people were looking for. H ow do we go through there, and how do we start to see the signposts that you're hitting, your marks here? Yeah. It's a really good question, and we gotta continue to message this very clearly. If you think about our vision, right? Our vision is to connect people, data, and applications quickly, securely, and effortlessly. Those last three words are the hard part. If you think about our key priorities for the year, they really speak to what we weren't focused on in the past, not because it was a bad thing. If you think about, you know, managing through divestitures, continuing to manage for efficiency to support the dividend, that's a very different mindset than what the board has asked us to do today. It's really developing customer obsession, right? Outside in focus rather than inside out. It's about innovating and investing for growth, building a reliable execution engine, radically simplifying the company, and building a culture of growth mindset. The investments that we chose to make for this year very purposefully supported those five. More specifically in our guidance, we're spending $700 million of free cash flow this year and next to really focus on driving that pivot. More specifically, how do we digitize the selling motion from beginning to end? We've got a great front end, but our ability to automatically provision and bill beyond that isn't there yet. That needs work. Network- as- a- Service. Again, we've got the biggest, you know, ultra-low-loss network in the world. How do we make that more accessible to our customers, who want to integrate their solutions or our partners to integrate their solutions so that they can be more easily consumed? We're gonna invest in that. Around simplification, there's obviously a lot of layering up of IT systems that exist in telecom, given all the M&A activity, and there's a real opportunity to unbundle some of that to unlock cost. The board and Kate and I, we knew that when we did this that the, you know, reaction would very likely be what we've experienced. This is the hard part of transformation, but it was necessary. As a result, when you look at the way we've been performing, we feel that simply with what's on the truck today, not some new thing that we haven't invented yet, but just with that increased focus on execution, alignment of all the objectives internally across functions and deep into the organization, that's what gets us to that revenue and EBITDA stability by the end of 2024. Can you unpack that $700 million investment CapEx, OpEx, in 2023, 2024? Yeah. About $500 million in CapEx, $200 million in OpEx. Again, these are project-based, so the accounting tells us how much of that is OpEx versus CapEx. It's not like they're different things. It's really around those three focus areas that I talked about. A couple of year kind of, investment cycle? Yeah. We think that the biggest bite of that will take place over a couple of years. I'm sure there will be other things that come from that as we go forward, but in terms of level of intensity, I'd say it's more intense in the near term. Over time, and we owe the investment community some more detail, and we're gonna have an investor day in June. Over time, what we'd expect from that is that we will drive operating leverage. We will grow OpEx slower than we will grow revenue. That our CapEx intensity, particularly as we move into more service areas, that will lighten as well. Great. You talked about the two large deals you've done. You've still got one large deal pending. T he EMEA transaction. Can you update us on where that stands, what approvals you need, timing? Yeah. The big operational thing is we needed French workers' council approval. We've received that. We exercised our put option on the transaction. Everything is now on track. We've gotta go through regulatory approvals. We're not expecting major issues. The good news is that we're dealing with a company that currently operates in this space. We're not standing up a new company. We have a great relationship with Colt. We expect to as we go forward. And timing? Timing at this point, you know, our planning assumptions, our guidance assumptions are beginning of next year. Maybe it's sooner. Too early to call. I would say that's a good estimate at this point. I think you indicated on the call that at this point, the proceeds will pretty much all go to deleveraging. Is that fair? That's right. I mean, if you look at the guidance, we knew that we were pushing leverage a bit this year in anticipation of getting the proceeds to help bring leverage back down once we get to the end of the year. The entire organization is very focused on making this pivot as quickly as we can. Again, we're in the painful window of an organizational shift. We wanna make sure the duration of that pain is as little as possible for all parties. Sure. It's, it's tricky for investors too, as you've been doing a lot of pro forma adjustments and everything, but do you think that's it for the major M&A? Are there other assets you could sell? It sounded like you might want to make some tuck-in acquisitions around capabilities. Yeah, I think so for now. I mean, the reality is we'll always look at our portfolio. There's some assets that exist in the enterprise side that if the right buyer at the right value came along, we'd consider. I won't get into details on that, obviously. If not, then we, again, we go back to our grow, nurture, and harvest mindset and resource allocate appropriately and go from there. You know, as it relates to M&A, I think of course, over time, certainly. I think right now though, the focus is on operational execution really in both businesses, and getting the ship turned, then those opportunities open up for us. Great. You'll have a lot more in June for us, presumably at the end? Yes. Okay. Frankly, you know, I'm hopeful that when we close the quarter, we can share more operational details. We all know that in this business, in particular in the enterprise space, it takes a long time to get from sale to revenue. We're obviously pre the sale right now in terms of being able to show that, but there's operational metrics that I think we can tighten down and start to share so that the investment community knows how we're measuring ourselves and we can share with you how we're evaluating, are we actually progressing in the right direction here. Great. Well, that's a good segue onto the bookings trends and what you're seeing and, you know, I think macro and what the second half looks like is gonna be a big topic here this week. Anything you can share with us in terms of how enterprises are behaving and consumers? Sure. I mean, really no change. I mean, there's no new news. It continues to be kind of a slow approval cycle. It's not better, it's not worse. I think we're gonna probably be in that environment for the bulk of this year just given what the economists are saying. You know, I also think that the reality is we're operating in a very different world today. People aren't coming back to work, broadly speaking. There'll be pockets of it. Being able to provide the connectivity with security wrapped around it, the computing needs, as I mentioned earlier, in a very hybrid environment, it's complicated. It's hard work, but those are margin-rich opportunities for Lumen. We play very well in that space. It's how we run our company. In fact, we announced a couple of weeks ago that, we're going to sell our campus in Broomfield and move our headquarters to downtown Denver. Really the reason behind that is we have a campus that if everybody that was assigned to it came in, it would be 50% capacity, and on any given day, it's, you know, 7%, 8% at best. Hybrid works if you can communicate with people and can motivate people. We feel that that's where the world is going, and that's how we're gonna operate. Okay, great. In terms of these capabilities, you can own them, but you can also partner. You talked about the Edge, and I know you have a partnership with T-Mobile, and there's a lot of questions from investors about the cloud companies and how they interact with the telcos. Is that a win-win or is that some, you know, threat as well for the industry? No, I think it is a win-win. I mean, the reality is the edge network that we have is built. But back to that outside in focus rather than the inside out focus, I think if there was an execution miss on our behalf is, we built a great solution, but we didn't, from a selling standpoint, really provide the use case solution that's saleable, right? That's a real opportunity for us to unlock now that it's built. In that, in that solution environment, there's opportunities for more partners, there's opportunities to work with the broader cloud companies because they serve a purpose, but edge is really about compute close to, in terms of speed, close to where it's consumed. Those two things work with each other very well. Again, we've got a great lead in that space because we have the network built. I think one thing that, you've talked about recently, and I've heard from Lumen for a number of years, is the market share opportunity. It sounds like a big opportunity, but it's a little bit opaque to the investor community. Can you, can you help, one, kind of size that for us and what sort of products are the most opportunistic? Then link that to the competitive environment because cable also sees a market share opportunity. You know, they're moving up from SMB to mid-market and enterprise. Yeah. No, I'll do my best, right? Because it's obviously a space where I think it's very hard to define the size of the market. In fact, if Kate were sitting here, she would tell you that she's more interested in total addressable problems than she is in total addressable market. Really, if you think about our innovation engine as we go forward, it's about identifying that cross-section between a customer problem and our ability to provide a solution at scale. That's really where we think we can hunt very well. If you think about the share opportunities more broadly, I can't define the size of the market, just given that comment. I mean, look, to the, to the same extent that cable's interested in large enterprise, Lumen has an enormous opportunity in the mid-market space. We simply haven't resourced that appropriately until now. There's a lot of investment going into digital offerings. You're gonna see us dramatically ramp our logo expansion to help grow in that space. Look, if you look at the, at the larger end of the scale, these are really complex engineered solutions. We play very well in public sector. We're taking a lot of share. Big wins last year that have all been very public. Those solutions cross over to the large enterprise space. Unfortunately, we can't disclose those logos, but many of them are household names. We play very well there, and we're amping up our game in terms of product offering and frankly, execution focus. It's fundamentally different today than it was a few months ago. Will that mostly show up in the growth segment? Is that where we're gonna see that? It'll be Grow and Nurture. I mean— Upside to that growth rate? Yeah. If you think about the enterprise portfolio today, Harvest is really the bucket where we no longer sell the product in a meaningful way. Grow and Nurture, we still sell. Nurture just happens to be things like VPN and Ethernet, where they're being sold. They're just being sold at a slower rate. Yes, the bulk of where we're headed is growth. In fact, we're very focused on actually doing something which telecom culturally has been afraid to do, which is cannibalization can be very good if you manage it. You know, sitting on a customer saying, "This is EBITDA rich. I don't want to touch it. I don't want the new product team talking to that customer." That's great till that customer leaves, right? It's about customer lifetime value. We're very focused on transitioning customers where applicable off of more legacy- type services. Think about voice, think about older VPN technologies to, you know, IP in ways with SD-WAN and SASE wrapped around it. That is a very focused motion of ours as we go forward. Does that mean that we might see some of those product categories see revenue declines accelerate as you kind of, I don't wanna say exit the business, but as you kind of pull the band-aid off? It's possible, but I would actually say that, there's execution gaps that exist today, where if we close those, that's a tailwind. If we cannibalize, it's a headwind. As we look at those in combination, I don't think it materially changes that. What does an execution gap mean? It means that with product parity and pricing parity in the market, we're not, we're not experiencing the same growth rate as the market or decline rate for that matter. We're worse. Yeah. That's execution. Sales folks. It's. Yeah. It's, and that focus. It's a training issue, so I wanna be very careful not piling on the sales force, but it's a training issue. It's making sure they've got the right tools in their toolbox. It's about clarity around expectations and where the focal points should be and not be. It's also about how we compensate and making sure that we're rewarding and incenting more for the growth products than we are for things that are more legacy in nature. Makes sense. Maybe we'll talk about mass markets for a little while. One of the things you did in your year was really take a long, hard look at the fiber build. You still have an ambitious build plan, but you've pared it back from what it was before. Help us take us through the logic because it seems like there's a lot of crosscurrents. You've got FWA out there, you've got rising construction costs. You've got ARPU pressure. What's your bottom line on fiber to the home? Is that a good product for Lumen to continue to throw a lot of money at? It is. It is in a thoughtful way. I think, frankly, what we're seeing in the broader market today is, you know, emotional exuberance starting to be replaced with rational thought. We're seeing a number of other players in the space do exactly what we did. They're pulling back on their fiber builds. You know, as a starting point, Quantum Fiber is a great product. It's got a very high NPS score, over 50. It's a $65 price point for a gig, symmetrical gig, all taxes and fees included. The price point is a solid price point vis-à-vis what some others are talking about. It's a prepaid product, so it works very well for us. It's very easy to consume. Once the device is in your home, you can be up and running within minutes on your phone. You know, there's no cancellation fee. From a product standpoint, it plays very well. We haven't really marketed it heavily because we haven't been at scale. When you look at the 2020 vintage being at over 30% penetration at this point without any real scaled marketing dollars behind it, that's very encouraging to us. We're also in great markets where we have an operational footprint, which is critical. There's a lot of talk about overbuilders, but these are not easy markets to build in. Seattle, Portland, Denver, Minneapolis, Phoenix, Salt Lake— Permitting and costs. And heavy subterranean. R eally hard to do. Our issue was, and the reason for the pause is that as we looked at the 2021 vintage, the penetration rates were lagging. There... I don't want to get into specific details, but there were some things that we were doing that frankly, we shouldn't have been doing. If you think about, the two operational objectives we have, they were on number of units and cost per unit. That's not enough, right? You need to think about, you know, longer term whether that's the right build to be doing or not. We've done all that work. What I'm really encouraged by is that if you look at planning yield, which is something we track internally and we'll continue to share this. Planning yield is, you know, the markets you want to build go on the top of the funnel. That then goes through things like site walks and engineering. They build a detailed engineering plan. The engineers come back with a cost. It goes to finance. Finance has to make a decision on whether we're gonna build or not, and that's what comes out the bottom of the funnel. That was very low. It was sub 20%. You know, I'm not ashamed to say that. When Kate came in, she made two rapid decisions. The first was to split operations in two. It was a horizontal function that supported both businesses under one leadership team. The consumer business now sits under Maxine Moreau, who runs that whole P&L. Dedicated resources. The second thing we did is we shifted the planning department from operations to finance. That planning yield in one month went to over 90%, and it stayed there every week since. It's actually well above 90%. If you forget percentages, 'cause you can play games with those, the raw output has gone up about eightfold. We really are starting to get that flywheel moving, and I feel very good about where we're going. I think your guidance implies about 500,000 homes passed this year, I think. Your new target is 5 million-7 million homes to get to 8-10 incremental. That's correct. That's correct. How long does it take you to get there? Don't know yet. I mean, we'll have clarity on that for the investor day. I would say that next year, again, we should be well above the 500,000 a s we get this spinning, but I don't wanna get too far over our skis. Just looking at the, at the planning yields, we feel very good about executing on, on the plan for this year. I guess that ties into capital intensity, the balance sheet and, you know, what leverage levels you're comfortable with. You know, where you wanna keep your ratings, et cetera. What's that? You've got good liquidity. There's some maturities out in the medium term. Exactly. We've got very good liquidity. We also, frankly, in our CapEx, our $3 billion of CapEx, there's flexibility. There's between $800 million and $1 billion of that going into the year that's uncommitted. You think about that success-based bucket and enterprise, the only piece of that that's committed going into a year are the contracts that were closed last year that'll be enabled this year. The rest of it is an estimate. If for whatever reasons sales lag, then the capital won't get spent. That gives us flexibility. We knew when we gave the guidance, as I said, that we were pushing leverage pretty hard this year. That was with intent. We wanna turn things faster, we feel we need to do it now, particularly before the 2027 maturities. There's no secret around that. That gives us time to do so. Ultimately, longer term, we wanna bring leverage down. We've been pretty clear about that. Clearly, any extra cash that we have in the near term needs to be focused on leverage. We know that. The markets are telling us that. That's what we'll do. Okay. How will you think about cash flow and the CapEx? You've got $0-$200 this year if you exclude the tax payment. Is that where we will be through this investment cycle and then grow the EBITDA? Yeah. We certainly do not plan on going negative. I think that's an important message. It will be more intense until the revenue turns, and that's why we said what we said with our guidance that next year would likely look similar. Again, over the next 24 months, we need to be giving all of you the information that we're using to say whether we're succeeding or not. If we're not, then we'll adjust. Some of your peers will say EBITDA turns before revenues turn. Have you got any sense of that yet? Hard to say. I mean, there's definitely some cost unlock from some of the investments we're doing. Quite frankly, if we can get at some of those older TDM circuits by driving some of the thoughtful cannibalization that I discussed, that may allow us to get to that sooner. It's a little early yet to call that, but it's definitely a focal point for us. Great. Well, we're running out of time here. Just one last one on the supply chain and just the overall challenges around inflation. Any easing on those pressures this year? I don't think in the near term. I mean, the supply chain headaches, I think, have eased somewhat. We, it's no secret on the balance sheet, we built inventory to try to offset some of that. We'll be bringing that inventory down over the next 18 months or so. From an inflationary standpoint, your guess is as good as mine. We're not counting on it going down. Obviously, that'd be great if it did. I do think that on the consumer side, the third-party labor environment probably gets a little friendlier with others pulling back on their build plans. Sure. Us, at the same time, building a more reliable funnel where we can commit to volumes that allow us to negotiate better. Great. Well, thank you, Chris. Appreciate your time today. Thanks, Alan. Great.