Good afternoon, everybody. Welcome to the Lumen Technologies fireside chat at the Goldman Sachs Communicopia and Technology Conference. It's my privilege to introduce the CEO, Kate Johnson, who's the CEO of Lumen Technologies. My name is Mike Ng. I cover U.S. telecom, cable, and media here at Goldman Sachs. We have about 35 minutes for today's presentation. I really wanted to start off by saying thank you so much, Kate. It's a real pleasure to have you here today. It's great to be here. Thanks for having us. Great. To start things off, let's just talk big picture strategy. I think there's a lot of natural investor market doubt about whether or not anybody can truly transform enterprise telecom. You say Lumen can. Why you? Why now? What's changed? really easy thing to think about is just assets and timing. We've got this really compelling set of assets, which I can talk about, but the time is probably the most significant part of our story. There is this war on complexity. CIOs every day are having to fight this growing data proliferation from AI. They've got hybrid architectures, so they have people, applications, and data dispersed throughout this hybrid architecture. We've got data centers, we've got cloud, we've got multi-cloud, we've got on-prem, we've got at the edge. Their whole job is to drive insight at the speed of thought at the right cost in that sea of complexity. Lumen's transformation is about solving that problem by making it easy to network for those CIOs so that they can deliver on that promise of insight at the speed of thought. The signals from the market so far are pretty dramatic. We've got more than 1,000 customers buying in this new NAS platform, and we've got $9 billion of deals under our belt to interconnect all the hyperscalers. You can transform. You gotta have the right people, the right culture, but the right assets at the right time. We've got all that. Great. How do you respond to investors and analysts who may see Lumen as more legacy telecom infrastructure rather than a digital networking platform for AI infrastructure? If you could just talk a little bit about where inside AI infrastructure Lumen fits. Yeah. The first thing is I have empathy for investors in the telco space because it's been a while since telco has innovated, and we're changing that story. What took, you know, a couple of decades to create in terms of seeding innovation to data centers and technology companies and digital upstarts, you can't unwind that in a day, a quarter, a year. It takes a couple of years. I would encourage investors to really get curious. Get curious about the technology infrastructure that companies need in order to thrive in an AI multi-cloud world. I think you would immediately see that fiber is an essential part of that, but also a new way to consume services on that fiber that's easier, more ubiquitous, available from everywhere, and covering all the different connection possibilities universally. We're the company that's doing that. A little bit of patience, but it's happening. We've cleaned up the balance sheet. We've got cash to fuel our transformation. The AT&T transaction allows us to focus on enterprise. We've built a platform that's thriving, and it's the fastest growing part of our revenue portfolio from a pace perspective. The future is very bright. Yeah. I appreciate the empathy in terms of the perception that telecom investors may have. You talked a little bit about the cash that you have to pursue this transformation. Revenues are still declining. Do you have enough time to turn this company around? What about the financial story is different this time around? Yeah, for sure. Yes, we have enough time. Yes, we've made enormous progress, and yes, I am the single most impatient person on the planet. Please don't tell my husband I admitted that. For me to say we have enough time is pretty compelling, but we do. The first thing is we've really stabilized the balance sheet. We stabilized the cash flow situation, period. We have a very robust modernization and simplification program that's allowing us to pull costs out so that we can pivot to EBITDA growth. We've announced, we've called that, guided that for 2026. Yep. which is right there on the horizon. The last piece of this puzzle is revenue. I talked about this digital revenue stream that we're focused on, which we're super excited about, but that's not the only part of the story. There are three pieces to it. There's the PCF revenue, which is deferred. As we light up those routes that we've sold to the hyperscalers to interconnect them, we start to recognize that revenue over these 20-year periods. We have our grow portfolio with IP and waves, which is growing in the mid to high single digits, year over year. We've got that digital revenue curve that looks like that and gets pretty creative over the next couple of years. A couple of moments that matter: 2026, not only will EBITDA grow, but our grow portfolio will be bigger than nurture plus harvest. That gives us a bit of a trampoline moment. Right. The second moment that matters is the business segment returns to revenue growth based on our plans that we're executing to in 2028. The total company returns to revenue growth in 2029. Right. Could you talk a little bit about how Lumen's strategy may be different relative to peers? You know, naturally, why do you, why aren't your competitors all running the same plays? Yeah. It's really interesting, and we feel kind of excited about the fact that Lumen is different. A couple of categories here. You've got the big carriers who are really focused on consumer and the convergence of wireless with broadband. That represents the AT&T deal, fiber to the home. It also shows another $23 billion, you know, for EchoStar, licenses, etcetera. They're focused on consumer. That's where they spend their next dollar of capital. They've got a return profile that looks good there, and they're competing for critical mass, and there's a consolidation going on. The next category are pure play networking companies, right? On the pure play networking companies that, you know, we all know about, number one, they just don't have the critical mass and scale that we do from a fiber network perspective. More importantly, they don't have the cash positions that we have, and they don't have the tech team that we have. We've got this enduring competitive advantage in the physical infrastructure. We've built a digital platform that they can't afford to build, and we're running a little faster than they are. I think there's a third category, and it's one that I would encourage investors to take a peek at, which is the digital upstart that says, hey, this Network-as-a-Service thing is really interesting. Networking is the final frontier for digital transformation. Why don't we cloudify, you know, these networking services? Those standalone companies don't own the underlying assets, and so they can't get owners economics. They never really get there from a profitability and a cash perspective, but they are growing, and they're valued, you know, very highly because digital revenues tend to fetch, you know, better valuations because they're sticky and they're high margin once you get to scale. Yeah. We're building that inside of Lumen and making a ton of progress on it. Right. You touched on PCF, you touched on NAS. Maybe you could just talk a little bit more about the customer value proposition here and how that translates into. Yeah. You know, financial that ultimately accrue to shareholders. Yeah. Look, our business model is about we are going to help CIOs simplify the complex. We've got three pieces to our strategy. The physical infrastructure, we've got a mile-long lead in the marketplace in terms of coverage and unique routes. You can't replicate our network because it's not just long haul, which would, you know, we think costs around $150 billion to replicate, as we've said in the past. Inside a metro, you can't go back there and interconnect all the buildings inside of Manhattan. That work was done a long time ago. If, you know, permitting and all those things make it make it super hard. We've got this really nice head start, and we've got to focus on driving utilization on our network. We interconnected all the hyperscalers and large cloud service providers, and created an ecosystem, brought in a bunch of cash, changed our financial story pretty dramatically, but most importantly, positioned us for the next piece, which is that digital platform, Lumen Digital, where we, you know, serve up Network-as-a-Service, make it easy to consume the services on that network, and drive more traffic on it. Instead of obsessing about the next build, we obsess about the next set of services on the network that we already built 25 years ago. Right. Okay, and then the last piece is the connected ecosystem. We got the hyperscalers, we've got density of customers, and now we're starting to build partnerships with some of the fastest growing technology companies on the planet to integrate technically our NAS capabilities into their cloud solutions, making them available through digital marketplaces. That three-tiered strategy, we believe, will get us business growth in 2028 and, you know, total company growth 2029 and beyond. A lot of the intellectual property that we have in R&D, we haven't even contemplated that in the plan, which I think is really exciting. It's a very conservative story here that we're going to aggressively go out to try and accelerate everything we do. Yeah. I mean, I would love to hear a little bit more about that connected ecosystem because it sounds like to me that, you know, you have your NAS platform and then you have the players that kind of sit on top of it, which in one way, shape, or form, or maybe even like resellers or. Yeah. Building on top of your. Look, in its simplest form, the connected ecosystem gives us a larger sales force. Right. With the right buyers. When we integrate our capabilities and make it easy for them to attach, and the pipes are bigger and smarter and more secure, our value proposition to those technology companies is that we accelerate their time to revenue. No longer do they sell their cloud solution and then wait for networking with their customer side by side. They can actually plug the whole thing in and get it up and running in record time, and they get direct access to the clouds because we have direct fiber access and 400 gig on ramps, which we've been announcing already. The biggest pipes, the most coverage, the most secure, etc. That's the base case. The base case is we have more feet on the street, lower cost of sale for our existing services, and that's something. What I think is really interesting is as these companies start to integrate our technology and recognize that, I want CEOs to say, you just increased our velocity to revenue recognition. I need to plug you in everywhere. That was pretty cool. We put APIs together, then we start to innovate together, then we start to build unique networking capabilities for them, etc. That's another whole set of offerings that we can bring to market. I think one of the ones that we're really excited about as well, and I just had a conversation with a CEO of a security company, and they want to embed their security offerings at our edge in our network, in our NAS platform. Picture a customer going and saying, okay, I want to fire up a Lumen NAS circuit, and I want some IP on demand, I want some voice, I want direct on ramps, and oh, what's this third-party capability that I can also put in there? We get a portion of every one of those subscriptions. We start to dramatically increase the amount of optionality and the richness of the intellectual property that we will serve up on our network. The connected ecosystem is that final piece of the puzzle that I think is incredibly compelling and nobody else has. Right. Could you maybe tie some of this together to really solidify in the minds of myself, investors. Yeah. the strategy with a real world customer example. Yeah. Sure. Every customer, every company needs to get data from one cloud to another. Right. Including us. We have the ability to move data from cloud to cloud through the NAS platform without going through data center companies. It's cheaper, it's faster, it's more secure, and it's highly intelligent because I can turn it on and off. Take all the cost out. It allows us a bit more pricing power, and we provide agility for ourselves. By the way, we discovered that capability with ourselves because we had some data in Google, we had some data in Azure, we needed to intermingle and then push it back out. We were like, it's gotta be a better way. Oh, yeah. Let's use our network to do that. Now you enter in, look, there's a million different examples, but backup and recovery is a problem that every company has. Cybersecurity is a problem everybody has. When there's a threat actor that takes down a company, restoration is the name of the game, and the speed to restoration matters. As a company, am I going to buy ports that are up and running at 400 gig or more and leave them open and pay for them every month for the rest of my life in case of incursion? Or am I going to say, hey, wait a minute, let me have a Network-as-a-Service platform and fire up those circuits in any intercombination. We connect data centers, prem, clouds, and edge in any combination, and we're the only network provider that does that digitally. Am I going to do it all the time, or am I going to cloudify this thing and do it when and as I need it? Think of a backup and recovery company that says, what network provider allows me the fastest path to rebuilding that data after a cyber attack? Lumen is the only one that can do it. They interconnect with us, and then we sell together into customers and say, okay, you're going to buy this solution. I'm being a little bit coy about the names of the companies because we have several that we will announce over the next couple of months. Sure. I don't wanna steal thunder from our analyst day. Right. Maybe you can talk about the most common or expected, like, AI use cases in a real-world example. Yeah. Yeah, I mean, look, AI is proliferating data. Yeah. Insight at the speed of thought, need the data workloads everywhere, NAS, and why it matters, why we have a thousand customers when this thing, you know, we started with GA in 2024 and got to a thousand customers really, really quickly. How did we do that? We did that by basically building a platform on net. Okay? We said single pane of glass, interconnect in any combination, and allow customers to fire up any port with any service, anytime, anywhere. How we operationalize it, there's the management console, there's the fabric port. The fabric port is a game changer. It's intellectual property through software that allows you to put thousands of services on one piece of hardware. Old school telco, one service, one port, and underlying infrastructure, fixed cost. New world, cloudified, we got as a service capabilities on a port, thousands of them. Every time you add a service, your marginal cost to serve that revenue goes down. Right. Right? That's super exciting because with a thousand customers that we have, we acquired those customers by selling into a universe of more than 100,000 buildings on net. We only had on net Network-as-a-Service available. In Q4, we'll be announcing the availability of these fabric ports more generally and with more capability on them off net. We go from being able to sell into 100,000 buildings to more than 10 million. Right. Okay. We cloudify the old school off net model and make it easy for customers to add more and more services on that same single port. Now take AI. Gosh, I don't know where I need my data and when, and, you know, how I'm going to be serving it. I need flexibility, I need it to be dynamic, I need it to be least cost, I need it to be biggest pipes, I need it to be most secure. Okay. AI companies are partnering with us to take our capabilities to their customers, like Palantir announced last week. I see. A thousand NAS customers adopting the platform. You know, is that enough to produce meaningful revenue? Like, what's the revenue potential per NAS customer? Yeah. We haven't announced the revenue potential per NAS customer, but we are going to be bringing P times Q math for modeling to a theater near you, okay? We're going to shine a light on it, because right now it's about customer adoption. Sure. A thousand enough customers. What we're seeing that's really exciting are buying patterns, that those customers are all coming back and adding ports. We have a lot of traction in financial services, a lot of traction in healthcare, and third, industry right after that is in retail. These are companies that, you know, have a lot of data needs. They work with clouds, but they're also geographically dispersed, and NAS is perfectly suited to them. The revenue model for that will be based on the fabric port and how many services we can put on top of it. You know, in a world, just dream with me for a second here. Happy to. Imagine sending a fabric port to a customer, eliminating truck rolls, and having the fabric ports that we're contemplating. You plug in, it's as easy as plugging in an Ethernet cable. It automatically self-registers with Lumen Connect and self-provisions, and you get a pick list of services. I want some IP, I want some voice, I want a cloud on ramp, I want some security. All the normal ASPs add that up, that's on one port. You say, okay, let's go to the next screen. What third-party services can I serve up on that port? I want security from this company. I want AI services from that company, etcetera, etcetera. You start to grow the revenue per port. The port is going to be the unit of measure that really matters. Growing revenue on top of it is going to be really important. Putting the ecosystem, the connected ecosystem together is what's really going to enrich it. Great. Lumen has an agreement to sell its mass fiber business to AT&T. You guys have also done a lot in terms of balance sheet restructuring. Yeah. Talk a little bit about how the balance sheet supports growth and what's the right optimal leverage for Lumen. I'm sorry. Did you just ask me about the balance sheet supporting growth for Lumen? I did, yes. That might be the first time that anybody's ever asked that question. Thank you. That was so much fun. Yes, it can support growth because we've cleaned it up, and it's pretty exciting. Post-AT&T transaction, we're going to be in a great place bringing leverage under 4, and we've got optionality because we've got cash from all these deals. Every dollar of capital, we're going to choose: is it best to invest more in the physical layer? What's the return look like? Is it best to invest in the digital layer? What's that return profile look like? Should I be spending more to integrate with more technology companies? What's the return on those scenarios? Is there a company out there that I should be buying, or should I go buy back stock? That optionality is something that we've never had. It's good to be here, but we will be relentlessly disciplined about examining those profiles before we spend any of those dollars because we like how it feels to be on this side of all of that. Right. As we think about returns, you've also talked about getting to meaningfully higher margins than. Yeah. Where we are today over the next few years, what gets you there? Is it product mix? Is it the modernization simplification plan? It's both. Okay. It's that's exactly what it's both. Just think about Lumen Technologies as a collection of, you know, companies that in a declining market, it was about going and getting the next big, you know, batch of revenue that you could glue together to try and stabilize, but there wasn't any integration underneath. We have this proliferation of applications. There wasn't any upgrade and modernization and process simplification. We're doing all of that now, and it's going extremely well. We called $250 million of savings exiting 2025, and we'll be probably at $350 million, exiting 2025. You know, that $1 billion that we committed to the street by the end of 2027, it gets more complex and harder to do, but we're on track. That's part of the margin expansion. The mix, as you said, also this digital revenue that's fastest, you know, growing piece of our portfolio. Again, smaller base. You know, being pragmatic here. Right. It's great margin. Over the next four to five years, I think we can expand the margin by about 20% to get into the mid-thirties. Yeah, you know, you're investing on all these new capabilities and products. At the same time, you know, the company's talked about a 50% reduction in CapEx intensity. You know, what is driving that? A couple of things. Number one, the AT&T transaction upon close will be the reduction, a reduction of about $1 billion of capital per year that we were investing in the quantum fiber business. Then we have these PCF deals. When we're finished with our current tranche of the $9 billion that we sold, that will be another $1 billion per year. We will go from around $4 billion to around $2 billion. The question is, can we do better than that? You know, the great thing about digital services is, you know, build once, sell many, marginal cost down. Is there more opportunity to continue to reduce our capital intensity? We think maybe. Additionally, cloud economics in NAS is fewer truck rolls and less capital intensity in terms of servicing and keep the lights on and all that stuff reduction. We think we'll continue to get more efficient. The truth is that we're also going to examine all of our opportunities in that disciplined approach that I talked about, where if there's more PCF deals to be done, which we believe that's a real possibility, the window for that capital intensity based on, you know, the incredibly lucrative economics of PCF deals, we may extend that window a bit. Great. Lumen's had some good recent success with public sector customers. Mhmm. Do you see that continuing? How do you balance the public and private sector opportunities, and are there synergies there? What's Lumen's strategy? Yeah. We are extremely committed to the public sector for a couple of reasons. Number one, we believe it's a matter of national security to maintain a leadership position in AI. We are working closely with the administration to ensure that they understand all the implications of AI infrastructure and infrastructure policy calls that they're making. We think they're doing a really nice job making it pro-investment, pro-business, but also best for the citizens because we need to maintain that leadership position. Secondarily, they're running a pretty significant modernization and simplification playbook of their own, right? We're a part of that. What I've really enjoyed is sharing our playbook of how you do that because it's not just about the dollars, and it's not just about hiring the right infrastructure provider. It's about playing to win. It's about making sure you really execute on a playbook that takes talent and skills and courage and culture into place. They've been extremely receptive knowing a little bit about our turnaround in terms of coaching them, which has ingratiated us in a way that's exciting. Great. You know, just in the last couple of minutes we have here, obviously, there's a lot of change happening in Lumen Technologies as there is for the broader industry. Yeah. You know, how do you think Lumen should be measured, in terms of success, right, beyond just revenue in the near future? You know, what should investors look for in the next 12 to 18 months that, you know, as proof points. Yeah. Lumen's strategy is actually working? Yeah. As you look to 2026 and beyond, what are the key operational priorities to drive consistent free cash flow? I really think that the complexity of our turnaround is hard to conceive, and you really have to take time and get curious and kind of dive in. There's just as much on the operational side as there is on the financial side. The financial, we've talked about free cash flow, we've talked about EBITDA. We have the plan for revenue growth, but the operational metrics really matter here. When I say we have a thousand customers on a brand new digital platform, and we got there in 18 months from GA to, you know, hit eclipsing a thousand. By the way, it's significantly higher than a thousand today. You know, any digital company out there that did that in a year and a half would garner a lot of attention. That capability and that platform is in the walls of Lumen, and we're continuing to press the gas pedal to accelerate. We can share operational metrics, but we have to be sort of very cognizant of the fact that disruption in the marketplace is structural, and it takes time, and it's really hard for us to call the ball of exactly what's going to happen and all the variables together. We are maybe even being a little bit more cautious than we should in terms of shining a light on that. Sure. Stick with us operationally. Look for customer stories. Look for announcements of upgrades in all of the metros, bigger pipes, smarter pipes. Look for third-party IP embedded in our network. These are the things that are indicators that we're cooking a pretty compelling story. Right. Very helpful. Kate, it's been an absolute pleasure and privilege to have you on stage here. Thanks, guys. Thank you so much for being here today. Yeah, thank you.