Lumen president and CEO Kate Johnson addressed shareholders during the company’s fourth quarter earnings call on Feb. 6, acknowledging a decline in revenue, but contextualizing it against competitors, saying, “While two large legacy telco companies saw Q4 revenue declines in their business wireline segment of roughly 8% to 10% year-over-year, Lumen’s business Q4 revenue decline was only 3.5% year-over-year, breaking away from the others for the second straight quarter.”
Johnson added, “This year, with the North America enterprise, we added over 3,000 customers and increased new logo sales by 13% sequentially in Q4,” and that Lumen “exited 2023 by outperforming market growth rates and taking share in both SASE and IP.”
“The good news,” she said, “is we’re making progress in mid-markets and large enterprise, shown by our sequential results for the second half. Installations were up 13%, migrations were up 4%, renewals were up 50%, and in Q4, usage was up 3%, helping us end the year strong.”
Scaling consumer fiber
Regarding mass markets, Lumen reports that, over the course of 2023, it grew its fiber network by more than 500,000 locations and obtained a Q4 Net Promoter Score of 64% for the company’s Quantum Fiber service.
Chris Stansbury, Lumen executive vice president and CFO, acknowledged the value of mass market business and reported that Lumen continues to invest in fiber deployment and subscriber growth.
“During the quarter, fiber broadband-enabled location adds were 126,000, bringing our total to approximately 3.7 million as of Dec. 31,” he said. “And during the fourth quarter, we added 20,000 Quantum Fiber customers, bringing our total to 916,000. Fiber ARPU was flat sequentially and increased on a year-over-year basis to approximately $61 in the fourth quarter. At the end of the quarter, our penetration of legacy copper broadband was approximately 10%, and our Quantum Fiber penetration stood at approximately 25%.”
Public sector remains an enterprise star
In the enterprise market, the public sector segment remained a bright spot in Lumen’s enterprise portfolio during the fourth quarter.
According to Johnson, Lumen’s public sector segment grew by double digits quarter-over-quarter and year-over-year in Q4. She reported that year-over-year, the company sold 29% more Grow products (the designation Lumen assigns to products it is investing in) to existing public sector customers.
Large enterprise revenue declined 3.6% in the fourth quarter, mid-market revenue declined 6% year-over-year, and public sector revenue grew 14.8% year-over-year.
Stansbury also reported that wholesale revenue declined 11.2% year-over-year, saying, “Within wholesale, approximately 39% of our revenue comes from ‘harvest’ products (products in decline), which declined 15.9% year-over-year in the fourth quarter and contributed to a majority of the 11.2% decline.”
He added, “Grow Products revenue increased 5.7%, driven by strength in IP across all enterprise channels, cloud services, and infrastructure product growth, particularly within colocation and dark fiber.”
The company’s Nurture products (mature products) revenue declined 9.7% year-over-year, with Stansbury noting that pressure within VPN and Ethernet services was responsible for the decline.
Stansbury also relayed that Lumen’s fourth quarter total reported revenue was $3.52 billion, down 7.4% year-over-year.
Stansbury said, “Approximately 39% of the decline was due to the impact of divestitures, commercial agreements, and CDN. Adjusted EBITDA was $1.1 billion in the fourth quarter with a 31.2% margin. Free cash flow was $50 million in the fourth quarter. In 2023, we delivered on our expectations for both adjusted EBITDA and free cash flow.”
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