Lumen’s new CFO sees tons of ‘pent up potential’ in the business

Lumen Technologies CFO Chris Stansbury has been with the company for less than three months, but he indicated it’s already apparent it has plenty of room for growth in both the business and consumer segments. Speaking at a Cowen investor conference, Stansbury said much of the groundwork for future growth has already been laid. Now, it’s a matter of execution, improving efficiency and ramping its deployment machine for its fiber-to-the-home expansion.

Stansbury acknowledged “there’s a real opportunity for Lumen to disclose more to the outside world on where and when” its growth will come from. It took a step in that direction with the disclosure of detailed metrics from its consumer-focused Mass Markets business during Q1 earnings, but the CFO said it plans to do more on this front going forward.

In the meantime, though, Stansbury offered his perspective on where the key opportunities for Lumen lie, starting with the enterprise segment.

“It’s really a tale of three or four businesses,” he explained. Specifically, he said the unit is comprised of non-recurring revenue from equipment sales, legacy businesses that are in decline, businesses – like VPN – which are slow or no growth but will be around for a while and growth businesses such as its SD-WAN, SASE, unified communications and edge offerings.

Lumen is already capturing “bigger, more complex deals” in the enterprise space which span thousands of customer locations. While this is a good thing because these relationships tend to be stickier, Stansbury said the downside is that it can take two or three years for these to yield run rate revenue due to their scale. He said Lumen is also seeing tailwinds from businesses circling back to take care of data center, network security and edge upgrades which were superseded by the need to implement remote work systems during the pandemic. And in the mid-market business segment, he said Lumen is working to enable more rapid revenue generation with the rollout of a new self-service customer portal.

On the consumer side of the equation, Stansbury said Lumen is preparing for a significant ramp in fiber-to-the-home deployments for its Quantum Fiber service in the back half of the year.

“If you think about what has to happen to take fiber to the home, you've got to do your market identification, you got to do sidewalks, engineering, permitting. And so, all of that activity to fill the 2022 build funnel really started in early fourth quarter of last year,” he said. “The work to get 2022 filled has been complete, we're waiting for permitting now.” Lumen has previously said it is aiming to build fiber to 12 million locations over the coming years.

Responding to a question about how supply chain issues could impact its build, Stansbury said Lumen has already ordered the equipment needed to build out its chosen markets. And given much of the labor it uses is internal, it’s also set on that front, he added.

“We’re building penetration rapidly, and quite frankly, we're not cannibalizing ourselves heavily because we're starting with a product in those markets that frankly isn't performing well. Right? So, there's a lot of upside to what we're bringing in,” he concluded.