Chris Stansbury: So the — just on the timing, Simon, obviously we don’t give quarterly guidance. I’m going to be careful here. The reality is that I think if you look at the savings, you’ll see a lot of the benefits start in Q2, will be at run rate in Q3. Don’t forget, in your modeling, Q3 is always seasonally our highest cost quarter because it’s when we’re doing a lot of maintenance, it’s obviously our highest use of energy for cooling and whatnot. But I don’t want to get into specific quarterly guidance other than to say, we’re confident that Q1 is the low point in EBITDA for the year.
Kate Johnson: And regarding your question about leveraging some of these technologies to drive productivity and create the digital experience for our customers to help them choose us over other platforms, we’re super excited about our progress so far. But what I’ve explained to you in my prepared remarks is really just one portion of this. Chris used the term shapeshifting. We’re reshaping Lumen to be a digital company, and that requires us to do a bunch of things. We’re going to import net new skills into the company. You’re seeing me do that at the leadership team. It’s happening across the entire company. Number two, you’ll see us reskill and upscale different populations across the company depending on what organization, [Technical Difficulty] and of course, but we’ll do that selectively as and where, and we’ll always take the opportunity to redeploy those folks to higher priority items.
And what we’re seeing so far last year we went really hard at this opportunity, being beta customers for various AI capabilities, both native to our enterprise system platforms, as well as being beta customers for things like Microsoft 365 Copilot. We’re really pleased with the adoption of those capabilities across the company at every level across every function, and we’re seeing amazing return on those investments. I’ll give you two examples. The first is in knowledge worker productivity. We’re seeing about 30 minutes a day of productivity per person across the company, that equates to around 700,000 hours of time that we get to redeploy towards higher priority items. We’re super excited about that. The second thing we’re seeing is about a 30% increase in our developer productivity, deploying AI and GitHub.
And so that is also extremely exciting for a company that’s now developing a digital platform. I think we can talk about the 14 new innovations in NaaS being directly attributable to a highly productive development team. We have another 16 innovations that we’ve delivered to market across ExaSwitch and our security and edge platforms all since October. So 30 net new innovations since that October timeframe. That’s multiple times the number of productivity that we were able to achieve in prior periods. So lots of progress there, and we’re continuing to go after it. It’s a major part of our turnaround.
Simon Flannery: Thanks a lot.
Matthew Debnam: Thank you. Simon. Operator, we’re ready for the next question.
Operator: Your next question comes from Nick Del Deo with MoffettNathanson. Please go ahead.
Nick Del Deo: Hi. Thanks for taking my questions. First, Kate, you talked about seeing demand for high capacity solutions driven by AI. Is it fair to say that it’s waves and dark fiber that are benefiting the most from that trend? And to what degree was this component of your bookings responsible for the overall increase in bookings that you cited? And then second, I think you’ve also talked about mid-market enterprise being a segment that’s turned to growth after public sector. And I think you’ve talked about the channel being an important driver, that engagement channel partners more. So, I guess, what can you share regarding the quality of the deals that the channel is bringing in and the compensation you’re paying to those partners for them?
Kate Johnson: I’ll start with your first question. Yes, we’re seeing a huge increase in demand for waves and for dark fiber for sure. We’re also seeing an increase in demand for what I referred to as custom private networks. And think of it as big technology companies or cloud companies that need to interconnect their data centers to push data back and forth, huge workloads, and to do so in a friction freeway as possible. And they’re coming to us for a couple of reasons. Number one, we have conduits, so there’s this ability to continue to over pull fiber and give a lot of flexibility there and room to grow. The second piece of it is because of the digital platform and because of our mission around delivering capacity on demand at every level of the network, it’s the value proposition of doing business with Lumen, so that’s the first part.
I think the second part regarding channel productivity, let me just say that we’re excited to be focused on the channel. We’re excited to continue to recruit and help our partners be as productive as humanly possible. We’re seeing improvement there, but it’s not enough yet. And so I just look at it as a huge opportunity to have more feet on the street selling these net new capabilities. And I think we’re getting better at building the rhythms around a true commercial engine, which is both direct and indirect for these net new capabilities like NaaS, like enterprise, to cloud connectivity through ExaSwitch, and like Lumen Defender with our security offerings. So more to this story coming, but Chris, do you want to add anything?
Chris Stansbury: Yeah. Nick, I think Kate hit most of it. I think the key thing for us, if I think about large enterprise, mid markets, public sector. Public sector first to turn a well-established sales motion deeply connected to the customer and understanding of the customer. And that was really strong muscle tissue at Lumen, frankly. Mid markets was almost the exact opposite. There wasn’t a lot there. There was a heavy reliance on a direct selling motion. The product set was really large enterprise focused trying to sell to a mid-markets customer. And so the bar was lower and there’s been tremendous work on fixing the product set, dramatically expanding the partner ecosystem to reach a bigger customer base. As Kate said, getting a lot of processes and measurement in place, that’s beginning to work.
And I won’t give the numbers specifically, but what I can tell you is that our partner ecosystem, those new logos are selling at a rate that’s into double-digits in terms of growth and it really is those growth products, so the motion is working. Large enterprise is the most difficult pivot because it’s big and because it was probably least prepared for where we’re going in terms of the kind of instrumentation, measurement, etc. And it’s obviously where a lot of the products set us focused. So a lot of work has happened there. It’s not like it hasn’t happened. It’s just going to be longer to see that turnaround take place.
Matthew Debnam: Thank you, Nick. Operator, we’ll take the next question.
Operator: Your next question comes from Greg Williams with TD Cowen. Please go ahead.
Gregory Williams: Great. Thanks for taking my questions. I just have one on the ILEC opportunities you mentioned, you take a market by market approach. Just wondering about the operational complexity with the plant specifically, if you sold some of it. When you sold Brightspeed, you noted there wasn’t much overlap with the enterprise markets. So it was like a cleaner break. And now you have a lot of plant that’s intertwined with the enterprise segments. Just wondering if there’s more complexity and more time to take for any opportunities. Thanks.
Chris Stansbury: Yeah. I mean, there is more complexity, but that’s part of what we do. It’s obviously contemplated in everything that we look at and it is in no way an impediment to us having the flexibility to do things that we think are right strategically. So I would say, it’s a consideration, but it’s certainly not a driver of our thinking.
Gregory Williams: Got it. Thank you.
Matthew Debnam: Thank you. Operator, we’ll take the next question.
Operator: Your next question comes from Frank Louthan with Raymond James. Please go ahead.
Frank Louthan: Great. Thank you. Can you walk us through on Slide 6, what percentage is that Lumen digital platform of revenue now and where can that go? And then second question, Black Lotus Lab is pretty fair amount of success. Would that be better as a standalone company to drive? Could you drive some shareholder value by spinning that out or is that best left inside the company? Thanks.
Kate Johnson: Thanks. So a couple of things. The first is the Slide 6 shows the digital platform NaaS, ExaSwitch, edge, fabric and security. That is a significant opportunity for growth across all those capabilities, not something we’re ready to report on. As we look to become a growth company, we’re maniacally focused on delivering customer value, that’s about making sure we delight every single customer one at a time and bring them in the door. And we’re going to focus on our key metric internally is customer adoption. That’s why I shared, we’re across 20 different industries, because the number of industries we can get to and then 1st, 2nd, 3rd, 10th, 20th, 25th customer, you start to go faster in each one and you get some momentum and critical mass for scale.
So we’re excited about the progress, lots more to do. But this is the future of the company and it represents net new profit pools and available marketplaces that Lumen didn’t have access to before in the tens of billions across each one of these spaces, some in the hundreds of billions. And so we’re excited at the opportunity. Black Lotus Labs is without a doubt a not so secret weapon, and they have helped keep the country safe. Their value is incredible and we’re incredibly proud to have them in our portfolio. The reason why they’re so valuable is because they see our network traffic and the capabilities that we’re developing and launching in Lumen Defender, take their patented data models and basically enable those to be available in an integrated fashion with our network.
Nobody else is doing that right now. So we’re excited about the potential value and you will see them as an integral part of our team moving forward.
Frank Louthan: All right. Great. Thank you very much.
Matthew Debnam: Thank you, Frank. Operator, we’ve got time for one last question.
Operator: Your next question comes from Jonathan Chaplin with New Street. Please go ahead.
