Lumen Technologies CEO Kate Johnson revealed the company has retired more than 7,000 SKUs and shut down 45 obsolete processes internally, as part of an “aggressive” turnaround effort aimed at simplifying the business and taking out costs. During Lumen’s Q1 2023 earnings call, Johnson noted the operator has also been revving its fiber deployment engine once again, after having paused construction late last year.
According to Johnson, Lumen started the year with more than 12,000 SKUs for enterprise products. But through elimination of legacy products, she said it has now scrapped more than 60% of those. Other simplification efforts have included consolidating its enterprise ordering systems from 10 down to three, shifting company communications onto one platform rather than five, and upgrading its enterprise resource planning (ERP) software to simplify processes.
CFO Chris Stansbury said Lumen has also announced plans to sell its campus in Broomfield, Colorado, and will be closing additional real estate locations “later this year.”
By shutting down the aforementioned 45 processes, Johnson claimed it is "saving the company about 120,000 people-hours and removing tens of millions of dollars of operating costs, which we're now redeploying to support our Growth agenda."
Speaking of its Growth product category, Johnson said Lumen has been ramping back up its residential Quantum Fiber build machine. It added 120,000 new passings in Q1, taking it to a total of 3.3 million and helping it achieve 24,000 fiber broadband net additions. However, it shed 80,000 other broadband customers (primarily copper), leaving it with a net loss of 56,000 broadband subscribers.
Johnson said while its enablement engine is up and running now, it still has to put “gas in the marketing campaigns” to juice subscriber growth.
Lumen is looking to do the same with sales and marketing on the enterprise side of the house, aiming to improve execution around existing products and commercialize underutilized assets.
“We just don't flex our muscles in a way that we can and should, and you'll see us doing that more and more,” Johnson said.
Metrics
Revenue of $3.7 billion in Q1 2023 was down 20% year on year from $4.7 billion. But the company noted the prior year’s figure included $716 million in revenue from the Latin America and ILEC assets it has divested as well as $59 million in non-recurring subsidy revenue. Thus, comparable revenue from Q1 2022 would have been $3.9 billion.
Sales fell across the board, with the most dramatic slide in Lumen’s Mass Markets business, which saw revenue fall 39% year on year to $782 million. Enterprise revenue was down 14% to $2.1 billion and wholesale fell 10% to $817 million.
Within its Mass Markets business, fiber broadband revenue rose 2.7% to $152 million, accounting for 19.4% of segment revenue.