Lumen's stock gains after beat on free cash flow

By Emily Bary

CEO cites 'expected headwinds' for reporting a surprise loss in the latest quarter, but company maintains full-year outlook

Lumen Technologies Inc. reported mixed results for the latest quarter, posting a surprise adjusted loss but topping expectations on free cash flow.

Shares were rising about 5% in Tuesday's extended session.

The company reported first-quarter net income of $57 million, or 6 cents a share, compared with $511 million, or 52 cents a share, in the year-earlier period. On an adjusted basis, Lumen (LUMN) lost 4 cents a share, whereas analysts were expecting earnings per share of 2 cents.

Lumen also recorded adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $977 million, while analysts tracked buy FactSet had been expecting $1.041 billion.

The telecommunications company, once known as CenturyLink, sported $518 million in first-quarter free cash flow, above the $350 million FactSet consensus view. Lumen had posted negative free cash flow of $75 million a year before.

"While we experienced some expected headwinds in the first quarter, we accelerated North America Enterprise sales to fuel future revenue streams, drove material improvement in customer satisfaction scores across customer channels, and delivered our best-ever reported Quantum Fiber broadband net additions," Chief Executive Kate Johnson said in a release.

Revenue fell to $3.29 billion from $3.74 billion, while analysts were modeling $3.38 billion. The company saw a 2% revenue drop in its "grow" businesses, which include unified communications, managed security and other areas that could help "future-proof" the company.

Sales in the "nurture" segment, which includes ethernet, were down 7%. Lumen saw a 6% decline in "harvest" businesses, which include legacy voice products.

Johnson said the company was making "material progress in our turnaround with our strategy intently focused on empowering digital enterprises with next generation connectivity solutions powered by our best-in-class nationwide fiber network."

The company continues to expect $4.1 billion to $4.3 billion in adjusted Ebitda for the full year, along with $100 million to $300 million in free cash flow.

Lumen had cash and equivalents of $1.58 billion as of the end of the first quarter. The company announced layoffs earlier this month in a bid to control costs.

Shares of Lumen have dropped 50% over the past 12 months, as the S&P 500 SPX has advanced 22%.

-Emily Bary

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04-30-24 1615ET

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