Can You Smell What The Kate Is Cooking (LUMN)? - Part 1

Part 1 of a multi-part series on LUMN: The Transformation of Lumen

Lumen (LUMN)’s CEO Kate Johnson and team deserve a lot of credit for the turnaround of the company over the last two years. However, if you believe Kate Johnson, the transformation of LUMN is just getting started. Kate Johnson just purchased $500K of LUMN stock last week after the stock’s bad allergic reaction to 4Q earnings. Her previous three stock purchases between 2023 and 2025 have been very well timed - average cost of $1.29 vs. today’s price of $8.00.

I want to review LUMN’s progress to date and talk about how I view the equity. Current EV is around $21B, $13B of which is debt and $8B is the equity market value. The company generated $3.4B of EBITDA in 2025. I’ve been going back and forth on LUMN over the last 12 months, sitting on my butt and doing nothing while the company kicked ass fixing its capital structure. Total debt dropped from $20B in 2023 to $13B in 2026, while interest expense dropped over 40% from $1.2B to $0.7B. Current leverage stands at a respectable 3.8x (which is low, dare I say, for today’s premier fiber asset). The credit has recovered so much that there’s probably nothing to do at this point, but we can talk about some trades through the capital structure where I see more/less value. I’m going to break up this writeup into two posts since there’s too much to cover all in one. This first post will go into the history and current strategy of LUMN. The next post will go into the capital structure, financial projections, cash flow analysis, valuation and my views on the stock. I’ll also do deep dives into some important aspects of LUMN (fiber footprint, strategic options) in the next few months as we try to figure out what the best play is. I’ll attach my slide deck and model on LUMN in the next post. As many of you guys know, LUMN financials are pretty opaque, so take the model with a grain of salt.

After we spend some time on LUMN, I will write a post about the similarities of LUMN and SATS, two distressed situations that have turned out pretty well over the last two years. Who says LME doesn’t work! We will compare and contrast them against other distressed situations that haven’t worked out well. And we will try to match up the other situations we’ve looked at over the last eight months (TV broadcasting, QVC, NextNav, cable, First Brands) and see how the conclusions from LUMN/SATS impact our analysis for these and future situations.