President And Chief Executive Officer at Lumen Technologies
Good afternoon, everyone, and thank you for joining us. 2022 brings new beginnings for Lumen. The team is energized for rapid change as we streamline our assets and aggressively invest to drive growth. I want to be clear, our focus is on turning our top line positive with profitable revenue. Every employee in our organization, our sales team, field techs, customer care, support functions is focused on this objective. On today's call, I'll provide a few thoughts on our fourth quarter results, an update on our announced transactions, a review of our key capital allocation priorities and a review of our investment plans, which we believe will position the company for long-term sustainable revenue growth. Neel will discuss the fourth quarter in more detail, provide our outlook for 2022 and update expectations for the timing and financial impact of our two announced transactions. We'll reserve time after Neel's remarks for your questions. Our fourth quarter revenue trend was stable compared to the third quarter and, on an organic basis, our business revenue was unchanged from the third quarter.
We said previously we do not expect a straight-line revenue growth, but our forward indicators provide us confidence that we can achieve our stated long-term goals. Quarterly sales were once again strong, and the funnel remains above pre-pandemic levels. The Lumen platform is transforming the way businesses approach their technology needs, bringing best-in-class solutions to enable 4th Industrial Revolution use cases and enabling the digital transformation for enterprises. Enterprises are adjusting to new hybrid workloads. And Lumen, as well as our world-class partners, are delivering the expertise necessary for our customers to succeed. As you can imagine, the excitement within Lumen is high as we position our Quantum Fiber platform for a major acceleration. Our robust, symmetric, all-digital experience is resonating with customers. Quantum will help drive revenue growth and lower the operating costs for our Mass Markets segment, improving the profitability and durability of the business. At the same time, incumbency provides us a meaningful cost advantage as we build and launch new Quantum markets and drive penetration gains. Our expectation for long-term penetration is fully supported by the strength of the product as well as the performance in our existing Quantum markets.
Even in our nascent Quantum footprint, we have achieved 29% penetration with limited marketing activities, more than doubling the penetration we have in our legacy copper areas. As we pivot from micro-targeting to a market-based approach, we expect to be able to attract and retain new and existing customers to our superior product capabilities much more aggressively. The opportunity for Quantum is significant. I hope you can feel our excitement for the future of Lumen as we invest to drive Enterprise and Quantum Fiber growth. Let's shift to a few quick thoughts about our previously announced transactions. These transactions allow us to focus on the areas of our business that we believe are best poised for growth. As you think about the pro forma revenue mix, over 1/3 of our mass market exposure to legacy voice and other revenue will be divested. Not only does our revenue mix improve but these transactions also delivered strong valuations, supporting the view that our overall asset portfolio remains deeply discounted by the market. While we disagree with our current valuation, there's only one way to realize our true market value: execution.
We get it and we're focused on delivering. We're making good progress toward closing both deals, and Neel will provide an update on our expected timing and financial impacts. We're working to be a strong partner to both Stonepeak and Apollo as they onboard our employees and customers and as we help position them for success. Last quarter, we provided you our top five capital allocation priorities as we deploy our significant free cash flow and utilize the proceeds from these valuable transactions. I hope I've been clear that investing in growth is always our highest priority, and we will invest in both capex and opex to lay the foundation to achieve our goals. I feel we are in a great position entering 2022. Let me start with Quantum Fiber. There's a tremendous amount of activity here at Lumen as we rev up the Quantum engine. We are readying the platform to deliver on our plan and remain very confident in our opportunity to deliver the terrific experience provided by Quantum to more than 12 million locations over the coming years. Quantum Fiber revenue grew 22% year-over-year, and we look forward to the growth that will come from our much more aggressive Quantum stance.
We see a long-term significant and sustainable revenue growth opportunity for our Mass Markets business resulting from our Quantum Fiber investment. As of the end of the fourth quarter, we had approximately 2.6 million enabled locations within the retained 16 states, in line with our expectation outlined last quarter. Our excitement builds as we enter 2022 with our plan to accelerate aggressively and ramp that enablement pace to over one million new locations, with a goal of hitting a run rate of 1.5 million to two million enablements per year as we exit 2022. Our fully-funded 2022 Quantum Fiber plan will enable millions of customer locations to experience our best-in-breed Quantum experience and product capability that we believe will drive higher ARPU, lower churn and significant customer lifetime value. We will invest heavily to bring the Quantum experience to our customers, especially in the areas of product development, marketing, brand and go-to-market sales initiatives. Both enterprise and mass market supply chains are stressed, and we continue working very closely with our diverse and valued suppliers to mitigate risk as we execute on our growth objectives. In addition, we're managing through this inflationary environment and, with some exceptions, do not expect pricing pressures to impede our goals.
Our excitement for Quantum Fiber is easy to understand, but we are equally excited about our Enterprise business as we continue to invest aggressively in our edge compute and storage platforms, our managed service offerings, SASE and our security products. Our customers' digital experience across our core networking services is unique and drives success with a customer-first posture. Along those lines, we have successfully launched our fully digital self-service edge compute ordering system, which allows existing and new customers to self-provision services, including bare metal and storage solutions in minutes without the need for human interaction. We believe our extensive long-haul and dense metro infrastructure and our ultra-low latency, ultrahigh capacity network, provide cost advantages over many of our competitors and deliver a powerful customer experience. We are seeing early signs that our customers understand that value proposition, and our recently announced $1.2 billion network services contract win for the U.S. Department of Agriculture is a great example.
As part of this solution, we're delivering secure remote access, managed data, contact center and cloud connectivity solutions to more than 10,000 USDA locations across the country and abroad. Awarded under the $50 billion Enterprise Infrastructure Solutions, or EIS, program, the 11-year task order is illustrative of the broad range of products and services offered on the Lumen platform. This is a long list but our services to the USDA includes SD-WAN, MTIPS, Zero Trust networking, edge computing, VPN, managed security, UCaaS, voice over IP, Ethernet and wavelengths and related equipment and engineering services. I mentioned earlier that we had another strong sales quarter in 4Q. While the USDA deal highlights our expertise in the public sector, our other sales within North America Enterprise, which do not include public sector, were up both sequentially and year-over-year. In fact, December was the highest sales month we've seen in several years for this area. Beyond driving growth, we believe returning cash to shareholders is a very important part of the Lumen strategy and that the $1 per share level is attractive and sustainable long term.
As we said, our payout ratio will likely rise in the near term during the accelerated Quantum build phase which we think should be viewed as a discrete project. The completion of the multiyear build phase, coupled with our expectation for top line growth, should return us to more normalized payout ratios over time. We will continue to manage our balance sheet to remain relatively leverage-neutral through our Quantum Fiber deployment plan, but we do expect the time line to reach our target net leverage ratio of 2.75 to 3.25 times adjusted EBITDA will be extended. To be clear, relatively leverage-neutral is inclusive of the impact of not only the transactions but also the CAF II to RDOF transition. We will also continue to evaluate our asset portfolio, and I hope our opportunistic but open approach to asset optimization is fully appreciated. Let me be clear, there is no urgency for us to divest additional assets, and we will only pursue opportunities that offer both a compelling valuation and a clear strategic benefit. Lastly, I want to emphasize that we continue to believe our shares are deeply discounted and do not reflect the tremendous opportunity we see for Lumen going forward. Our Board remains prepared to authorize further buybacks on short notice if we believe a buyback provides the best and most prudent return for our shareholders.
With that, I'll turn the call over to Neel to discuss our fourth quarter results. Neel?