Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Cogent Communications Holdings Fourth Quarter 2022 and Full Year 2022 Earnings conference call.

As a reminder, this conference call is being recorded, and it will be available for replay at www.cogentco.com. A transcript of this conference call will be posted on Cogent's website when it becomes available. Cogent's summary of financial and operational results attached to its press release can be downloaded from the Cogent website.

I would now like to turn the call over to Mr. Chief of and Communications Chairman Schaeffer, Executive Cogent Officer Holdings. Dave ahead, sir. go Please

Dave Schaeffer

Thank to Officer. earnings I'm everyone. XXXX morning, Weed, review on you, good and our is call Welcome had CEO with Year Thad a Earnings this to morning's Cogent's Chief and XXXX our you've conference press Schaeffer, call. Financial release. Dave our and me Hopefully, Full quarter fourth chance

consistent present way a includes of quarterly these number in we a quarter. Our press release each metrics historical and

Now our for comments results. on a couple of

revenue and Our our revenues increased growth corporate accelerated this quarter by X.X%.

for increased the Our X.X% revenue increase quarter to an $XXX million, year-over-year. by X.X% of sequentially

X.X%. adjusting by currency basis grew a year On service our by for revenues on and currency basis, revenue growth of currency our quarterly And revenue year to X.X%. XXXX year, impact by our revenue On quarterly constant or X.X% on a a universal for a also increased basis, was full for constant the full fee constant X.X% $XXX.X million. on and basis, X.X%. quarter-over-quarter for our Our year-over-year revenue grew full negative year-over-year by revenues grew

district. some pre-pandemic by have is look measured business indicate markets a slow while be corporate improvement to leasing that central and that and card district activities swipes estate pace security this the still not business seen at year-to-date by levels. that statistics influenced continues continues in activity business are at Our building as central Key we real improvement, entries at in buildings

other from pandemic. the growth for outlook result our of uncertain emerging We revenue the continue to the a about economic and environment as remain given challenges cautious corporate

continues continued video, business benefit and growth NetCentric streaming. in accelerating to Our traffic from

on quarter, our basis full year a XX% accelerated and up the growth year-over-year. sequentially network to For traffic XX% was traffic

X.X% year-over-year. X.X% growth XXXX improve. year from by by revenue On XX.X% a for quarter NetCentric increased For network currency basis, XXXX the basis, sequentially growth grew by our and U.S. full by constant NetCentric and fourth revenue our On full GAAP grew to year, XX.X%. growth continues quarter for grew traffic our the a of

rep force. Our was the our force productivity rapid impacted sales of expansion sales by

was installed number rep sales quarter full-time equivalent equivalent by reps is reps and per equivalents. increased Our or ended with This X.X% of orders full We an per X.X month. the XXX reps. time of XX productivity X%. full-time We XXX the increase quarter this sales in

XXXX, sales XX.X%. net by we full million For our or force increased a year of $XX number

this force sales rep decline have rapid to sales productivity. Our on did pace expansion impact average of due equivalent tenure and negative a rep full-time

talk like progress our to take closing for and our Sprint T-Mobile a pending I'd wireline Now business. about merger moment in the

with We Wireline are of close the Sprint our diligently business acquisition T-Mobile. to working

year XXXX, U.S., approvals material the anticipate agencies all We incur received have will the quarter this in and approximately for We FCC globally, from acquisition second this in associated with the associated and Public of professional million did acquisition including XXXX. fees the the quarter California full fees We the with in $XXX,XXX approximately in in regulatory Commission. $X.X Service close acquisition.

wireline Sprint million. anticipate We at were year-end XXXX revenues $XXX

XX We be reduced will the SKUs down $XXX to closing from today products the unique at to approximately We of wireline or rate ultimately annual Sprint number anticipate be an four. products of of run also time number million. dramatically that approximately expect

sell a our T-Mobile. this to the wavelength resale through quarter commercial begun have agreement We with to service customers

and and then $XXX Sprint approximately the the savings North expect the achieve the to network; continue million, we savings of in America achieving million in over SG&A savings network. We in in wireline expense $XX transaction to other operation the the of on of expense achieving anticipate the to its three hand, feel in finally, the significant next integration cost American maintenance and next approvals regulatory $XX now by imminent world do of cost North and also network additional of through reducing savings synergies for years. all our the rest networks, the we second revenue With years, close is Over approximately the Sprint Cogent of XXXX. million wireline its in network for several quarter

on comment buyback and our a dividend for strategy. Now

XXXX, through we During shareholders our dividend regular the payments. million to our to full for million And we returned our dividend. through regular returned shareholders quarter, quarterly $XX quarterly $XXX.X year

and of this decided consecutive by Directors, quarter, Board merger quarterly Sprint our the our on quarterly dividend from XXnd dividend $X.XXX increase share. This rate the the regularly in Our reflected growing with which dividend of yet cash-generating raising opportunities approximately to pending investment sequential again sequentially capabilities, strong is represents per our our per $X.XX now X.X%. dividend share and this annualized quarter $X.XXX growth to

combined have year. combined businesses, a Sprint X% expansions approximately XXX revenue rate of for wireline between of about margin Now annual long-term points business an anticipate an with guidance. of X% our and basis couple the we on and Once growth EBITDA the we annual expectations per

EBITDA revenue intended and multiyear to are and targets be goals as be or annual to not are even Our guidance. quarterly used intended guidance

harbor for quarter. remarks, call in the a way floor read then the our of answers. the Weed Now the provide following review will I'd And Tad questions like we some and and will I to further safe Tad? open to language over of and performance operating turn for these

Thaddeus Weed

forward-looking to to and reconciled conference GAAP Dave, all not measurement made and Thank these everyone. we expectations. our corresponding during impacted financial may earnings and statements are upon If we statements. in that you find measures these and releases, statements other includes by earnings forward-looking forward-looking morning, the you, this Yes. our report differ our K and information number XX-Q. call risks on intent, the be website are be of based could results Please to filed and our described and on Form filings annual Like update many XXXX end no will week, on detail in to are of This COVID-XX and uncertainties, or will Cogent actual our risks more pandemic undertakes actual posted for COVID-XX continue are statements, to this use in materially. forward-looking statements for week, facts obligation to non-GAAP are and These other which cause good call to current and our reports Form this historical SEC may on refer that be our factors cogentco.com. risk factors companies, subject a call, that at revise this the in differ. related on quarterly our results more belief

customer type. we our based upon into revenues analyze network customers noncore, classify revenue of connections, our on-net, NetCentric NetCentric also customers. and upon corporate customer and are we revenues type, two connection types, based all We our On and corporate analyze which and off-net customers

data from office or are in financial buildings customers multi-tenant our institutions office located network These and carrier-neutral us centers. bandwidth footprint. professional in Our corporate typically center connected carrier-neutral firms, to in our buildings services or through large multi-tenant buy customers services firms educational data

data business of access and Our streaming bandwidth NetCentric customers networks providers content buy customers. well include service and significant consumer who companies as from centers and us in serve as distribution amounts carrier-neutral

for XX.X% Our corporate this and quarter revenues business our our represented of XXXX. of revenues XX.X%

XXXX, year-over-year sequentially Dave by quarter Our revenue but $XX.X mentioned, as quarterly X.X%. million declined X.X% from to corporate by increased of the fourth

$XXX.X We our our was XX,XXX sequential connections customer XXXX, X.X% network year full corporate of revenues declined at by million. had a corporate decline to decrease and a X.X%. year-end. For year-over-year on That X.X% of

USF tax in the and revenues negatively impacted were revenues rates our corporate year-over-year changes a by total Our basis. on

there but impact year, from For And $X.X of of was USF negative a impact the the year-over-year about USF the full of quarter, was the our flat, million. of impact quarter last was year. revenues negative fourth the on $XXX,XXX for

if X.X%, a for in and constant year-over-year adjusted USF revenues constant year revenues, better currency substantially USF comparable increased the X.X% the the from you total XXXX. to On than decline currency in by revenue growth basis, tax for full rate XXXX our adjust

represented million and by another which X.X% our revenues solid and to XX.X% by year-over-year. had business, quarter, of NetCentric $XX.X sequentially this quarter grew X.X% Our

our grew NetCentric revenue Dave to the by by sequentially year, by the X.X%. year-over-year and XX.X%. a by for constant grew $XXX And year, basis Again, our impacts NetCentric on currency full million. in decreased our revenues so full the volatility For primarily XX.X% currency NetCentric basis, XX.X% mentioned, foreign quarterly exchange NetCentric revenue a as -- on

NetCentric had and our X% We customer XX,XXX network end. year-over-year a That connections at X%. increase sequential quarter on was of of increase a

a $XXX.X the on-net a year-over-year increase million of Our revenue and X.X% X.X%. of was sequential increase quarter, for

revenue increased by $XXX.X full Our X.X% the on-net year million. to for

multi-tenant buildings. XX,XXX serve total Our And year-end. on-net and X,XXX in customer at customers office these our on-net were on-net data center carrier-neutral connections we

increased gigabit ARPU. our XXX gigabit to continue selected selling We larger locations, has connections connections XXX in succeed which and in on-net

and Our increase for a That year-over-year of off-net X.X%. was quarter. million X.X% was revenue sequential $XX.X the of

lower revenues into off-net incorporated for are by Our our to local obtained impacted loop cost we prices our the customers. pricing savings

Our in megabit primarily sequentially $X.XX The our these XX.X%. connections declined end North the to price at America. the about that we and are by customers $XX,XXX off-net base for year-over-year customer serve of off-net were and off-net year, X,XXX the by buildings average per in installed X.X%

of in installed the lowering our rate for in connection sequential per of XX%. XX.X%. average price changes our megabit of at XX.X% of However, ARPU. quarter decline results greater average per year-over-year new effect $X.XX, mix and than contracts was average a and Selling rate larger the our was our annual historical The for in change base megabit long-term than has of for better price connections this a decline our

ARPU. Regarding

for off-net vendors at we're a our ARPU but off-net our From to for on-net we customers. on pass that ARPU pricing, our and continued lower Our quarter circuit modest the to obtaining increased off-net rate. decline again, the

includes $XXX which NetCentric to both $XXX. Our from customers on-net and X.X% sequentially ARPU, by corporate increased

corporate ARPU, by customers, sequentially which off-net $XXX is Our X.X% predominantly to declined $XXX. from

Our remains strong. churn

and churn were on-net continue quarterly for rates X%. sequential our around relatively to and Our stable hover connections off-net

improvement unit to quarter last Our X.X% off-net from for X% churn slight this quarter was for X.X% a the quarter. was our last and churn on-net compared rate X% rate quarter,

that are dedicated turnover, retain us, us. In to induce us and/or terminating considering purchase customers offer to reverse may the from of with termination to additional contracts their our customers their we these to pricing that order discounts reduce works who services in to decision service customer them their sales order term employed to they we indicated with have a group extend to

quarter, long-term the our and advantage customer X,XXX $XX commitment contracts certain for million. discounts Cogent contract and that us and During over entered revenue volume connections with by term of over customers their NetCentric our of increased took to into

the in EBITDA beginning of of our annual impact typically services to Again, EBITDA at Sprint our cost each employees the acquisition payroll margin. earnings include increases, we cash on year-end each SG&A Some bonuses from timing vacation and quarterly factors costs predominantly flow and and now level also and EBITDA seasonal our U.S. resetting and our expenses of of that operations benefit year, taxes to or the Seasonal and periods, the annual press paid cost of comments CPI reconcile in EBITDA releases. plan increases. our living tax and audit our

of million the $XXX,XXX $X.X full incurred year about quarter. and costs We fourth for Sprint in acquisition the

Our $X.X EBITDA by decreased the acquisition for by of and costs Sprint the decreased inclusive quarter, million sequentially year-over-year. $X.X million

for full $XXX.X these year increased to sequentially of EBITDA by XXXX, million. Our costs X.X% inclusive

to to full our related impact XXXX and and our headcount, onetime expansion; sales $X.X Our circuit impacted to million employees in bonus were international year and granted year the EBITDA inflation. costs our increased of eligible fourth quarter results offset increase a the that by to help we rep

margin costs sequentially and decreased quarterly year-over-year to XXX by XXX Our XX.X% basis inclusive points points. basis Sprint of EBITDA by

Sprint full XX.X%. of inclusive our margin sequentially the year, to decreased XX For points by basis EBITDA

full acquisition our quarter by our the the and costs, by XXX basis to XXX and basis sequentially for year, decreased EBITDA Sprint margin Excluding points for X.X%, XX.X% year-over-year points. by increased

Sprint year XX XXXX, full sequentially to excluding by the margin, points basis For XX.X%. increased our EBITDA

Comments on foreign currency.

were earned American XX% this revenue outside African approximately quarterly States South of in revenues were revenues Canadian, and to XX% based reported About of quarter our revenues Our and X% dollars quarter. Pacific, Asia was is of U.S. of Mexican, our the in related United our total this and Europe our operations.

about to $X.XX. euro the believe about Canadian quarter the impact XXXX, million, remainder is positive average Our rates quarter, rate would on these revenues average of so of revenue negative $X.XX and USD average million. and be is first remain $X.X far rate for USD not by concentrated. exchange the quarter If We this the to amount, is base year-over-year the be but highly sequential would by estimated same the our foreign $X.X that customer

X% about of represented quarter. again this customers our XX top revenues Our

$XX.X equipment typical to the chain These anticipation schedule Supply Sprint the the interconnection networks ensure to of growth together new product purchases closing have sequentially shift our that our and levels offerings inventory locations CapEx $XX of the satisfactory wavelength and our us we result of quarterly including year. Our to customer acquisition decreased and are million anticipatory a network plans, for full to expenditures meet as designed were of of multiple to network equipment. acquisition in caused million in for needs. investments our purchasing uncertainty two Sprint our accommodate

balance sheet Some comments.

XX Our IRU long-term the renewal often typically or terms initial longer initial finance obligations XX and term. are and for years include lease fiber to leases dark options have multiple of after

for Our term XX lease is longest years.

year-end. finance IRU million current $XXX.X totaled Our lease at obligations

total of different of diverse a very have we with suppliers. set IRU IRU have and a fiber dark XXX suppliers, We contracts

and $XX.X value cash restricted cash the estimated tied rate interest our restricted of cash and is of end, our $XXX.X At million equivalents cash fair agreement. swap million. was to quarter

flow Our for from for year. the million quarter $XXX.X cash $XX.X operations was million the and

Our par, total at was gross including billion million. debt net at debt $XXX.X and was year-end, $X.X our obligations, IRU

Our quarter Sprint net the and X.XXx for debt was $X.X million. debt costs, was adjusted end, at total to our months EBITDA last XX gross trailing ratio

indentures, Our calculated ratio was and under was ratio, consolidated our fixed as our X.XX. under indentures leverage our leverage the as coverage X.XX%, secured and calculated different, slightly X.XX% ratio

$X.X the swap in of rate the rate interest estimated our the decreased $XXX or agreement We end, fair on last million notes At are an overnight at agreement remaining with these each interest gains rate of period, value market reporting value swap the quarter end to agreement swap variable million. financing $XX.X corresponding the changes a that We party rates. by fair to interest obligation from term we notes. the secured interest based for due incur XXXX to of modifies our obligation the record rate noncash quarter and to losses million fixed of

We -- are cost May November our additional $X.X made XX in the are savings, made payment XXXX the had period restricted under agreement payments the savings that the with required XX, November net payment we The cash The balance achieved period net XXXX. settlement next payment we XXXX, cash $X.X to October for XX, of of to under we April equal counterparty XX and $X.X payment, for million interest payment previous May made maintain to I'm for swap sorry, XXXX. initial Under November to in next settlement the liability, to the the under a for million of May. a the period savings was cash million we that of the August made the each and and for XX. in November a from October

and bad debt were quarter. which comments day the for for on some Finally, and sales, year excellent the

improvement That our of for and only was for Our last expense year. revenues an the our revenues quarter from was year. bad our of X.X% of X.X% X.X% debt revenues the of

Our to billing a our to always, and days team We do at at customers recognize as and thank for from our customers. XX and outstanding members days collecting want job worldwide these year-end. is collections continuing excellent fantastic consistent serving in very just and sales

that, call with will to back Dave. And I the over turn

Dave Schaeffer

revenue excellent Thanks, business. network, We've I'd of base our our a of customer and like growth achieved sales force. couple NetCentric Tad. our our to highlight strengths in

video streaming At net are we data We direct centers. beneficiary carrier-neutral X,XXX over-the-top in on of international and a increased end, are quarter's markets. in particularly services,

enables NetCentric latency. data bringing networks We their of center independent more measured globally other our our any this better to carrier footprint centers, coverage data research. by data total X,XXX is optimize centers, customers The and also have breadth third-party reduce XX to on-net than Cogent-owned

over connect data year We our centers as to over also continue will per network widen XXX an expect the our to this to and carrier-neutral additional several next footprint. XX Sprint to lead the approximately market years, be we centers network project we adding to data

majority We This solely sophisticated directly we access and connect this operators market. market our collection world's force other XXX a ISP's, this NetCentric close for will the also as broadband on group team this The professionals is most companies, telephone sales largest sales of who focused mobile had of we of sales responsible be Sprint on cable carriers of end, mobile force the of the unique direct X,XXX believe give focus phone vast At subscribers transaction. quarter networks. quarter sale At professionals segment. wavelength products primarily end, users. to the systems, us to and and the we

on corporate for the Now comments couple market segment. a of

environment corporate of people Internet as diverse to customers part positive We to which in believe home and from We in established capacity our larger look work work to infrastructure continue are will business seeing upgrade access an our in office. as more their way connections becomes the corporate trends connections.

are work-from-home that applications customers will inside of corporate aggressively Our the outside the This bandwidth usage both and new environment, high require as connections video integrating some conferencing. such of became of part premise. the

redundancy costs aggressive requires. data robust their lower demand connections hybrid has bandwidth for X bidirectional symmetric Our increasingly to carrier-neutral push ad the in begun buying corporate provide that customers gigabit VPNs Corporate are boost workforce to ports. for to hoc greater and gig support centers our and and coverage XX

growth and headcount basis, out sequential increased On quota-bearing XXX or manage to reps. focused sales remain net continue XX underperforming our rep sales productivity year-over-year a sequentially of programs sales force by We total XX.X% a X% our and reps. in sales to and our force training and sales by improve

from XXX number that Our in three for have seat those reps months equivalent the XXX. than full-time been to reps, of increased more

a of per the and operating improved turnover the over last is month. past when peak X.X% that from Our pandemic during X.X% was, are quarter month sales X.X% turnover we the in down This XX number month in that rate force was sales history. rate sales per from turnover our below force X.X%. to fact, historic turnover per worst corporate averages force substantially again with averaging now averages, But years, rate

position So our unique in North serving summary, central remain located about and districts American businesses major business in optimistic we the cities. of small in medium-sized

representing buildings space, billion XXX,XXX of X,XXX building square average large size approximately of an office over square feet. net have on rentable feet multi-tenant We one

about networking and excited adding expanding are to customers customer our base We wavelengths Sprint our we product center adding a new of services, or acquisition footprint. the transport sell Cogent excited about that and optical U.S. enterprise our large ability to most to are through portfolio to our data into are all

Currently, key below leasing remain and activities activity, improving workplace indicators of pre-pandemic do are office levels. including but reentry

We space, are new that are and what returning architectures settling new they they now have indicated tenants are their network many work are on leasing will encouraged that office, to they like.

the As addressable elect to us allows office move tenants and requirements, space for corporations opportunity buildings our certain increases our buildings, increase market buildings. office corporate new on-net downsize to and this to into multi-tenant those total

our a including dividends for restricted $XXX on million general stock and exceeds basket amount the that cumulative we that million available hand. actually cash of agreements, have buybacks payments carve-out, indenture Under have we the $XXX

diligently Sprint to transaction. working are wireline We close the

our and optimistic company of cash We about and footprint. the are set flow generating with excited capabilities very the expanded product combined

transaction the quarter close expect the We of XXXX. in to second

the that, for I'd now questions. With to floor like open

Operator

James. at first our Instructions.] [Operator Raymond Louthan from take question Frank you. We'll Thank

Frank Louthan

Great.

the this -- recognize be the to towards accountants. updates to to think to to end? how going the able the And close be you going is the to updates quarter be you're of Just that any and can EBITDA the give going beginning towards any to you do going on are revenue clear, from more

Dave Schaeffer

Frank. Yes. Thanks for questions, both

been diligently longest is groups hand, services we have while working successful all regulatory XX the agreement. the in transition integration, our have approvals with on remaining lead item of and over the we working So, completion

the negotiation parties. While I most close that say beginning have quarter. items probably weeks unlikely the highly the confident closing to be and the we on we will during close is service that that It continuing. have is fact XXX of complete probably But the just items likely mid-quarter And we feel have requisite would we'll quarter, discrete very agreed of we included, framework transition over are the at of it be to that will that of is to all the there addressed date. five based agreement by and both identified have to only the negotiation.

and of would the I as needs characterize negotiations that is this parties constructive, detail both to get very are work there to occur. done, lot While determined a just

T-Mobile in consultation stream to we Now able of the transit services that financials. of be in & with will question and feel Young, that of our majority agreement our $XXX that we auditors, with the vast Ernst our transaction. as into this will part revenue as for we be In about revenue entered Cogent million reporting to the recognize therefore, included and comfortable

Operator

next go We'll William Blair. at Breen James to

James Breen

a Just follow-up on that.

rate sort about of the at of talked You revenue run close.

it I sort think you minimum of there, said thoughts sort Any down revenue or bare around deal there the on bottom taken the think closes? is see and you to -- from of that and do more once attrition you'll $XXX. the it grows you've

Dave Schaeffer

Thanks your question, Yes. for Jim.

sooner the the acquired the going them than anticipated, product two We be close $XXX the rate expectation project probably million revenue customer customers' sets. we There the most be to stable million. will end-of-life it at do acquired was the the of transaction initially is approximately in in had run of adequate quarter, $XXX second enterprise that So, is rate notice to requirement because actually annualized base points. about run to above a closing give contracts our

million run So and we'll we at end-of-life to being that closing see probably products then rate. of get several those acquired next will over the down probably $XXX months, some

team we're preserving Cogent with about revenue of also professionals revenue will the also focused We some sales but that, enterprises professionals, base a of we and million per Sprint from that primarily about large year service, their to enterprise at do year. customer revenue. of X% base the goal expectation quality but X,XXX be will probably $XXX two be and to think away individuals, able the X% grow at identified to sales improving ultimate enterprise we plateau networks expect of initially is or their about that We've of a on the that modernizing large

James Breen

just that as around from T-Mobile, the deal get then right Or And would the payment there when the cash you come a on that transaction, deal lag Great. between the receive the you side, closes? and flow first is closed when payment? that period

Dave Schaeffer

million comes the and first at to of contract It approximately the is this next first month after months. the closing, payment going probably for over end month be $X slightly XX month, as to down that be we XX up end to then per that $XX will revenue, million for reduces having month the a Because and months to is recognized value. treated straight-line able

over will initial burn revenue that lease. will have the some the life we off So, deferred of then

Operator

to We'll Markets. move Brandon next Nispel at Capital KeyBanc

Evan Young

continue do sales for It's quarter going that expenses? think and Evan your your rep about going you expenses to forward, Young talk hiring Brandon. SG&A on for the impacting you that's Did

Dave Schaeffer

Yes.

as onetime the shot. quarter, of do we, was inflation lieu larger workforce Evan, the that for So, our much CPI a felt all, to $X.X of million a impact of to increase, a we global elected first bonus in of

While be locked we there continuing component, did want continuing is a expense. to that not higher into

was in roughly that quarter an was points bonus. hit margin basis the and extraordinary expense of that XXX through So

the on approximately was actually had we to We hard about XXX reps, all, FTEs. that about the of XX%. our headcount. And quota-bearing particularly headcount clear XXX we experienced Second were total decline address pandemic number, of pre-pandemic, headcount very

equivalent pace are to that not will we inclusive individuals accelerated about These pandemic, numbers company's have quota-bearing we from the the of getting in emerged full-time reps, in the XXX that fastest anticipate to back transaction. lost As pre-pandemic level from brand. quota-bearing have the reps. we about of to that our XXX history XX regain the roughly quota-bearing hiring order come Sprint

So, are they additive.

quite of about an team, XXX million tenure that our long. So the the total is average off since FTE entire reps, is team of almost Sprint with and base

year. the grow to much sales forward expect on head basis count X% about We rate force at going more a per of normalized a

So, rate We have expect than with pace roughly we a at we're will put programs training And that, We grow turnover total think we growing that continue once force today. place we decelerate. be to pace year XXX net head reps, to bit. about a averages. about to X% the that that count, hiring helped historic XX our should the below our get in quite or lower per sales hope

Operator

move next SVB Deo at We'll to Nick Del MoffatNathanson.

Michael Srour

with what it Michael is the Nick. NANOG mentioned speed last customers interest was mean announced. commercial a for agreement which deal continued. you on obviously degree that wavelengths could that's might wavelengths wavelengths closing? On through began on update received was you fiber earnings dark for had you to and very you start dark and after the for shared fiber after from This And T-Mobile. your how encouraging. that And sell with Srour resale now I might of expressions wondering with you call, you recognizing at shortly if an which to spoke the And give was revenue us you've

Dave Schaeffer

Michael. Thanks Yes. the questions. for Sure,

that would training to That actually and after more just at wavelengths through It actually then negotiate length product to series could it the that deal initial to complicated period, launched in resell. the next the needed month. Actually, commercial beginning last a us to then the sell to does process sales arm's was allow couple than agreement the of week, training in So, world. our of into wavelengths team be months. to February, teach-ins of staff agreements enter pre-closing. the closes in last sell In we the and is month place we sales the around us agreement the we require put engineers began formally

ultimately We today sell of anticipate. can we also than a much what locations number we have smaller that in

was your XX to By and we this just have locations it in refresh trialed immediately. XX networks, only about an able product to sell memory, additional So had added Sprint locations. integrating the

in Sprint Cogent wavelengths metro our can footprint at today, are locations. available So about or resell XX

expect probably before we approximately the number standard locations. days XX across take wavelength to XX is the that Over go another It next product to will year our XXX. XXX from

have I order at would great We a already wavelengths. booked about is the have count We a orders. dozen say initial this deal do probably of from initial the interest. Cogent side point

for I selling. than think a that's good week of pretty less

the our in that same beginning metro so. Sprint network week of also could side since do or using last formally kind also think roughly XX they is I that

are discussions. these So, encouraging pretty

of one we of dark terms with counterparty route. memorandum on understanding fiber In one sales, a have

in closing not We one, have not dark length advance Sprint Two, pricing. a for ever for been precedent of product transaction cautious lot the of in three that it's arm?s to sold. there's fiber sell a reasons: has trying

So sale received prior of we were value didn't after to the then to sale to it, T-Mobile, that would not want to reselling demonstrate want and length and completed Cogent monies so we a regulatory from fiber closed. any be we the to a finally, risk. not dark accrue transaction would sure is if we until need deal the make closing, to wanted would And we take arm?s

should dark more to be first, realistically, and fiber the report we time we opportunity. going I fiber a position second, dark focus the give much by in wavelengths color think on to market we're third on quarter, I think

Michael Srour

year averaged. talk from about would quarter when pandemic. say Yes. the had funnel? fact, we of how indicators, better a be Got going it still the it anticipated back last X.X% wait rapid sequential that see. I it's at one on saying tried more, we a counsel of Again, there'll all but corporate X% state what growth growth we're from rate. be that look temper we And Can earnings continued ARPU, into can. now to by that is as much than of and sequential really overall if sequential leading of more and than QX to been a before return has couple sequential growth kind also you kind cadence rate. corporate have improvement. of whether so, of corporate are activity us encouraging growth we experiencing and the taking And And to the the I think those that QX want proposals, during to And indications it. we're X% I first I've I our normalized be continued giving trended orders, the But the pre-pandemic far it's all rate, we're of the corporate to encouraged, to into sales But improve. we're in calls, the more

Operator

David [Operator Barden BofA Securities. at go to Instructions.] next We'll

John Crawford

You for got John Crawford on Dave.

about curious leverage. Just

And if the So Can mindset few that discouraging cash expecting you range. to has it's spoke past on tell excess about over last me head to you're in continuing above since changed direction your X.X% what to that quarters XXXX? you grow X.X% it?

Dave Schaeffer

had the in So it's a consistent utilizing balance systematic thanks discouraging Dave's a on of for But the increase and Dave policy name, and slowly we've I a through cash think question Barden. correction sheet dividend. our

our increase lease I payments principal this our committed is in leverage we an are think due networks the CapEx. increase to together. tie our capital effort to remain that that of true and quarter is in elevated going to to did It Much strategy. the primarily

to Sprint got data indicated I with the connected earlier, of associated capital a Each that. additional network. centers had As those an expenditure we've XX

another capital. we spent have have also already process that We XXX in where

on see start our here, come not leverage up a think go much net and will a I basis, from little but to maybe then we down.

$XXX no to utilize for capacity margin locations cost flows port is revenue as million that Cogent. payments the that in because reserved have EBITDA through of from the recognition T-Mobile for would choose directly a XXX% they incremental if And The T-Mobile we product to OpEx cash transient gross product. our service remember, to have

revenue So, margin, additional stream delever. with that rapidly will we and

John Crawford

And can. I it. if another, Got then

rationalization on wondering that working of on your changed to philosophy team sales. I if over? that you're announced you the be mentioned the you has know wavelength was bring would NetCentric headcount number I from like hoping So, it, since people transaction

Dave Schaeffer

had the It organization really Sprint sales. day signed deal, we has employees at those the of only not. XX were Remember, X,XXX the in and

very X,XXX there a remain, voluntary have and that have today has number is slightly the of salespeople That T-Mobile headcount under those have severance they of employees. packages offered T-Mobile below occurred that generous reductions force been All been employees. in in stewardship

number We of the these to packages. severance decline continue use through to expect that

some million as additional those We take not guess senior to My $XX and employees, organizational is as are following and will individuals and roles people employees structure. with there we negotiated be to become fallout our post-closing assignments. beyond capital the Sprint T-Mobile. with Cogent organizational above have the structure some Cogent, additional realigned both Cogent an choose but as of new All pool of $XXX the management expected well million

I the has. additional closing X,XXX would mirror somewhere be severance employees, that program So, that anticipate we around their say X,XXX about at post-closing. to we to can Cogent

X,XXX, operational growth part the force. attrition expect post-closing, and So we would just offset in by our some over additional sales in

we between head to anticipate the be XXX So, X,XXX. count and combined company's

Operator

next Capital to RBC Bora go We'll Markets. at Lee

Bora Lee

us remind So, CapEx and you're you integrating and Sprint you're wireline expanding thinking those efforts where about the internationally how assets? can while

Dave Schaeffer

question, Yes. Bora. Thanks for the

countries today Cogent operates the around So world. in XX

and Peru, rings through recent constructing multiple initial in IRU acquisition, our most we Lima Our expansion was market. as are

an dark dark into intercity look and and international centers markets. data fiber market, those to significant then connect go buy also intracity we when fiber, in So, to we typically all

go in are requisite several significant will had adding. is process we the in intended but those Thailand other new regulatory countries to India, where has We has that Sprint acquiring markets. markets Cogent Malaysia. be of to the being that, of each organically lags in had And already addition three that and licenses Cogent

on net So, they come quickly. will

centers on. countries carrier working year. neutral three will in data another add or That those approximately factored organically five that adding I suspect probably XXXX, additional a is we and our six So into expectation would XXX Cogent markets about of is

the remind capacity. U.S., of based entirely to dark just fiber. of network the Mexico lit rented network outside The inclusive based investors, Cogent Canada Sprint on and was is entirely owned on And

in So, of XX intercity international already Sprint Cogent-owned of have those centers over the center those brought About we process onto on data been the converting connectivity net. are networks data network. and

we is rate. then Sprint savings effort eliminated XX annual network, and international the and least another a in $XX that about until a completely that have about have We we'll process, million continue anticipated to year in result

Bora Lee

one And I could. more if

to SG&A? to margin terms expansion X% and per basis the you expansion this X% thinking in margin How of revenue specifically, between But are So, guidance long-term the and point year. more your growth alluded in to of question. answer XXX my of that COGS sources somewhat of you

Dave Schaeffer

margin back XX-XX Cogent public Historically, equally basis of go gotten of SG&A from Yes. XX look has expansion, roughly the a filings. almost and if XXX years split, past at its points and COGS efficiency, efficiency you

impacted performance, had forward, sales was looked the fourth we our quarter, continued in smaller pandemic. going When actually company's the it same. rapid force would this expect SG&A very the The gross rate about margin and history, expansion really EBITDA XX.X% margin at of the our really think think, best improvement. of by I we I we quarter, rehiring in EBITDA post was year-over-year it's

by should improvement a I we think our kind of gross we'll be SG&A coming about about EBITDA margin this it midyear and through of margin year, get from efficiency. coming back that and of cadence from of to half pickup half

Operator

our take we'll Citi. next And question Michael Rollins at from

Michael Rollins

that the is how share opportunities that to every of a And consider the variance plan factors share about compare to think or to multiyear you're create positive of Corporate from it's with of variance? learn acquisition? often. when there NetCentric that we you And practice negative share taking upcoming as pace and find you try taking generally if expand something process expectations does take in the update each the going you and whether the your are the what with business the that this cause to variance, so curious segment, I'm products of these from that the

Dave Schaeffer

there'll base is business. enterprise, the traditional small our corporate question. Yes. to which really or I customer, a a Sure, think Mike. actually is customer going a which third than be category, for tends And be forward, medium-sized Thanks which large very different

I when share as a penetration segment, footprint. in look market better and more our that think result at footprint corporate of is the we gain in

footprint I configurations. I think, as in with think around the in vacancy tenants direct paralysis by came variance the the The their remaining pandemic. the increase that uncertainty of rate a of the, office decision-making result and

in of or emerging a still As work that we're entirely from vacancy, seeing and elevated companies adopted settling are yet. be hybrid kind work we those office, plan, but not it an is the whether implementations are there are universally because and plan improvement, on

that modify better I had. but the realistic we we've is think trying clearly corporate slower-than-expected And kind rebounding. about a not It it much during business. it rebound pandemic, than the be is was I consistency think It the back we're is to sequential look based year seen in the to of we're performance in And call, pre-pandemic from at our as all that growth that. leading why the We then on a probably away said as well least just earlier data have. and that's we of I plan. indicators X% the actual at

too traffic business. to our over the applications, were aggregate at their to actual business. connections conservative look We of NetCentric and Moving multiple And customers reduce on basis. we NetCentric traffic look we the to there, we probably There, have daily in latency growth. look at at a in need patterns modeling the around our

think were probably But in growth gain rate the rate very the I continue, share, and in and we're in a that market accurate we traffic will very of of of and think consistent that we've decline, in messaging. I conservative. been price too terms

on average. NetCentric year-over-year We continue basis, a about faster grow to at XX% long-term than currency constant our business our

growth longer We that it to outpaced but expected, to for continue than that some we begin also at will, think expect moderate. point, we

will cycles, through empirical technology piece, the XX been final for The they've Sprint with the materials on than a fact decline year modest inside million we've X%. of refresh rate two and improve at multiple that and by extremely plateau grow see pretty that to a being for can on those date only less that the that is $XXX They've that And reviewed customer we which margins net X% we Sprint conservative years run other enterprise have quality encouraging. think large then our million is bringing diligence in services we been we're of we will or base. $XXX belief and

each the on those So our and quarter, that of are that's to each goes assumptions, inputs each thinking literally based Board we every and they projections quarter these in adjust of real-world the kind categories. revisited and into every of

Operator

And at go LightShed. Walter to next, we'll Piecyk

Unidentified Analyst

Walt. Apologies intensity elevated. this I but Dave, is if guess, I this for capital earlier, on Joe missed remains

what's at of principal growth in and from going Because an I this maintenance think lease least QX, So, capital to baked standpoint is kind about was guess, there year, the a kind of way what's large in there versus acquisition forward? repayment?

Dave Schaeffer

Yes.

So, we about have three very been categories. the clear

continuing. that That needs number and number The a year, $XX to beyond expansion. the as for that and we Cogent its business. we would organic be of number anticipate be being spending What be maintenance about above first kind would million

or the average that either $XXX,XXX a connectivity, We add also at additional we an fiber, then million new building have added in XXX about building, in and about $XX about metro cost of buildings or markets we densifying that we for of said are we and beyond Cogent expand have we into markets spend million networks. one the Sprint will integration time that, Above that in. and $XX

to Some, integrate those actually was networks. to capital lease begin fiber to a significant that part, of the get

combined intensity, will of be is business capital capital that acquiring, third to districts to expense. still integration support business connected million wavelength spend inclusive the we've higher Sprint that Sprint The company not $XX spent that we a the and the locations in needed be on for central then is the year. of And product oftentimes, are which bucket portion. a were onetime to in needed is some more There significant about and the

be necessary about carrier the in fiber of million, business of about is Cogent we're way going million $XX about to we that's is neutrals and integration whatever expansion time the neighborhood $XX million CapEx, million to effort once either that these think $XX the million said, And for So, the that is XXX then Sprint, complete this of metro adding new about in business, recurring running as to for now right or markets. we'll And $XX probably and $XX million intercity do. footprint one buildings. the $XX so

Operator

to Dave our does back conclude for session. question-and-answer remarks. I would over to that the And closing like Schaeffer conference turn any

Dave Schaeffer

that most a I'd answering investors' questions. we negotiated protects quarter. will that all parties, everyone. have their the thank talk to of importantly, like Bye-bye. making we quickly, confident forward happen that the closing we'll fully Sprint everyone, second quite been both we've soon. we And to Take in in transaction complete care, agreement and look Hopefully, and sure services feel transition

Operator

concludes this for today's Again, participation. you conference call. And your thank

disconnect. now may You

Cogent Communications (CCOI) 23 Feb 232022 Q4 Earnings call transcript