Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Cogent Communications Holdings First Quarter 2023 Earnings Conference Call [Operator Instructions].

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 at Cogent's Web site when it becomes available. Cogent's summary of financial and operational results attached to its press release can be downloaded from the Cogent Web site.

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

Dave Schaeffer

Schaeffer, and morning, earnings all Dave our me Chief and had Thad good release. Hopefully, chance call welcome this conference CEO. morning's on thank I'm Financial XXXX Hey, press Weed, quarter to you, to review is earnings With first on call. you've Officer. Cogent's a our our

that includes a each number we metrics present release quarterly basis on press Our quarter. historical consistent a of

our results. of Now overview for an

Our quarter X% to On year-over-year our the revenue million a $XXX.X the X%. for basis, X.X% for by sequentially increased currency and quarter year-over-year. increased by revenue grew constant

statistics, business central the of in districts security including activity pre-pandemic to continues building these by influenced badge in entries returned corporate into business to business real yet leasing year-to-date, has major see the of leasing that a activities indicate estate and activity not central key improvement, continued to but the Our districts and levels. real level be Two market estate has cities.

corporate to our our after are result of the continue remain the and pandemic. given challenges outlook the cautious a of economic for that effects in other uncertain We environment revenues

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

quarter, year-over-year. on revenues traffic grew X.X% by quarter-over-quarter a For sequentially U.S. by X% the basis, XX% our NetCentric our was and year-over-year increased a and sequentially up GAAP basis. On X.X% grew

of by fluctuations, on from for currency currency quarter our revenues However, constant XXXX. XX.X% adjusting basis, NetCentric the first a increased

person. to per per last from productivity per force installed X full-time full-time per quarter increased sales units Our month month equivalent sales orders equivalent X.X

XXXX. This quarter reps quarter reps a of ended sequential X.X% first increase. X.X% sales quarter to XX reps. reps of full-time represents also by the quarter the from sales this a sequential We the of in of equivalent XXXX XXX XXX increase the sales number full-time and sales equivalent We increased of with or fourth

$X.X cumulative overviews the the associated business. on of some Group fees professional a quarter closing run approximately of The expense the acquisition closure The of on of T-Mobile's for Wireline closing. transaction. initially spent professional closed $XXX our for year of our closing revenues Sprint $XXX were about incurred May ahead Sprint million. have We We the the revenue million transaction Markets first in XXXX. this Global in approximately or fees Now $XXX,XXX is and in Sprint that Wireline with announced million planned annually rate at fiscal approximately recently Wireline business Xst,

expect number a at base of the elimination exit to and of customer remain to reason reduction of year continued revenue stable. this for million, The is primary decline We the expect in this we products. the year run which with $XXX then non-core acquired end rate

products number when agreement that reduced core be signed down approximately was that will products expect XX our four year We end. from products at of were offered to

synergies expect of the to significant these three savings the businesses. the we years, to due combination Over next annual of achieve

to Sprint, of will use that elimination on in annualized network shutting as million traffic $XX Sprint on network to Sprint about that the migrating in owned down of all resulting Cogent and the existing network, opposed savings. footprint the the through leased primarily the of be Internationally, will and services. network expect off-net North $XXX million on-net saved American our we We be the of

positive reductions and well next to through as anniversary the our exit within network America occurs exit Cogent as in expense revenue be significant a synergies will that us And and savings in annually North other that that achieving $XX approximately when of IRU we then next for operation couple able to years. anticipate additional allows synergies. finally, will We cost maintenance SG&A save million

million approximately in capital working payment to $XX.X $X paid we in capital purchase On This set date, forth as the related closing cash the we primarily the working the for was funded to to employees international and agreement. seller migrate to $XX.X liquidity vendors subsidiaries approximately customers, facilities entities. of and in injection have those XX Cogent million on to international those the operations continue those sufficient in as we these

Additionally, capital months approximately installments equal will T-Mobile payment paid through adjustment we post-closing. These $XX XX acquired receive million the that working estimated in from includes X an for be obligations. lease XX XX% of will in

business, customers. Now customers from Communications operational without we and to connectivity optical of Sprint and of services. expansion. intend network In We spending to optical the dedicated expense sell the the to and capital of connection our own and for ongoing product overview owning These wavelength are operating optical sell services little customers a existing transport require infrastructure. with customers, acquisition beginning their to these new acquired associated wireline

over This approximately As Cogent. month. T-Mobile X, XXXX. of our be equal entered or payments months the months of XX million we T-Mobile, Services million over with XX May part will IP an a a Transit consists services Agreement the transaction $XXX into $XX aggregate from of next million on $XXX next of transit totaling purchasing

then spread out additional subsequent or million will $X $XXX receive for monthly equally approximately We month. the XX an million months a

straight carries investors, million line recognize that XX infrastructure. margin month. a contribution over to a EBITDA this or exists as XXX% deliver million capacity it transit the in available completely approximately a remind is on To product services will We Cogent's associated revenue the on-net already services and basis these from $XX is $XXX of T-Mobile months a

technology, to of of be information we receive in and addition, estate closing, services business. services chain real human These agreements. and orderly and back support the services to transition entered services a order order facilities In services related vendor and finance transition to signed These supply agreement. transition-related into management in T-Mobile. an primarily a provided office transition transition On series maintain support we specific a are from under agreement resources will

the back providing be support, technology, remaining facilities that where components and in In will addition, acquired. we wireless located transition network that are support reverse a necessary we finance we entered to support into agreement services office

as year services request each be ability being party a transition to migrates these the time reverse of And diminish paid Our the services Cogent monthly rendered month. under per into anticipated systems, $XXX,XXX approximately the calls to costs transition $X.X is that agreement, will were either with its to be T-Mobile. services These and previously transition side own initial for for the year extension. a transition fluctuate for able agreement. expected are be provided expense costs transition two period to one under T-Mobile the paid The initial approximately to services to by services to services agreement over may million be

with in passed Either no at off incurred party be will these with costs cost providing services services transition Third-party with XX days can on these additional notice. of margin.

the to will services, addition outside be In commercial agreement. to selling T-Mobile services of the transition we transit

at services. will XX also to fluctuate we'll Layer space addition initially and for be Our in commercial power, this that X IP of month services these $X.X million in services initial and on connectivity X, services This includes either portion they diminish services the over day relationship over million indicated approximately Layer time. in This or providing transit colocation, T-Mobile a use and these agreement Cogent has of cash months. a next with commercial $XXX to will result X. T-Mobile may T-Mobile is the T-Mobile paying that the

footprint. Cogent materially we to In our expand reach opportunity the network at had addition, and

Sprint to data XX XX we are Cogent We centers operate. adding data that the centers

owned. All that these of simple from acquiring are Sprint facilities we're fee

So combined the XXX Cogent company X,XXX to data in that centers the connects addition to. the centers are carrier-neutral data

of owned route XX,XXX adding fiber. in miles are We our city

in We with fiber adding route from metropolitan miles acquired are conjunction -- finally, of IRU adding this route And IRU acquisition, Sprint. we are also approximately from miles also intercity XX,XXX fiber metropolitan acquired miles XX,XXX fiber. of and X,XXX of X,XXX Sprint owned

comment our Now on a for dividends.

dividend. quarter, in of to we the returned During our million $XX.X quarterly form regular shareholders

cash our the opportunities, sequentially This to dividend dividend flow sequential on Our sequential all inclusive capacity $X.XX, our Sprint of decided consecutive of cash of dividend. to Board and growing requisite our generating $X.XXX Directors represents of our flow our of reflected streams quarterly by regular and $X.XXX. XXrd increase from business, investment quarterly the month raising acquisition the its strong

stands X.X%. Our annualized dividend rate now growth at

not Now quarterly company specific in does terms of guidance, give guidance. the

from of and about growth rate business, rate This a synergies. EBITDA should approximately annualized and at expand XXX anticipate of between X% of year have long-term not does combined X% of revenue Cogent the been an the the basis a once expectation However, T-Mobile. annually. these combination achieve in we transit we points able business IP with Wireline Sprint business the margins initial the $XXX for the million include to

Our that revenue growth acquired exclusive is stream. of

quarterly intended or to EBITDA Our multi-year be meant guidance be revenue goals to and goals. annual specific and are not are

conclude further the for some quarter. Thad details then for our ask with statements And read to that, then like following floor and harbor I'd safe a operating open our we'll provide language, I'll few performance the on questions. Now

Thad Weed

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

reports XX-Q. related more XXXX our COVID-XX in and detail Form risks on in described are report to Our our other in on annual Form quarterly our risks XX-K and

analyze Some analyze types, the into network customers is enterprise on-net, our type. customers acquisition, comments our and And off-net our connection customers currently based with on which revenue. to be non-core. and will also corporate upon based type, We classify our adding we customer we X mix. upon customers. NetCenteric Sprint revenues revenue We And

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

-- streaming on-net buy in of as providers consumer companies NetCentric distribution data business carrier centers access content as Our service that serve us well and customers. -neutral bandwidth significant who a from customers networks amount and includes

revenues Our represented the corporate XX.X% of quarter. customer for our business

decrease of by XX,XXX had of We X.X% at decreased corporate and quarterly corporate sequential quarter quarter of Our declined network X.X%. X.X% which revenue year-over-year from connections million only a sequentially, customer year-over-year to the our X.X%. decline and by $XX.X was year last slightly first end, but a on

For first million was sequential of our of impact And impact was on the from the year-over-year, about quarter quarter, last positive the year. USF the revenues not $X.X at significant.

year-over-year XX.X% represented Beginning NetCentric we grew revenue increased which XX,XXX of our a quarterly revenue on business, a with network and year-over-year another of as exchange our customer NetCentric year-over-year grew NetCentric quarter of sequentially enterprise a report on $XX report, X.X% impacts X.X%. We Volatility foreign sequential the revenues our NetCentric and new mentioned. at X.X% Our constant as to XX.X%. by by customer a rates X.X% I begin was next basis. and And type, quarter end. customer connections in currency primarily basis, quarter for had quarterly by a increase million to our That solid will on revenue. increase had our

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

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

our selling We impact larger which connections locations, continue the again and ARPU, selected connections succeed XXX happened increasing gigabit this and on-net to in in has gigabit this quarter. XXX of

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

impact the off-net from the -- lower impacted obtained this pricing, local decreasing that ARPU, loop our by incorporated loop prices Our off-net savings quarter. cost we of revenues and happened into which again our is are

located were customer connections America. off-net primarily quarter are serve we North end buildings. customers in off-net in about Our X,XXX these XX,XXX at and off-net off-net These buildings

and year-over-year was X.X% Comments on The of base of was decline our in XX.X%, The ARPU. for connections price by contracts a results average lowering customer megabit XX.X% per has change a quarter. change Related to connection by That for the installed per this our averages. by ARPU. $X.XX greater entering megabit a and and sequentially customer average changes was with into than impacted price price to XX.X% during rate our consistent year-over-year and larger quarter our in some contracts effect contracts the our average mix megabit new Selling the long-term declined and to pricing. sequential larger larger at per of $X.XX.

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

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

Our off-net of ARPU, declined connection. X.X% which from stable. by is to $XXX Churn corporate sequentially predominantly $XXX comprised customers, is per very

quarter churn that for quarter. was and the and last Both this on-net were for off-net and were around was and rates on-net that's quarterly same the quarter. what for sequential both Our as X% off-net X% they

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

include customer also expenses and timing or increases, releases. earnings impact employees our the certain our to vacation quarter, States SG&A EBITDA commitment we each level in of and entered into of X,XXX periods, our CPI EBITDA that cost our Cogent audit operations and million. contract volume customers On acquisition factors connections. of end plan cost at and and of our bonuses over and annual the recently of quarterly year, cash long-term resetting for by taxes services payroll each and Sprint reconcile us our revenue contracts During $XX.X benefit United discounts the from the costs EBITDA EBITDA their of term typically our to the with and That flow paid year advantage margin, beginning annual in to tax Seasonal press of increased took living seasonal increases. over

for the of EBITDA acquisition Sprint these million During we the incurred and quarter, by million $X.X quarter our by sequentially year-over-year. decreased including $XXX,XXX And $X.X costs. costs

and to were increases increased results expansion. annual CPI impacted rep compensation by circuit EBITDA headcount, related power international sales Our materially our and our costs

Our margin year-over-year quarterly EBITDA sequentially to by XXX $XXX,XXX by basis costs points. XX.X% and of Sprint XXX decreased the acquisition including basis points

Mexican, about of to dollars quarterly related reported Canadian, average quarter Rest which XX% outside on so we $X.X this rate these current and If of total Europe was remainder About earned at this the conversion $X.XX. our FX XX revenues at revenues. and far United were revenues is our customer this the will for revenue $X.XX highly and of revenue rate World only operations, not exchange and the States the averages the African and Our of quarter. about customers South of revenues Canadian concentrated dollar at impact of top is based this in base is level of American quarter, remain quarter quarter average for million. and positive USD X% U.S. Customer XX% about approximately also be positive is million our were in were would Oceanic, our sequential that $X.X and estimate The be the our our operations. to is revenues the euro year-over-year concentration, X%

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

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

$XXX.X end. finance Our at IRU million obligations quarter were lease

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

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

Our end net including at was lease gross $X.X at $X debt total debt par, billion obligations, quarter finance was billion. and

XX debt EBITDA gross at costs. last debt total and X.XXx to acquisition was our was as trailing X.XXx. months Our for adjusted Sprint That quarter ratio end net ratio

leverage under calculated and leverage was X.XX%, was consolidated ratio our note X.XX%. our ratio, Our secured as indentures,

Our as fixed under X.XX%. coverage ratio our note calculated was indentures

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

We cash equal the required to to with estimated the maintain liability. are balance counterparty restricted a

some and comments on days outstanding. debt bad Finally, sales

for Our bad expense the quarter. debt was revenues of X.X% our

call the back Dave do team and some customers worldwide continuing will for them. an at going quarter, metrics Our collecting remarks. Sprint every sales These a our serving members days our over And fantastic which thank days, to in job may final was metric. year and with our amazing was end be turn XX outstanding acquisition the want collections is for to by recognize and I I and billing excellent same impacted forward. from personally to

Dave Schaeffer

now network, and the our Thad. of customer some force. highlight like strengths our to Thanks, our of I'd sales base

with we'll revenue NetCentric We've our excellent business. First, start NetCentric. in achieved growth

carrier to continue At XX grand optimize in benefit for total particularly them a any other and of centers our data measured in and networks X,XXX X,XXX coverage centers, breadth than international quarter's markets. the third-party from us Cogent-owned We NetCentric to The end, and serve transition of reduce enables is third-party more latency. to video data our allow data streaming, increased on-net customers carrier-neutral to were by and centers of their over-the-top research. we

in network this widen years. per adding to expect lead several XXX the next over We we'll our project we to continue market as an year carrier-neutrals our additional

In we acquired Sprint Cogent-owned expanded XX both IRUs owned fiber centers our adding miles. addition, We significantly acquired are data with the to network footprint. and footprint route

a subscribers. At X,XXX mobile networks. exclusively had NetCentric direct of Again, This in predominantly in broadband constellation force closing of companies, solely Sprint this carrier end, largest of other be for of of is represents carriers transaction. other any that quarter's segment group directly begin vast operators world's than on the we'll end, the the sales sales This industry. sale responsible Cogent to the mobile connectivity allow on we focused market. telephone phone is most force focused professionals our connected with companies, world. we At and the sales the this to products of cable quarter's will the more and a XXX professionals This the that ISPs, majority likely offering wavelength the

of on Now [Indiscernible]. a for comments couple

corporate environment from work. our connectivity increasingly infrastructure in has some seeing home willing upgrade larger remote week. We work facilitate established people's Internet customers as support business trends of corporate as and are to are to believe positive their work part become We

of inside work both Users that video are premises. high outside the new aggressively as connections their require Our of corporate and such applications conferencing. customers will world become part integrating capacity

return symmetric has demand additional buying redundancy to and to Corporate bidirectional coverage push ad and even that segment, continued in highlighted their our on last business. and and data for are provide offerings. we lower are ability from bandwidth to but to as our port XX-gig virtual long-term, the corporate of cost increase improvement aggressive continued The sequential corporate underlying quarter, for greater be to sustainable facilitate private provide the X-gig networks trends hoc Our long-term carrier-neutral customers robust the connections centers to will work in for both typically growth favorable home.

some focused sales number the sales for people the of our of We remain highlights productivity on individuals. force. on those Now and

our continue year-over-year in basis, sequentially a programs, to or equivalent reps full-time total increased sequential training we're X.X% to and headcount our representing increase by in XX equivalent underperforming managing year-over-year full-time from improve We XX.X% XX.X% a to sales aggressive The number X.X%, sales but increased sales XXX On reps. also of out XXX, XXX expand reps. by reps reps.

about the remained per our historical per unique quarter. X.X% in force to be the business X.X% the to is multi-tenant average on-net feet position X.X% sales month over than month X is businesses turnover billion and medium-sized square of stable districts the sales month. of our turnover at and able optimistic That X,XXX Our net space. the central better of pandemic significantly in during below cities We in of remain our per peak small with force long-term of rentable connected serve to network major buildings office

number Currently, indicators wavelength very the wavelengths also our adding of also about office revenue leasing total report the a product those activity customers workplace base to as wavelengths services. still and improving, services of to separate both remain intend below also enterprise re-entry enterprise reporting to optical We of large pre-pandemic sold customer report are levels. be or networking activities and and and we a We're but our customer transport key will adding those portfolio. type. customer We're excited mix,

may as to including of and have requirements We Under to architectures our downsized we increase the we available cumulative dividends are for the decisions general improvement basket, hand. $XXX we amount are a activities. corporations see of indentures, have customers their stabilize building number buildings that and on cash exceed those tenants many in amounts leasing moving buybacks making million their for continue actually in environment. potential that forward, offices. network work have actually have the beginning encouraged And the Certain new network

the integrate these Sprint about cash the are and We generating remain working Wireline excited to flow optimistic acquisition. We accelerating assets. capabilities diligently of

to X annualized achieve of years, approximately million, the continue I earlier. expect $XXX the indicated as Over to order next we savings in

also and SG&A to our allow flow. free Cogent will grow and revenue cash have services. by We wavelength both enhanced synergies additional savings cross-selling This scale

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

Operator

question from of Our the of David comes first from Barden Bank line Instructions] [Operator America.

David Barden

on on Dave. questions closing I Congrats the deal Monday, if three the on transaction. ask could I Sprint guess

around First, on disclosures reporting then be Dave, to X be I thanks basis. you're helpful that count be to on a for these and Any that adding reporting. color plan other clear, incremental basis going the just more guess customer on the revenue numbers. that line structure a that to would you adding go-forward sharing

we have be, think on you've years, to spectrum strategies opportunities And any you second that aggressive strategy be what pricing and market bandwidth requirements services come either data to I the of The for with wavelengths both successful the revenue the then approaching savings connectivity should How aggressive lit centers, accomplish of integrate asset the in these you that standpoint? is one, do in been hope and pricing from super dark over a new to and some last a in you profitability Sprint expecting about CapEx or have the kind fiber buildings. moderately could, if achieve perfect to of would targets?

Dave Schaeffer

Thanks three take I'll try for questions, to order. these and the Dave, in

the consistent and in Our to very be we goal revenues. way is report to transparent continue

to as content historically classify which and a -- sold which have service customers. of whether NetCentric. been or as corporate access, to content or they have third classified have we will We SMBs, class be providers, We

of With acquisition up the picking the Sprint a GMG number customers. enterprise we of significant business, large are

type for both helpful number called be to will it think revenue. connections by unit that separately, of and I customer investors out very see

wave as will a Cogent's Internet with revenues. also which services, XX% of at we reporting small revenues And of amount power we service the X% that report revenues, XX% wavelengths. To intend as adding We X about We access wavelengths are products, of and in SD-WAN about on colocation our revenue a revenues. networking to report transport report be the and today. associated our line and with revenues, fourth products are be which those of to quarter, then We do number intend will will primarily or VPN of about space services. those we optical be each our the VPLS dollar product

I in achieving our think will track allow progress objectives. our to this investors revenue accurately

again we We expected, separate we the revenue that than we our of reporting noncore report nonstrategic. and We both more that of products, many products, of run and line gross a increase transaction end we noncore than an do said, in go rate we a to are stub rate close while closing trying line that from million and also $XXX that is anticipate run revenues have to margin And due of anticipate to actively as negative life, at nongrowing will as then $XXX the these small anticipated. are it did There sooner and fact to million a about of some the of be we burning item stable. will noncore be off.

answer going in said integrate about $XX we it the And to windows. One, to have are going your this X I'm pivot to to CapEx in continue expect X and we I'm million question. spending CapEx Now networks. to that

have fiber and We both in fiber that usually to We're physically IRU It's where and CapEx, available is necessary. where is markets spent connect requires Sprint already the building And physical money network. the of spent. that fiber. for? is the trenching being some but U.S. that buying still XXX that to there Cogent What majority network

expenses. not are anticipate than any those We other more XX% are of We onetime the that through do onetime but process, way expenses.

combined support the business. ongoing Cogent maintenance understand in acquired roughly components: annually million in capacity which or CapEx for annually the of about $XX the million $XX therefore, not kind X the to to million Now network but of are expansion $XX footprint maintenance. augmentation, There Sprint includes CapEx CapEx, network, really in about

a that, few state In either expansion, footprint we in year are international million $XX already in markets of that approximately going we or being new continue kind to new centers our markets forward. addition to steady to expect and anticipate adding new spend in. And we a buildings that multi-tenant data number

that go-to-market that selling aggressive in customer It base being the Now Cogent strategy be has your on we'll is to exceedingly pricing. question. true reputation wavelengths of to

to not to world, aggressive, were the pricing. as We we the test Cogent provider ago. provider number based We've be exit Sprint. do that this for years market market of same as need our market less probably are, a aggressive with but transit. the in funded X/X become gaining will had In in that transit today, share aggressive #X the of the crowded be the we believe in X% XX% entered year T-Mobile about market wavelength we that have as bed XX on in due share we market, than

However, wavelengths X provisions between on and planning guarantee days. purposes that maybe to today do great accurate routes line XXX for somewhere in significant can to meter instances; of nature most unique days, going we X) market network, have carrier; X) have advantages. than over to expects X importantly more market routing an of of we because homogeneous our net accuracy value The will will endpoints has services we provide provisioning maps services and days. and some that at available wave we XX% the for to average other all, within the of will forward, have of diversity Cogent XX buy customers; XX of we X) be any X)

network, of XX-day to we we We level agreement to with market a installs, over able will expect for Hopefully, days a in because a in helpful use needed. fully we X-year service be have then to to X as but guarantee. level as answering will negative basis a we aggressive, but be period that the interconnect down And your a was approximately get we'll pricing with networks the only XX-day go finally, question. initially

Thad Weed

Let the revenue me to classification. go just back

quarter, which business, categories, new I'll will on-net, Classic business So to call second face will was the continue along the when and and have a it Cogent, for we Sprint that have into income sales. include Sprint statement existing line XX-Q in from with the some separate look operation, wave Cogent look like we'll what the that acquired be wave off-net and then at included the going those will and is the of noncore, to acquired

agreement, revenue as at we'll line recognized revenue because from have to rate IP mentioned the from over line. that wave one initial in transit will that materiality, disclose the starts And also noncore script. the of off-net, the commercial $XXX the we with Sprint its line the also revenue the we'll So the straight one term million separately arrangement on-net, need a

the in new will quarter. So of the for will categories, face include will that's metrics, customers, income that, Underneath the like. the what I helps. enterprise customer we the which classification that disclose statement look hope this

Operator

from Our LightShed of next from line Walter. Walter the Piecyk question comes

Walter Piecyk

answers. more kind a are you prepared law of don't floors recovering additional about concept I this that know, is if -- like just I'm both of sales but upcoming to to past then customers more full-time which to more office goes of that I corporate returning year And ago the lower, two in that But seeing -- quarters? fact, full on in when the corporate floors I'm see new couple some I narrative out to on is be three In mean, up curious to the low, understand X were you'd have now terms you up growth the you that. in is in employees. churn of get to these I to one if like one the outside people I in like the XX% trying do floors. not, your firm Is productivity then that and force but lead I two as we're next you remarks, KPI -- floor, so that equivalent they of the kind what no over be giving, going of totally you employees and reps. they quarters. maybe stuff, about can corporate lease were I'm guess, from think capacity that seem the those should initially ramp and taking one to correlated is and vacancies type indicative tied know sure like corporate, very adding not of for that growth your in like because give corporate referencing quarters? of

on actually everyone are in leaning So terms driven heavily we customers? corporate getting just growth all pipes? fatter of by that signing Or hoping new fatter is up and

Dave Schaeffer

the with We sales start on disclosed the let's definitions So force. some clarifications and of salespeople. total number

We a training. equivalent, which months full-time also disclosed is of who's someone undergone three

Difficulty] they We've full-time improves rep disclosed carrying meaning to XX about of to the transition full have quota equivalent, responsibilities. FT a trainee average that a first those quota. from not For where productivity they're end from don't Therefore, also typically equivalent linearly they a month months, three that time mature. [Technical they're

pre-pandemic We at over We're today. We total also below force, peaked numbers. but XXX still are the sales slightly our XXX. sales about are headcount at growing

was Now during reason pandemic The primary for performance. trough troughed XXX. turnover the at lack due the about to the level that of of we elevated

and most both market to also to effectively Now we as but train attribute conditions them the manage inability effectively that reps remotely.

office company. So office in remains X-day Cogent a return to the and the

actually of disclosed that terms focus the of corporate. of we the the split, NetCentric, reps that on on In number focus number reps

also will that of disclose exclusively to begin number reps enterprise. large on We the focus

So metric one could in you and their The each all we'll is track across categories, is quarter. decline or category, spread productivity each that groups. X growth have

to think, much not rep KPIs here I really goal additive productivity data And to down little, a KPIs and it's relatively So break they're not equivalent. trends. too is obfuscate give key useful the by and that type,

couple quarters growth your to positive underlying growth of did have We of rates. about corporate Now question sequentially. a

recovery it's the we or I quarter office and on to longer, a going in of and saying XX expected We've taking quarters months ago, is call, specific corporate. couple This very we rapid anticipated. a was more earnings be And ago a dipped very negative that return even [X.X%]. that this in than clear less year slower been to

We are improvements. seeing

seeing up. We go corporate are ARPUs

not to back seeing as do it. are now the growth accustomed get to revenues I believe to, year-over-year effectively we'll but opposed declining, XX% were We we flat

to go going I'm Now back to your leasing comment.

that lease in of U.S. peaked average While the the it is are have is and all vacancy declining, rate But size modest. very major decline is declining. again, rates true markets

the buildings today. about XX% at is That about vacancy. Cogent across It's they had that in vacancy. X% actual peaked XX.X% looked pre-pandemic, down you about If to

and not not it's it's So worse. better, materially is getting but better it

occupancy, improvement which port then we We've size. larger this tenant of increases centers seen in some for So migration are data and seeing ports count. also in backup customers taking additional a

All of probably units. of pure the these some in decline have buffered

decline it which at have from is at than perfect units, It as visibility, about is decline revenue it's look that appear pace. I want is but the you improving, if and does in But don't a more XX%. much transparent uneven now, but business corporate So corporate slow to as We better. modest I the be pre-pandemic again, the getting to can.

Walter Piecyk

than Doesn't lot by recession hit of that to XX, of went it these maybe economists to it's year, a you better. rather that down to get maybe concern talking will if the XX, how specifically are to market, down so six XX, from going worse it about that the end but

Dave Schaeffer

assets generally other they real are operation in assets business to the not recession. are on trouble. through can the was market going these owners That's while tenants been more they increase estate out don't are rent materially the pressure. have estate lending, pressure Great and we rolls at And are basically to recession-proof the necessarily tends continue comes are mature. a including to think Recession, screenings And which least willing the I rates. businesses policy the in preselect down, and of material. as the I more that's shock tremendous to to. I cause probably need not slow regional base monetary significant four tell credit putting as think the system. what's And pressures are and in believe recessions, of be you the because the tend impact with most underlying we most desirable again, highest market of to that the Most the a while banks vacancy more to office economy tenant who of under do So sell our likely do profound the than that from buildings that banks a myself, estate owner, is go I liquidity recession. real a the refinance real going to

Walter Piecyk

that down consideration max debt your we paying? They on mean leases. earlier. that there? when gross increase that Because stock leases, just out? there is the call that? the that's than of the can in to up if rate SBA what's final they're you're remind paying that it a obviously, a you're is which consuming loan you're paying paying, with cash capital to -- my capital a than in back. And more showing I terms the is good what segue for is, dividend obviously anything buying is question, there you're it's had And Is maxing flow instrument. the us just free on Is your debt of And you rate -- what part -- of rather had part

Dave Schaeffer

signed. both into In of these fee we enter many an our The to upfront was touch are in all, capital meaning that. indentures, on than pay rate time. lease a prepaid, on don't when anything leases that's I'll of imputed rates the and first So maintenance our interest other leases. Tad no on else underlying depends fee cases, the ability we over let have limitation pay

Thad Weed

XX-Q which the we disclosed as all is Dave... The in X%. leases And the average for about

Walter Piecyk

rises, But million. then to $XX million is which What's And $XX balance -- like, lease $XX -- you million, right, on new coming at? low. say, Tad that not went your if rises, the capital let's if up

Thad Weed

it's accepted the route is changed. when is at not time, lease the rate and the recorded that at No,

range. next the And the value the the will if month rate come on new goes leases. is leases up, for actually new rate the used So the down of

Walter Piecyk

Understood.

Dave Schaeffer

floating the leases into… are not existing But

Thad Weed

don't change. they but Yes,

Operator

line the from comes of question next MoffettNathanson. Our Nick Del of Deo

Nick Del Deo

ask and had sell basically, dark the can regarding kind which since been is their whether it's that may had team It commercial to you question months to same the deal, under pre-deal? customer in deals Sprint evolved I've positive date, the any waves and us you've a it'd of belt interest wanted closed have that waves traction update asked I it's to you fiber and first, Dave, you've interesting negotiating pretty seems been few be you how sales now any and fiber. like dark announced

Dave Schaeffer

is have several the waves, waves So which questions. those get agreement backlog that can that We've two a with different have pre-closing dozen several are a a product longer began standardized we approved. waves process no to hundred Q answers different truly We in they step sold and since of Sprint. two we've a to On selling and on two on-net. now process resale

at Wave simplifying product product easier. are even also a to Sprint and We looked make that albeit selling bed, the test

Sprint. our a to have the the for system, quoting into allows we previously ability sell instantaneous than multi-day demand as to And process more at opposed waves which been I anticipated. We robust CRM waves say integrated for has actually would

from can that customers we've us we ability to now been that were we also taking existing interested the waves, prospect Secondly, we've that had customers are surprised in cross-sell, to meaning and both NetCentric sell customers them haven't funnel sold in at but because transit. buying our waves

and quickly So X was $XXX from acquisition of out we wavelength there. a run how about on and run quite a $X Cogent. We we the based confident million get test years, for feel rate probably for we're a to within product that our rate going estimates business beat purely backlog, of laid target revenue a to million, will internal to T-Mobile the grow have

wavelengths. So positive on the really remain we

Fiber different. very It's is Dark route-specific.

going more others. experience as them buyer, have in agreements, a a demand a enter these And routes honestly into to are experience long-term not because Some of than We are a we're cautiously. quite lot lot seller. of as

dark deal agreement closed. only fiber couldn't actually X We have until the we executed actually consummate that

conditional selective. was to we are be But it agreement. going So a

additive. expectations of today, set our not But viewed opportunistic into forecast to of investors. maybe demand really prepared as will And an fiber experience a for in realistic revenue dark in on sale. as kind not I a out be to market have in that we'll view our We it guidance, factored be it's our not have quarters it's few think We projections. lay enough and

Nick Del Deo

wave in all is per a being something think that few in for encouraging, Should month waves. That's unit, a range? ARPU especially very that bucks we thousand

Dave Schaeffer

than little Nick. Yes, bit I will it a higher actually think be that,

kind Are you by but on divided the today, you So Sprint basis. Zone to country X going a X into We're in and Zone sold much or down dominated X, go XXX-gig system. two actually is collapse between waves. still zone X? are the of XX-gig and subway some product that X to and three, like Do Zone was London the market two. The there it waves, zones,

metro We also and don't out they go to where had have that buy link to the sale. same constraints a had then in metro they complete typically the wave

two. down think So we'll -- do dippy I to we'll

I for way waves, it. think the to probably XXX-gig range $X,XXX is think the about

probably waves, but market And a in. variance, XXX-gig is participate $XXX, that XX-gig two $XXX it's one reasonable a of we'll For is the whether zones. wave or there little a price developing nascent in then bit market. Again,

percentages I the think decline realistic that some of XX-gig eventually will to I its become XXXs XXXs replace would the and and to become of suspect continue category. 'XX. waves the And will own in

you that there's if the so that, Xx call established the market an While pricing roughly we for a really capacity, existing you been not have of and the price, it today, product. much pattern has not $X,XXX double

something to selling 'XX. that's we it's think a of wave, be but way XXX-gig I probably reasonable won't a think sometime in until

Nick Del Deo

a kind growth? I for you seasonally when viewing kind growth traffic of And decelerated sequentially that trends? growth should expect can of what's those out you. term of we should traffic was about here from on usually said be near long think NetCentric maybe quarter concerned And kind term? quite Dave, and strong just for of touch and soft X% we of what growth noticeably we or business NetCentric aware Q-over-Q. Anything

Dave Schaeffer

sales. to some grew was new X% quarter per be -- customers year-over-year. megabit over price tends XX% There just as we So sequentially, deceleration. around It lumpy of

is business trend the will The the it the constant It share. It's the still customers, customers. domestic, a good, does basis, we a suspect tends that would kind and line. was above on of to than year. gaining continue more that the That's pretty have. faster large where XX.X% funnel to our pandemic, over looks and in still of of was more than even it revenue appear trend but the currency we us NetCentric I Now probably above long-term grow peak past out run growing visibility long also slower the quarter, probably international for the next the grower. a it of is line kind smaller of trend market reversed of the year, very sales were to trend is trend

Operator

from Our comes the Citi. question from of line Michael Collins next

Michael Collins

VPN future around Curious unpack connections about seeing little services off-net. do a possible back the And that core corporate curious for as terms customer corporate bit offer, go for per if see you're you the just some of tailwind the if the more and demand or can of we then in segment. could beyond you other a the the to you And and building that connection a types corporate in revenue the in the growth headwind in way? demand

Dave Schaeffer

different questions there one. and three think I So

So in vacancy building rate the the materially is up.

a the of they're yet. though are base not response there Walt's the Even question, to are new So businesses. smaller material part less in leases

growing. So the than it is it today was but TAM pre-pandemic, is smaller

connection average up is is bigger, the size which Second, getting pulling ARPU.

or that minority is in just they willing realization important the customers than need hoc VPN That's also about ports sales. ad remain their still significant Internet, they approximately post-pandemic The XX% XX% more revenues of for SD-WAN VPN are our whether not less dedicated and centers. but data they more VPNs, point total a Third, and and are kind a the use VPLS pre-pandemic. but to majority a customers, yet new trend quite fourth More taking are were be concentration. of of redundancy

VPLS seen MPLS encapsulated the from saw see shift in the the during encrypted significant away either reacceleration a is the to where conversion ride shift slowdown DIA the services we over starting VPNs SD-WAN. And while have Internet, the not rate to away Internet. transition we from of don't or So a pandemic, or or that of we're a

is material headwind. think I So that don't a

offices. There locations. branch in removing them down, has companies endpoint is But a than grooming offices, of been to fiber continued that headwind. more a actually by results that branch question offset availability your of part more is final the shutting of The

competitive the All we fiber are and overbuilds, a over services months. now mean able can where expand customers focused past a on are over And pressures that, off-net. now between footprint. past because as and to a that's commercial really which we X fiber-based years, now million increase of also off-net case going right numbers, if to result the increase of that at the been look I the regional commercial though ARPUs of is the sell the buy buildings. continuing continue. That's predominantly XX% rapid we XX our can And you pretty for grow, that's providers. off-net various in residential actually see are And off-net even declining revenues couple to of trend

customers really dependent of on of And corporate out and I premise think both tailwinds, questions. one kind procrastinating It kind headwinds that and making we're we a So they're when earlier of net the than of was neutral. necessarily just out business. of not going really the the decision

Michael Collins

-- how the that to go some back was used how the you work that a get those that service time you they're when they're and and cycle then you in show renew ready good with performs whatever approach promotions to it? that to you free the last used Do get of and on? Is attacks

Dave Schaeffer

It was approach. an excellent

in this we some to promotions meant temporary. that promotions But point We this try And our will time. at later have is not are be year. are doing buy expectation and

Operator

comes the Frank next from James. Louthan Raymond question Our from line of

Frank Louthan

an where to do seeing some those Can us out. is of some can of you EBITDA give things Sprint you And pressure? what the are the costs idea areas main the unit get the of

think how to traffic lastly, do then to some I some savings? said it And that down would get get you move circuits you when take to breakeven, and better over you quickly GMG to begin take to two can years can maybe some that? of

Dave Schaeffer

circuits moving of with agreements a the we through T-Mobile. of started series So actually pre-closing process

was all Cogent's for outside that Sprint's initially Our primary on reason the of international. is U.S. network facilities. XXX% was focus And network U.S. outside area leased the fiber. IRU of Almost of the on is of of

a One is customers. difficult continuing couple to reasons. on-net. first process out the is being bring XX% the all are on-net. anticipate Sprint able approximately year. We savings of probably international more Cogent a of for X% lot Domestically, more that and in is it's approximately

to migrating going customer off-net being to exercise. because several has That just complete but count more customers begun, a So customers' we are terms, thousand take from it's contractual the year on-net. to that of than process and

also circuits Sprint out We lease be that had will taking domestically.

Sprint will of We that what be with duplicative eliminating fiber some we have. IRU it's because

be will contracts. our footprint and our densifying also We off-net consolidating

we'll will and we'll investors closing signing why because accretive from savings. the million this USDXXX Now million layer we post The all you additional of year when pretty down to X those be X. that We're get out as transit rate there it And year $XXX at negative between and to million negative can't years within Sprint revenue contracts existing closing, work have cash or down take-or-pay we're USDXXX move, and that laid $XX waterfall burn of moving begun. we're X. we $XXX possible got We see has already we still from million confident and that $XXX T-Mobile means of are negative matter savings. flow fast at out X, EBITDA to after from day costs in which how quickly the as term, a cost that's the million down -- that no we've get take on receiving million closing, that

Operator

from the Capital question Markets. Nispel of from next comes Brandon KeyBanc Our line

Evan Young

the for on rest was high OpEx would on Brandon. watermark the of could the looking that any if color It's think QX if provide Evan And just for Young the your I year? see year. be you you throughout to more

Dave Schaeffer

will onetime so terms in granted have think some extraordinary anticipated SG&A. tends CPI or I expenses. improvement sales our extraordinary expenses were instead of see quarter of We CPI, to offset QX growth our bonuses though, But to we last in of to audit continue in highest did force. increases, be quarter QX that So offset be some bonuses. Part by we should that, in

related Sprint of our Many by I'll to will employees. and severance Sprint. OpEx also agreement costs have or perhaps onetime a let side reimbursed We of further Tad give with those number on you the any detail. purchase expenses under other maybe

Thad Weed

we payroll prepared resetting the and mentioned, lot taken a the of mentioned quarter. have I of think in rebuilding first taxes first vacations and and quarter, there's remarks, also the obviously, reserves quarter, The in the we in you're Dave the fourth vacation

are have compared of second amounts we -- cumulative those meeting. dollars fourth quarter, plus-plus first in the a to the million quarter. So in also our We're couple are annual to quarter, we sales had the going

$X.X to We So in about million in a expense. had be that nonrecurring going April. that's

SG&A in reps QX how So the to depending we've net-net, QX, we should see hire many managed from a the decline upon by to sales end of quarter.

Operator

time. at speakers. back questions no over are I our the to further There this turn call

Dave Schaeffer

given future in thank Cogent. appreciate like you color the I'd granularity we've today. I interest for their on time and All investors Hopefully, to additional right. Well, our reporting. some

want to clarity accountable the way consistent you Cogent, information the making this commitments around us and in we're in the you We that also our for key help give a hold model that trends provide will business.

has again, Bye-bye. Sprint all for asset, take seeing which you flow under to at everyone and meaningful to use and quickly. opportunity soon cash about much. forward their We want been and you I So free excited thank most the very time. to the generate Take conferences look underappreciated are Thank care.

Cogent Communications (CCOI) 4 May 232023 Q1 Earnings call transcript