Cogent Communications (CCOI) 6 Nov 222022 Q3 Earnings call transcript

Good morning and welcome to the Cogent Communications Holdings Third Quarter 2022 Earnings Conference Call.

As a reminder, this 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 the same 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. [Operator Instructions] I would like to turn the call over to Mr. Chief of and Communications Chairman Schaeffer, Executive Cogent Officer Holdings. Dave

The And Welcome And I'm metrics third for Hopefully CEO. release. this good that in our consistent you. had manner Tad we quarter. earnings you've to call a Dave includes Officer. chance me is morning's morningX, Cogent call. Thank Chief to conference everyone. present release Financial our our number Weed, every on earnings quarter Schaffer, with XXXX review a press press of historical a

Our increased revenue to due since and the the growth corporate accelerated pandemic, this quarter part time sequentially first the and our increase first the revenues the in from beginning in of by USF X.X% is quarter, revenues.

revenues, sequentially essentially revenues USF Excluding our corporate for quarter. the flat $XXX,XXX were increase the sequential in

Our by increased of year-over-year. to million, $XXX sequentially X.X% exactly an increase total revenues X%

our total dollar. negative exchange of foreign the revenues were strengthening Our the by quarter continuing and materially impacted impact the of the Netcentric in revenues and US

For basis. X.X% the negative a and sequentially by negative on X% exchange foreign currency million $X.X and of year-over-year $X.X by impact million a our was revenues was constant grew basis, grew quarter, year-over-year. On the sequential

workers' first On sequentially corporate GAAP offices to the increased districts the XXXX. by real and our X.X% returned markets Leasing not leasing quarter business activities of Corporate across to since business to continues cities. estate cards, and yet seen central buildings, activities including and revenues security for their real rights date, continue but and to market levels. in improvement, be slowly. activity these of basis, a the in second indicate the have the albeit statistics, business Our year pre-pandemic time central major key major estate influenced improve US leasing districts Two American North level activities have to of some that, return

in these Corporate to continuing and uncertain challenges improvement to cautiously in outlook the economic deal revenues in optimistic for our remain with times, continue We our COVID-XX. of

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

our by quarter, our of rate sequentially X.X% the by year-over-year of our sequentially up revenues X% XXXX. currency a GAAP basis, traffic a grew grew revenues a the in and For X.X% was third accelerated network increased quarter. year-over-year US from to Netcentric traffic On growth a X.X% XX% grew basis. on the by basis, On sequentially quarter third XX.X% Netcentric and constant and

units the This company's acquisition for the to adjusted highest on expense as were rep the incurred T as that XX X.X million time the a force basis XX Sprint XX adjusted equivalent GMG basis the EBITDA rep sequentially with basis increased per Mobile associated sales margins, EBITDA productivity known in year-over-year quarter EBITDA or represents Our was year in full of XX.X%. and extraordinary points per business, the as $X to compared wireline, by points margin quarter. X.X Our last history, margin in the by

equivalents, reps. net quarter full increase the and with ended XXX ancestry. in productivity. rep in This full We XXX equivalent sales by in it is year-over-year significantly ever adding the the increase, our representing XX represents increased of X% this of force We reps, improvement. decline sequential size X.X%, sales a While did time impact sales our force time X.X% sales reps a X.X% Cogent's a still increase a largest

Sprint acquisition business. Wireline for couple on words of Now the a the

that million We regulatory approval We acquisition in the and agencies to We anticipate numerous of were conjunction Wireline fees working approximately professional process be of the complete annual half the acquisition Wireline the second various fees T revenues to world. We incurred of professional acquisition. dramatically in for $XXX rate are through diligently approximately XXXX will Sprint's subsequent those the with with close million around at conjunction reduced the in the million the run will third business the date. $XXX anticipate physical anticipate quarters. year XXXX. close Mobile quarter $X our Sprint in in be We that

the dramatically products from reduced Sprint that of approximately Wireline down products number today, X will expect offered closing. We be XX by to the

and $XXX the Over anticipate building utilizing annualized savings we Cogent years, three next American metro portfolio. on by the network, of the North million primarily on-net footprint our

we the by in $XX operating anticipate be and And million cost and thirdly, abandoning. network that will globally. international savings will off network a network of savings on also maintenance We include a SG&A reduction $XX Cogent's migrating There the about operating we, annual headcount expect to with synergies. that additional be IRU on reduction lease general an owned of associated million expenses Cogent other

returned quarter, not We any we and our million the regular million our program. to extended During available our dividend purchase shareholders which to the $XX.X the through XXXX. board program, $XX.X under during have stock did buyback quarter

in $X.XXX regular opportunities sequential from reflecting to cash in quarterly represents investment flow with in is X.X% front Directors, A share. $X.XX per of free company, our our increase by per increase to dividend. our line annualized dividend rate strong dividend now flow This $X.XXX increase sequentially cash share the of in generation. dividend consecutive our growth generating growth XXst the rate share raising quarterly quarterly on Our Board decided capabilities, per the

around comments of long-term couple expectations. a for Now

Our approximately guidance targeted expansion basis is year. for XXX points per EBITDA margin long-term

and for margin rate entities, combined, currency are Cogent are after Our the initial about be targeted our multi-year will is the basis that rate constant annually, to and per that and year. Once annual anticipate will revenue between XX%. achieved, synergies XXX Sprint, growth combined expansion targeted points entity, is we EBITDA be the growth X% X% be

be targets annual either Our guidance targets EBITDA guidance. are to not specific be are to intended intended multi-year and quarterly revenue and for or even used

answers. for Now, I'd some some data. the language, and that, ask to open read operating to questions performance after like And Harbor will provide additional Safe Ted then we call

second refer includes filings differ. of Netcentric intent, revenue forward-looking are non-core our beliefs We quarter our forward-looking our Corporate and This analyze uncertainties, connection customer at factors and and updates. on two impacted current are companies, customers our results historical These our based Dave. upon for expectations. statements information number these undertakes analyze reconciled detail revenues measurement risk could will not reports that GAAP to and If many and we in are and in no type good quarterly differ obligation non-GAAP statements and statements. of on more connections. continue risks risk described Comment and in our Friday. Cogent this and Netcentric website actual annual our pandemic first measures revenues the upon on-net, network and this quarter's other a cause SEC the which be made report we'll Form XX-Q on may type, XX-K subjected Corporate all morning, on will that all based to types, this and and which cogentco.com. you, Please our actual COVID-XX update for customers. materially. and revise to be for off-net XXXX classify by we forward-looking call customer customers call releases COVID-XX you and COVID-XX our in facts to corresponding that and also our earnings posted are more financial our are call, And to These on related based into to find statements other is use on the Form during and Like Thank be risks this or filed upon earnings results may forward-looking conference everyone. to report statements. which

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

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

revenues as year-over-year million increased Dave X.X% to represented our quarter declined of first and by the XXXX. quarter by mentioned, third second of revenue the corporate sequentially last since this corporate Our of business the our but, year, time X% quarter $XX.X from for XX%

increase which sequential a on X.X%. XX,XXX at of We have and a year-over-year corporate decline network quarter-end, our customer connections X.X% of was

tax total Our are by in USF impacted the updated changes revenues are which quarterly. our rates Corporate and revenues

X.X For the a and quarter, the the the positive was impact million impact same negative was year-over-year by of USF our on million. revenues $X.X amount,

XX% multi-tenant by X.X% to primarily and Netcentric of type, on headwinds, and which of represented from a revenues million exchange Our by X.X% customers material which last a X.X% revenue revenue and which business, X.X% quarter-end. year-over-year. That was office of in increase XX.X%, of by foreign our was and customer was on-net grew sequentially had quarter increase GAAP and year-over-year customer $XXX.X network for and Netcentric by materially year-over-year. on despite to grew currency and last XX,XXX increase revenue, buildings. and was the of impacts connections basis. X.X% We sequential negative by network was our sequential solid basis, a increased our X.X% XX,XXX on-net and quarter, On of sequentially currency had increase a Netcentric sequentially Volatility connections a year-over-year rates also which another impact and Netcentric increase our FX our in carrier increase quarter, constant constant US an revenue Our $XX.X X.X%, year-over-year by at quarter, revenue our X,XXX quarter serve by this was customer neutral and total center X.X%. X.X%. grew sequentially increased the both which connections the XX.X% an increased our increased from million year-over-year was on-net on-net a a X.X% On and data We

succeed connections, has increasing XXX at our in the locations connections, to that had gigabit gigabit We XXX on-net continue larger and connections ARPU. select impact selling and of

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

of obtained off-net off-net ARPU. base by into incorporating off-net introduction we the into local our are prices customers impacted cost savings lowers pricing. The our from Our our revenues lower revenue these loop

XX,XXX Our off-net primarily about ended That by quarter off-net in the And North serving was located off-net increase. we buildings are X.X% X.X% customer customers a sequentially X,XXX connections These in to our America. connections. increased year-over-year off-net off-net buildings.

contracts per Selling This decline by our was our base price megabit The of declined long-term our customer decreased long-term installed year-over-year annual last quarter XX.X%. base historical for megabit as new customer customer was for sequentially same the average rate install megabit of of installed than our average a our year-over-year of our a to was $X.XX. effect to X.X% ARPU. per our XX.X%. in larger This greater in of flat. price for mix rate the average average lowering our decline and results for of rate per and new megabit our was $X.XX The per megabit the connection and the average of rate decline than at price base by and price That of contracts declined our quarter price XX.X%. for has quarter, of change decline better rate connections compared per in was our a Our decline annual XX.X%. for changes

Our lower on-net from rate to obtaining off-net and continued f slight our but increased ARPU our customers. our slightly decline, pass off-net vendors on from pricing that ARPU to we we're circuit at a

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

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

churn. on comments Some

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

are a on-net decision Our offer group last termination unit customer to X% that to churn churn have reduce reverse from X.X% indicated and in was retain order our rate considering turnover, last to additional extend to service quarter to works We that to who quarter us. off-net quarter, their of In this Cogent our induce these dedicated with services purchase customers their pricing compared discounts us was X.X% X% they and/or quarter. them terminating this customers employ contract. order and may to term the their sales we rate unit

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

of quarterly EBITDA of in benefit payroll Sprint impact comments in We EBITDA EBITDA more year, the our recently, audit or our SG&A Some factors resetting level operations expenses the cost at and our typically EBITDA our Seasonal beginning annual our vacation periods, States cost and particular and services, increases, include of CPI releases. living cash and in United of and from our tax annual acquisition plan costs the reconcile margin. seasonal on each of that each flow earnings timing to taxes our increases. the

year-over-year Sprint fee the million. costs, million X.X $X.X if and you by million decreased acquisition of include sequentially Our $X EBITDA, by slightly increased professional

costs, year-over-year. by EBITDA, $X.X $X.X The increased $X.X of EBITDA growth exchange Our foreign negative and million excluding these Sprint by million. year-over-year impact acquisition reduced sequentially million our

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

the due to increase loss excluding and $XX.X XX in XX.X% sequentially costs basic and of We and by per the the margin Sprint Comments points basis points. acquisition increased EBITDA quarterly earnings incur $X.XX Our our share by non-cash a net our to million diluted quarter. $X the loss swap increased million share. this basis quarter was year-over-year per for XX on did valuation of agreement

translation USD swap contributors the valuation of consequently on the losses and per have our we of the extinguish XXXX in of share in Further the interest in June comments the euro changes Foreign net until to losses extinguishment on foreign exchange the on currency. debt them notes XX, and agreement, income our gains variability our our non-cash and rate results. XXXX, been primary and

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

the rate reported volatility X.XX. foreign US is materially average US the our our this year-over-year results. negative our quarter, negative remain far is quarter, materially rates dollar revenue quarter, this exchange exchange again can be foreign our We remainder at base impact to this of conversion year, exchange the FX foreign the impact negative The these quarterly about million revenues both and $X.XX million. believe is top $X revenues materially the customer average on quarter, that rate again in exchange CAD for on fourth estimate our consistent the experienced quarterly so the be on would and for The quarter GAAP dollar revenues quarter quarter was sequentially be to impact sequentially our a highly not customers quarterly X% represent our current negative the this XX Canadian quarter. euro the fourth of levels average and Should and X.X for that is revenue concentrated we fourth As would impact and we our expected so and with rates the a past. fourth in year-over-year of conversion

Some CapEx. comments on

network Sprint our expenditures acquisition interconnection multiple to increase Wireline closing designed Supply us purchases of we our our plans. the anticipatory million. and in Cogent of leases inventory levels typical the networks as offering in $XX includes caused schedule finance investments our satisfactory result to accommodate and quarterly Our shift payments. needs. capital uncertainty our that chain and Wavelength and anticipation sequentially locations purchasing to ensure meet of These Sprint did lease for acquisition together equipment. to and that to have have Finance customer equipment two network of growth product our a new And the are

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

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

equivalents is $XX.X suppliers of XXX as and We different fiber collateral. directly have rate and of restricted and estimated cash flow. agreement set was across of the world. quarter-end, with our our value cash have diverse the $XXX.X suppliers dark At million cash swap to cash tied a operating IRU and very interest fair IRU restricted million. Cash cash contracts

$XX.X flow Our and increase and million cash Cogent year last from third quarter a from this increase operations from record, the quarter, $X.X million was a an $XX.X million of of last quarter. significant of

on ratios. comments Some debt and

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

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

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

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

the comments Some swap. on

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

to We to The settlement our liability. with a equal agreement balance restricted November maintain cash estimated are in payments and required swap the counterparty May. made are under the net

net savings on That of a payment, payment we're XXXX. Under initial year, XXXX But year, total net XX, that two of settlement period for achieved will of in the made last $X.X from a XX. the million under made May of net cash April $X.X November for Our May million. from period October through we we the to $X.X making the cash of it which in was those X, million payments. payment November for we savings savings cash settlement $X.X interest million November last be a a X expense was of settlement combined

both bad comments some debt improved. DSO and which on Lastly,

quarter improvement from for Difficulty] improved but was or Our the for improved And sales outstanding, and X.X% our days, XX debt last our expense in by XX activity over quarter, only from last year. significant our was X and will Again, unchanged I quarter, DSO, do a of day turn last the third accounts receivable to customers. the revenues and excellent of thank just worldwide back days bad want fantastic days a [Technical customers results. from members team continuing for quarter. worldwide And that, billing Dave. we collecting with call collection to And recognize our collection and serving from to job our

strengths few our network, to base our a force. sales Thanks, of the like I'd customer and of Ted. highlight our

to was growth particularly excellent end, there of couple to Netcentric basis, a connected quarter's total for We business measured we our research. third-party by their Now as Netcentric independent centers currency QX. X.X% centers, XX.X% the over-the-top of from data video in performance. XX,XXX growth was neutral achieved data and latency. acceleration in of currency our beneficiaries international markets. comments and constant reduce than Cogent for our X,XXX enables trend Netcentric other network, revenue any that a increasing where on growth of constant Netcentric direct XX customers data centers were grand better an delivered networks our on The year-over-year coverage our optimize revenue We're XX.X% carrier At of streaming, an carrier a and in breadth more

subscriber to we telephone We end, networks centers were us this our in operators, one We for and and cable most our to comprise years. Netcentric – a sales connected this companies, year sophisticated directly continue collection carrier we the network industry. subscriber and is other quarter's force the focused to force At professionals access the to market. end, X,XXX as project largest companies, broadband that world's the of several exclusively mobile believe in teams XXX sales next ISPs, over vast the sales mobile of this market the customers. who widen an the segment we majority expect that provide lead data of This had for of will that neutral additional market At quarter's and the majority internet. sales on carriers add to each XXX we of

business. Now our for a couple Corporate of comments on

We are our Corporate seeing business. some positive trends in

our routines, to larger part we As customers established infrastructure of normal see work-from-home internet looking people's access many corporate capacity of environment work to becomes their upgrade connections. as

from require are have integrating environment, and outside higher part premise. new including capacity video connections, the This home inside of applications, conferencing. work corporate the usage both of will customers Our aggressively become which

neutral corporate Our training a sequentially lower environment. VPNs a On centers X.X% aggressive ad We buying interface. provide and is out to reps. in focused push force customers Corporate basis, demand greater a raps has program product, X.X% to manage bidirectional, and or total XX to XX hoc sales hybrid our our X robust, support and connections to work to on data sales which productivity users' for boost are of remain a bandwidth sales quota-bearing continue gig increasingly symmetric, costs either year-over-year increased redundancy gig their in for our improve significantly or headcount rep coverage sequential begun XXX and our of carrier underperformers.

time reps full also of XXX. from number XXX increased Our equivalent to

force in continued This from Our sales from do turnover sales the the per our and to having X.X% ability per pandemic of X.X% turnover our result back rate the during improve force and training. month. X.X% of the reduced and was to in month QX of office having in-person reported is to a we rate direct peak

portfolio a for customer Wavelength remain a We adding buildings representing of activity, major office Now leasing, about on including nearly product that reentry districts services, key below that transport few businesses summary that segment position of large in business X,XXX X our are billion a serving remain and the space. and cities Sprint office levels. Currently, multi-tenant office to network networking. is excited optimistic acquisition small result large customers adding We're central of and mid-sized and as OTM in feet of unique services, also as our our square pre-pandemic known optical located our for enterprise remarks. new business. indicators commonly workplace the or

indicated that team office tenants in our leasing and rebound. continue to to sales activities going optimistic being space encouraged of in a return begun XXXX we're many office have commercial that for and that We're However, office the decisions is with benefit a have to network establishing from to policy. to work or are tenants the have will selling architectures delayed deferred we the long-term more due hybrid Many work upgrade companies normalized who environment, a will of network support that our pandemic. permanent return combination customers

to office certain on-net actually downsize multi-tenant Corporate tenants building per increasing requirements the or number increase, corporations elect in opportunity. buildings, of As will Cogent's

We of leasing a to direct new showing also that aggressive landlords result Canada. been occupying from US benefit the will has done tenants as who services our buildings are across the and these by

growth per Our constant revenue remains approximately EBITDA rates and long year. will points margin XXX multi-year targeted our XX% basis currency rate be term expansion

combined Sprint, However, our XX%. once we have with revenue scale increases by nearly

X% growth will had $XXX.X we to held rate giving cash consistently us once to decelerate margins, quarter-end, A Our synergies, EBITDA $XX.X we have will million between and the a basis our either dividends completed grow at XXX Holdings, Cogent and cash at is able Group, an about network $XXX.X be and points freely X% for of Holdings or year. transferable Cogent million additional buybacks. which was million unrestricted to available by

is a dividend, sequential cash This is our dividend our a XXst line Directors growth with flow. rate and at $X.XXX approved per dividend to share. the in our dividend. increase again annualized share represents increase our This current in growth Our consecutive $X.XX increasing X.X% Board once of sequential per in rate, free which a

Our our optimism cash ability consistent free dividend our business' increasing demonstrates to amounts increase flow. continued of about generate

generating We that, mid to that a opportunities with customer to process now year working will the the like the to have business. larger we excited cash diligently are by flow the approval about the acquisition diverse I'd product close of through the and end We're and base. acquisition Sprint and for on anticipate open to XXXX. Wireline improved We floor optimistic questions. globally With more of complete

[Technical Instructions]. Difficulty]. [Operator

led the in through the increase how was Sprint to what going just with of take you can thought kind that the your we especially should sequential board there about think reduction closing? in dividend, Dave, forward, post that conversation the us the and process

As free on it into public the and flow venues rate cash the in for earnings and to quarter, last I numerous growth dividend and the necessary last the over growth reiterated come is rate alignment. and call

that by environment They going the our rate corporate cash time. think business, of also were in the are growth looked board the I improvements realistic some flow. at encouraged Corporate are in improvements in our underlying but take to current the

order the of increase leverage, in annually. So, growth to or the that dividend X.X% net decided in per rate share board mitigate $X.XX to the moderate to

improvements flow We in will the continue free generation. to our and its business monitor cash

to will being quickly that stewards efficient through And to that we're Corporate our free buybacks. flow returning and rate expectation with capital dividends business, shareholders it committed that cash reaccelerate how either but are conjunction uncertain of in capital the growth or We will is our occur. our improvement and in improvement

it the take in So to seemed more dividend. increase prudent moderate rate the board of to this more

macro, change year follow any mix with target ratios on one has thought so company? might up guys Just past of what the or company, your or business, is, for looking you the change targets? your swap new and the satisfied you the seeing how the for any performed over current just – given leverage Are the outlook your for

we had worked swap You're not has hoped. as absolutely out the correct, as well

cash While made savings million, a million. be deficit. of that'll today $X.X payment indicated, be we will This in Ted as $X.X we had interest of cash initial

We economic million. a magnitude of of loss So, net velocity did about anticipate swap not increases. on and $X.X interest the the rate

the While more has rate we anticipated had increase than some, we been the Fed's in fund forecast. accelerated

will and, during the and decline most in of will decline rate inflation think may to the and increase period. moderate will swap therefore, moderate even continue likely underlying the rate interest also that of that We

fixed of still between about to right we jury's off and and the the XX% now the swap better was we be borrowings because will it that out. So, have decision, XXXX, I think diversified But will think because and XX% our variable. we

part second the leverage the second of to is ultimate target. Now question, which your

sheet. have think Our the We investors leverage X equity do it XXX% today, to the disgorge flow we to peak rate more has of which over balance than where the in to times now at decade, above to cash range range. been with past And net We're policy to is as X.XX increase our basis. communicated goal free to That is the expect excess We begin cash a cash of actually and our on return should that have X.X on we place. relatively consistently, in say holders. net decline. dividend, and more moderate remains is the

measured going to approach. a we're So, take

look will to our remain flow free and equity. in We committed flow the cash cash to that at returning growth

James And William question our Blair. Breen next from come will was

about you CapEx about seemed absolute of Can targets of quarter takes levels how Dave, this EBITDA for jumped Can closes talk you just like it And a you the talk then might the levels? also, some bit a and the the acquisition puts some sequentially. business from the just perspective. and growth CapEx about talked long-term once there? quite it change

to and about targets talk take CapEx going first I'm the Yeah, secondly. long-term one then the

has CapEx up this two one – to well, reason for for quarter and for now elevated been two. Our

those with we of have schedule and ability we ship inventory that are to to reason, to maybe months XX equipment excess and levels cycle. We in first exists, be these later. main than of then shortages vendor that the supply delivery and chain ordered able random vendors. be The improve draw which somewhat the to because and had believe much inventories. normalized normalized forced has – on over That discussions components of will find is configuration equipment are ordering We still this worst constraints us we carry of much components receiving and is order a what next and or is and to ourselves kit accustomed XX% XX% order will the anymore And equipment higher we of we'll to. miscellaneous our continue only back X Cisco, from ship – The more to to we our a modular. complete down order past

unique which our was a was interconnect The one-time would expenditure, investors quarter, told beginning world. spending in locations about there around second to of $XX the expenditure of We to network achieve interconnections. monies this million had that multiple Sprint with the be to the network those

advance of spent getting this that as of for next and CapEx regulatory anticipatorily continue will expenses, the can they actually do result the of one-time Some the in these quarters. approvals. work is several and we We a

minimis. view Now but getting we the regulatory run do approvals, risk that de we of risk as not

Our and have sides basis, the will takes a at through deal going what On company to Cogent's this scale purchase $X.X about a include $XXX get billion, both hell agreement the of revenue it combined close approval scale. a does high provision, from regulatory water will so forward do traditional million process. up roughly

scale As standalone. million larger have will than annual and anticipate combined the new product, our for for we would $XX Cogent of that the, capital company be higher larger forward, a that been going expenditures about result they Wavelengths,

of $XX So, and set one-time the two, of going forward. two The recurring extraordinary $XX incremental expenses things. million then, million

pandemic. Now, around for impacted business the negatively tremendously the long-term been by core has targets, growth revenue Cogent's EBITDA. both and

year. per We and of business we and to rate think that also comfortable comfortable are us we continue. impact to that XX% for That's negative not will. return are growth average rate we returning. exactly subside that trend when organic we encouraging will Cogent's seeing growth will our But in is feel we historic predicting But

the of of growth large enterprise concentrated And customers know will products these that probably or also sell to million material that of that is configured from five growth very to we in We an years a business. long-term of we of do the annually. grow can to in at meteoric anticipate most that, million come optical business that T of revenue in $XXX companies wavelengths. transport closing, and X% agreements that, Today, million $XXX million X% order anticipate these $X Mobile, the $XXX Sprint. million We revenue. we're combined is are the within in our that out already real because have revenue generate ability acquiring of Sprint $XXX only about their that But from business, business networks, the the stream, that not

the line XXX three low of and X% slower a mid this a expand is with The when customer with relatively at large XXs So to associated add growth the and basis, revenue up should company on basis getting enterprise of to the in margin we year. and of normalized expansion X% about grow the ability consistently combined top lower them. margin a margins static, to those points to streams the legs result initial EBITDA more ramp in kind the business, past margins ability Wavelength we together these find

in flow, question, But been. same in have sustainable other Walt's While absolute to produce Cogent products more return pace company at growing scalable we delever, the cash they as ability the and dollars cash company. than would possession combined much independently they the the not to look when and are at the shareholders, to in is a

that. follow-up Just a quick to

company you're debt. combined revenue, on taking you So look a larger, at incremental obviously, but as not lot the

you expense sort a relative you'll margin mean revenue off interest does flow mid to combined, because low the yield of that be that have cash XXs So the to free have now? that higher of EBITDA will small

absolutely correct, Jim. is That

per we've more will flow forecasting. be share. We be with investors. even are may free again, cash better what tried actually we Things than transparent significantly producing absolutely And be to

$XXX T our in growth Mobile. over We are XX from In revenue, of million getting forecasts and cash months margin.

is revenue. will will we some, and not revenue. the a margins material any taking that that and conservative are function revenue we that's much can that actually is most of predicting. all, than are highly count unlikely, If I counting as growth better what our It We as our those approach with possibly up of think even likely case, have be payments the step that

from will next come question Louthan with James. Our Raymond Frank

on when that know the forth? and it same the you declining was kind of When recognize? of what and same announced will sort is that business able what some you And that you're the the is so Sprint deal? was on the that with it to pace of network status Is pace still then,

our contractual take Mobile, Frank. all, in customer obligations, rate are let being is, and are agreement There with the the First reason actually decline. off me switch. of we It's subscale unprofitable end-of-lifed. the turn of And T products can't accelerating, so

working expect stream the million $XXX at close customers also teams announcement as to closing. sales to decrease and from as down about rate the design, historically the teams actually by to That's of by Sprint to fast XX%, one-year the from alternatives. engineering the had period decline been. about revenue We to give we with twice But are $XXX million in

products metro is services. bringing the ability products footprint from stable and improves to unprofitable remain expect throughput increase in of customers ultimate the margin, Ted? the a our network, purged to but get set not allows those to it customer remaining that by we their once our on-net using only However, increase XXx

in that basis, to since T at say, the will that revenue at combined contract term the be And as be entered of appears into that would contract with months. accounting final respect the acquisition. the time same acquired the made preliminary for transit With – same that on appraisal the I the half accounting the IP payments is business. We transit for performed the Mobile, acquisition is time majority of IP over the be will contracts the the will once determination next the of year. performed it would be second the expect to the XX over straight-line a with

to that we're going we're investors. in reporting that comfortable and our to, And Ernst Yeah. number auditors, work before exact with appraisal need Young, & ultimately,

Deo next Our from question Nick come MoffettNathanson. from Del will

expected substantive articulated shared you same recent the the didn't write numbers First, as then Were ones. the savings in down what the prepared enough remarks one speaking. fast conferences? were Sprint you total deal more quick at you your clarification and for two investor as I

is, yes, of and about identical. $XXX of $XX network set a American year. million anticipating savings, North Sprint savings, million And about approximately $XX Sprint aggregate savings network they million an million of of and network international absent we're The North were SG&A answer savings. American That of Cogent headcount being $XXX numbers,

What's on you first that? there or sort level the reclass else? any which were record at value had a sequentially, something and like capital So, capital Or up question, couple your lease real leases is Was it ago? million principal years about $XX were meaningful. payments behind your a of of obligations is pretty

Two very different things.

point have but is fiber those balance to some over the that two also first was upfront, IRUs of began reflect actually And the we modest, term. XX is, that, the cash there's which networks. to new The all fiber for acquire a the we interconnect to lease when both payment do years. physically we actually, relatively of routes, term And O&M in for

So, that number can pretty be large.

second and for period. IRU that no major O&M but reflect was France The for thing to then XX another obligation payment, in the that we a to over elected extend that happened that There quarter have in is ended. upfront years, XX-year

reasons initial two both are those and the increase. the balance So the why payments

in extension France? there Was any OpEx to impact the

why them And the get but for was till ago. one-time years capital and would lower several than this three moved what window it extension increase, we remaining part because period, reclassification we we the The adjustment, which lower a CPI then of to of counterintuitive a to years CPI kind that to our lease away elected this CapEx, off. negotiation of from just convinced could that rate had that counterparty with extend. it's something walked already when a but OpEx in was better four No, because occurred years, market, sounds they have of nothing

really that aggregated coterminous with leases term and long lease. individual number one we happened were what under And a transaction all the in France made of is had

accounting both the simplified the and really So extended and term contract. for the it

sell of getting to early any you're Last question. customer on potential regarding dark us wavelengths close? Sprint Dave, can you the post updates or feedback interest give expressions or fiber

can NANOG, about conference, kind some understand ago. chose – American our them services an larger of they homework, and Network And kind just And with Angeles not meetings, Microsoft, to to they deal, of done but attend any Los And list very encouraged orders and the to but told closing, very take can't forum, folks deal we a do held was so meetings Group, was this these sign announced being one to of waters which demand shopping in city these were to so many was is we me customers of attending interested routes would those we I what North of that surprising to like left the their not Amazon, in. at Operators its a like teams wish we be our Charter, able engineering I very, planning Cox, provide customers, that closes, I Facebook, for their those because day could have engineering of came able not month yet. it purchase. actually could payers customers, of specific the the of really to with there pool many significant that to lists Netcentric conference after quarterly that I Sprint services. but sit down key until initially

America. Bank of question next Our Barden with David come will from

Dave, point. on just that

there's there's cash more the potential money know of be to would on in with piece that this, be your dividend then, guess, And incremental kind piece to had on a the And the I So, take you've the I with followed win taxable something focused the was towards been that money, low kind in as very million the out thought about flow million real audit process get strategy and made to alongside we've we really wavelength to intention the tax the later? we and a side term? these of it the nearer to where far making And it strategies that'll trying a strategy. get, industry. where to $XXX board that really to closing, is it I two like strategy, the goes is think along the simple, cost $X of very of you're on as of which your guess, got piece, then, I you've $XXX – up closing? the Corporate apply which broadband that figure this but lower scaling side guess, Corporate it? your business cost Netcentric Or second path the geared that profit to the you're happen we've to million got the related Is relevance pricing, I company, price the where share there think between services, and this mercilessly going is marginal

going wavelength premise first a take on slightly from to XX% make on-net and XX% business business. be Netcentric product we services. from our come the is mix, revenues on-net money your on-net products, going Netcentric is In In first XXX% most Corporate and it profitable revenues with the I'm at on-net XX% actually the come business, Cogent question which our offering. I'm that XX% of off-net. come don't will of disagree off-net. and of The the virtually In our to question,

the to struggled only the way the part has reason sell is and market. it practical in sprint really So, of why

about We dominated also a Zayo. have cost and There initially, addressable network basis. major day with a market is that's negative billion $X Lumen one, two a players, by

in been of number to in world's years XX of the being as aggressive be as XXX traffic transit now a have ago a pool two the that will providers couple and transit one. We of being literally we market. rose market carrying of We nearly out percentage points XX% of within number

We have the same kind of ambitions our business. wavelength for

breadth model. But and capture locations destroy can our pricing we don't will that the be share aggressive. want we offer We the market. to So, through will we of

We in profitable will doing be this.

T have contracts, them Now the be, revenue, and that gain payments upfront. that we consequence heard we say as Mobile. we you will upfront. uneconomic is opposed is more The to a think Ted will ratably still recognized to ascribed the from of the but kind majority of tax of recognize that taxes, pay as pay to pay portion upfront to assumption and of we If the

be each but we shareholders. combination law. and advisers, an every is can to the to Whether going compliant quarter. increasing measured answer amount board we buybacks, returning fungibility committed with look tax cash Cogent, we're of and are through of come the work that's ever cash our or auditor by with to dividends, at to a our So the best to total the We for with

The this underlying to rate of what growth. think costs. the our that's You improve. out that we But our we business improve where just going commitment is decelerated play Sprint will But a process million of of reduce COVID dynamic business going advance to is years and need $XXX have corporate of dividend. quarter a and growth lack in saw not the we reflection It's had to business. acquired of that in done to two

basis, we position more to have would to will post-closing we of than standalone quarter every believe we company all in a cash return that as on combined together, put a we a that, Cogent. when So, be shareholders

is is dividends or every quarter. something Now, whether and that buybacks each board determine the that will

Brett question come with from Feldman Sachs. Next Goldman will

mind. you don't Two follow-up questions, if

because talking wavelength I your I be how the is have it's you think the basis, that cost So, you're deal acquiring the intend be intent you start – it's you're think you were low acquiring going point in to here negative just now. in assets to assets when to could new market aggressive a it's think capital the market. meaning a deploying I doing the leverage about And that closes. don't your

you So think I the think that at acquiring? to certain second you actually the really clarify got day you from have I is, I the can of I asset address question The portion to said I'm assets because wavelength you're but want a see with X transition market question XX you're do products close. the stats this – to what wrong, going

only asset, have a but that is does to turn those clean to It's four growth are going into revenue taking actually winding One on, be make And the the mechanisms are of accountability you're expenses happen those Like, at down growing streams the actually a businesses it's two-part get something then not Or they when asset. to gone? to are question. sure the so, close? today? the revenue, that the And you all there businesses.

haven't have mentioned, business Let's a we're needed. capital spending for That's XXX% just so slightly number so an that not more wavelengths, when we It's haven't a maximum because the it's of fiber, totally fiber to IP anyhow, the for one-time it's On we VPN the would margin. do we be and in expense. we start And sized there's with need the that and which incremental Dark inventory. no that expense. together, a incremental money But could answer, sell. market. endpoints the networks dark that wavelength business we subtle selling upfront tie to

and to cards a will CR the optics continue optical the pluggable optics, also The transponder the continue going-forward to improve. [ph] transport We know improve. technology that, basis, on will

for continue combined be capital that embedded While we wavelength And equipment, will to we capital our million portfolio incremental the is technology. to remain modernize to that at inheriting in of of be cutting inventory business. a spending $XX expectation that will the of large edge of

our can get appears then So, eventually far, raise us, I will focusing product less prefer have to we in cede profitable them. think set But have we'll directions competitors so of to this what to share and see very we different be think for targets. as but how And for Maybe are Cogent going will sights we our XX% transit market. in to in XX% be is that may different and our ceded realistically react. segments. better, to competitors this and on that segment customer share happening they profitable our they to Much be

expected our products to close beyond question, But answer are date. product Now there part of closing. will prior end-of-life Brett. your to relationships The the extend of customer most is that these

will end-of-life, while products, supported. these of some still be And

of million negative to part T So costs, is the $XXX honor we payment Mobile those cover help while from contracts. those us

dishonor provider. alternate will customers try that not customer do, will and to to we We any those any find acquiring. What to go contract are most however, likely an is we

the So underlying we will that will the provide connectivity top they on connectivity. and provide service of

acquired the to the revenue and on MPLS. VPNs products are revenue. there being – $XXX access internet rates are of are Basically, that million growth Both of based those within major Now products business. two about

those come $XXX both number products. of have without of decline million for service. two the those a would the Sprint stable us been of of million $XXX relatively So, They inside from years, improving but

they to almost last hope wanted VPLS be the relationship XXx, railway that I actually on-net, port what to MPLS pointed VPN technology of bringing their a timeline and this was will increasing Sprint be customer doing out MPLS. that And and we a contract the frame MPLS converting from service. – an from migrated from per they VPLS. to with back yesterday. what the a migration to for previously by So exclusive for had over-XX-year, customer they and And extension then reviewed relay is have bandwidth end them that customers the XXX to working an frame Sprint,

The So We basically through coming material that will that products growth the attrition or revenue year. these coming not of attrition. the happen. X% is to optical we that embedded Maybe X% is we large, grow anticipate revenue through growth and products. do is believe But can a flat. material base end-of-life transport

to market that? or wavelength of you point of the US XX% is address, clarification, market an Quick XX% component the that to international the think can wavelength is you there

North American. It's

utilize the We Africa no other So, Sprint and point, Canada, at it's expand Obviously, acquisitions, where but product. look were if there in which basically can currently to have we network. American LatAm, this at plans US this is that, or is North Europe, we that a Asia-Pac. would

Our come from Suisse. Credit with next question will Badri Sami

This Engroff for George is on Sami.

you think the or just corporate view rate recession's outside recessions a cash period? potential noted free the about growth rate from flow the we the and the last was normalization sort something should changed deceleration a your today's on corporate of growth Has COVID on Just XXXX/XXXX of of touching alignment impact dividend sort as you sort materially mentioned of in period. where to that not impacted quarter prior that anything

those order. take in reverse I'll

dividend. while the just And recession to we slow, that in XXXX, our a be our Great tend was continued business. And be cash impacted slower the recovery, more The Recession. time two-quarter tend deeper our every we align the I XXXX from there moderation grow part the anticipated of have population. business the ability of growth the most expected. continue the Corporate improvement, the seeing dividend prudent be than us Corporate the in much period a COVID negative think to to a recognition and only a The revenue to on negatively beginning think To occurring, growth risk in talk albeit flow Corporate longer question, is just is and desirable rate in than that the than seems any able Corporate our business of the impact recession our of the don't that it business serve saw our is to dividend. is end so proof recession the tenants was of Other recessions growth or to free market. to of either streams in material buildings impact there general fact the in not we we're business, the at recession to and

countercyclical. not that more that's pattern, our historic actually people consuming is business somewhat up COVID, more and that And been extremely Netcentric been for when generating video, We bits a and us. also fortunate there's just actually recession, have more end therefore, a revenue they stream

independent I to ability major absent what think grow dividend. kind these And are place. in in of macroenvironment, depression, of the some kind trends comfortable of we in happens feel the our

of follow-up, Just to know the as hesitant the in dividend past, of Board growth change a I sort has rate. the Directors been

sort certain free in And similar to to of that time, so, wants see it of what and a I point if about that, I the be where thinking guess, reaccelerate of is rate be adding should be to on going guess, a growth going sustained the lag is in to reacceleration? cash make flow sure there at Directors Board that? sort way we a does

has growth $X.XX rate First share. board dividend then the It was of to the $X.XXX improved all, share a in a the initially times. $X.XX – $X.XX multiple and

board six the and than expected months slower we corporate linear and the basically the the recognition This responded. is at So ago. improvement has was that looked response underlying performance less even

the on board growth, I sheet continue if reaccelerating sense. leverage rate Also, makes the ability think use quickly cash would interest balance more improve. take pretty react and to of the to if flows rates moderate, dividend the to

of both factors. at look those would we So

quarter. the Congrats on

from come will question next with Rollins Our Michael Citi.

Two if I could.

provide some for And the you a what Dave, there you have in what's buildings return these about or Are to up? you interest two? networks? cogent today either then, in the for also market you office? that Corporate just wireless path significant other taking natural share look to partner to steps or to that that of whichever Corporate push and separately, higher? the pushing of than connectivity the XX%, any Is do cells carrier outcomes seeing more the is wants simply provide to currently into it is company the for First, and just that actually with and in year those think Or buildings, And range is just fiber where share open at private a to make you're DAS are the them networks? for networks operating you've buildings if enable those that? just small private been seeing in demand join And

not in, normal. the And some those we more therefore, to the most share. have we levered the plus First interested is of are Cogent's buildings that are all, percent market be and, best tenants to products. we're buildings buildings where have bandwidth That that in tend XX

business increasingly telemarketed, And our COVID rate. changes was that office. tried is, Corporate helped us from increase had it's we improving. vacancy less improve think sales as because as versus when work we Corporate productive Two, three a I in them to to think and that decline as rate. of in to remote. that factor And still they of basically There's easy now make could in to productivity. allowing be rep return focus customers growth clear and perfectly sales saw third from uncertainty around as coming high to not our could every but is clarity force position orders, improvement that's uncertainty hurt And making a obvious And while what place is direct sell and hard and One, home, we stopped people I into because it's are picture to just That's work very the to we turnover they a company, home the factors. of things the customers understand. many Cogent's building. is in the

office, home that, we've trainers brought we that to sincerely rep back policy that vaccine pandemic, our to we'll productivity reps people have we with that the but and be decline. can't the hope predict we turnover our Now forced again. send improve the in-person, not are rep we seen there ever Again, implemented,

And I a our maybe in hundreds factors, of once a of improve result hopefully think this three these think that, us will was years. productivity. help of I as event, all once-in-a-lifetime

solutions. of a participate right. our Now networks, to with Wi-Fi we we impact DAS get to buildings, to those are about buildings where provide carriers question have have our we in our the your right small of landlord the would In not have do all some very three percentage cell, would to and vast back worked second an the There go But significantly to limitedly wireless additional to ability majority networks different to this small segment. of that. that

limited I widely three technologies, being they're would far, deployed. in of So all say, how these are

we're the players. meaningful to it's is So Yes, But an our to not it's answer the revenues. contributor talking yes, today, opportunity. a right

And with from our Capital comes final question Markets. RBC Bora Lee

Historically, one about spoken Just CapEx side. question declining my you've over from time.

resuming expansion Or a actually years that five included that that or downward in CapEx? the thinking be international you've that market and you elevated you're interested number X internationally it how trajectory? we it Sprint the the earlier? by starts assets, in like, about CapEx actually expansion Given international indicated markets cited further, to Sprint given before three for, opportunity Would provided of years be expanding is $XX million should

expansion. $XX That's harmonize have answer initially million it to one-timer. interconnect of to does is the spend that them. a to again, There's tried to networks be going very The We, transparent. our we kind include need this be and international

We also, chain the past equipment face supply had issues not did the honestly, we've anticipate quite that to year-and-a-half. for

issue. result, are to as For six and couple pandemic, over probably But go that That away. a inventory still And the capital quarters the there But improving. should first of ago, is of a it not more we've had peaked chip key months of shortages it was components. and gear. spend an

additional year CapEx non-expansion data of it for number Cogent, still that be number spent foreseeable future. percentage maintenance larger, should which our for the than And a I centers basis, revenue outlined kind but we wavelength number combined company. picking expansion the year decline, As think for be of revenue, absolute the a think adding. of because the should is to the will XXX-plus to closer a million every scale do product, up even some our was CapEx get And CapEx we're that we be rather $XX million, an there decline. will will I $XX on

more think handful we're about And to going And $XXX,XXX are investors $XX to kind still is MTOBs. I of of remember, going data XXX each of roughly. So, should add for those, the expect center a a million. expense, next than years, several add much we

of that several So, level but won't our go get will for to down, maintenance CapEx more kind it years.

remarks. session. And today's for Dave question-and-answer that back to closing conclude like will to Schaeffer Mr. turn I'd the call

I everyone. our know all we everyone's try go Take calls care. soon. of talk thank long, support answer Bye-bye. questions. to the but we to appreciate I like I'd will and

will your this conference. you participation conclude disconnect. today's you And for Thank now and may