Cogent(US:CCOI)2025-11-06 14:30Financial Data and Key Metrics Changes - The company's revenue for the quarter was $241.9 million, with an adjusted EBITDA of $73.8 million, reflecting a sequential increase of $0.3 million and an adjusted EBITDA margin increase of 70 basis points to 30.5% [10][11] - Total gross debt was $2.3 billion, with a net debt of $1.9 billion after accounting for $224.2 million due from T-Mobile [16][17] - The net leverage ratio was reported at 6.65, slightly up from 6.61 in the previous quarter, while the adjusted gross debt to EBITDA ratio improved from 7.74 to 7.45 [4][16] Business Line Data and Key Metrics Changes - Wavelength services revenue increased to $10.2 million, a 93% year-over-year increase and a 12% sequential increase [6] - IPv4 leasing revenue rose by 14.1% sequentially to $17.5 million, with a year-over-year increase of 55.5% [7] - On-net revenues were $135.3 million, showing a slight year-over-year decrease of 0.9% but a sequential increase of 2.2% [13] Market Data and Key Metrics Changes - The company serves 1,686 carrier-neutral data centers and 186 Cogent data centers, with a total of 214 megawatts of installed and available power [8] - The average price per megabit for the installed base decreased by 10% sequentially to $0.16 and by 31% year-over-year [14] - The company anticipates long-term annual revenue growth rates between 6-8% [8] Company Strategy and Development Direction - The company has refined its capital allocation priorities to strengthen financial flexibility and accelerate its deleveraging strategy, including a reduction in the quarterly dividend to $0.02 per share [2][3] - The company is actively working to monetize its acquired Sprint assets, including data centers, to further accelerate capital delivery [21] - The goal is to capture 25% of the long-haul wavelength market in North America within three years, with a focus on enhancing service quality and provisioning speed [6][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential of the wavelength services business, citing a backlog of 5,221 opportunities [6][22] - The company expects to return to total revenue growth by mid-third quarter 2025, despite a revenue decline of $4.3 million or 1.7% for the quarter [8][9] - Management noted that the integration of the Sprint network has been completed, leading to reduced capital expenditures going forward [7][21] Other Important Information - The company has temporarily suspended its stock buyback program to focus on reducing leverage [4] - The average revenue per IPv4 leased was $0.31 per address, with a total of 14.6 million addresses leased at the end of the quarter [7][11] - The company has completed the grooming of low-margin Sprint-acquired contracts and is focused on selling higher-margin products [9][12] Q&A Session Summary Question: Dividend cut and future levels - Management indicated that the dividend cut was a strategic decision to reach a net leverage target of four times EBITDA before considering a return to previous dividend levels [23][24] Question: Data center sale valuation - Management confirmed that the recent data center sale was representative of the overall portfolio, but specific pricing details were withheld to avoid setting benchmarks for future negotiations [24][25] Question: Wavelength run rate expectations - Management clarified that the expected run rate of $20 million-$25 million by year-end is dependent on customer acceptance of installed wavelengths, with ongoing efforts to improve acceptance rates [26][30] Question: Competitive landscape and provisioning - Management acknowledged that while competitors are enhancing provisioning timelines, the company's unique route diversity and reliability remain significant competitive advantages [42][43] Question: IPv4 address leasing strategy - Management explained that the leasing strategy has accelerated revenue growth from IPv4 addresses, allowing for quicker depletion of inventory compared to outright sales [44][45]