Cogent(US:CCOI)2025-12-02 15:32Cogent Communications Conference Call Summary Company Overview - Company: Cogent Communications (NasdaqGS:CCOI) - Event: 2025 Conference at the Bank of America Leveraged Finance Conference - Date: December 02, 2025 Key Points Wavelength Business - Current Revenue: Q3 wavelength revenue increased by $1 million sequentially to $10 million, annualized at $40 million, with a previous goal of $100 million annualized by year-end [5][9] - Network Expansion: Successfully wave-enabled over 1,000 data centers, with wavelengths provisioned in 30 days or less at speeds of 10, 100, or 400 gig [7][8] - Sales Performance: Sold approximately 1,000 waves before completing the entire footprint; however, sales were lower than expected due to customer acceptance delays [8][9] - Future Goals: Targeting $500 million in revenue with a 25% market share by mid-2028 [9][13] Legacy IP Business - Growth Trends: Corporate customer connections in Q3 2025 were lower than pre-Sprint acquisition levels, with a decline in corporate services growth rate from 11% pre-pandemic to 3% currently [17][19] - Sprint Acquisition Impact: The Sprint business, which represented 40% of combined revenue, has been declining at an annualized rate of 24.2% since acquisition [18][19] - On-net vs Off-net: Post-acquisition, the corporate business shifted from 60% on-net to 49% on-net by revenue, with off-net revenue declining due to customer attrition [19][20] Market Conditions - Geographic Concentration: Cogent operates in 1,870 buildings across North America, with a significant decline in occupancy rates from 51 unique tenants pre-pandemic to 38 today [22] - Corporate Business Headwinds: The vacancy rate in connected buildings increased from 4% to 17%, impacting corporate business growth [22] Netcentric Business - Revenue Growth: Netcentric revenue was $100 million in Q3, up $3 million sequentially, driven by wavelength sales and IPv4 leasing [24][25] - International Traffic Growth: Increased traffic in less developed markets has contributed to revenue growth, contrasting with slower growth in developed markets [25] Cost Management and Financial Outlook - Cost Reductions: Approximately $220 million in direct costs have been eliminated since acquiring Sprint, with an additional $20 million targeted for reduction [26] - EBITDA Growth: Cogent has grown EBITDA for nine consecutive quarters, with a focus on achieving 6%-8% top-line growth to offset the loss of T-Mobile subsidies by 2028 [28][29] - Debt Management: The company has paused its dividend to focus on deleveraging, with plans to address $750 million in unsecured notes due in 2027 through various refinancing options [31][33] Strategic Initiatives - Digital Services Growth: The company is focusing on Network as a Service (NaaS) and partnerships with tech companies to drive future revenue growth [54][58] - Hyperscale Connectivity Deals: Cogent has signed $10 billion in cash upfront deals, with revenue recognition expected to ramp up in 2026 and 2027 [60][62] Future Outlook - Revenue Inflection: The company anticipates a revenue inflection point in 2028, driven by growth in digital services and hyperscale connectivity [52][60] - Long-term Vision: Aiming for a simplified debt structure and improved operational efficiency post-acquisition of Sprint assets [80][81] Additional Insights - Customer Experience: The transition to NaaS is expected to improve customer satisfaction and reduce churn, although market education remains a challenge [56][57] - Market Position: Cogent's extensive network infrastructure provides a competitive advantage in meeting the growing demand for fiber connectivity, particularly in the AI sector [66][73]