Cogent(US:CCOI)2023-08-10 20:01Financial Data and Key Metrics Changes - The company's revenue for the quarter increased by 56.1% to $239.8 million, with a year-over-year increase of 61.5% [50] - Legacy EBITDA reached a record $61.7 million for the quarter, with an EBITDA margin of 38.1%, marking the first time the business exceeded $60 million in EBITDA [41] - The company recorded a gain on a bargain purchase of $1.2 billion, approximately $24 per share, due to the acquisition of Sprint's wireline business [42][49] - Operating cash flow was $82.7 million for the quarter, a 130% increase sequentially and a 140% increase year-over-year [62] Business Line Data and Key Metrics Changes - Legacy Cogent revenues grew by 5.3% sequentially and 9% year-over-year, while legacy NetCentric revenues grew by 11.1% sequentially and 19.3% year-over-year [47] - Corporate revenues experienced minimal growth of 0.007% sequentially and 0.006% year-over-year [47] - The acquired Sprint wireline business generated $78 million in revenue for the two-month period from May 1st to June 30th, 2023 [50] Market Data and Key Metrics Changes - The corporate business represented 46.3% of total revenues, with a year-over-year increase of 30.2% to $111 million [86] - The NetCentric business represented 36.5% of revenues, growing sequentially by 28.9% to $87.6 million, and 38.4% year-over-year [87] - The average price per megabit for the installed base increased sequentially by 12.3% to $0.28, while the average price for new customer contracts remained at $0.10 [58] Company Strategy and Development Direction - The company aims to achieve long-term annual revenue growth rates of 5% to 7% and expects EBITDA margin expansion of approximately 100 basis points annually [53] - The acquisition of Sprint significantly expanded the company's network, customer base, and employee talent, with an annualized revenue run rate exceeding $1 billion [77] - The company is committed to monetizing its assets, including selling dark fiber, and plans to better understand inventory and demand on a route-by-route basis [34] Management's Comments on Operating Environment and Future Outlook - Management noted that the corporate business is influenced by real estate activity in central business districts, which has seen some improvement but has not returned to pre-pandemic levels [86] - There is optimism regarding cash flow generation capabilities from the combined operations, with substantial cost savings expected in multiple areas [78] - The company is cautious about corporate revenue outlook due to the uncertain economic environment and challenges from the pandemic [86] Other Important Information - The company returned $44.9 million to shareholders through its quarterly dividend program, increasing the dividend by $0.01 per share [53] - The company plans to convert additional Sprint technical spaces into Cogent data centers, with a goal of selling wavelengths in over 800 carrier-neutral data centers by the end of 2024 [67] Q&A Session Summary Question: What was behind the decision to treat the transit payments in EBITDA? - Management explained that it was critical for investors to understand the cash flow impact of the payments, leading to recognition as received rather than billed [32] Question: Can you provide an update on pricing in the wave market? - Management indicated that they are pricing competitively in the wave market, leveraging a low-cost base [12] Question: What are the anticipated synergies and cost savings from the Sprint acquisition? - Management expects to achieve annual cost savings of approximately $180 million from network optimization, $25 million from Sprint's international wireline network, and $15 million from reduced operation and maintenance expenses [81]