Cogent(US:CCOI)2023-02-23 22:21Financial Data and Key Metrics Changes - Revenue for Q4 2022 increased sequentially by 1.3% to $152 million, a year-over-year increase of 3.2% [5] - Full year revenue for 2022 was $599.6 million, reflecting a 1.7% increase [5] - On a constant currency basis, quarterly revenue grew year-over-year by 5.5% and for the full year by 3.9% [5] - EBITDA for Q4 2022 decreased sequentially by $0.7 million and year-over-year by $0.3 million, while full year EBITDA increased by 1.2% to $230.6 million [24] Business Line Data and Key Metrics Changes - Corporate business revenue declined year-over-year by 1.2% to $85.8 million in Q4 2022, and for the full year, it decreased by 4.4% to $342.6 million [17] - NetCentric revenue grew sequentially by 2.6% to $66.2 million and year-over-year by 9.6% in Q4 2022, with full year growth of 11.1% to $257 million [19] - The number of corporate customer connections decreased by 1.3% year-over-year to 44,844 [18] - NetCentric customer connections increased by 7% year-over-year to 51,670 [20] Market Data and Key Metrics Changes - Corporate business represented 56.4% of revenues in Q4 2022, while NetCentric business accounted for 43.6% [17] - The average price per megabit for installed base declined year-over-year by 19.6%, but the decline was better than the historical average [21] - The churn rate for on-net connections was stable at 1%, while off-net churn was 1.1% [21] Company Strategy and Development Direction - The company is focused on closing the acquisition of Sprint's wireline business, expecting to achieve significant cost savings and revenue synergies post-merger [10][11] - The company anticipates an annual revenue growth rate of 5% to 7% and EBITDA margin expansion of approximately 100 basis points per year after the merger [13] - The company is expanding its product offerings, including wavelengths and optical transport networking services, to enhance its market position [34] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about corporate revenue growth due to the uncertain economic environment and slow recovery in central business districts [6] - Positive trends in corporate business are noted as companies adapt to hybrid work environments, leading to increased demand for higher bandwidth connections [40] - Management expects a gradual return to pre-pandemic growth rates, estimating it will take more than a year to achieve a 2% sequential growth rate in corporate business [60] Other Important Information - The company returned $44 million to shareholders through dividends in Q4 2022, marking the 42nd consecutive quarter of dividend growth [12] - The company incurred $2.2 million in professional fees related to the Sprint acquisition for the full year 2022 [10] - The company has a diverse set of IRU suppliers, with obligations totaling $304.2 million at year-end [28] Q&A Session Summary Question: Update on the Sprint acquisition timeline and revenue recognition - Management anticipates closing the acquisition in mid-quarter, with confidence in recognizing the majority of the $700 million revenue stream from T-Mobile [45][46] Question: Thoughts on revenue run rate post-acquisition - Management projects a stable revenue run rate of approximately $450 million at closing, with expectations for gradual growth thereafter [48][49] Question: SG&A expenses and sales rep hiring impact - Management noted a $1.5 million bonus to employees as a one-time expense, with plans to normalize hiring rates post-pandemic [52][53] Question: Update on wavelengths and dark fiber sales - Management has begun selling wavelengths through a commercial agreement with T-Mobile, with initial orders showing strong interest [56][58] Question: Corporate sales activity trends - Management reported improved corporate sales activity, though still below pre-pandemic levels, with expectations for continued sequential improvement [59][60] Question: Leverage expectations for 2023 - Management expects leverage to increase slightly but anticipates a rapid deleveraging due to new revenue streams from T-Mobile [62][63]