Q4 2023 Cogent Communications Holdings Inc Earnings Call

Operator: is available. Cogent's summary of financial and operational results attached to its press release can be downloaded from the Cogent website. I would now like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings. Yeah, hi, good morning.

Cogent summary of financial and operational results attached to its press release can be downloaded from the cogent website.

I would now like to turn the call over to Mister, Dave Schaefer, Chairman and Chief Executive Officer of Cogent Communications Holdings.

David Schaeffer: Yeah, Hi, good morning won't come through our earnings call for the fourth quarter of 2023, and four year 2023, do Schriefer Cogent Chief Executive Officer.

David Schaeffer: Welcome to our earnings call for the fourth quarter of 2023 and full year 2023. I'm Dave Schaeffer, Cogent's Chief Executive Officer. With me on this morning's call is Thad Weed, our Chief Financial Officer. Hopefully, you've had a chance to review our earnings press release. Our press release includes a number of historical metrics that we present on a consistent basis each and every quarter. Now, for a quick summary of our results. We closed the acquisition of the Sprint business on May 1, 2023.

David Schaeffer: Beyond this morning's call his head with our Chief Financial Officer, hopefully you've had a chance to review our earnings press release or press release includes a number of historical matrix that would present on a consistent basis, each and every quarter.

A quick summary of all resolved.

David Schaeffer: We close the acquisition of the sprint business on May 1st 2023.

David Schaeffer: This transaction significantly expanded our network, our customer base, and materially increased the scope and scale of our business. Our annualized revenue run rates are now in excess of a billion dollars. We acquired a large number of enterprise customer relationships. These customers are typically larger than our Cogent Legacy corporate customer base. We also acquired a significant network comprised of owned fiber and owned facilities, many of which are being converted to data centers. We acquired a network with an appraised value substantially above $1 billion, or $1. We are repurposing the acquired fiber network to be optimized for the sale of wavelength services.

David Schaeffer: Actions significantly expand our network, our customer base and materially increase the scope and scale of our business or annualized revenue run rates are now in excess of a billion dollars.

David Schaeffer: We acquired or number of enterprise customer relationships.

David Schaeffer: <unk> customers are typically larger than or cogent legacy corporate customer base. We also acquired a significant network comprised of O fiber and O facilities, many of which are being converted to data centers.

David Schaeffer: We acquired network within appraised value substantially above $1 billion one dollar.

David Schaeffer: <unk> R.

R Repurposing via acquire fibre network can be optimized for the sale of wavelength services.

David Schaeffer: We will receive a total of $700 million over time from T-Mobile to offset the operating losses of serving enterprise customers. $350 million of these payments will be made in the first year at $29.2 million per month. And then $350 million of payments will be spread out over the next 42 months at $8.3 million per month. We remain optimistic about the cash flow capabilities of our combined operation. Our recent results show that we have achieved immediate and substantial savings in multiple areas, many of which have exceeded our initial expectations. We anticipate additional cost savings from our current run rate. Our combined Cogent business had a very good quarter and a very good year. Our total revenues for the quarter were $272.1 million and $940.9 million, thousand for full year 2023. Our EBITDA as adjusted for the quarter was $110,500,000, and for the full year, it was $352.5 million in 2023. Her EBITDA as adjusted margin was 40.6% for the quarter and 37.5% for the full year 2023.

David Schaeffer: We received a total of $700 million over time from T mobile to offset the operating losses of serving enterprise customers.

350 million of these payments will be made in the first year at $29.2 million per month, and then 350 million of payments will be spread out over the next 42 months.

David Schaeffer: Of 8.3 million per month.

David Schaeffer: We remain optimistic about the cash flow capabilities of our combined operations or resume results showed that way a bit shaved immediate and substantial savings multiple areas.

David Schaeffer: Many of which have exceeded our initial expectations, we anticipate additional cost savings from our current run rates.

David Schaeffer: Or combine cogent business had a very good quarter and a very good year are total revenues for the quarter or $272.1 million and 940 million 900.

Thousand for full year 2023.

David Schaeffer: Our EBITDA Ah suggested for the quarter was 110.500 million and for the full year was 352.5 million and 2023.

David Schaeffer: Our EBITDA as suggested margin bush, 40.6% for the quarter and 37.5% for full year 2023.

David Schaeffer: We've received... 3 payments totaling $87.5 million from T-Mobile this quarter and a total of 7 payments in 2023 totaling $204.2 million. Total debt trailing 12-month EBITDA is adjusted, and our net debt ratio significantly improved in the quarter. Our gross get to trailing 12-months EBITDA as adjusted ratio was 4.07% at year end, and our net debt ratio was 3.75, a substantial improvement from the 4.23 times in the last quarter. Our network traffic increased sequentially by 7% and was up 22% year over year. We have a number of areas in which we expect to continue to execute on cost savings.

David Schaeffer: We received.

David Schaeffer: Three payments totaling 87.5 million from T mobile this quarter and a total of seven payments in 2023, <unk> 204.2 million.

David Schaeffer: <unk>.

David Schaeffer: Total get trailing 12 month EBITDA as suggested in our net debt ratios significantly improved and a quarter or Bruce get.

David Schaeffer: Two trailing 12 months shape it off as a trusted ratio was 4.07.

David Schaeffer: At U R N and our net debt ratio was 3.75, a substantial improvement from the 4.23 times in the last quarter.

David Schaeffer: Network traffic increase sequentially by 7% homeless up 22% year over year.

David Schaeffer: We have a number of areas in which we expect to continue to.

David Schaeffer: Execute on cost savings with the process of realizing savings as senator shoes over a three year period.

David Schaeffer: We're in the process of realizing savings and synergies over a three-year period that will result in an annualized savings of $220 million. We anticipate achieving additional SG&A savings and other cost and revenue synergies over this over the next several years, hopefully exceeding that $220 million target. Our recent progress in achieving these savings is very encouraging, and we do intend to surpass the targets that we have laid out.

David Schaeffer: Will result in an annualized savings of $220 million.

David Schaeffer: We anticipate achieving additional SG&A savings another cost in <unk> revenue synergies over this over the next several years hopefully exceeding that 220 million dollar target or recent progress in achieving the savings is very.

David Schaeffer: <unk> and we do intend to surpass the targets set way of laid out.

David Schaeffer: Our Salesforce productivity last quarter was 3.6 units installed per wrap and 3.3 units per full-time equivalent this quarter. Our sales rep productivity has been substantially impacted by the enterprise customer reps that joined us from the Sprint business. These new enterprise reps are continuing to receive training on Cogent sales processes and have not yet reached their full productivity. Now, for the size and scope of our sales force, in connection with the Sprint acquisition, we hired a total of 942 employees. As of today, 742 of these employees remain employed with Cogent.

David Schaeffer: Our sales force productivity last quarter was 3.6 units install per rap and 3.3 units per full time equivalent those quarter, our sales rep productivity has been substantially impacted.

David Schaeffer: By the enterprise customer reps that joined us from the sprint business.

David Schaeffer: Does you enterprise reps are continuing to receive training oncogen sales processes and have not yet reached their full productivity.

David Schaeffer: Now for the size and scope of our sales force in connection with the <unk>, we hired a total of 942 employees.

David Schaeffer: <unk> today 742 of these employees remain employed with cogent.

David Schaeffer: During the quarter, our total sales rep count increased by 20, or approximately a 3% sequential increase. For full year 2023, our total sales reps increased by 109, or a 20% increase, substantially ahead of our normal rate of sales revenue growth, catching up for some of the slower growth that occurred throughout the pandemic year. We ended the year with 657 sales reps, of which 620 were counted as full-time equivalent.

David Schaeffer: During the quarter or total sales rep count increased by 20 or approximately a 3% sequential inquiries for full year 2023, or total sales reps increased by 109 or a 20 per cent increase.

David Schaeffer: I actually ahead of our normal rate of sales worth crowed catching up for some of the slower growth that occurred throughout the pandemic years.

David Schaeffer: We entered the year was 657 sales reps of which 624 counted as full time equivalents.

David Schaeffer: Now for some comments on our Wavelength and Optical Transport Services. In connection with our acquisition of the Sprint business, we are expanding our product offering to include wavelengths and optical transport over our newly acquired fiber optic network. We are selling these wavelength services to existing customers, as well as customers acquired from Sprint. These customers require dedicated optical transport connectivity without the capital and ongoing expenses associated with operating their own network.

David Schaeffer: Now for some comments on our wavelength, an optical transport services and.

David Schaeffer: In connection with our acquisition of Sprint S. S. We are expanding our product offering to include wavelengths, an optical transport over our newly acquired fiber optic network. We are selling these wavelengths services joy existing customers as well as customers require from sprint.

David Schaeffer: These customers require dedicated optical transport connectivity without the capital and ongoing expenses associated with the operating there Oh network.

David Schaeffer: We have sold wavelengths to date in 65 locations, and many of these have shorter provisioning cycles. We have connectivity and the capability to sell wavelengths today in an additional 285 locations, with longer provisioning times. By year-end 2024, we expect to be able to offer wavelength services in 800 North American carrier-neutral data center locations, with substantially shorter provisioning times. Our footprint expanded materially with the acquisition of. We added 18,905 route miles of owned inner city fiber and 12,000, Excuse me, 1,257 route miles of Own Metropolitan Fiber to our now. We also added 11,400 route miles of inner city IRU fiber and approximately 4,500 route miles of metropolitan IRU fiber to the Cogent network.

David Schaeffer: We have sold wavelengths to date and 65 locations. Many of these have shorter provisioning cycles, we have connectivity and capability to sell wavelengths today and an additional 285 locations with.

David Schaeffer: Mmm longer provisioning cycles.

David Schaeffer: By year end 2024, we expect to be able to offer wavelength services and 800, North American carrier neutral data center locations was substantially shorter provisioning times.

David Schaeffer: Our footprint expanded materially with the acquisition of Sprint. We added 18905 route miles of one <unk> fibre and 12000.

David Schaeffer: Gives me 1200 and 57 route miles.

Oh, Oh metropolitan fiber to our network. We also added 11400 route miles of inner city I argued fibre and approximately 4500 route miles of Metropolitan I R U five over to the coach.

David Schaeffer: We were in the process of rationalizing the acquired I R U fiber agreements as their contractual terms allow us to exit them.

David Schaeffer: We are in the process of rationalizing these acquired IRU fiber aggregates, as their contractual terms allow us to exit that. To date, we have also reconfigured 22 of the acquired Sprint facilities into data centers. We added these new data centers to the 1,558 carrier-neutral data centers that we operate, bringing and bringing the total of Cogent-operated data centers to 77, which today have 157 megawatts of power. We're in the process of converting an additional 23 Sprint facilities into Cogent data centers and optimizing and rationalizing our data center footprint. During the quarter, we returned $46.4 million to our shareholders with our regular quarterly dividend. We paid. Four quarterly dividends in 2023 totaling $181.7 million or $3.76 per share. We expect the tax treatment for these dividends will generally be completely a return of capital, so therefore 100% of those dividends will be treated on a tax deferred basis.

David Schaeffer: To date, we have also reconfigured 22 of the acquire sprint <unk>.

David Schaeffer: Facilities and two data centers.

David Schaeffer: And we have these new data centers to the 1500 and 50, a camera or neutral data centers that we operate bring and bought the total of coaching operated data centers to 77, which today have 157 megawatts of power.

David Schaeffer: We're in the process of converting an additional twenty-three sprint facilities and <unk> data centers and optimizing rationalizing our data center footprint.

David Schaeffer: Gotten a quarter, we returned $46.4 million to our shareholders with our regular quarterly dividend.

David Schaeffer: We paid.

David Schaeffer: Four quarterly dividends in 2023 totaling $181.7 million or $3.76 per share.

David Schaeffer: We expect the tax treatment for these dividends are generally treated as completely return of capital. So therefore 100 per cent of those dividends will be treated on a tax deferred basis.

David Schaeffer: Our Board of Directors, which continues to evaluate our growth in cash flow and the capabilities of our team to execute against our opportunities, inclusive of the Sprint acquisition, increased our quarterly dividend yet again by a penny a share sequentially, raising our quarterly dividend from 99.5 cents per share per quarter to 96.5 cents per share per quarter. This increase represents the 46th consecutive sequential increase in our quarterly dividend and a 4.3% annual growth rate in that dividend. Now for a couple of comments on our long-term target. Now that Cogent is fully integrated and combined with the Sprint business, We anticipate our long-term average revenue growth to remain between 5 and 7 percent annually.

David Schaeffer: Our board of directors, which continues to evaluate our growth and cash flow and the capabilities of our team to execute against our opportunities inclusive of the sprint acquisition increased our quarterly dividend yet again by a <unk>.

David Schaeffer: Sure sequentially.

David Schaeffer: Racing or quarterly dividend from 99.5 cents per share per quarter to 96.5 cents per share.

David Schaeffer: Corner.

David Schaeffer: This increase represents the 46 consecutive sequential increase in our quarterly dividend and a 4.3% annual growth rate and that dividend.

David Schaeffer: Now for a couple of comments around our Aung term targets.

David Schaeffer: Now that cogent is fully integrated and combined with a sprint business, we anticipate our longterm average revenue growth to remain between five and seven per cent annually.

Thaddeus G. Weed: And we expect our EBITDA margins, as adjusted, to increase by approximately 100 basis points annually. This will be impacted in the short term by the step down in payments from T-Mobile. Our revenue and EBITDA guidance targets are intended to be multi-year goals and are not intended to be used as quarterly or annual specific targets, EBITDA as adjusted, and leverage ratios are impacted by the $700 million payment stream that we received from T-Mobile. Beginning in May of 2024, these payments will step down from $29.2 million per month to $8.3 million per month and remain in place for the subsequent 42 months. The reductions will impact our future EBITDA as adjusted leverage ratios and will impact our ratios in the third quarter of 2024 on a trailing 12-month phase. Now, I'd like to turn it over to Thad to read our safe harbor language and provide some additional details, and then I will jump back in to address some additional operating methods. Thank you, Dave, and good morning, everyone.

David Schaeffer: And we expect our EBITDA margins acid trusted to increase by approximately 100 basis points annually.

This will be impacted in the short term by the step down and payments from T mobile.

David Schaeffer: Our revenue and EBITDA guidance targets are intended to be multi year Kohl's.

David Schaeffer: We're not intended to be used as quarterly or annual specific targets.

David Schaeffer: Our EBITDA as a trusted and leverage fries shows are impacted by the 700 million dollar payment stream that we received from T mobile.

David Schaeffer: Beginning in 20 May have 20th 20th for these payments will step down from $29.2 million per month to $8.3 million a month and will remain in place for the subsequent 42 months. So.

David Schaeffer: The reductions will impact our future EBITDA how's your trusted leverage ratios.

David Schaeffer: And will impact our ratios in the third quarter of 2024 on a trail a 12 month basis.

David Schaeffer: Yeah, I'd like to turn it over to Tad to read our safe Harbor language and provide some additional details and then I will jump back on to address some additional operating matrix.

Tad: Thank you Dave and good morning, everyone. This earnings conference call includes forward looking statements. These forward looking statements are based upon our current content beliefs and expectations. These forward looking statements and all their statements definitely made on this call but are not historical facts are subject to a number of risks and uncertainties an actual results.

Thaddeus G. Weed: This Earnings Conference call includes forward-looking statements. These forward-looking statements are based upon our current intent, belief, and expectations. These forward-looking statements and all the statements that we made on this call that are not historical facts are subject to a number of risks and uncertainties and actions. 2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Department of Agriculture and Rural Affairs University of Georgia College of Agricultural and Environmental Sciences Please refer to our SEC filings for more information on the factors that could cause action. Cogent undertakes no obligation to update or revise our materials.

Tad: May differ materially.

Tad: Please refer to our S. C C filings for more information on the factors that could cause actual results to differ.

Cogent undertakes no obligation to update or revise are forward looking statements.

If we use non-GAAP financial measures during this call you'll find these reconciled to the corresponding with that.

Thaddeus G. Weed: The Bulletproof Executive 2013, Corresponding Gap Measurements, and our earnings releases that are posted on our website. So, some comments on the accounting for the Sprint acquisition. Very complex.

Tad: Earnings releases that are posted on our website at <unk> Dot com.

Tad: So some comments on the accounting for the sprint acquisition, which was very complex Franklin.

Thaddeus G. Weed: In connection with our accounting for the acquisition, we recorded a total gain on bargain purchase for the year of $1.4 billion, or almost $27 per share. Included in that $1.4 billion gain is the discounted present value of the $700 million IP transit services during the fourth quarter and in consultation with our auditors and valuation specialists. Big Four Accounting. We recorded both Big Four.

Tad: In connection with our counting for the acquisition, we recorded a total gain on bargain purchase for the year 1.4 billion are almost $27 per share for the year.

Tad: Included in that 1.4 billion dollar gain is.

Tad: As the discounted present value of the 700 million I P Transit services agreement with T mobile.

Tad: During the fourth quarter and in consultation with our auditors and valuations specialist a big for accounting firm.

Tad: We recorded both before accounting firms, we recorded an additional and tangible asset for 9.9 million of I P. V. Four internet addresses that we acquired in the spring acquisition.

Thaddeus G. Weed: We recorded an additional intangible asset for 9.9 million of IPv4 internet access we acquired. The Bulletproof Executive 2013, These IPv4 addresses have an indefinite useful life and are not being... This asset was recorded at $458 million, or an average of about $46 per acre, because of the novel nature of this asset.?? The Bulletproof Executive 2013, already resulted in a material bargain purchase gain prior to recording this asset. We recorded the asset after consideration of the appropriate valuation.

Tad: These I P V. Four addresses have an indefinite useful life and are not being amortized.

Tad: This asset was recorded at $458 million or an average of about $46 per address.

Tad: Because of the novel nature of this asset and the fact that the transaction has already resulted in a material borrowing purchase game prior to recording this afternoon.

Tad: We recorded the asset after consideration of the appropriate valuation approach.

Thaddeus G. Weed: The Net Aftertax Impacts of Recording the IPv4 Internet Address and other valuation adjustments that we made this quarter resulted in a net additional gain on the bargain purchase of $254 million. The Bulletproof Executive 2013, The Acquired Network, including owned real estate assets. FiberRoute, right of way.

Tad: The net after tax impact of recording the I T V for Internet addresses and other valuation adjustments that we made this quarter resulted in a net additional gain on the bargain purchase of $254 million that we recorded in the fourth quarter.

Tad: The acquired network, including owned real estate assets fiber routes right of way agreements network equipment and the I T V for Internet addresses have been appraised by a big for accounting firm at a valuation total valuation of $1.4 billion.

Thaddeus G. Weed: Network equipment and the IPv4 Internet have been appraised by a Big Four accounting firm at a total valuation of $1.4 billion. Total Fair Value, Net Assets Acquired. The net of liabilities was $800 million, and including the net present value of the consideration to be paid to us by T-Mobile of $600 million, while discounted, and the 458 million IPv4 internet add-ons. Again, the total acquisition resulted in a $1.4 billion bargain purchase gain. These amounts are subject to additional adjustments through one year from the closing date, which will be May.

Tad: The total fair value of the net assets acquired so net of liabilities was 800 million.

Tad: Including the net present value of the consideration to be paid to us by T mobile of $600 million discount.

Tad: Discounted value and the 458 million of I P. More internet addresses again, the total acquisition resulted in a 1.4 billion bargain purchase gain.

Tad: These amounts are subject to additional adjustments through one year from the closing date, which will be may one of 2024.

David Schaeffer: Some comments on corporate and net-centric revenue and customers. We analyze our revenues based upon network connection type, which is on-net, off-net, wavelength services, and non-core services. And we analyze our revenues based upon customer type, and we classify all of our customers into three types: Netcentric, Corporate, and Enterprise. Corporate business continues to be influenced by real estate activity.

Tad: Some comments on corporate and Netcentric revenue in customer connections.

Tad: We analyze our revenues based upon network connection type, which is on net off net wavelength services and non core services.

Tad: And we analyze our revenues based upon customer type and we classify all of our customers into three types netcentric corporate and enterprise.

Tad: Our corporate business continues to be influenced by real estate activity in central business districts.

David Schaeffer: We continue to remain cautious in our outlook for our corporate revenues given the uncertain economic environment and other challenges from the lingering pandemic. Our corporate business was 46.5% of our revenues this quarter. Quarterly corporate revenue increased year-over-year by 47.6%, to a total of $126.6 million for the fourth quarter of last year and increased sequentially by 5.1%. For the full year 2023, corporate revenue is expected to increase by 29.5%.

Tad: We continue to remain cautious and our outlook for our corporate revenues given the uncertain economic environment other challenges from the lingering pandemic effects.

Tad: Our corporate business was 46.5% of our revenues this quarter.

Tad: Quarterly corporate revenue increase year over year by 47.6% to a total of $126 $6 million from the fourth quarter of last year and increase sequentially by 5.1%.

Tad: For the full year 2023, corporate revenue increased by 29.5% to $443.7 million.

David Schaeffer: 400... We have 54,493 corporate customer connections on our network at This represented a sequential decrease of one percent, a year-over-year increase of $21 billion. For the quarter, the sequential impact of USF taxes, recorded as revenues, on our corporate revenue was a positive 5.9, and a positive year-over-year quarterly. 3, For the full year, the positive USF impact was 35%. Comments on the Net-Centric.

Tad: We had 54493 corporate customer connections on our network at year round.

Tad: This represented a sequential decrease of 1% on a year over year increase of 21 and a half per cent.

Tad: For the quarter, the sequential impact of USAF taxes recorded those revenues on our corporate revenues was a positive $5.9 million and a positive year over year quarterly impact of $16.3 million.

Tad: For the full year, the positive USF impact was $34.8 million.

Tad: Some comments on the net centric business.

David Schaeffer: Our net-centric business continues to benefit from the continued growth in video traffic, streaming, and Wavelength. Our net-centric business represented 34.2% of our revenues this quarter, and we are increasing sequentially by 1.9... 93.1 million, grew by 40.7% on a year-over-year basis. For full year 2023, our net-centric revenue increased by 33.7%. 343, We had 62,370 net-centric customer connections on our network at year-end. That was a slight sequential increase of 0.1% and a year-over-year increase of 20%. Comments on the enterprise.

Tad: Our Netcentric business continues to benefit from the continued growth and video traffic streaming and wavelength sales.

Tad: Our Netcentric business representative 34.2% of our revenues this quarter and declines sequentially by 1.9% to 93.1 million and grew by 47% on a year over year basis.

Tad: For the full year 2023 are netcentric revenue increased by $33 70 per cent to $343.6 million.

Tad: We had 63370 netcentric customer connections on our network it year and that was a slight sequential increase the 0.1% a year over year increase of 27 per cent.

Tad: Comments on the enterprise.

David Schaeffer: Our enterprise business represented 19.2% of our revenues for the quarter. $52.3 million. We had 20,740 enterprise customer connections at the end of the year on our network. Our enterprise revenue decreased sequentially by $7.7 million or by 12.8%.

Tad: Our enterprise business representative 19.2% of our revenues for the quarter and was $52.3 million.

Tad: We had 20740 enterprise customer connections at the end of the year on our network.

Tad: Our enterprise revenue decreased sequentially by 7.7 million or by 12.8% for.

David Schaeffer: For the full year 2023, our enterprise is revenue with 16 points. We have a total of 153.96% of our revenues. Just a reminder, there was no enterprise revenue last year. Or 153.97%. Thank you. Lastly, on the wavelength.

Tad: For the full year 2000, twenty-three our enterprise business revenue was 16.3% of our revenues reminder, there was no enterprise revenue last year or $153.6 million.

Lastly on the wavelength business are new wavelength product represented 1.2% of our revenues this quarter and was $3.3 million and we had a total of 667 connect waveland connections on our network at year end.

David Schaeffer: Our new wavelength product represented 1.2% of our revenues this quarter and was $3.3 million, and we had a total of $600,000 in revenue. 7, Wavelength Connections on our network at, Revenue and Customer Connections by Network Type. We need to make some comments also on the billing transition that we went through. In the fourth quarter, we fully integrated our Sprint customers into our billing, or Cogent, worldwide are now billed from one platform. This transition delayed some customer payments from December into January since the former Sprint customer needed to update their systems to remit payments to our lockbox and T-Mobile.

Tad: Revenue in customer connections by network type.

Tad: I need to make some comments also on the billing transition that what he went through in the fourth quarter and.

Tad: In the fourth quarter, we fully integrated are sprint customers into our billing platform.

Tad: All cogent customers worldwide are now bills from one cogent billing system.

Tad: This transition delay some customer payments from December to January since the former sprint customers needed to update their systems to remit payments as to our lockbox from the T mobile lockbox.

David Schaeffer: This increased our daily sales to 37 at year end, which was temporary. Additionally, once we provisioned every Sprint order into our billing... We reclassified $1 million of on-net revenue into $400,000.

Tad: This increase our day sales 637 at year end, which was a temporary increase.

Tad: Additionally, once we provisioned every sprint order into our billing system, we reclassified one or 1 million of on net revenue and 400000 of off net revenue from Q3 to non-core revenue.

David Schaeffer: Off-Net Revenue from Q3 to Non-Core Revenue. We also reclassified 1,373 on-net customers at the end of the third quarter. 157, Off-Net Customer Connections. 1,200, non-core.

Tad: We also reclassified 1373 on net customer connections at the end of the third quarter.

Tad: Two 157 off net customer connections and 1216 non-core customer connections. This was to conform to our classification methodology as we were using the T mobile billing system.

David Schaeffer: This was to conform to our classification methodology as we were using the T-Mobile billing system. The Bulletproof Executive 2013, October. These changes are reflected retroactively in our Summary of Financial and Operational Results tables, which include On-net revenue. Our on-net revenue, including wavelength revenue, was $141.2 million for the quarter. That was a sequential increase. The Bulletproof Executive 2013, For the full year 2023, our on-net revenue increased by 14.5% to $500 million. Our on-net customer connections were 88,733.

Tad: Through.

Tad: October of 2023.

Tad: These changes reflected retroactively and our summary of financial and operational results tables that is included in our press release.

Tad: On net revenue are on net revenue, including wavelength revenue was $141 2 million for the quarter that was a sequential increase of 6.9% a year over year increase from 22.8%.

Tad: For the full year 2023 are on net revenue increased by 14.5% to $518.6 million.

Tad: Are on that customer connections, where 88733 at year end.

David Schaeffer: We serve our OnNet customers in our 3,277 total OnNet multi-tenant offices. Care of a Neutral Data Center continues to succeed in selling larger 100 gigabit connections and 400 gigabit and Kero Nutri Data Centers and selling 10 gigabit..., and Selected Multi-Tenant Offices. Selling these larger connections has the impact of increasing our year-over-year and sequentially on net, or off-net revenue. $123.7 million for the quarter, a decrease of 5.3% in a year over 235. The consequential decline in our off-net revenue was partially impacted by our marginalizing certain off-net customers to on-net. For full year 2023, our off-net revenue increased by $106 million. 390% to 393.5%. Our off-net customer connections were 36,895 at year-end.

Tad: We serve our our neck customers and our 3277 total on net Multitenant office and carry a neutral data center buildings.

Tad: We continue succeed in selling larger hundred gigabit connections and 400, <unk> gigabit connections and carrying Notre data centers and selling 10 gigabit connections and selected Multitenant office buildings.

Tad: Selling these larger connections as the impact of increasing our year over year and sequentially on that.

Tad: Are off net revenue it was 123.7 million for the quarter.

Tad: That was a sequential decrease of 5.3% a year over year increase of $235, 4%.

Tad: [noise] sequential decline in our off net revenue was partially impacted bar migration certain often that customers to on that.

Tad: For full year 2023 are off net revenue increased by 169.2% to 393 and a half million dollars.

Tad: Are off net customer connections, where 36895 at year end and.

David Schaeffer: We serve these off-net customers in over 27,000. These off-net buildings are primarily... Lastly, on non-core revenues, our non-core revenue was $7.3 million for the quarter. That was a sequential decrease of $5.6 million. The Bulletproof Executive 2013, The Bulletproof Executive 2013. Non-core customer connections were 1,975.

Tad: And we serve these off net customers an odor and over 27000 off net buildings.

Tad: These often that buildings are primarily located in North America.

Tad: Lastly on non-core revenues are non-core revenue was 7.3 million for the quarter that was a sequential decrease of $5.6 million or 43.5% due to our decision to end of life. These non-core products.

Tad: Non-core customer connections were 1975 year round.

Tad: Some statistics on pricing or average price per megabit for our installed base decreased sequentially by 7.1% to 28 cents, but increased year over year by 4.9%.

David Schaeffer: Statistics on pricing, our average price per megabit for our installed base decreased sequentially by 7%. The Bulletproof Executive 2013, but it increased year-over-year by 4.0. Our average price per megabit for our new customer contracts for the quarter was $10,000.

Tad: Our average price per megabit for our new customer contracts for the quarter was 10.

Tad: <unk>.

Tad: Our on net <unk> increase sequentially and are off net are poo decreased.

David Schaeffer: Our on-net ARPU increased sequentially than our off-net ARPU. However, our year over year on that and off. The Bulletproof Executive 2013, are on that ARPU increased sequentially by 9.7%. 484-530. Year over year, our Omnit is, by 14.4 percent; off-net ARPU decreased sequentially by 2.9%. 1150.

Tad: However, our year over year on that end off net <unk> increased primarily from the impact of the sprint business and also selling larger connections.

Tad: Our on net <unk> increase sequentially by 9.7% from 484 to 530.

Tad: Year over year on that are Pooh increased by 14.4% from 464 last year.

Tad: Are off net <unk> decreased sequentially by 2.9% from 1150 1117.

David Schaeffer: 1117. Year-over-year, our off-net ARFU increased by 22.2% from 914,000. Our sequential churn rate for on-net and off-net connections for the combined business improved. Our on-net unit monthly churn rate was 1.2% for the quarter, which was a material improvement from 1.8%. Our off-net unit monthly churn rate was 1.3% this quarter, an improvement from 1.5%.

Tad: Year over year are often in our food increased by $22, 2% from $914 last year.

Tad: Or sequential churn rate for on and off net connections for the combined business improved.

<unk> monthly churn rate was 1.2% for the quarter, which was a material improvement from 1.8% last quarter.

Tad: Are off net unit monthly churn rate was 1.3% this quarter, an improvement from 1.5% last quarter.

David Schaeffer: EBITDA and EBITDA margin. We reconcile our EBITDA to our cash flow from operations in each of our quarterly press releases. We incurred $17 million of Sprint non-capital acquisition costs, compared to 400,000.

EBITDA and EBITDA margin, we reconcile our EBITDA to our cash flow from operations in each of our quarterly press releases.

Tad: We encouraged 17 million of sprint Noncapital acquisition cost this quarter compared to 400000 last quarter.

David Schaeffer: Included in that $17 million... The Bulletproof Executive 2013, 16.2 million of severance costs that we paid but are fully reimbursed by T-Mobile and have, Under U.S. GAAP, these costs need to be reported as SG&A post-acquisition costs and correspondingly as a component of the bargain purchase gain, so no net P&L. And they are reflected as print acquisition costs since they are directly tied to the act Classified that way on our p.m. EBITDA as adjusted and EBITDA as adjusted.

Tad: Included in that $17 million of sprint acquisition costs for the quarter or $16.2 million of severance costs that we paid but are fully reimbursed by T mobile and have been fully reimbursed.

Tad: Under us GAAP these costs need to be reported as SG&A post acquisition costs and correspondingly as a component of the bargain purchase gain so no net P&L impact.

Tad: And they are reflected a sprint acquisition cost and stay are directly tied to the acquisition classified it.

Tad: That way on our piano.

Tad: EBITDA as adjusted and even as adjusted margin.

David Schaeffer: Our EBITDA, as adjusted, includes adjustments for Sprint Acquisition Costs and Cash Payments received under the $700 million IP Transit Services Agreement with P-Mobile. We billed and collected $87.5 million under that agreement this quarter, billed $233.3 million, and collected $242.2 million under that agreement for the full year. The Bulletproof Executive 2013, All amounts billed under the IP Transit Services Agreement have Our EBITDA, as adjusted for SPRINT acquisition costs and cash payments under the IP Transit Services Agreement, was $110 million for the quarter and $40 million. The Bulletproof Executive 2013, Our EBITDA, as adjusted, was $352.5 million for the full year and a 37.5% increase. Regarding foreign currency, our revenue earned outside of the United States is reported in U.S. dollars and was about 16% of our revenue this quarter and 18% for the year. About 10% of our revenues for the quarter were based in Europe, and the remaining 6% outside of the U.S. were related to Canada, Mexico, Oceania, South America, and Africa. The average USD to Euro rate so far this quarter is $1.09, and the Canadian dollar average rate is $0.75.

Tad: Or even as adjusted includes adjustments for sprint acquisition costs and cash payments received under the $700 million Transit services agreement with T mobile we.

Tad: We build and collective 87, and a half million dollars under that agreement this quarter.

Tad: We build $233.3 million and collected $242 $2 million under that agreement for the full year 2023.

Tad: All amounts billed under the IP Transit services agreement had been paid to us on time.

Tad: Our EBITDA as adjusted for Sprint acquisition costs and cash payments under the IP Transit services agreement.

Tad: It was $110 million for the quarter and a 46% margin.

Tad: Our EBITDA is adjusted for 352, and a half million dollars for the full year and a 37.5% margin.

Tad: Comments on foreign currency Ah revenue earned outside of the United States is reported in U S dollars and was about 16% of our revenue this quarter and 18% for the year.

Tad: About 10% of our revenues for the quarter were based in Europe, and the remaining 6% outside of the U S were related to Canada, Mexico, Oceanic South American and African operations.

Tad: The average USD to euro rate. So far this quarter is one dollar nine in the Canadian dollar average rate 75 cents and if those average rates remain at their current levels for the remainder of the first quarter of this year, we estimate that the F X conversion impact on our sequential quarter.

Tad: Lee revenues would be positive and about half a million dollars and the same impact on a year over year basis.

Tad: We believe that our revenue in customer base is not very highly concentrated even with the sprint acquisition.

Tad: Including the impact of the customers acquired in the sprint business, our top twenty-five customers represented 16% of our revenues this quarter and 15% for the year.

Tad: Capex, our quarterly Capex was 43.6 million this quarter and our Capex was $129 6 million for the year. We are continuing our network integration of the former sprint network and legacy Cogent network, one unified network and converting sprint switch sides into cogent.

David Schaeffer: If those average rates remain at their current levels for the remainder of the first quarter of this year, we estimate that the FX conversion impact on our sequential quarterly revenue will be positive and about half a million dollars. The same impact on a year. We believe that our revenue and customer base is not very highly concentrated, even with the Sprint acquisition. Including the impact of the customers acquired in the Sprint business, our top 25 customers represent. Thank you.

Tad: Data centers.

Tad: On finance leases and payments.

Tad: Our finance lease are you obligations are for long term dark fiber leases and typically you have initial terms of 15 to 20 years with longer and often include multiple renewal options. After the initial term.

Tad: Our total I are you financed lease obligations were 484, and a half million dollars a quarter and.

Tad: We have a very diverse set of ru's suppliers, and we have contracts with over 325 different dark fiber suppliers worldwide.

[noise] comments on cash and cash flow at quarter end, our cash and cash equivalents and restricted crash with $113 80 million.

David Schaeffer: Capital expenditures, our quarterly capital expenditure was $43.6 million this quarter, and our capital expenditure was $129 million. We are continuing our network integration of the former Sprint Network and legacy Cogent Network. One Unified Network and Converting Sprint Switch sites into Cogent Data. Finance Leases and Payments. Our finance lease IRU obligations are for long-term dark fiber leases and typically have initial terms of 15 to 20 years or longer and often include multiple renewal options after the initial term.

Tad: R $38.7 million a restricted cash is directly tied to the estimated fair value of our interest rate swap arena.

Tad: Are operating cash flow results are materially impacted by the timing and amount of our payments under our transition services agreement with T mobile and the presentation of payments under the $700 million odd transient.

Tad: Service is agreement <unk>.

Payments under the I P Transit 700 million dollar agreement on a U S gap are considered cash receipts from investing activities and not classified as operating activities.

Tad: Are operating cash flow was of use of 32, and a half a million dollars for the quarter compared to $52.4 million of of us last quarter.

Tad: Operating cash flow this quarter was impacted by the billing conversion and are operating cash flow was 36 $33.6 million for full year 2023.

Tad: Our payments received under the I P Transit agreement are recorded as cash provided by investing activities.

Tad: And were 87 and a half million dollars last quarter. The same as this quarter and for the year $204.2 million was collected.

David Schaeffer: Our total IRU finance lease obligations were $484.5 million a quarter. We have a very diverse set of IRU suppliers, and we have contracts with over 325 different dark fiber suppliers. Comments on cash and cash equivalents and restricted cash At quarter end, our cash and cash equivalents and restricted cash is $113.8 million. $38.7 million of restricted cash is directly tied to the Fair Value of our interest rate swap. Our operating cash flow results are materially impacted by the timing and amount of our payments under our transition services agreement with T-Mobile and the presentation of payments under the seven. Transcription by CastingWords, Services Agreement.

Tad: Our total gross debt at par, including finance are you lease obligations was one and a half billion a year and and that that was one 4 billion or.

Tad: Total gross debt to last 12 months EBITDA as adjusted in our net debt ratios both significantly improve this quarter.

Tad: Our total gross debt to last 12 months EBIT is adjusted was 4.7 at year end and net debt was $3 75, an improvement for two three at the end of Q3.

This is compared to a gross debt and last 12 months of EBITDA as adjusted race.

Tad: A ratio of 479 at the end of Q3 and again net ratio of 423 last quarter.

Tad: Our consolidated leverage ratio is calculated under our note and dentures slightly different reduced to 367457 last quarter and are secured leverage ratio is calculated under the note adventures reduced to two four from 2.97 last quarter.

Tad: Some comments related to our swap agreement we are party to an interest rate swap agreements that modifies are fixed interest rate obligation associated with our $500 million 2000, 2006 notes to a variable interest rate obligation based upon the secured overnight financing right or sofa.

Tad: For the remaining term of those notes.

Tad: Re recorded the estimated fair value of the swap agreement each reporting period.

David Schaeffer: Payments under the IP Transit program will be $700 million. This gap is considered cash receipts from investment, not classified as operating. Our operating cash flow was a use of $32.5 million for the quarter compared to $52.4 million. Wow. Operating cash flow this quarter was impacted by the billing conversion. Operating cash flow was $33.6 million. Our payments received under the IP Transit Agreement are recorded as cash, and Activision paid $1,387,500,000 last quarter, the same as this quarter, and for the year, $212,000. Total Gross Debt at PAR, including finance. Thank you.

Tad: And incur corresponding non-cash gains and losses due to the changes in market interest rates.

Tad: Our interest expense and operating cash flow for the full year 2023 was impacted by 21 5 million of interest expense paid in May and November associated with the swap agreement.

Tad: And that was compared to $2.1 million last year.

Tad: The fair value of our swap agreement decreased by $17.7 million from last quarter to $38.7 million.

Tad: We are required to maintain restricted cash balance with the counterparty equal to the liability.

Tad: Our days sales outstanding or DSO as I mentioned earlier was significantly impacted by the billing conversion.

Tad: DSO for worldwide accounts receivable was 37 days versus 27 last quarter or Dsos after a year and have reverted back to historical norms.

Tad: Are bad that expense was $1.9 million and 7% of our revenues for the quarter that was also impacted by the billing conversion.

Tad: That that expense was eight $6 million, 0.9% of our revenues for the year.

Tad: Finally, Wanna, Thank and recognize our worldwide billing and collection team members for managing this billing conversion from legacy T mobile sprint billing platform to our cogent billing engine. This was a tremendous operational achievement and we completed this in only six months from the acquisition date all <unk>.

David Schaeffer: 1.5 billion at year-end, and net debt. $4 billion. Our total gross debt to last 12 months' EBITDA has adjusted, and our net debt ratios both significantly improved this quarter. Total gross debt to last 12 months' EBITDA as adjusted was $4.07 at year end, and Net Debt was $3.75. The Bulletproof Executive 2013....

Tad: Customers were billed worldwide from the cogent billing system starting in November of 2023.

Tad: I will now turn the call back over to Dave Hey, Thanks, Ted <unk>, a couple of the strengths of our network, our customer base and a sales force.

David Schaeffer: We continue to experience significant profit growth and our Netcentric business. We continued debate beneficiaries of increased over the top video and screaming, particularly in international markets.

David Schaeffer: This is compared to a gross debt and last..., ratio of 4.79. Network. Our consolidated leverage ratio, as calculated under our note in, is slightly different. It was reduced by 7.7 from 4.57 last quarter.

Speaker Change: A quarter of <unk>, we ended with 15.

David Schaeffer: Hundred and 58 camera or neutral data centers and 60, a cogent data centers directly connected to our network.

David Schaeffer: The Bulletproof Executive, 2013, under the note. The Bulletproof Executive, 2013. ....

David Schaeffer: That total of 1600, 20th such data centers.

David Schaeffer: More than any other carrier globally as men measure I independent third party research so.

David Schaeffer: Related to our swap agreement, we are party to an interest rate swap agreement that modifies our fixed interest rate obligation associated with our $500 million grant. 6, a variable interest rate obligation. The Bollinger Bands, LLC.

David Schaeffer: Breakfast this coverage allows us to surf the net suite truck market.

David Schaeffer: Allowing our customers to optimize their networks for reduced latency, we expect to continue to whine mislead in a market as we project, adding over an additional hundred carrier neutral data centers to our network per year for the next several years.

David Schaeffer: We also expect to continue to convert sprint facilities and to coach in data centers 20th one of these facilities are in process of being converted today. We have completed the conversion of 22 of the facilities and <unk>.

David Schaeffer: We recorded the estimated fair value of the swap agreement each reporting period and corresponding Non-Cash Gains and Losses Due to Changes in Market Interest Rates. Our interest expense and operating cash flow for the full year 2023 was impacted by $21.5 million paid in May and November associated with the swap. And that was compared $1,000,000 last year. The fair value of our swap agreement decreased by $17.7 million from last quarter to $38.7 million.

David Schaeffer: <unk> data centers.

David Schaeffer: As of today, we are selling wavelength services and 65 carrier neutral data centers.

David Schaeffer: With like splendor provisioning cycles, we can also sell wavelengths and an additional 285.

Neutral data centers or a total of 360 facilities across North America.

David Schaeffer: We are required to maintain a restricted cash balance with the counterparty. Our Day Sales Outstanding, or DSO, as I mentioned earlier, was significantly impacted by the billing conversion. Our DSO for worldwide accounts receivable was 37 days versus 27 last quarter. Our DSOs, after year, have reverted back to stores. Our bad debt expense was $1.9 million and 0.7% of our revenues for the quarter.

David Schaeffer: We are generating $3.3 million of revenue from wavelength sales and the previous quarter was 667 discrete installed wavelengths.

David Schaeffer: We have a significant funnel of wavelength waters in the pipeline.

David Schaeffer: Today, we have an a combination of.

David Schaeffer: That was also impacted by the billing conversion. Our bad debt expense was $8.6 million in 0.9 years. The Bulletproof Executive 2013, Finally, I want to thank and recognize our worldwide billing and collection team members for managing this billing conversion from the legacy T-Mobile Sprint billing platform. To our Cogent billing engine, this was a tremendous operational achievement, and we completed it in only six months from the acquisition. All customers were billed worldwide from Cogent Billing starting in November. I will now turn the call back over to... Hey, thanks, Thad.

David Schaeffer: Orders.

David Schaeffer: Signed as well as in our sales funnel of over 2300 waters.

David Schaeffer: Our network traffic continues to increase it increased 7% sequentially and 22% year over a year.

David Schaeffer: At quarter N. We directly connected to 70 988 networks.

David Schaeffer: [noise] collection of Isps telephone companies cable companies mobile operators and other carriers allow us to directly reach the vast majority of the world's broadband subscribers and mobile phone users.

David Schaeffer: <unk>, we had a sales force of 271 Netcentric reps focused on this market.

David Schaeffer: I'd like to highlight a couple of the strengths of our network, our customer base, and sales. We continue to experience significant traffic growth in our net-centric business. We continue to be beneficiaries of increased over-the-top video and streaming, particularly in international markets. At quarter's end, we ended with 15... 158 carrier-neutral data centers and 68 Cogent data centers directly connected to our network. That total of 1,626 data centers is more than any other carrier globally as measured by independent third-party research.

David Schaeffer: That was in addition to the 374 reps that we have focused on our corporate segment.

And 12 sales reps focused on our enterprise market.

David Schaeffer: The corporate trends that were saying are positive, but have still been impacted by the pandemic.

David Schaeffer: Corporate customers are continuing to integrate new applications.

David Schaeffer: Which will become part of their normal workload, including the extended use a video conferencing.

David Schaeffer: Usage requires high speed high capacity connections, both inside and outside of their promises.

David Schaeffer: The breadth of this coverage allows us to serve the net-centric market, better allowing our customers to optimize their networks for reduced latency. We expect to continue to widen this lead in the market as we project adding over an additional hundred carrier-neutral data centers to our network per year for the next several years. We also expect to continue to convert Sprint facilities into Cogent data centers. 23 of these facilities are already in the process of being converted.

David Schaeffer: Our enterprise customers continue to focus on dedicated Internet access M. P. P N surfaces inclusive of the older Mpls technology to manage their networks.

David Schaeffer: We remain focused on improving our sales force efficacy through training and man or shrink out underperforming sales reps are salesforce turnover rate get improved substantially in the quarter to 4.1 per cent.

David Schaeffer: To date, we have completed the conversion of 22 of the facilities into Cogent data centers. As of today, we are selling Wavelength services in 65 carrier-neutral data centers. With expanded provisioning cycles, we can also sell wavelengths in an additional 285. carrier Neutral Data Centers, or a total of 360 facilities across North America. We're generating $3.3 million of revenue from wavelength sales, and the previous quarter was 667 discrete installed wave. We have a significant funnel of wavelength orders in the pipeline. Today we have a combination of orders, signed, as well as in our sales funnel, of over 2,300 orders. Our network traffic continues to increase. It increased 7% sequentially and 22% year over year. At Quarter End, we were directly connected to 7,988 networks. This collection of ISPs, telephone companies, cable companies, mobile operators, and other carriers allows us to directly reach the vast majority of the world's broadband subscribers and mobile phone users.

David Schaeffer: Per rap per month for the quarter down from a peak of 8.7 <unk> per month at the height of the pandemic and much better than our average.

David Schaeffer: For a whole number of 5.6%.

David Schaeffer: We are continuing to train wraps cojuangco chunk from the sprint business.

David Schaeffer: We remain optimistic about our unique position and serving the market, particularly around our corporate footprint in central business does correct, where we have over a billion square feet, a friend to the office space and 1800 and 62 <unk>.

David Schaeffer: Multitenant.

Buildings on yeah.

David Schaeffer: We're excited about our org enterprise customer base as this provides us a new targeted market.

David Schaeffer: And our wavelength opportunity is just beginning to one fold as we continue to repurpose the sprint network and optimize it for the delivery of wavelength services.

David Schaeffer: As mentioned earlier, we conserve customers and 65 locations today, where we are delivering waves. We have another 285 locations that are unable for service with all of our provisioning windows, that's significant backlog in funnel off of <unk>.

David Schaeffer: <unk> 2300 wavelengths opportunities give.

David Schaeffer: At quarter end, we had a sales force of 271 net-centric reps focused on this market. That was in addition to the 374 reps that we had focused on our corporate segment and 12 sales reps focused on our enterprise market. The corporate trends that we're seeing are positive, but they have still been impacted by the pandemic. Our corporate customers are continuing to integrate new applications, which have become part of their normal workload, including the extended use of videoconferences. This usage requires high-speed, high-capacity connections both inside and outside of their premises. Our enterprise customers continue to focus on dedicated Internet access and VPN services, including the older MPLS technology, to manage their network.

David Schaeffer: Gives us a great deal of confidence that as we continue to modify and enhance the sprint network.

David Schaeffer: Two profession wavelengths, we will be able to convert these on a much more expeditious schedule and by year and hope to mirror the provisioning windows that we have experienced in our Netcentric transit services.

David Schaeffer: The key indicators of office activity workplace re entry and leasing activity.

David Schaeffer: Substantially below pre pandemic levels. However, many tenants are returning to their offices and greasing activity appears to be getting to improve.

David Schaeffer: We are diligently working to continue to enter great all police sprint assets and customers.

David Schaeffer: To our systems are processes and one unified now for this.

David Schaeffer: This will allow us to continue to improve our cash flow generation.

David Schaeffer: Over the next four years, we anticipate an annual savings due to multiple senator cheese.

David Schaeffer: We remain focused on improving our sales force efficacy through training and managing out underperforming sales reps. Our Salesforce turnover rate did improve substantially in the quarter to 4.1% per rep per month for the quarter, down from a peak of 8.7 reps per month at the height of the pandemic and much better than our average, historical number of 5.6 percent. We are continuing to train reps who join Cogent from the Sprint business. We remain optimistic about our unique position in serving the market, particularly around our corporate footprint and central business districts, where we have over a billion square feet of rentable office space and 1,862 multi-tenant buildings on net. We're excited about our Orange Enterprise customer base as this provides us with a new targeted market. And our wavelength opportunity is just beginning to unfold as we continue to repurpose the Sprint network and optimize it for the delivery of wavelength services.

David Schaeffer: Of over $220 million a year.

Speaker Change: With that I'd like to open to call now for questions.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.

Speaker Change: Your first question comes from Anton Renee with Cowan. Please go ahead.

Anton Renee: Hi, Thanks for giving me on the call. This is anton filling in for quite slowly instead take out I saw as Catholics came in a little bit higher at 43 million, how how should we think about capex just going forward and the outlook there. Thanks.

Speaker Change: Yeah sure Anton Thanks for the question.

Speaker Change: We outlined the Capex.

Speaker Change: We expect to spend on a going forward face it should be about $100 million a year. We also indicated at the time, we announced the acquisition off the sprint that far that that would be about a 50 million dollar one time set of expenditures.

Speaker Change: We are about 60% of the way through that extra ordinary $50 million that was the reason why our capex came in at approximately $130 million last year.

David Schaeffer: As mentioned earlier, we can serve customers in 65 locations. Today, where we are delivering waves, we have another 285 locations that are enabled for service with longer provisioning windows. That significant backlog and funnel of approximately 2,300 wavelength opportunities gives us a great deal of confidence that as we continue to modify and enhance the SPRINT network to provision wavelengths, we will be able to convert these on a much more expeditious schedule and, by year end, hope to mirror the provisioning windows that we have experienced in our net-centric transit service. The key indicators of office activity, workplace reentry, and leasing activity remain substantially below pre

Speaker Change: Thinking about the capital required to run the combined business. There are really three categories. There is the maintenance capital required to Ron.

Speaker Change: <unk>.

Speaker Change: Like a sea cogent network and its associated I P. M V. P N S, which is about $35 million a year.

Speaker Change: There was approximately $30 million a year and continuing capital expenditures on the acquire sprint network. We are continuing to spend that capital. However, we how repurposing, though to <unk> expenditures to primarily focus on.

David Schaeffer: However, many tenants are returning to their offices, and leasing activity appears to be beginning to improve. We're diligently working to continue to integrate all of these Sprint assets and customers into our systems, our processes, and one unified network. This will allow us to continue to improve our cash flow generation. Over the next three years, we anticipate an annual savings due to multiple synergies of over $220 million a year. With that, I'd like to open the call now to questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star 1 on your telephone keypad. Your first question comes from Anton Renert on Cowen. Please go ahead.

Speaker Change: The wavelength opportunity.

Speaker Change: And then third we are expecting to be able to.

Speaker Change: Additionally.

Speaker Change: Be able to use.

Speaker Change: Capital to expand the footprint, we spend about $30 million a year and footprint expansion.

Speaker Change: The final point I'd like to make is in thinking.

Speaker Change: Thinking about or a capital you really need to look at the combination of what is reported as capital as well as the principal payments on capital leases and in fact sequentially from the third quarter to the fourth quarter those principal payments on <unk>.

Speaker Change: Capital leases declined materially from $41.3 million to 18.8 1000, yet I think you should think about these as pretty good run rates going forward. So you're probably a new order of about 80 million a year for the next several years.

David Schaeffer: Hi, thanks for getting me on the call. This is Anton filling in for Greg Williams at TD Canada. I saw that CapEx came in a little bit higher at $43 million. How should we think about CapEx just going forward and the outlook there? Thanks. Yeah, sure, Anton.

Speaker Change: <unk> principal payments on capital leases and then an addition to that about $100 million in Capex.

Speaker Change: Got it thank you.

Hey, thanks.

Speaker Change: Your next question comes from Alex Lawyers with Bank of America. Please go ahead.

David Schaeffer: Thanks for the question. As we outlined, the CapEx that we expect to spend on a going forward basis should be about $100 million a year. We also indicated at the time we announced the acquisition of the Sprint Network that there would be about a $50 million one-time set of expenditures. We are about 60% of the way through that extraordinary $50 million. That was the reason why our CapEx came in at approximately $130 million last year. In thinking about the capital required to run the combined business, there are really three categories. There is the maintenance capital required to run the legacy Cogent network and its associated IP and VPN business, which is about $35 million a year. Additionally, there was approximately $30 million a year in continuing capital expenditures on the acquired Sprint Network. We are continuing to spend that capital; however, we are repurposing those expenditures to primarily focus on the wavelength opportunity. And then third, we are expecting to be able to.

Alex Lawyers: Hey, Dave Thanks, so much for taking the question maybe just first on wavelengths can we may be just talk up a little bit about the rationale of no longer stripping out wavelengths in the press release and.

Alex Lawyers: And then secondly on that just heading into 2024, I think last quarter U. You noted that we should probably be around the 20 million dollar range a corner by mid year for wavelengths can we just talk about that as we get there and then just on SG&A can we just talk about the uptick quarter over quarter and then how we should think about.

Speaker Change: <unk> going into 2024 thanks.

Speaker Change: Yeah sure. So the decision on just start including it in the press release was so we would have a more fulsome opportunity to discuss it in the prepared remarks as we did.

Speaker Change: You know, we I think it is important to be able to disclose both the revenue run rate, which was 3.3 million.

Speaker Change: Sequentially and the unit account, which was 667.

Speaker Change: We are still hampered by the number of sites that we can profession.

David Schaeffer: Additionally, be able to use capital to expand the footprint. We spend about $30 million a year on footprint expansion. The final point I'd like to make is, in thinking about our capital, you really need to look at the combination of what is reported as capital as well as the principal payments on capital leases. And, in fact, sequentially from the third quarter to the fourth quarter, those principal payments on capital leases declined materially from $41.3 million to $18.8 million.

Speaker Change: Backlog has more than doubled sequentially and a quarter. So on the third quarter earnings call. Our backlog was approximately a thousand.

Speaker Change: Waters and the sales final and provisioning funnel that number is up to approximately 2300, we actually anticipate based on.

Speaker Change: Information from the sales force in our conversations with customers that we're going to continue to see an acceleration and the order or fall you. We are frustrated by the amount of time, it's taken to wave enable sites.

David Schaeffer: I think you should think about these as pretty good run rates going forward. So, you know, probably in the order of about 80 million a year for the next several years on principal payments on capital leases. And then, on top of that, about 100 million in capital. Got it.

Speaker Change: We are still confident by year end that we will be able to have 800 sites that can provision waves with a kind of two week average provisioning window. We are definitely not fair today as a result, we will.

David Schaeffer: Thank you. Hey, thanks. Your next question comes from Alex Waters with Bank of America. Please go ahead.

David Schaeffer: Hey Dave, thanks so much for taking the question. Maybe just first on wavelengths, can we maybe just talk a little bit about the rationale for no longer stripping out wavelengths in the press release? And then secondly, on that, just heading into 2024, I think last quarter you noted that we should probably be around the $20 million range a quarter by mid-year for wavelengths. Can we just talk about that ramp as we get there?

Speaker Change: Probably not be on a run rate by mid year of 20 million of installed business. I think we will have a final that will demonstrate that.

Speaker Change: But the sheer number of sites that need to be touched and the number of steps that have to be done to convert the former sprint voice network into a wavelength optimize network.

David Schaeffer: And then just on SG&A, can we just talk about the uptick quarter over quarter and then what we should think about SG&A going into 2024? Thanks. Yeah, sure. So the decision to just not include it in the press release was so we would have a more fulsome opportunity to discuss it in the prepared remarks, as we did. You know, we think it is important to be able to disclose both the revenue run rate, which was 3.3 million up sequentially, and the unit count, which was 667. We are still hampered by the number of sites that we can provision. The backlog has more than doubled sequentially in the quarter.

Speaker Change: Is a very daunting task, we are progressing well they're over a thousand of our 2000 employees who are almost completely full time focused on this effort.

Speaker Change: We absolutely will meet the urine targets, but I think by mid year. The final will demonstrate that run rate, but it probably will not be proficient due to the extended provisioning windows.

Speaker Change: 285 sites and I'll, let tad jump into the ashtray on a numbers sure. So I think.

Speaker Change: The best way to look at Mark cost run rate is to look at the combined Cogs in SG&A together, we had some classification adjustments we needed to make in the quarter and for the year result of that is for a period of time T. T mobile was paying our bills for us. So we were get.

David Schaeffer: So on the third quarter earnings call, our backlog was approximately 1,000 orders in the sales funnel and provisioning funnel. Now that number is up to approximately 2,300. We actually anticipate, based on, you know, information from the sales force and our conversations with customers, that we're going to continue to see an acceleration in the order volume. We are frustrated by the amount of time it's taken to wave enable sites. You know, we are still confident by year-end that we will be able to have 800 sites that can provision waves with a kind of two-week average provisioning window. But we are definitely not there today.

Speaker Change: That information and having to classify it accordingly, what came in.

Speaker Change: The takeaway is for the third quarter, the combined cost of goods sold in SG&A rate was about $231 million there.

Speaker Change: There was a benefit in that quarter of about eight and a half million dollars for the change in accounting for a capital lease so adjusted for that it's about $240 million for the quarter the.

Speaker Change: The combined for this quarter was about $249 million now we had a couple of increases that are not going to reoccur. Our USAF as we mentioned on the call increased by $6 million, we had a bad debt that we needed to record since it's based on the relationship of cash receipts to bill.

David Schaeffer: As a result, we will probably not be on a run rate by mid-year of $20 million in installs. I think we will have a funnel that will demonstrate that, but the sheer number of sites that need to be touched and the number of steps that have to be done to convert the former Sprint Voice Network into a Wavelength Optimized Network is a very daunting task. We are progressing well. There are over a thousand of our 2,000 employees who are almost completely full-time focused on this effort. We absolutely will meet the year-end targets, but I think by mid-year, the funnel will demonstrate that run rate, but it probably will not be provisioned due to these extended provisioning windows in those 285 sites. And I'll let Thad jump into SG&A.

Speaker Change: <unk> and because of the billing delay that one up and that was about 2 million and then we have the year and audit adjustments and also Ah bonuses to employees combined of about $2 million, So you're comparing and adjusted $240 million combined Cogs in SG&A for Q3, two about 200.

Speaker Change: 39 million this quarter. So it did slightly improved I know, that's a little complex and I think the other way to look at SG&A on a going forward basis is about 27% of revenue.

Speaker Change: Hopefully that helps.

Speaker Change: Thank you very much.

Speaker Change: Okay.

Speaker Change: Your next question comes from Walter <unk> with Lights Adventuress. Please go ahead.

Walter: Thanks for the details I was that was going to be my.

Walter: My question and I assume that there was some reversal of reversals, but U S F and revenue as well alright. So at the expense goes up and that's correct that is correct.

Walter: 5.8 million sequentially.

Speaker Change: So let's look at it a different way [laughter], let's take a 110.

Speaker Change: Reported minus the 87 and a half I guess the $23 million.

David Schaeffer: Sure, I think the best way to look at our cost run rate is to look at the combined COGS and SG&A together. We had some classification adjustments we needed to make in the quarter and for the year. The result of that is for a period of time. T-Mobile was paying our bills for us, so we were getting that information and having to classify it according to what came in. The takeaway is, for the third quarter, the combined cost of goods sold and SG&A... was about $231 million. There was a benefit in that quarter of about $8.5 million for the change in accounting for accounts receivable.

Speaker Change: Which was down 50% sequentially.

Speaker Change: You know.

Speaker Change: Do whatever comparisons you want year over here.

Speaker Change:

Speaker Change: We can't.

Basically they said that's the new run right, maybe less 240 versus 240 liked less $9 million.

Speaker Change: Run rates 30 millions of EBITA.

Speaker Change: The legacy business when you exclude the TSA payments, which we all know I'll have a finite apps.

Speaker Change: So what you're arithmetic bet Ford in this case, because what you're doing is counting the expenses that way acquired in acquiring the sprint enterprise space, but then excluding from.

Speaker Change: That the subsidy payments that T mobile contractually agreed to while you are correct. They are finite show or those expenses and we are achieving substantial improvements by reducing head count by exiting.

David Schaeffer: So adjusted for that, it's about $240 million. The combined for this quarter is about $249. We had a couple of increases that are not going to reoccur. For example, our USF, as we mentioned on the call, increased by 6 million. We had a bad debt that we needed to record, since it's based on the relationship of cash receipts to billing, and because of the billing delay, that... And that was about two million. And then we have year-end audit adjustments and also a bonus. The Bulletproof Executive 2013, So you're comparing and adjusting 240 million combined COGs and SGBs to about 239 million this quarter. So it did slightly improve.

Speaker Change: An economic agreements and by moving customers from off net to on that as we had described it would take US three years to do that and we would achieve approximately 220 million N annualised.

Speaker Change: <unk> savings, we actually are running ahead of that.

Speaker Change: T mobile payments.

And there are pacing.

Speaker Change: <unk> based on negotiations between the parties and the contractual schedules that were expenses that we knew we would accept but maybe could not accept immediately so I actually think to calculate.

David Schaeffer: I know that's a little complex, and I think the other way to look at SG&A on a going forward basis is about 27%. The Bulletproof Executive 2013, Thank you very much. Your next question comes from Walter Piecyk with Light Shed Ventures. Please go ahead.

Speaker Change: EBITDA you have to use both the expenses.

Speaker Change: And.

Speaker Change: The money's coming in.

Speaker Change: That's not true flawed at all [laughter].

Speaker Change: I fully appreciate [laughter] the synergies that won't be achieved in three years, but those that's three years from now you don't get the synergies today.

David Schaeffer: Thanks for the detail. That was going to be my question. I assume that there was some reversal of reversals, but the USF gave revenue as well, right? So the expense goes up and down. That's correct.

Speaker Change: And we're trying to figure out obviously, a baseline for your EBIDTA and then you will achieve synergies, which will give you full credit for over three years and just say that.

David Schaeffer: 5.8 million. So let's look at this a different way. Let's take the 110 reported, minus the 87 and a half. That gets you to 23 million, which is down 50%. Quench.

Speaker Change: You're ahead of schedule and the 220.

Speaker Change: The baseline EBITDA going 30, that's not necessarily a positive right you don't want it [laughter] you don't Wanna say, we've got more synergies ahead of us to achieve off of off of that baseline as opposed to less.

David Schaeffer: You know, or whatever comparisons you want, um Subs by www.zeoranger.co.uk. You basically just said that's the new run rate, maybe less $240,000 versus $240,000, like less $9 million. So the run rate's 30 million a day for the legacy business. When you exclude the TSA payments, which we all know have a finite amount, So Walt, your arithmetic is a bit flawed in this case because what you're doing is counting the expenses that we acquired in acquiring the Sprint Enterprise Base but then excluding from that the subsidy payments that T-Mobile contractually agreed to. While you are correct, they are finite, so are those expenses, and we are achieving substantial improvements by reducing As we described, it would take us three years to do that, and we would achieve approximately $220 million in annualized savings. But we are actually running ahead of that.

Speaker Change: So I don't see how my math is flawed I fully understand how synergies are achieved over time I'm just saying.

Speaker Change: Baseline EBITDA today.

Speaker Change: So first of all we have begun achieving those synergies today many of those synergies have contractual counterparty applications that roll off between now and the end of 2026, as we have been very clear and <unk> and <unk>.

Speaker Change: And what do you think that everyone's estimates, but that has nothing to do with today's EBITA.

Speaker Change: But then everyone everyone know your living expenses falloff.

Speaker Change: Right to cover those expenses, we have a stream of payments that are contractually obligated to be pay by T mobile to us.

Speaker Change: And looking at EBITDA Hugh need to include those T mobile expenses you know.

Speaker Change: <unk> pointed out for example, the $16.2 million in severance reimbursement that we got in a quarter. It's not in your EBITDA number, but it was a cash payment to us from T mobile.

Speaker Change: You know, we're trying to be as.

Speaker Change: Transparent and granular as we can possibly be.

David Schaeffer: The T-Mobile payment and its pacing were based on negotiations between the parties and the contractual schedules that were expenses that we knew we would exit but maybe could not exit immediately. Uh, so I actually think to calculate EBITDA, you have to use both the expenses and the money's coming in, which... No, that's not true. That's not flawed at all. Because you're...

Speaker Change: But the <unk> I think that I think it would be helpful them, if you're trying to be transparent to put all of this information in the press release, rather than having people feverishly right down the data on I know you said earlier you. Just said you want to have a robust prepared comment, but that's not helpful. In the spirit of transparency as opposed to.

Speaker Change: Putting the numbers in print in the press release, when the quarters released.

Speaker Change: I think we're pretty granular and the level of detail and can and that's what I heard comments.

Speaker Change: And the press release, Walter compared to other public companies you know I'm going to differ with you I think we are very granule are the only comment that I made is have one of the opportunity to describe the wavelength farnell and our frustration.

David Schaeffer: I fully appreciate the synergies that will be achieved in three years, but that's three years from now. You don't get those synergies today. And we're trying to figure out, obviously, a baseline for your EBITDA, and then you will achieve synergies, which we'll give you full credit for over three years. And to say that you're ahead of schedule on the 220, but the baseline EBITDA is only 30, that's not necessarily a positive, right? You'd want to say we've got more synergies ahead of us to achieve off of that baseline as opposed to less. So, I don't see how my math is flawed. I fully understand how synergies are achieved over time.

Speaker Change: And that we're only suddenly wavelengths of 65 locations today, while we have orders and hundreds of other locations have we are rapidly enabling to be able to support those wavelengths, but again to your EBITDA number.

Speaker Change: And yeah, we can take this off on I'm happy to do a follow up with you I think you can read the K you can look at the detail we're about an equation horse palm read at all we read at all.

Speaker Change: <unk> let.

Speaker Change: Let me last question day, but let's let's focus on revenue corporate revenue on the positive side, although again, there's numbers that you don't get like been spreading encore it.

David Schaeffer: I'm just saying that this is the baseline EBITDA today. So, first of all, we have begun achieving those synergies to date. Many of those synergies have contractual counterparty obligations that roll off between now and the end of 2026, as we have been very clear in explaining. Which is in our estimates, which is in everyone's estimates, but that has nothing to do with today's EBITDA. But everyone knows that those expenses fall off.

Speaker Change: It looks like it at least is not declining anymore can you give us a I can't even stripped through all these numbers since there's stuff that's not reported but.

Speaker Change: What is this what do you think the sequential growth is and your legacy corporate revenue you know excluding me.

Speaker Change: Everything else written numbers that are provided in the press release for.

Speaker Change: For the quarter revenue 126.6.

Speaker Change: Alright, but that includes 20.

Speaker Change: To access the numbers [laughter].

Speaker Change: Hold on let's finish wall, let me put it.

David Schaeffer: Right, but to cover those expenses, we have a stream of payments that are contractually obligated to be paid by T-Mobile to us. In looking at EBITDA, you need to include those T-Mobile expenses. You know, Thad pointed out, for example, the $16.2 million in severance reimbursement that we got in the quarter is not in your EBITDA number, but it was a cash payment to us from T-Mobile. You know, we're trying to be as... transparent and granular as we can possibly be.

Speaker Change: Last quarter 125, that's an increase of 6.2 in that increase is 5.8 million of USAF. So there was a net increase of about 300000 sequentially. If you adjust for you as well and a reality.

Speaker Change: Also in that number also isn't that number is sprint corporate nine corps, which is not broken out in that number can go up and down.

Speaker Change: So the total non core total non-core declined from 12 to shop declined by five and a half million.

Speaker Change: It actually declined by more than that as we pointed out because when we convert a customers from the sprint billing platform that T. Mobile was operating ours. There was another 1.4 million of revenue that really was not cool.

David Schaeffer: But I think it would be helpful then, if you're trying to be transparent, to put all of this information in the press release. Rather than having people feverishly write down the data on, I know you said earlier, you just said you want to have a robust, prepared comment, but that's not helpful in the sphere of transparency, as opposed to putting the numbers in print in the press release when the quarter's released. I think we're pretty granular in the level of detail and consistency in the press release, Walt. You know, compared to other public companies, I'm going to disagree with you. I think we are very granular.

Speaker Change: Sure, but not designated what product codes that would represent non-core under T. Mobile spelling show that the five and a half million dollars sequential decline in encore is actually understated <unk> milian so at the end.

Speaker Change: Hey, we're not moving stuff around what we're trying to get everything into a consistent way she'll quarter over quarter. You can look at the no of course not gonna go back up it's going to continue to go down and the fact that it went from 12 and a half to seven and a half with a 1.4.

David Schaeffer: The only comment that I made was I wanted the opportunity to describe the wavelength funnel and our frustration in that we're only selling wavelengths in 65 locations today, while we have orders in hundreds of other locations that we are rapidly enabling to be able to support those wavelengths. But again, to your EBITDA number, And, you know, we can take this off on. I'm happy to do a follow-up with you. I think you can read the K, you can look at the detail. We're about as granular as possible. We read it all. We read it all the time.

Speaker Change: 4 million dollar Ad pack.

Speaker Change: Is to me very.

Speaker Change: Positive in terms of I didn't think it was it I'm just trying to keep that number cause I was saying that it looks like you inverted positive this quarter I just wanted to affirm that because of the multiple moving pieces and getting to what was a very predictable number prior to all of this mess with sprint. So I assume that that's positive male which is.

Speaker Change: And I'm, assuming you're again, so I assume you're expecting that to continue positive going forward and if you Wanna talk about you know the dynamics of the corporate market.

Speaker Change: Please do.

Well you know you are correct or corporate business net of U S have Kate grow sequentially Yep.

David Schaeffer: And let me last question Dave, let's focus on revenue, corporate revenue on the positive side. Although, again, there's numbers that we don't get like the Sprint non-core. It looks like it at least is not declining anymore.

Speaker Change: Continuing to grow.

Speaker Change: A pace at that growth is not at pre pandemic levels, but we are seeing sequential improvements.

Speaker Change: Perfect. Thank you very much.

Speaker Change: Hey, Thanks wall.

David Schaeffer: Can you give us a? I can't even sort through all these numbers since there's stuff that's not reported, but, What do you think the sequential growth is in your legacy corporate revenue, excluding the excise taxes and everything else? that are provided in the press, for the quarter, corporate revenue, 126.6. Right, but that includes 20 million with excise taxes. Hold on, let Ted finish, Walt.

Speaker Change: Thank you all.

Speaker Change: Your next question comes from next to help out with Moss that Nathan <unk>. Please go ahead.

Nathan: Alright, Hey, corny guys number of questions I, I guess, yeah, I I'm I'm still a little confused on the on the cost and you <unk> trajectory.

Nathan: I got you know maybe they ask you a slightly different way last quarter, your EBITDA, including the T mobile payments.

Nathan: Excluding integration costs was $131 million this quarter was 110 or 111.

Nathan: So call it a $20 million sequential decline in EBITDA and <unk> I know you called out the higher bed that for a couple of million Bucks <unk> bonus for a couple of million Bucks in queue for I guess anything else worth calling out to help explain that 20 million dollar delta.

David Schaeffer: Last quarter, 120.5, that's an increase of 6.2. In that increase is 5.8 million of USF, so there was a net increase of about $300,000. Subsequently, if you adjust for USF.

Speaker Change: Yeah last quarter, we have the benefit of the lease accounting, which what I said was $8.4 million. So that that's a different to that and then also you know the USAF impact.

David Schaeffer: Total non-core revenue, total non-core revenue declined from 12 to 7, it declined by five and a half million. It actually declined by more than that, as we pointed out, because when we converted customers from the Sprint billing platform that T-Mobile was operating to ours, there was another $1.4 million of revenue that really was non-core but not designated with product codes that would represent non-core under T-Mobile's billing. So the $5.5 million sequential decline in non-core is actually understated by $1.4 million. So at the end of the day, we're not moving stuff around, Walt. We're trying to get everything in a consistent way, so quarter over quarter, you can look at the non-core. It's not going to go back up.

Speaker Change: Was five and then the bad debt, though then you've got your in Baghdad audit bonus accruals that thing that those all combined are close to $5 million.

Speaker Change: Okay, just I I could see maybe I'll schedule that onto it.

Speaker Change: Really the costs comparable it's about 240 versus 239 and.

Speaker Change: And that's causing SG&A combined now revenue did declined.

Speaker Change: That's really the pure as adjusted.

Speaker Change: Yeah dot $3 million less rack payments for the same 87, and a half 87 and a half.

Speaker Change: So okay SG&A run right forget three classes and other things in your end adjustments should be about 27% of revenues for a modelling purpose going forward.

Speaker Change: She just loves the 30 S S.

Speaker Change: For this quarter.

Speaker Change: Oh, Okay, just to clarify two things so the U S F for five G called out again.

Speaker Change: Isn't U S up just a password with no profit impact.

Speaker Change: Yeah. It is but when you're reconciling those lines you need to included I agree on the EBITDA perspective, it's awash.

Speaker Change: Okay, and then the the least adjustment again I I thought that.

Speaker Change: <unk> you had the 12 or 13 million dollar adjustment, where at least went from opex to to a finance lease.

David Schaeffer: It's going to continue to go down. The fact that it went from $12.5 to $7.5 with a $1.4 million ad back is, to me, very, positive in terms of I didn't say it wasn't I'm just trying to get to that number because I was saying that it looks like you inverted positive this quarter I just wanted to affirm that because of these multiple moving pieces and getting to what was a very predictable number prior to all of this mess with sprint so I assume that that's positive now which is an inversion and I assume that you're so I assume you're expecting that to continue positive going forward um and if you want to talk about you know the dynamics of the corporate market you know please do, Well, you know, you are correct, our corporate business, net of USF, did grow sequential. It is continuing to grow. The pace at that growth is not at pre-pandemic levels, but we are seeing sequential improvements. Perfect. Thank you very much.

Speaker Change: <unk>, so I thought that would that would rickard in Q3 and Q4 consistently.

Speaker Change: No because of the previous expenses were reversed when the accounting was changed.

Speaker Change: Both.

Speaker Change: Net does continue going forward, but you.

Speaker Change: Kind of the payments this quarter his interest and principal.

Speaker Change: And when we recorded the lease and the third quarter you recorded the balance and then you had to reverse the prior amounts that have been charge from may through.

Speaker Change: September 30th so it was really.

Speaker Change: Five months.

Speaker Change: <unk> versus.

Speaker Change: The run right, okay, okay that that ladder nuance I hadn't picked up on alright, well. Thanks for thanks for clarifying all that maybe.

Speaker Change: If I can ask two two other questions may be sure.

Speaker Change: You know first with the with the sprint I P V four addresses.

Speaker Change: What's the plan there you know do you seldom delisa hang on to them for the business and you know what might the financial impact the overtime.

Speaker Change: <unk>. So there is a fair amount of complexity here. So when we acquired P. S. I that we got a large number of address as previous to spread and we had some organic cogent and some from other app with sessions, but free sprint we had.

David Schaeffer: Thanks, Walt. Thank you, Walt. Your next question comes from Nick DelBow with Moffett Nathanson. Please go ahead. All right. Hey, good morning, guys.

David Schaeffer: A number of questions. I guess, yeah, I'm still a little confused on the cost and EBITDA trajectory. Again, you know, maybe ask it in a slightly different way.

Speaker Change: Approximately 28 million addresses that had zero valuable on our balance sheet.

David Schaeffer: Last quarter, your EBITDA, including the T-Mobile payments and excluding integration costs, was $131 million; this quarter, it was $110 or $111. So call it a $20 million sequential decline in EBITDA. And Thad, I know you called out the higher bad debt for a couple million bucks, year-end audit, and bonus for a couple million bucks in Q4. I guess anything else worth calling out to help explain that $20 million delta? Yeah, last quarter, we had the benefit of the lease accounting, which I said was 8.5% of a million dollars. That, that's different, and then also.

Speaker Change: They had real economic value those addresses are traded everyday and public exchange shows for about.

Speaker Change: $55 an address you can go online and we'll get that quote says we talk [laughter].

Speaker Change:

Speaker Change: When we did the acquisition of P. Assign at West Valley that had crashed this customer we're still available for Fray and second the accounting rules were different and we've recorded things as negative goodwill, which is no longer how you record again <unk>.

Now recorded as Oregon purchase gain as we did in sponge cash.

Speaker Change: In the case of sprint, we acquired 9.9 million incremental addresses spring or total to about 37.8 million addresses that we oh.

David Schaeffer: USF, which was five, and then the bad debt. So those were- Then you've got year-end. That, that, audit, bonus accruals, that thing, those all combined are... Okay, just, maybe just drill down on two of them.

Speaker Change:

Speaker Change: When that happened we.

Speaker Change: We actually initially.

Speaker Change: <unk> kind of focus on down.

Speaker Change: And because we had been Shannon rating leasing revenue from addresses since 2015 included in our corporate and that sound correct numbers, it's primarily netcentric, it's roughly 85% that San track.

David Schaeffer: Well, you're looking at, really, the costs comparable. It's about 240 versus 230, and that's Cogs and... Now revenue did decline, so that's really just the pure as it just is. Yeah, three million less because the cash payments were the same. So the SG&A run rate, forget reclasses and other things and year-end adjustments, should be about 27% of revenue. Modeling. Okay, just to...

Speaker Change: 'bout, almost 13% corporate and a couple of percent and enterprise.

Speaker Change: We trinary $40 million a year out of leasing Douglas numbers out we continue to reach out incremental inventory today, we are Li Shang about 11.4 million of the 37.8 million.

David Schaeffer: Okay, just to clarify two things. So the USF for five you called out, again, isn't USF just a password with no profit impact? Yeah, it is.

David Schaeffer: But when you're reconciling those lines, you need to include it. I agree on the EBITDA perspective. Okay, and then the lease adjustment, again, thinking of, I thought that, Maybe I'm thinking something different. You had the $12 or $13 million adjustment where the lease went from OPEX to a finance lease that bumped up even more dollars. So I thought that would have occurred in Q3 and Q4 consistently. No, because the previous expenses were reversed when the accounting... Oh, okay. So it's both...

Speaker Change: <unk> addresses that we currently have our.

Speaker Change: Our average lease price per address is about 30 cents per address per month.

Speaker Change: We were somewhat unique in the market.

Speaker Change: And having an inventory and being a service provider unleashing these had crashes.

Speaker Change: We didn't focus a whole lot of attention <unk> was just included in all of our numbers didn't even break it out as a separate product cause it's just a.

Speaker Change: Den now we are going to break out the unit account and the number separately and part of the change occurred about a year ago, when Amazon, which had been a serial buyer of addresses began to compete with cogent.

David Schaeffer: It's a huge net. Yeah. It does continue going forward, but the payments... But the payments... You've got to...

David Schaeffer: The payments this quarter hit interest and... and when we recorded the lease in the third quarter. The Bulletproof Executive 2013, from May through... September 30th, so it was really five. Reversal, versa.

And Lisa Trashes Amazon leases, it's addresses on.

Speaker Change: On an hour a quick base us through AWS, but nobody really <unk> by the hour and in fact, they generate about $3.60 an address a month or 12 times coaches right. So based on kind of know a two party leasing market.

David Schaeffer: Thanks for clarifying all that. You know, first, with the Sprint IPv4 addresses: what's the plan there? Do you sell them?

Speaker Change: And a transaction market.

David Schaeffer: Do you lease them? Do you hang on to them for the business? And, you know, what might the financial impact be over time? Okay, so there's a fair amount of complexity here. So, when we acquired PSI then, we got a large number of addresses. Previous to Sprint, and we had some organic Cogent and some from other acquisitions, but pre-Sprint. We had approximately 28 million addresses that had zero value on our balance sheet, yet they had real economic value.

Speaker Change: The accounting firm that did the appraisal came back and said you guys have to recognize a bigger bargain purchase gain to account for these addresses that's why we picked up another 254 million. The final point to that says we are going to continue.

Speaker Change: You to evaluate opportunities to either sell addresses which way up not Don Yep.

Speaker Change: Or potentially securitize, the cash flows from those addresses or generating about 40 million <unk> today awful far address leasing and that continues to grow.

David Schaeffer: Those addresses are traded every day in public exchanges for about $55 an address; you can go online and look at the quotes as we talk. When we did the acquisition of PSINET, there was no value to addresses because they were still available for free. And second, the accounting rules were different, and we recorded things as negative goodwill, which is no longer how you record a gain. You now record it as a bargain purchase gain, as we did in Sprint's case. In the case of Sprint, we acquired 9.9 million incremental addresses, bringing our total to about 37.8 million addresses that we own. When that happens, we actually initially initially. We're not going to focus on them now.

Speaker Change: <unk>.

Speaker Change: We'll continue real evaluate us better to lease or should we shell.

Speaker Change: Is there and just want to.

Speaker Change: Go ahead, Oh, sorry go ahead go ahead to add gods.

Speaker Change: Just summarize quickly on the inventory and the accounting just I know Dave covered it but so we have 38 million addresses in total in.

Speaker Change: In 2000 to $28 million were acquired with T assignment, we paid only $12 million in cash to Pee assignment back in those days. The accounting was you record only the assets equivalent to your purchase price. So we recorded 12 million of intangibles basically the rules now.

Speaker Change: Now are you record the fair value of all assets acquired with sprint, we acquired $10 million 9.9 additional addresses that is an acquired assets that needs to be valued we had the big.

David Schaeffer: And because we have been generating leasing revenue from addresses since 2015, included in our corporate and net centric numbers, it's primarily net centric, it's roughly 85% net centric, about almost 13% corporate, and a couple percent enterprise. We generate $40 million a year from leasing those numbers out. We continue to lease out incremental inventory. Today, we are leasing about 11.4 million of the 37.8 million addresses that we currently have. Our average lease price per address is about $0.30 per address per month. We were somewhat unique in the market in having an inventory and being a service provider and leasing these addresses. We didn't focus a whole lot of attention on it. It was just included in all of our calculations. They didn't even break it out as a separate product. It was just baked in.

Speaker Change: Big for accounting firm include in their appraisal how much. These addresses are worse and it came out with a net total per address value of $46 per address so they are reflected on our balance sheet and our 10-K, which we will file today at $458 million.

Speaker Change: In total the.

Speaker Change: Net gain for the quarter includes the $250 million.

Speaker Change: Increase the bargain purchase includes that 458 million new address.

Speaker Change: The adjustment for the income tax impact of that so deferred taxes and then we have some other adjustments that we recorded so I hope that's a good summary.

Speaker Change: Where we are as Dave mentioned, we are leasing $11.4 million of the addresses and generating about 35 million.

Speaker Change: Lease revenue currently per year, there's no costs associated with this revenue stream.

Speaker Change: And they are an asset that's partly on our balance sheet and partly not.

Speaker Change: Okay.

Speaker Change: A lot of great detail. Thank you guys I guess, just one one quick clarification here about how many do you think you need to run the business. So in other words, how many are surplus that you could sell or lease outer securitize. If you if you wanted to.

David Schaeffer: Now we are going to break out the unit count and the number separately. And part of the change occurred about a year ago when Amazon, which had been a serial buyer of addresses, began to compete with Cogent's and Lee's addresses. Amazon leases its addresses on an hourly basis through AWS, but nobody really leases them by the hour.

Speaker Change: Virtually none probably.

Speaker Change: Hundred thousand you can run the network you would use some two number your own network devices. You know today, we have about 60000 network devices in the network and customers can bring around between 2004.

David Schaeffer: And in fact, they generate about $3.60 an address a month for 12 times Cogent's rate. So based on kind of now a two-party leasing market and a transaction market. The accounting firm that did the appraisal came back and said, "You guys have to recognize a bigger bargain purchase gain to account for these addresses."

Speaker Change: 15, and mid year 2022, we actually would only lease addresses to people that bought bandwidth from us.

Speaker Change: Anticipating amazon's entry into the market, we relax those rules and we saw a significant spike up and leasing activity <unk> crushes to people that don't buy bandwidth as well as those who do continue to buy bandwidth we could sell those <unk>.

David Schaeffer: That's why we picked up another $254 million. The final point on this is that we are going to continue to evaluate opportunities to either sell addresses, which we have not done yet, or potentially securitize the cash flows from those addresses. We're generating about 40 million in EBITDA today off of our address leasing, and that continues to grow. We'll continue to evaluate whether it is better to lease or should we sell. If there is one, go ahead. Oh, sorry. Go ahead, Thad.

Speaker Change: <unk> above that roughly 100000 or run the company. Many other service providers have very limited pools of addresses.

Speaker Change: Okay. Okay. Thanks, Dave and then sorry, the last question I wanted to hit on Yeah, and sorry for this being so long I I guess I I'm not sure. What you can say or would want to say about the peering dispute with N T T, but I'm I'm interested in what you can share and whether you think it's going to have any customer revenue in packs incoming quarters.

Thaddeus G. Weed: Just summarize quickly on the inventory and the accounting, which I know they've covered. So we have 38 million addresses in total. In 2002, $28 million were acquired with PSI Net. We paid only $12 million in cash to PSI.

David Schaeffer: Happy to talk about it it it was actually something initiated by cogent.

David Schaeffer: So we have had a peering relationship with N T K since 2001.

Thaddeus G. Weed: Back in those days, the accounting was, you record only the assets equivalent to your purchase. So we recorded 12 million of them. The rules now are, you record the fair value of all assets acquired. With Sprint, we acquired $10,000,009.9. That is an acquired asset that needs to be valued. We have the.

David Schaeffer: They are the four core just network in the world.

David Schaeffer: As we continue to gain market share in Asia.

David Schaeffer: N T T refuse to give us connectivity in Asia, we remain connected in the U S and in Europe.

Thaddeus G. Weed: Big Four Accounting Firm, including their appraisal of how much these addresses are worth, and it came out with a net total per address value of $46 per address. So they are reflected on our balance sheet in our 10K, which we will file today, at $458 million in total. The net gain for the quarter includes the $250 million that we've..., increased the bargain purchase price includes that $458 million new address. The adjustment for the income tax impact of that, so deferred taxes, and then we had some other adjustments.

David Schaeffer: We had multiple conversations with N T T technical and management individuals and they.

David Schaeffer: Basically said they did not welcome <unk> entry into the Asian market and refuse to add porch in Asia as our peering required.

David Schaeffer: In retaliation after multiple attempts to get them to connect even outside of the home market of Japan, We're willing to take Singapore, Australia, you have Taipei, Hong Kong, a number of other Asian locations being so.

Thaddeus G. Weed: I hope that's a good summary. Where we are, as Dave mentioned, we are leasing 11.4 million addresses and generating about 35 million in lease revenue currently per year. There are no costs associated with this revenue stream.

David Schaeffer: Sensitive to the protection of their home market. They continue to refuse so as a result, we keep peer them, but only in Europe. They do have a European deafness at.

David Schaeffer: And they are an asset that's partly on our balance sheet and partly not. Okay, a lot of great detail, thank you guys. I guess just one quick clarification here: about how many do you think you need to run the business? So in other words, how many are surplus that you could sell or lease out or securitize if you wanted to? Virtually none.

David Schaeffer: And they were forcing Asian traffic to trombone to the U S. Basically they're still connectivity that was just customers had to go from Japan.

Speaker Change: I am back.

Speaker Change: We kind of implement a similar strategy in Europe, they're European customers have to come to D C or New York and back to Europe, I know it sounds almost childish and it's a tit for tat, but unfortunately, there are still bad.

David Schaeffer: Probably 100,000 you could run the network. You would use some to number your own network devices. You know, today we have about 60,000 network devices in the network, and customers can bring their own. Between 2015 and mid-year 2022, we actually would only lease addresses to people that bought bandwidth from us, anticipating Amazon's entry into the market. We relaxed those rules, and we saw a significant spike in leasing activity by leasing addresses to people that don't buy bandwidth as well as those who do continue to buy bandwidth. We could sell those addresses above that roughly 100,000 or run the company. Many other service providers have very limited pools of addresses. Okay, okay. Thanks, Dave. And then the last question I wanted to hit on, and sorry for this being so long.

Speaker Change: Actors in the World, who don't embrace net neutrality.

Speaker Change: I'll expand one point further.

Speaker Change: We have a similar situation with Deutsche Telekom, which has been Paul Black and they continue to expand capacity in Asia, but refused to expand in Europe. So that will expand connectivity in the U S or.

Speaker Change: Asia, but they want to protect their German market. So while they may meet the four corners of a net neutrality order in your country. They are absolutely violating the spirit and it's actually somewhat encouraging that the F. C. C may fight.

Speaker Change: Finally, yep codified us in a way to stop people from playing these games.

David Schaeffer: I guess I'm not sure what you can say or would want to say about the peering dispute with NTT. But I'm interested in what you can share and whether you think it's going to have any customer revenue impacts in the coming quarter. Happy to talk about it. It was actually something initiated by Cogent.

Speaker Change: Okay.

Speaker Change: I'll I'll I'll stop there. Thank you Dave Thank you <unk>.

Speaker Change: Your next question comes from Tim Horton with Oppenheimer. Please go ahead.

Timothy Horan: Oh, Thanks, guys. So device if AWS is 12 times the price I mean, why wouldn't you increase your prices like.

Timothy Horan: Next I mean.

David Schaeffer: So, we have had a peering relationship with NTT since... 2001. They are the fourth largest network in the world. However, as we continue to gain market share in Asia, NTT refused to give us connectivity in Asia.

Timothy Horan: I'm just gonna go do you think you would lose those customers are and you know if I do the math if you have a six X price increase that's obviously $40 million goes to 240 of free cash flow, what's preventing that thanks.

Speaker Change: Yeah. So first of all we didn't have a W. S. S. A benchmark what the pricing umbrella in 2015, one we started releasing addresses and.

David Schaeffer: We remain connected in the U.S. and in Europe. We had multiple conversations with NTT technical and management individuals, and they basically said they did not welcome Cogent's entry into the Asian market and refused to add ports in Asia as our peering required. In retaliation, after multiple attempts to get them to connect, even outside of their home market of Japan, we're willing to take Singapore, Australia, you know, Taipei, Hong Kong, a number of other Asian locations. But being sensitive to the protection of their home market, they continue to refuse. So as a result, we de-peered them, but only in Europe.

Speaker Change: Yeah, we have never changed our pricing on addresses while our band what pricing has declined at 23% a year during that same period.

Speaker Change: Second point is you are absolutely correct in your statement that customers probably are pretty sticky the expenses small and the labor involved and rain numbering is pretty significant.

Speaker Change: Amazon doesn't disclose it's numbers from this particular product shall I can't tell exactly how successful. They are what I do know is that they are inventory of addresses which had been acquired they were not to work an Amazon is about comparable in size.

David Schaeffer: They do have a European business, and they were forcing Asian traffic to trombone to the US. Basically, there's still connectivity. It was just customers had to go from Japan to LA and back. We kind of implemented a similar strategy in Europe.

Speaker Change: <unk> actually both Microsoft and Amazon had been cereal buyers for the past decade, and each have address inventory about equivalent to kojak.

David Schaeffer: Their European customers have to come to D.C. or New York and back to Europe. I know it sounds almost childish and it's a tit-for-tat, but unfortunately, there are still bad actors in the world who don't embrace net neutrality. Now, I'll expand one point further. You know, we have a similar situation with Deutsche Telekom, which has been public, and they continue to expand capacity in Asia but refuse to expand in Europe. So they'll expand connectivity in the U.S. or in Asia, but they want to protect their German market. So while they may meet the four corners of a net neutrality order in their country, they are absolutely violating the spirit.

Speaker Change:

Speaker Change: We are of how you're waiting should we do something that is quite honestly foreign to our thought process and raise prices that's.

Speaker Change: You know, we're conscious of that and we are going to evaluate over the next few months what are the best ways to maximize the value of these addresses and whether that includes.

Speaker Change: Securitisation that includes raising prices or it includes the.

Speaker Change: The ability to sell addresses four evaluating all of those opportunities and we understand we were walking that we just have a big asset that turned out to be valuable.

David Schaeffer: And it's actually somewhat encouraging that the FCC may finally, you know, codify this in a way to stop people from playing. Okay, I'll stop there. Thank you, Dave. Thank you, Ted. Your next question comes from Tim Horan with Oppenheimer. Please go ahead. Thanks, guys. So, Dave, I...

Speaker Change: I explained to one and faster, it's kind of like bitcoin with a purpose.

Speaker Change: So, it's sometimes better to be.

Speaker Change: Lucky than smart well I guess they have related to this you know what everyone's a bit frustrated about is the complexity in the counting can you just give us a sense of what the adjusted EBITDA should look like and and twenty-four you know as far as the 110.

David Schaeffer: If AWS is 12 times the price, I mean, why wouldn't you increase your prices by, you know, 6x? I mean, where are customers going to go? Do you think you would lose those customers? And, you know, if I do the math, if you have a 6x price increase, that's obviously $40 million goes to $240 of free cash flow. You know, what's preventing that?

Speaker Change: A good run right I mean, I know, there's a million moving parts of it if you can't talk about that maybe the 220 million an expense savings how much how does that kind of pace out over the next three years or any more color would be helpful.

Speaker Change: Yeah, I'll try to touch on both of them. So the first point is we have been very clear that there is going to be a step down in the cash payments that we received from T. Mobile one year from closing so may of 24.

David Schaeffer: Yeah, so first of all, we didn't have AWS as a benchmark with a pricing umbrella in 2015 when we started leasing addresses, and you know, we have never changed our pricing on addresses while our bandwidth pricing has declined by 23% a year during that same period. Second point is, you are absolutely correct in your statement that customers probably are pretty sticky. The expense is small, and the labor involved in renumbering is pretty significant. Amazon doesn't disclose its numbers for this particular product, so I can't tell exactly how successful they are.

Speaker Change: That will impact our EBITDA as reported.

Speaker Change: Secondly, we are continuing to achieve those cost synergies those costs <unk>. Unfortunately are limited by some of the contractual obligations that we assumed when we bought this business from T mobile.

David Schaeffer: What I do know is that their inventory of addresses which have been acquired, they were not organic to Amazon, is about comparable in size to Cogent. Actually, both Microsoft and Amazon have been serial buyers for the past decade, and each have address inventories about equivalent to Cogent. We are evaluating whether we should do something that is quite honestly foreign to our thought process and raise prices? You know, we're conscious of that, and we are going to evaluate over the next few months what are the best ways to maximize the value of these addresses and whether that includes, you know, securitization that includes raising prices or it includes, the ability to sell addresses. We're evaluating all of those opportunities. And we understand we were lucky that we just had a big asset that turned out to be valuable.

Speaker Change: And again these are all things that were considered in the negotiation in the purchase price.

Speaker Change: Even pack to the I P addresses T mobile sold 2 million addresses prior to closing it was fully disclosed sauce and they recorded 120 million dollar gain from that sale.

Speaker Change: Quite honestly they could have chosen to keep more addresses and sell them and then the subsidy check they would've had a right would've been larger so it's not like these are surprises. They were all thought about in the negotiations are in terms.

Speaker Change: EBITDA he should think about the current run rate is about correct for the next couple of quarters, then it will step down when those payments come down from T. Mobile and then gradually increase as those cost savings.

David Schaeffer: Like I explained to one investor, it's kind of like Bitcoin with a purpose. So it's sometimes better to be Lockheed and Smarr. Well, I guess they're related to this, you know, what everyone's a bit frustrated about is the complexity in the country. Can you just give us a sense of what the adjusted EBITDA should look like in 2024? You know, is the 110, you know, a good run rate?

Speaker Change: <unk> R a cheap.

Speaker Change: You know what we have said publicly and we are absolutely reaffirming <unk> within five years of closing the company will do at least 1.5 billion of revenue and have at least $500 million of EBITDA.

Speaker Change: That's 133 that we did last quarter and 110 this quarter kind of shows were already on pace for that the reality is EBITDA will go down and then come back off and I understand it's complicated accounting and I also understand it is hard to bowl the model that goes up and down.

David Schaeffer: I mean, I know there's a million moving parts, and if you can't talk about that, maybe the 220 million in expense savings, how much, how does that kind of pace out over the next three years, or any more color? Yeah, I'll try to touch on both of them. So the first point is, we have been very clear that there is going to be a step down in the cash payments that we receive from T-Mobile one year from closing, so May 24. That will impact our EBITDA as reported. Secondly, we are continuing to achieve those cost synergies. However, those cost synergies, unfortunately, are limited by some of the contractual obligations that we assumed when we bought this business from T-Mobile. And again, these are all things that were considered in the negotiation of the purchase price. You know, even back to the IP address.

Speaker Change: Now, we're trying to be as transparent as possible without giving <unk> yeah.

Speaker Change: The payments are fixed per month. So we know it's $29.2 million per month for a year and then $8.3 million for the remaining time.

Speaker Change: And the step down what will occur in may.

Speaker Change: I would say that the SG&A cost run right now we had in the fourth quarter, which was about 30% will be less in the first quarter and we should think about and SG&A as percentage of revenue as I mentioned earlier.

Speaker Change: 27%.

I'm in network operating expenses what percent should that be roughly [noise].

Speaker Change: That will be relatively flat.

Speaker Change: Flat may come down slightly as well have some experienced savings additional savings from circuits and from facilities.

David Schaeffer: T-Mobile sold 2 million addresses prior to closing, it was fully disclosed to us, and they recorded $120 million gain from that sale. Quite honestly, they could have chosen to keep more addresses and sell them, and then the subsidy check they would have had to write would have been larger. So it's not like these are surprises.

Speaker Change: So it should come down slightly from the 64% this quarter. Yeah now it's gonna go up from additional on net sales, but net net it should decline yes.

Thank you [noise].

Speaker Change: I should say, it's off nets off that yeah. Thanks, Tim.

Speaker Change: Your next question comes from Michael Rollins, which city. Please go ahead.

Michael Ian Rollins: Thanks, Good morning, a few questions just a quick one on the the I P addresses can you remind us what the addressable market for that is just your share of that market.

David Schaeffer: They were all thought about in the negotiation. In terms of EBITDA, you should think about the current run rate is about correct for the next couple of quarters, then it will step down when those payments come down from T-Mobile, and then gradually increase as those cost savings are achieved.

Michael Ian Rollins: Yeah sure so when.

Michael Ian Rollins: When the Internet was can save the there were Ah numbering scheme and they chose I P V. Four which is two to the 64 power that is approximately 4.3.

David Schaeffer: You know, what we have said publicly and what we are absolutely reaffirming is that within five years of closing, the company will do at least $1.5 billion in revenue and have at least $500 million of EBITDA. You know, the $133,000 that we did last quarter and the $110,000 this quarter kind of say we're already on pace for that. The reality is EBITDA will go down and then come back up. And I understand it's complicated accounting, and I also understand it's hard to build a model that goes up and down. We're trying to be as transparent as possible without giving exact guidance on it, Thad. The payments are fixed per month, so we know it's $29.2 million per month for a year and then $8.3 million for the remaining terms. Step down. I would say that the SG&A cost run rate we had in the fourth quarter will be less in the first quarter.

Michael Ian Rollins: <unk> address.

Michael Ian Rollins: Those Hannah crushes were initially allocated by the Department of Commerce, then allocated by I Anna as a contractor for the department of Commerce and then subsequently those allocations were delegated to five regional registries around the world.

Michael Ian Rollins: The U S government held back address is for its own purposes, primarily D. O day since there's been about three point.

Michael Ian Rollins: 5 billion usable addresses the.

Michael Ian Rollins: The registries began to run out of addresses and 2011 a market for those had trust as developed and prices to buy an address at that time or about $4 in the intervening.

Michael Ian Rollins: Decade, or 13 years that price has gone from four to 55 all of the registries ran out of addresses by 2018 and there are no more addresses to get now there has been a movement to migrate to I P. P.

David Schaeffer: We should think about SG&A as a percentage of revenue, as I mentioned earlier, of about $20,000. And in network operating expenses, what percent should that be roughly? That will be relatively flat.

Michael Ian Rollins: Six which is to to the hundred and 28th power number of addresses so basically the square of 4.3 billion a very very large number.

Michael Ian Rollins: But there have been many challenges in doing that including literally trillions of dollars of capital that will be necessary to replace equipment to support that shall I P. V. Six still has a relatively small presence on the internet about 7% of traffic.

David Schaeffer: May come down slightly as we have some experience, savings, additional savings from circuits and from. So it should come down slightly from 64% this quarter? Yes. Now, it's going to go up from additional on-net sales, but net-net, it should do. Thank you.

Michael Ian Rollins: So the market is.

David Schaeffer: Thanks, Tim. Your next question comes from Michael Rollins with Citi. Please go ahead. Thanks. Good morning.

Michael Ian Rollins: Anybody who needs those addresses and wants to reach the whole internet there.

Michael Ian Rollins: There are multiple work around schemes, but those schemes are not easily implemented and are not as easily manage as just renting or buying I P. P. For so I think for the foreseeable future of the world where one of the four.

David Schaeffer: A few questions. Just a quick one on the IP addresses. Can you remind us what the addressable market for that is? Thank you for your share of that, Mark. Yeah, sure. So, uh, when the internet was conceived, there was a numbering scheme, and they chose IPv4, which is 2 to the 64th power.

Michael Ian Rollins: There'll be limited supply and as a result people will either leash or by the age to fulfill their needs.

David Schaeffer: That is approximately 4.3 billion addresses. Those addresses were initially allocated by the Department of Commerce, then allocated by IANA as a contractor for the Department of Commerce, and then subsequently, those allocations were delegated to five regional registries around the world. The U.S. government held back addresses for its own purposes, primarily DoD.

Speaker Change: Thanks, and then just a question on the business the sales productivity.

Speaker Change: Yeah.

Speaker Change: On kind of a flat F. T. E account can you attack what's happening in terms of sales productivity, where there might be pluses and performance, where there might be some minuses and performance.

Speaker Change: Yeah, I mean, I would say the biggest drag on productivity and I'm not trying to call out specific names, but have been employee came over from sprint.

David Schaeffer: So there have been about 3.5 billion usable addresses. However, the registries began to run out of addresses in 2011. A market for those addresses developed, and prices to buy an address at that time were about $4. In the intervening decade, or 13 years, that price has gone from $4 to $55. All of the registries ran out of addresses by 2018, and there are no more addresses to get. Now, there has been a movement to migrate to IPv6, which is 2 to the 128th power number of addresses, so basically the square of 4.3 billion, a very, very large number. But there have been many challenges in doing that, including literally trillions of dollars of capital that would be necessary to replace equipment to support that. So IPv6 still has a relatively small presence on the internet, about 7% of traffic. So the market is anybody who needs those addresses and wants to reach the whole internet. There are multiple workaround schemes, but those schemes are not easily implemented and are not as easily managed as just renting or buying IPv4.

Speaker Change: Yeah as part of.

Speaker Change: Our contractual obligation we had to guarantee their quota for a full year from closing.

Speaker Change: It's very different than the way a organically higher cogent salesperson would be calm.

Speaker Change: And their productivity has been a significant drag now there's only a dozen of them left focused on the enterprise accounts, but we have <unk>.

Speaker Change: Transfer those reps into corporate and that's centric roles, but their productivity.

Speaker Change: Remains depressed the second factor that has fallen down productivity has been the rapid expansion of the salesforce coming out of the pandemic normally pre pandemic, we were growing at about seven per cent a year and absorb.

Speaker Change: Bring those people and training them and reality is while they have three months to become a full time equivalent it takes really a year to be boy productive.

Speaker Change: Last year, we grew the sales force 20 per cent you over here show almost three times faster than we normally grow the sales force. So that's been a second drag on those numbers I think we.

David Schaeffer: So I think for the foreseeable future, the world will run on v4. There'll be a limited supply, and as a result, people will either lease or buy them to fulfill their needs. Thanks, and then just a question on the business, sales productivity. Transcribed by https://otter.ai For more information, visit www.fema.gov. Yeah, I mean, I would say the biggest drag on productivity, and I'm not trying to call out specific names, but have been employees that came over from Sprint. You know, as part of our contractual obligation, we had to guarantee their quota for a full year from closing. That's very different than the way an organically hired coach and salesperson would be compensated.

Speaker Change: We will see some additional turnover and hopefully we'll see.

Speaker Change: Productivity start to improve.

Speaker Change: Thanks very much.

Speaker Change: Hey, Thanks, Mike.

Speaker Change: Again, if you would like to ask a question. Please press star one now.

Speaker Change: Your next question comes from Borelli with Army C capital markets. Please go ahead.

Borelli: Good morning, one bit of housekeeping first.

Borelli: D N a during the quarter around says T. Three key while Capex increase what's that related to send that that'd be class activities and is that for quite a number at the jumping off point, that's all right.

Speaker Change: Something else, we should be thinking about.

David Schaeffer: And their productivity has been a significant drag. Now, there are only a dozen of them left focused on enterprise accounts, but we have transferred those reps into corporate and other roles, but their productivity remains depressed. The second factor that has drawn down productivity has been the rapid expansion of the sales force coming out of the pandemic. Normally, pre-pandemic, we were growing at about 7% a year and absorbing those people and training them. And the reality is, while they have three months to become a full-time equivalent, it takes really a year to be fully productive.

Speaker Change: More of the Reclass occurred in the fourth quarter versus the third quarter really the impact on the run rates in the third quarter are dominantly you had to do with the impact on cause from the lease accounting.

Speaker Change: Okay <unk>.

Speaker Change: I'm, sorry, so that DNA stepped down in the fourth quarter was related to.

Speaker Change: SG&A in the fourth quarter hasn't increase from the third quarter and I tried to D N a.

Speaker Change: Yeah, SG&A yesterday yeah.

Speaker Change: Okay.

Speaker Change: So the right way to pick them up or is just about.

Speaker Change: About 27% of revenues going forward I think these.

Speaker Change: These moving pieces of Reclass are hopefully behind us and that we've got everything into cogent systems, they're all been audited by Ernst and young and comply with all of the gap requirements and critical accounting matters for police account.

David Schaeffer: Last year, we grew the sales force 20% year-over-year, so almost three times faster than we normally grow the sales force, so that's been a second drag on those numbers. I think we will see some additional turnover, and hopefully, we'll see productivity start to improve. Thanks very much.

Speaker Change: <unk>. So I think we're pretty good shape, we are.

Speaker Change: Mmk and accurate swearing at the sprint spaces sorry.

Speaker Change: <unk>.

Speaker Change: What are you, saying something.

Speaker Change: Okay. No no go ahead go ahead.

David Schaeffer: Hey, thanks, Mike. Again, if you would like to ask a question, please press star 1 now. Your next question comes from Bora Lee with RBC Capital Markets. Please go ahead. Good morning.

Speaker Change: Alright is your clearing out the <unk> is there an opportunity to supplement that Oh, the appointment and is that meaningful or just sort of a task that needs to be done.

Speaker Change: It's definitely a task that needs to be dawn. It does not have a meaningful salvage value.

David Schaeffer: One bit of housekeeping first. There was a step down in DNA during the quarter relative to 3T, while CAPEX increased. Was that related to some of the reclass activities, and is that quarter number a good jumping off point to go forward, or is there something else we should be thinking about? More of the reclassification occurred in the fourth quarter versus the third quarter. Really, the impact on the run rates in the third quarter predominantly had to do with it.

Speaker Change: Most of this equipment has been not manufactured for 15 plus years.

Speaker Change: There is a minimum amount of scrap value for copper in the equipment.

<unk> equipment that has been sold to third party brokers, but there's also a workout for associated with taking those 22005 Honda racks of that equipment out net net.

David Schaeffer: Okay, so sorry, so the DNA step down in the fourth quarter was related to SG&A in the fourth quarter increased. ENA. Yeah, SG&A. SG&A. Okay. So, the right way to think about PORA is just, you know, about 27% of revenues going forward. I think these moving pieces of reclass are hopefully behind us and that we've got everything into Cogent's systems. They're all been audited by Ernst & Young and comply with all of the gap requirements and critical accounting matters for lease accounting.

Speaker Change: This is not <unk>.

Speaker Change: Yeah, it's going to be a significant either a cost or a significant revenue opportunity for us the better opportunity it is going to be Ashley.

Speaker Change: Deep populate these facilities of this that equipment and convert them to cogent data centers, yeah that those 68 facilities and.

Speaker Change: 157 megawatts that we have now.

Speaker Change: That are less than 30% utilized become a significant opportunity, particularly as there is a short term crunch for power in space for data centers driven by a <unk>. We are in the process of looking at multiple.

David Schaeffer: So I think we're in pretty good shape. We are. Okay, and as you're clearing out the sprint spaces, is there, sorry, Thad. Were you saying something? No, no, go ahead.

David Schaeffer: Go ahead. Great. As you're clearing out the sprint spaces, is there an opportunity to sell some of that old equipment, and is that meaningful or just sort of a task that needs to be done? It's definitely a task that needs to be done, but it does not have a meaningful salvage value.

Speaker Change: Ways to fill that space up more quickly.

Alright, and I guess lastly from me recognizing that it's still early days do you have any quantitative qualitative color on that extent to which there has been.

David Schaeffer: Most of this equipment has not been manufactured for 15 plus years, so there is a de minimis amount of scrap value for copper in the equipment. There is some equipment that has been sold to third-party brokers, but there's also a work effort associated with taking those 22,500 racks of dead equipment out. Net net. This is not, you know, going to be a significant either cost or a significant revenue opportunity. The better opportunity is going to be as we depopulate these facilities of this dead equipment and convert them to Cogent data centers, you know, those 68 facilities. And, you know, the 157 megawatts that we have now that are less than 30% utilized become a significant opportunity, particularly as there is a short-term crunch for power and space for data centers driven by AI.

Speaker Change: Alcohol cross selling our cross and tests across the legacy coaching and sprint customer business.

Speaker Change: So I will say I'll start with wavelengths.

<unk>.

Speaker Change: Majority of the wavelengths and that funnel and the wavelengths of way of souls.

Speaker Change: Or to customers that cogent already had a relationship where there are a handful of cases, where they're a customer that cogent had not worked with previously but the fast majority of those twenty-three hundred of waters and the final and those that have been installed.

Speaker Change: The 667 have come from people that coach and had a relationship with.

Speaker Change: The second thing is.

Speaker Change: The sprint.

Speaker Change: Fries space.

Speaker Change: Has been receptive too far on Netflix print.

Our global reach and our ability to modernize their V. P N technologies.

David Schaeffer: We are in the process of looking at multiple ways to fill that space more quickly. And I guess lastly for me, recognizing that it's still early days, do you have any quantitative or qualitative color on the extent to which there's been actual cross-selling or cross-interest across the Legacy, Cogent, and Sprint customer bases? So I will say, I'll start with wavelength.

Speaker Change: We actually saw very modest, but a very slight uptick sequentially and the number of enterprise connections and remember this is with a much smaller salesforce focusing on those costs from us. So I think there is going to be the ability.

David Schaeffer: The majority of the wavelengths in that funnel and the wavelengths that we have sold are to customers that Cogent already had a relationship with. There are a handful of cases where there is a customer that Cogent has not worked with previously, but the vast majority of those 2,300 orders in the funnel and those that have been installed, the 667, have come from people that Cogent has a relationship with. The second thing is that Sprint Enterprise Bank has been receptive to our on-net footprint, our global reach, and our ability to modernize their VPN technology. We actually saw a very modest but very slight uptick sequentially in the number of enterprise connections. And remember, this is with a much smaller sales force focusing on those customers. So I think there is going to be the ability to help modernize some of those enterprise customers. So I think there'll be cross-selling opportunities in both directions. Great, thank you. Hey, thanks, Boa. Your final question comes from Brandon Nispel with KeyBank Capital Markets. Please go ahead. Hi guys, it's Evan on for Brandon.

Speaker Change: Help modernize some of those enterprise customers. So I think that'll be cross selling opportunities in both directions.

Speaker Change: Alright, thank you.

Speaker Change: Hey, thanks for.

Speaker Change: You know our final question comes from Brandon This fall Keybanc capital markets. Please go ahead.

Speaker Change: Hi, guys, it's even on for Brandon.

Brandon: The backlog you guys talked about for wavelengths, you were saying, it's growing now pacing the provisioning you're able to do on your facilities do you think you'll be able to get through the 2300 order backlog by the end of the year or or are you finding any customer.

Brandon: <unk> finding alternative solutions because of the the backlog thanks.

Brandon: So even I think two different things will happen.

Speaker Change: We will provision most of the others, who orders, but there will be some customers who cannot wait.

Speaker Change: We are trying to be very transparent with customers and that's a side by side discussion of what that provisioning window will look like we know that with the network right configurations that we have going on will have more than them.

David Schaeffer: The backlog you guys talked about for Wavelengths, you were saying it's growing and now pacing the provisioning you're able to do at your facilities. Do you think you'll be able to get through that 2300 order backlog by the end of the year? Or are you finding any customers finding alternative solutions because of the backlog? So, Evan, I think two different things will happen.

Speaker Change: <unk> the number of sites and a standardized provisionary window bye gear and but in the intervening time, if a customer needs to go somewhere else and we can't profession, we are going to let them out of that obligation I mean, that's yeah.

Speaker Change: If we wanted to do business with them going forward, we need to understand that this is a cogent problem and not the customer's problem. Conversely.

David Schaeffer: We will fulfill most of those orders, but there will be some customers who cannot wait. You know, we are trying to be very transparent with customers, and it's a site-by-site discussion on what that provisioning window will look like. We know that with the network reconfigurations that we have going on, we'll have more than double the number of sites and a standardized provisioning window by year end. But in the intervening time, if a customer needs to go somewhere else and we can't provision, we are going to let them out of that obligation. I mean, it's.

Speaker Change: As we continue to build credibility with customers and we get more sites enabled and shorter provisioning windows, we actually anticipate the pace of that funnel building actually accelerating.

Speaker Change: And the last quarter it took us.

David Schaeffer: You know, if we want to do business with them going forward, we need to understand that this is a Cogent problem and not the customer's problem. Conversely, as we continue to build credibility with customers and we get more sites enabled and shorter provisioning windows, we actually anticipate the pace of that funnel building to actually accelerate. You know, in the last quarter, it took us, basically, five months from closing to build a funnel of 1,000. In the last quarter, we got that up to 2,300.

Speaker Change: Basically <unk>.

Speaker Change: Five months from closing to build a funnel off a thousand in the last quarter, we got that up to 2300 and yes. There have been some fall out but the net number grew and I think that will continue to grow as I stated earlier over the long run I think it's not healthy to talk.

Speaker Change: Talk about finals, but installed revenue, but until we get the network configured correctly and get enough.

Speaker Change: Sites, where we can profession, and a expeditious manner of a couple of weeks, we have to give both customers.

David Schaeffer: And yes, there have been some fallouts, but the net number grew. And I think that will continue to grow. As I stated earlier, over the long run, I think it's not healthy to talk about funnels but installed revenue.

Speaker Change: Customers and investors and understanding of what the backlog looks like.

Speaker Change: Thanks.

Speaker Change: Great. Thanks.

Speaker Change: This will conclude our question and answer session I will now turn the call back over today, if say sorry for closing remarks.

David Schaeffer: But until we get the network configured correctly and get enough sites where we can provision in an expeditious manner within a couple weeks, we have to give both customers and investors an understanding of what the backlog looks like. Bye. Great. Thanks, guys. This will conclude our question and answer session. I will now turn the call back over to Dave Schaeffer for closing remarks. Hey, thank you very much. I know it was a long call, but there are a lot of pieces of information. We are definitely trying to be wholesome and transparent in what we are reporting. Thank you all very much, and we'll talk soon. Take care.

Speaker Change: Hey, Thank you very much I know again, it was a long haul, but there are a lot of pieces of information.

Speaker Change: There are definitely trying to bay.

Speaker Change: Wholesome and transparent in what way are reporting.

Speaker Change: Thank you all very much and we will talk soon take care bye bye.

Speaker Change: This concludes today's conference. Thank you for your participation you may now disconnect.

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