Q4 2025 Cogent Communications Holdings Inc Earnings Call

February 20, 2026

Operator: Good morning, and welcome to the Cogent Communications Holdings Q4 and full year 2025 earnings conference call. As a reminder, this conference call is being recorded, and it will be available for replay at www.cogent.com. A transcript of this conference call will be posted on Cogent's website when it becomes 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 Sir Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings. Please go ahead.

Speaker #1: A transcript of this conference call will be posted on COGENT's website when it becomes available. COGENT's summary of financial and operational results, attached to its press release, can be downloaded from the COGENT website.

Speaker #1: I would now like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings. Please go ahead.

Speaker #1: Hey, thank you, and good morning to everyone. Welcome to our fourth quarter 2025 and full year 2025 conference call. I'm Dave Schaeffer, Cogent's CEO, and with me on today's call is Tad Weed, our Chief Financial Officer.

Dave Schaeffer: Hey, thank you, and good morning to everyone. Welcome to our Q4 2025 and full year 2025 conference call. I'm Dave Schaeffer, Cogent's CEO, and with me on today's call is Tad Weed, our Chief Financial Officer. I'd like to highlight a few key events and significant matters in the quarter. I'd like to be able to go through these metrics to help you understand better our business. We are continuing to increase our margins. Our increase in gross margin and EBITDA margins have been driven by cost reductions and a rotation to more profitable on-net products. In Q3 2023, the first full quarter, Cogent was combined with Sprint wireline revenues. Our combined revenues by connection type for the third quarter versus this quarter have changed materially.

Speaker #1: I'd like to highlight a few key events and significant matters in the quarter. I'd like to be able to go through these metrics to help you understand better our business.

Speaker #1: We are continuing to increase our margins. Our increase in gross margin and EBITDA margins has been driven by cost reductions and a rotation to more profitable on-net products.

Speaker #1: In the third quarter of 2023, the first full quarter COGENT was combined with Sprint Wireline, revenues, or combined revenues by connection type for the third quarter versus this quarter, have changed materially.

Speaker #1: Our on-net revenues were 47% of our revenues in the third quarter of 2023. Our total on-net revenues as a percentage of revenues has increased from 47% of revenues in the third quarter of 2023 to 61% of revenues this quarter.

Dave Schaeffer: Our on-net revenues were 47% of our revenues in Q3 2023. Our total on-net revenues as a percentage of revenues has increased from 47% of revenues in Q3 2023 to 61% of revenues this quarter. Our off-net revenues were 48% of our total revenues in Q3 2023, immediately after the combination of Sprint and Cogent. Our off-net revenues as a percentage of our total revenues have decreased from 48% of revenues down to 39% of total revenues this quarter, and our non-core revenues were 5% of total revenues in Q3 2023. Our non-core revenues as a percentage of our total revenues have decreased to less than 1% of our revenues this quarter.

Speaker #1: Our off-net revenues were 48% of our total revenues in the third quarter of 2023, immediately after the combination of Sprint and Cogent. Our off-net revenues as a percentage of our total revenues have decreased from 48% of revenues down to 39% of total revenues this quarter.

Speaker #1: And our non-core revenues were 5% of total revenues in the third quarter of 2023. Our non-core revenues as a percentage of our total revenues have decreased to less than 1% of our revenues this quarter.

Speaker #1: I'd like to take a moment and outline our progress and our wavelength sales. At year-end, we're offering wavelength services in 1,068 locations, all capable of 10 gigabit, 100 gigabit, and 400 gigabit services, with provisioning intervals of approximately 30 days.

Dave Schaeffer: I'd like to take a moment and outline our progress and our wavelength sales. At year-end, we were offering wavelength services in 1,068 locations, all capable of 10 gigabit, 100 gigabit, and 400 gigabit services, with provisioning intervals of approximately 30 days. As of today, we have actually increased that service footprint to 1,096 locations. Our wavelength revenue for the quarter was $12.1 million, a 74% year-over-year increase compared to the comparable quarter in 2024. Our sequential wavelength revenue growth accelerated and increased by 19%. That is better than the 12% sequential increase in Q3 over Q2. Our wavelength customers increased by 18% sequentially to 2,064 connections at the end of the quarter.

Speaker #1: As of today, we have actually increased that service footprint to 1,096 locations. Our wavelength revenue for the quarter was $12.1 million, a 74% year-over-year increase compared to the comparable quarter in 2024.

Speaker #1: Our sequential wavelength revenue growth accelerated and increased by 19%. That is better than the 12% sequential increase in Q3 over Q2. Our wavelength customers increased by 18%.

Speaker #1: Sequentially to 2,064 connections at the end of the quarter. Our wavelength revenue for the full year 2025, which was the first full year we were selling wavelength services across our footprint, was $38.5 million.

Dave Schaeffer: Our wavelength revenue for the full year 2025, which was the first full year we were selling wavelength services across our footprint, was $38.5 million, an increase of 100% from the 2024 number. Our wavelength customers during that period increased by 85%. As of the end of the quarter, we had sold wavelengths in 518 locations, compared to 454 locations at the end of Q3. We continue to anticipate capturing 25% of the highly concentrated wavelength market in North America. Now, for a few comments on margins. Our EBITDA, as adjusted for the quarter, increased by $3 million to $76.7 million. Our EBITDA as adjusted margins for the quarter increased sequentially by 140 basis points to 31.9%.

Speaker #1: An increase of 100% from the 2024 number. Our wavelength customers during that period increased by 85%. As of the end of the quarter, we had sold wavelengths in 518 locations, compared to 454 locations at the end of Q3.

Speaker #1: We continue to anticipate capturing 25% of the highly concentrated wavelength market in North America. Now, for a few comments on margins. Our adjusted EBITDA for the quarter increased by $3 million to $76.7 million.

Speaker #1: Our EBITDA, as adjusted, margins for the quarter increased sequentially by 140 basis points to 31.9%. Our increased margins continue to come from our cost reductions as well as our product optimization.

Dave Schaeffer: Our increased margins continue to come from our cost reductions as well as our product optimization. Our EBITDA as adjusted for the full year 2025 was $55.6 million. Our EBITDA as adjusted, then adding back the payments under the T-Mobile transit agreement. Our decrease in EBITDA as adjusted was as a result of the $104.2 million dollar reduction in our IP transit payments from T-Mobile and a reduction of $21.4 million dollars for other reimbursable Sprint acquisition costs that we incurred in 2024. There were no Sprint acquisition costs in full year 2025. The $104.2 million reduction in scheduled payments and $21.4 million reduction in these acquisition costs more than offset the organic growth of $70 million dollars in Cogent's EBITDA or EBITDA Classic for full year 2025.

Speaker #1: Our EBITDA, as adjusted for the full year 2025, was $55.6 million; our EBITDA is adjusted, then adding back the payments under the T-Mobile Transit Agreement.

Speaker #1: Our decrease in EBITDA, as adjusted, was as a result of the $104.2 million reduction in our IP transit payments from T-Mobile and a reduction of $21.4 million for other reimbursable Sprint acquisition costs that we incurred in 2024.

Speaker #1: There were no Sprint acquisition costs in full year 2025. The $104.2 million reduction in scheduled payments and $21.4 million reduction in these acquisition costs more than offset the organic growth of $70 million in Cogent's EBITDA, or EBITDA Classic, for full year 2025.

Speaker #1: Our EBITDA classic for 2025 was $192.8 million. For the full year of 2024, it was $122.8 million. Our EBITDA as adjusted margins were 30% for the full year 2025, down from 33.6% for the full year 2024 because of the reductions that I just previously mentioned.

Dave Schaeffer: Our EBITDA Classic for 2025 was $192.8 million. For the full year of 2024, it was $122.8 million. Our EBITDA as adjusted margins were 30% for the full year 2025, down from the 33.6% for the full year 2024, because of the reductions that I just previously mentioned. Our EBITDA Classic margins, however, for full year 2025 were 19.8%, up from the 11.9% for full year 2024, or an improvement of approximately 840 basis points on a year-over-year basis. Under our IP transit agreement with T-Mobile, we will continue to receive an additional 23 monthly payments of $8.3 million per month until November 2027.

Speaker #1: Our EBITDA classic margins, however, for full year 2025 were 19.8%, up from the 11.9% for full year 2024, or an improvement of approximately 840 basis points on a year-over-year basis.

Speaker #1: Under our IP transit agreement with T-Mobile, we will continue to receive an additional 23 monthly payments of $8.3 million per month until November of 2027.

Speaker #1: There are further cash payments related to lease obligations we assumed at closing of at minimum $28 million. This $28 million payment is to be made by T-Mobile in four equal monthly payments from December of 2027 through March of 2028.

Dave Schaeffer: There are further cash payments related to lease obligations we assumed at closing of at minimum $28 million. This $28 million payment is to be made by T-Mobile in four equal monthly payments from December 2027 through March 2028. Now for a comment on our improvement and leverage. We have refined our capital allocation priorities and strengthened our financial flexibility and accelerated our delevering strategy. Our leverage ratios have improved. Our gross debt leverage, as adjusted for amounts due from T-Mobile for the last twelve months, EBITDA as adjusted ratio was 7.35, as compared to 7.45 in the previous quarter. Our net debt ratio was 6.64 in Q4, compared to 6.65 in Q3 of 2025.

Speaker #1: Now, for a comment on our improvement in leverage. We have refined our capital allocation priorities and strengthened our financial flexibility, and accelerated our delevering strategy.

Dave Schaeffer: Our leverage ratios have improved. Our gross debt leverage, as adjusted for amounts due from T-Mobile for the last twelve months, EBITDA as adjusted ratio was 7.35, as compared to 7.45 in the previous quarter. Our net debt ratio was 6.64 in Q4, compared to 6.65 in Q3 of 2025.

Speaker #1: Our leverage ratios have improved. Our gross debt leverage, as adjusted for amounts due from T-Mobile, for the last 12 months EBITDA as adjusted ratio was 7.35, as compared to 7.45 in the previous quarter.

Speaker #1: Our net debt ratio was 6.64 in Q4, compared to 6.65 in Q3 of 2025. We believe that the amounts due from T-Mobile under our transit and purchase agreement should be considered, and calculated into our leverage ratios.

Dave Schaeffer: We believe that the amounts due from T-Mobile under our transit and purchase agreement should be considered in calculating our leverage ratios. We believe that these amounts essentially represent both long-term and short-term cash and are discounted appropriately on our balance sheet. Due to T-Mobile's credit rating and payment history, we are confident that these payments will continue to be made in a timely manner. T-Mobile pays us $25 million a quarter through Q4 2027 under this IP services agreement. The monthly payments from T-Mobile under the IP transit agreement reduces from the balances that are due each month as they are received. Now for a couple of comments on our improved IPv4 leasing activity. Our IPv4 leasing revenue increased 44% year-over-year to $64.5 million for full year 2025.

Speaker #1: We believe that these amounts essentially represent both long-term and short-term cash and are discounted appropriately on our balance sheet. And due to T-Mobile's credit rating and payment history, we are confident that these payments will continue to be made in a timely manner.

Speaker #1: T-Mobile pays us $25 million a quarter through the fourth quarter of 2027 under the IP services agreement. The monthly payments from T-Mobile under the IP transit agreement reduce the balances that are due each month as they are received.

Dave Schaeffer: T-Mobile pays us $25 million a quarter through Q4 2027 under this IP services agreement. The monthly payments from T-Mobile under the IP transit agreement reduces from the balances that are due each month as they are received. Now for a couple of comments on our improved IPv4 leasing activity. Our IPv4 leasing revenue increased 44% year-over-year to $64.5 million for full year 2025.

Speaker #1: Now, for a couple of comments on our improved IPv4 leasing activity. Our IPv4 leasing revenue increased 44% year-over-year to $64.5 million for the full year 2025.

Speaker #1: We are currently leasing 15.3 million addresses at year-end. This is an increase of 2.2 million incremental addresses, or 17%, on a year-over-year basis. We have title to 37.8 million IPv4 addresses.

Dave Schaeffer: We are currently leasing 15.3 million addresses at year-end. This is an increase of 2.2 million incremental addresses, or 17% on a year-over-year basis. We have titled to 37.8 million IPv4 addresses. Our capital expenditures for the last half of 2025, once our data center modernization program had been completed, was $73.3 million, as compared to $114.3 million for the first half of 2025. This $41 million decrease was due to the completion of a significant amount of reconfiguration work in our Sprint-acquired facilities. We have converted these facilities into data centers in the first six months of 2025, as well as the last six months of 2024. We have converted a total of 125 facilities.

Speaker #1: Our capital expenditures for the last half of 2025, once our data center modernization program had been completed, were $73.3 million, as compared to $114.3 million for the first half of 2025.

Speaker #1: This $41 million decrease was due to the completion of a significant amount of reconfiguration work in our Sprint-acquired facilities. We have converted these facilities into data centers in the first six months of 2025, as well as the last six months of 2024.

Speaker #1: We have converted a total of 125 facilities. At year-end, we are providing facilities in, or providing services in, 1,715 carrier-neutral data centers as well as the 187 COGENT data centers.

Dave Schaeffer: At year-end, we are providing facilities in providing services in 1,715 carrier-neutral data centers, as well as the 187 Cogent data centers. The Cogent data centers have an aggregate capacity of 213 megawatts of installed and available power. Now, as many of you know, we have intended to monetize and sell 24 of these facilities that we view as surplus. We acquired these facilities through the acquisition of Sprint, and we intend to monetize them through either outright sale or leasing on a wholesale basis. The non-binding letter of intent we mentioned on our last call was not finalized due to a change in the original terms, not in price, but a requirement by the purchaser for Cogent to provide a portion of the purchase price in terms of owner financing, which we found unacceptable.

Speaker #1: The Cogent data centers have an aggregate capacity of 213 megawatts of installed and available power. Now, as many of you know, we have intended to monetize and sell 24 of these facilities that we view as surplus.

Dave Schaeffer: We acquired these facilities through the acquisition of Sprint, and we intend to monetize them through either outright sale or leasing on a wholesale basis. The non-binding letter of intent we mentioned on our last call was not finalized due to a change in the original terms, not in price, but a requirement by the purchaser for Cogent to provide a portion of the purchase price in terms of owner financing, which we found unacceptable.

Speaker #1: We acquired these facilities through the acquisition of Sprint, and we intend to monetize them through either an outright sale or leasing on a wholesale basis.

Speaker #1: The non-binding letter of intent we mentioned on our last call was not finalized due to a change in the original terms—not in price, but a requirement by the purchaser for COGENT to provide a portion of the purchase price in terms of owner financing.

Speaker #1: Which we found unacceptable. We reverted to some of our backup agreements and are in active discussion with multiple parties for multiple offers across a broad set of these data centers.

Dave Schaeffer: We reverted to some of our backup agreements and are in active discussions with multiple parties for multiple offers across a broad set of these data centers. We do expect several of these to result in multi-site acquisition offers. Now, for a moment about our leverage and balance sheet strategy. Our June 2027 unsecured notes of $750 million are still roughly 18 months from maturity, but we have begun receiving proposals to refinance these notes. We intend to complete a refinancing transaction for new secured notes of $750 million as soon as the make-whole period expires in June of this year. Now, for our long-term goals. We anticipate our revenue growth to continue to improve and be in the 6% to 8% range.

Speaker #1: We do expect several of these to result in multi-site acquisition offers. Now, for a moment about our leverage and balance sheet strategy. Our June 2027 unsecured notes of $750 million are still roughly 18 months from maturity.

Speaker #1: But we have begun receiving proposals to refinance these notes. We intend to complete a refinancing transaction for new secured notes of $750 million as soon as the make-whole period expires in June of this year.

Dave Schaeffer: We intend to complete a refinancing transaction for new secured notes of $750 million as soon as the make-whole period expires in June of this year. Now, for our long-term goals. We anticipate our revenue growth to continue to improve and be in the 6% to 8% range.

Speaker #1: Now, for our long-term goals. We anticipate our revenue growth to continue to improve and be in the 6% to 8% range. We expect our rate of EBITDA margin to actually moderate to roughly 200 basis points a year that we will be able to deliver over a multi-year period.

Dave Schaeffer: We expect our rate of EBITDA margin to actually moderate to the roughly 200 basis points a year that we will be able to deliver over a multi-year period. You know, the nearly 800 basis points that we delivered this year was due to some extraordinary cost savings. And while we will continue to deliver these results, we do expect the rate of margin expansion to moderate. Our revenue and EBITDA guidance are meant to be multi-year goals and not intended to either be quarterly or even annual guidance. Now, I'd like to turn the call over to Tad, provide some further detail, and provide our safe harbor language. Tad will also give a further breakout of the trends in the revenues acquired from the Sprint base versus the Cogent Classic base since our acquisition in 2023.

Speaker #1: You know, the nearly 800 basis points that we delivered this year was due to some extraordinary cost savings, and while we will continue to deliver these results, we do expect the rate of margin expansion to moderate.

Speaker #1: Our revenue and EBITDA guidance are meant to be multi-year goals, and not intended to either be quarterly or even annual guidance. Now, I'd like to turn the call over to Tad to provide some further detail and provide our safe harbor language. Tad will also give a further breakout of the trends in the revenues acquired from the Sprint base versus the Cogent Classic base since our acquisition in 2023.

Speaker #1: I know this has been an area of focus for investors, and we have been able to disaggregate those revenues and now present them with clear trends and metrics.

Dave Schaeffer: I know this has been an area of focus of investors, and we have been able to disaggregate those revenues and now present them in, with clear trends and metrics. With that, we'll then open the call up for questions and answers. Tad?

Speaker #1: With that, we'll then open the call up for questions and answers. Tad, thank you. Dave, and good morning to everyone. This earnings conference call includes forward-looking statements.

Tad Weed: Thank you, Dave, and good morning to everyone. 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 other statements that may be made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. Please refer to our SEC filings for more information on the factors that could cause actual results to differ. Cogent undertakes no obligation to update or revise our forward-looking statements. If we use non-GAAP financial measures during this call, you will find these reconciled to the corresponding GAAP measurement in our earnings releases that are posted on our website at cogentco.com. Some overall comments on results and revenues.

Speaker #1: These forward-looking statements are based upon our current intent, beliefs, and expectations. These forward-looking statements, and all other statements that may be made on this call that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially.

Speaker #1: Please refer to our SEC filings for more information on the factors that could cause actual results to differ. Cogent undertakes no obligation to update or revise our forward-looking statements.

Tad Weed: Please refer to our SEC filings for more information on the factors that could cause actual results to differ. Cogent undertakes no obligation to update or revise our forward-looking statements. If we use non-GAAP financial measures during this call, you will find these reconciled to the corresponding GAAP measurement in our earnings releases that are posted on our website at cogentco.com. Some overall comments on results and revenues.

Speaker #1: If we use non-GAAP financial measures during this call, you will find these reconciled to the corresponding GAAP measurements in our earnings releases that are posted on our website at cogentco.com.

Speaker #1: Some overall comments on results and revenues. So, our total revenue for the quarter was $240.5 million and $975.8 million for the year. Our total revenue for the quarter declined sequentially by $1.4 million, or by 0.6%.

Tad Weed: So our total revenue for the quarter was $240.5 million and $975.8 million for the year. Our total revenue for the quarter declined sequentially by $1.4 million, or by 0.6%. This was an improvement from the $4.3 million, or 1.7% sequential quarterly revenue decline that we experienced last quarter. While our sequential revenue declined within our fourth quarter, our total revenue increased each month in the quarter. Our total monthly revenue increased from September to October, increased from October to November, and, excluding a change in USF revenues, increased from November to December. This month-to-month total revenue increase continued from December 2025 to January 2026. There was a negative FX impact on our quarter sequentially revenues of -$0.2 million.

Speaker #1: This was an improvement from the 4.3 million or 1.7% sequential quarterly revenue decline that we experienced last quarter. While our sequential revenue declined within our fourth quarter, our total revenue increased each month in the quarter.

Speaker #1: Our total monthly revenue increased from September to October, increased from October to November, and, excluding a change in USF revenues, increased from November to December.

Tad Weed: Our total monthly revenue increased from September to October, increased from October to November, and, excluding a change in USF revenues, increased from November to December. This month-to-month total revenue increase continued from December 2025 to January 2026. There was a negative FX impact on our quarter sequentially revenues of -$0.2 million.

Speaker #1: This month-to-month total revenue increase continued from December 2025 to January 2026. There was a negative FX impact on our quarter sequentially revenues of $0.2 million.

Speaker #1: So, for the quarter, we experienced a $2.2 million sequential decline in off-net net revenues. Our on-net revenues, including on-net wage revenues, increased by $0.9 million, or 0.6%, and our non-core revenues decreased by $0.2 million, and now those revenues have declined to only $1.2 million.

Tad Weed: So for the quarter, we experienced a $2.2 million sequential decline in Off-Net revenues. Our On-Net revenues, including On-Net wave revenues, increased by $0.9 million, or 0.6%, and our non-core revenues decreased by $0.2 million, and now those revenues have declined to only $1.2 million. Sequential wavelength revenue growth, which is On-Net, accelerated to 18.8% from 12.4% last quarter, and increased sequentially by $1.9 million. Gross margin. Our gross margin for the quarter increased sequentially by $1.6 million to $112.5 million. Our gross margin increased sequentially by 100 basis points to 46.8% from continued cost reduction and product optimization, including our focus on our On-Net products.

Speaker #1: Sequential wavelength revenue growth, which is on net, accelerated to 18.8% from 12.4% last quarter and increased sequentially by $1.9 million. Our gross margin for the quarter increased sequentially by $1.6 million to $112.5 million.

Speaker #1: Our gross margin increased sequentially by 100 basis points to 46.8%, from continued cost reduction and product optimization, including our focus on our on-net products.

Speaker #1: Our gross margin for full year 2025 increased by $46.7 million to $442.7 million. And our gross margin for full year 2025 increased by 720 basis points from 38.2% last year to 45.4% for full year 2025.

Tad Weed: Our gross margin for full year 2025 increased by $46.7 million to $442.7 million, and our gross margin for full year 2025 increased by 720 basis points, from 38.2% last year to 45.4% for full year 2025. EBITDA. Our EBITDA, not including payments under the IP Transit Agreement for the quarter, increased sequentially by $3 million to $51.7 million, and our EBITDA margin increased by 130 basis points to 21.5%. Our EBITDA for the full year, not including the IP Transit Agreement or Sprint acquisition costs, increased by $70 million to $192.8 million from $122.8 million for full year 2024.

Speaker #1: EBITDA—our EBITDA not including payments under the IP transit agreement for the quarter—increased sequentially by $3 million to $51.7 million. And our EBITDA margin increased by 130 basis points to 21.5%.

Speaker #1: Our EBITDA for the full year, not including the IP transit agreement or Sprint acquisition costs, increased by $70 million to $192.8 million from $122.8 million for full year 2024.

Speaker #1: And the EBITDA margin for this year increased by 790 basis points from 11.9% to 19.8% for full year 2025. We analyzed and classified our revenues into four network connection types.

Tad Weed: The EBITDA margin for this year increased by 790 basis points from 11.9% to 19.8% for full year 2025. We analyze and classify our revenues into four network connection types and three customer types. Our four network connection types are on-net, off-net, wavelength, and non-core. Our three customer types are NetCentric customers, corporate customers, and enterprise customers. Dave mentioned we're gonna provide some information on Sprint Wireline acquired revenue and Cogent Classic revenue. We have been hesitant to separately disclose our revenue performance related to our acquired Sprint Wireline business and our Cogent Classic business, once the operations have been fully integrated. However, we believe that the following analysis will be beneficial in understanding some of the changes in our total combined revenues.

Speaker #1: And three customer types. Our four network connection types are on-net, off-net, wavelength, and non-core. And our three customer types are net-centric customers, corporate customers, and enterprise customers.

Tad Weed: Dave mentioned we're gonna provide some information on Sprint Wireline acquired revenue and Cogent Classic revenue. We have been hesitant to separately disclose our revenue performance related to our acquired Sprint Wireline business and our Cogent Classic business, once the operations have been fully integrated. However, we believe that the following analysis will be beneficial in understanding some of the changes in our total combined revenues.

Speaker #1: Dave mentioned we're going to provide some information on Sprint Wireline acquired revenue and COGENT Classic revenue. We have been hesitant to separately disclose our revenue performance related to our acquired Sprint Wireline business and our COGENT Classic business once the operations have been fully integrated.

Speaker #1: However, we believe that the following analysis will be beneficial in understanding some of the changes in our total combined revenues. The substantial changes in the acquired Sprint wireline revenue base have masked the underlying performance of our legacy Cogent Classic business.

Tad Weed: The substantial changes in the acquired Sprint Wireline revenue base have masked the underlying performance of our legacy Cogent Classic business... So in May 2023, when we closed the transaction, the Sprint Wireline revenue base had a run rate of $39.4 million per month, or $118 million per quarter. This acquired revenue base has decreased from that $118 million per quarter at the acquisition date, to down to $43 million for this quarter. That's a $75 million quarterly revenue decline related to the Sprint Wireline revenue base, or 64% decline since the deal closed. At deal closing, our Cogent Classic revenue run rate was $155 million per quarter.

Speaker #1: So, in May 2023, when we closed the transaction, the Sprint wireline revenue base had a run rate of $39.4 million per month, or $118 million per quarter.

Speaker #1: This acquired revenue base has decreased from that $118 million per quarter at the acquisition date to down to $43 million for this quarter. That's a $75 million quarterly revenue decline related to the Sprint wireline revenue base, or a 64% decline since the deal closed.

Speaker #1: At deal closing, our COGENT Classic revenue run rate was $155 million per quarter. This quarterly revenue base has increased by 27%, or by $42 million, from that $155 million prior to close to $197 million for this quarter, the fourth quarter of 2025.

Tad Weed: This quarterly revenue base has increased by 27% or by $42 million, from that $155 million prior to close, to $197 million for this quarter, Q4 2025. Additionally, our Cogent classic revenues increased sequentially by 1.5% from the third quarter of this year, increased year-over-year by 3.1% from Q4 2024, and increased by 2.3% for full year 2025 over full year 2024. Our consolidated revenue declines have been largely attributed to the reduction in the acquired corporate and enterprise revenues from Sprint. At closing, the Sprint Wireline revenues represented a total of 42% of our total revenues, and that percentage has materially dropped from 42% down to only 18% of our total revenues at year-end.

Speaker #1: Additionally, our COGENT Classic revenues increased sequentially by 1.5% from the third quarter of this year, increased year over year by 3.1% from the fourth quarter of 2024, and increased by 2.3% for full year 2025 over full year 2024.

Tad Weed: Our consolidated revenue declines have been largely attributed to the reduction in the acquired corporate and enterprise revenues from Sprint. At closing, the Sprint Wireline revenues represented a total of 42% of our total revenues, and that percentage has materially dropped from 42% down to only 18% of our total revenues at year-end.

Speaker #1: Our consolidated revenue declines have been largely attributed to the reduction in the acquired corporate and enterprise revenues from Sprint. At closing, the Sprint wireline revenues represented a total of 42% of our total revenues, and that percentage has materially dropped from 42% down to only 18% of our total revenues at year-end.

Speaker #1: Our total corporate business was 42.7% of our revenues this quarter and 43.9% for the year. Our quarterly corporate revenues decreased by 9.1% year over year and sequentially by 2.3%.

Tad Weed: Our total corporate business was 42.7% of our revenues this quarter, and 43.9% for the year. Our quarterly corporate revenues decreased by 9.1% year-over-year, and sequentially by 2.3%. For the year, our total corporate revenues declined by 9.7%. At the closing of our acquisition of Sprint Wireline in May 2023, the Sprint Wireline corporate revenues were 30% of our total revenues. Those Sprint Wireline acquired corporate customers now represent only 10% of our total corporate revenues. The Sprint Wireline acquired corporate revenue base has decreased from a run rate of $13 million per month, or $39 million per quarter at closing, to a run rate of $2.7 million per month, or $8.1 million per quarter at year-end 2025. The same analysis for NetCentric.

Speaker #1: For the year, our total corporate revenues declined by 9.7%. At the closing of our acquisition of Sprint wireline in May 2023, the Sprint wireline corporate revenues were 30% of our total revenues.

Tad Weed: Those Sprint Wireline acquired corporate customers now represent only 10% of our total corporate revenues. The Sprint Wireline acquired corporate revenue base has decreased from a run rate of $13 million per month, or $39 million per quarter at closing, to a run rate of $2.7 million per month, or $8.1 million per quarter at year-end 2025. The same analysis for NetCentric.

Speaker #1: Those Sprint Wireline-acquired corporate customers now represent only 10% of our total corporate revenues. The Sprint Wireline-acquired corporate revenue base has decreased from a run rate of $13 million per month, or $39 million per quarter, at closing to a run rate of $2.7 million per month, or $8.1 million per quarter, at year-end 2025.

Speaker #1: The same analysis for net-centric. Our total net-centric business continues to increase and benefit from the growth in video traffic, activity related to artificial intelligence, streaming, IPv4 leasing, and wavelength sales.

Tad Weed: Our total NetCentric business continues to increase and benefit from the growth in video traffic, activity related to artificial intelligence, streaming, IPv4 leasing, and wavelength sales. Our NetCentric business was 43% of our revenues this quarter, and 40.3% for the year. Our quarterly NetCentric revenues increased by 10.4% year-over-year, and sequentially by 3.1%. For the year, our total NetCentric revenues increased by 6.8%. At the closing of our acquisition of Sprint Wireline, the Sprint Wireline NetCentric customers represented 20% of our total NetCentric revenues. Those Sprint Wireline acquired NetCentric customers now are representing only 7% of our total NetCentric revenues this quarter.

Speaker #1: Our net-centric business was 43% of our revenues this quarter and 40.3% for the year. Our quarterly net-centric revenues increased by 10.4% year over year and sequentially by 3.1%.

Speaker #1: For the year, our total net-centric revenues increased by 6.8%. At the closing of our acquisition of Sprint wireline, the Sprint wireline net-centric customers represented 20% of our total net-centric revenues.

Tad Weed: For the year, our total NetCentric revenues increased by 6.8%. At the closing of our acquisition of Sprint Wireline, the Sprint Wireline NetCentric customers represented 20% of our total NetCentric revenues. Those Sprint Wireline acquired NetCentric customers now are representing only 7% of our total NetCentric revenues this quarter.

Speaker #1: Those Sprint wireline-acquired net-centric customers now represent only 7% of our total net-centric revenues this quarter. The Sprint wireline-acquired net-centric customer revenue base has decreased from a run rate of $6 million per month, or $18 million per quarter, at closing to a current run rate of $2.9 million per month, or $8.7 million per quarter, at year-end 2025.

Tad Weed: The Sprint Wireline acquired NetCentric customer revenue base has decreased from a run rate of $6 million per month, or $18 million per quarter at closing, to a current run rate of $2.9 million per month, or $8.7 million per quarter at year-end 2025. Lastly, the enterprise business. Our total enterprise business was 14.3% of our revenues this quarter, and 15.8% of our revenues for the year. Our quarterly enterprise revenues decreased by 24.7% year-over-year, and sequentially by 5.8%, primarily due to reduction in the acquired non-core enterprise, and Off-Net low-margin enterprise revenues. For the year, total enterprise revenues declined by 20.3%.

Speaker #1: Lastly, the enterprise business. Our total enterprise business was 14.3% of our revenues this quarter and 15.8% of our revenues for the year. Our quarterly enterprise revenue decreased by 24.7% year over year and sequentially by 5.8%.

Speaker #1: Primarily due to reduction in the acquired non-core enterprise and off-net low-margin enterprise revenues. For the year, total enterprise revenues declined by 20.3%. At the closing of our acquisition, the Sprint wireline enterprise customers represented virtually 100% of our enterprise revenues, as this was a new line of customer for Cogent.

Tad Weed: At the closing of our acquisition, the Sprint Wireline enterprise customers represented virtually 100% of our enterprise revenue, revenues, as this was a new line of customer for Cogent. The Sprint Wireline acquired enterprise revenue base has decreased from a run rate of $20 million per month, or $60 million per quarter at closing, to a current run rate of $8.8 million per month, or $26.4 million per quarter at year-end 2025. These substantial changes in the acquired Wireline revenue base have masked the underlying performance of our legacy Cogent classic business. An analysis on revenue by customer connection network type. On-Net revenue. We serve our On-Net customers in 3,579 total On-Net buildings. For the year, we increased our On-Net buildings by a total of 126 On-Net buildings, similar to prior years.

Speaker #1: The Sprint wireline acquired enterprise revenue base has decreased from a run rate of $20 million per month, or $60 million per quarter at closing, to a current run rate of $8.8 million per month, or $26.4 million per quarter at year-end 2025.

Tad Weed: These substantial changes in the acquired Wireline revenue base have masked the underlying performance of our legacy Cogent classic business. An analysis on revenue by customer connection network type. On-Net revenue. We serve our On-Net customers in 3,579 total On-Net buildings. For the year, we increased our On-Net buildings by a total of 126 On-Net buildings, similar to prior years.

Speaker #1: These substantial changes in the acquired wireline revenue base have masked the underlying performance of our legacy COGENT Classic business. An analysis on revenue by customer connection network type.

Speaker #1: On-net revenue. We serve our on-net customers in 3,579 total on-net buildings for the year. We increased our on-net buildings by a total of 126 on-net buildings, similar to prior years.

Speaker #1: Our total on-net revenue, including on-net WAVE revenues, was $146.4 million for the quarter, a year-over-year increase of 7.8% and a sequential increase of 0.6%.

Tad Weed: Our total On-Net revenue, including On-Net wavelength revenues, was $146.4 million for the quarter, a year-over-year increase of 7.8%, and a sequential increase of 0.6%. Our total On-Net revenues, including On-Net wavelength revenues, increased as a percentage of our total revenue by 400 basis points to 58.4% for this year, from 54.4% for full year 2024. Off-Net revenue. Our low margin Off-Net revenue was $92.9 million for the quarter. That was a year-over-year decrease of 17.9% and a sequential decrease of 2.3%. Our Off-Net revenue results are impacted by the migration of certain Off-Net customers to On-Net, and the continued grooming and termination of acquired low-margin Off-Net contracts.

Speaker #1: Our total on-net revenues, including on-net wavelength total revenue, grew by 400 basis points to 58.4% for this year, up from 54.4% for the full year 2024. Off-net revenue.

Speaker #1: Our low-margin off-net revenue was $92.9 million for the quarter. That was a year-over-year decrease of 17.9% and a sequential decrease of 2.3%. Our off-net revenue results are impacted by the migration of certain off-net customers to on-net and the continued grooming and termination of acquired low-margin off-net contracts.

Tad Weed: Our low margin Off-Net revenue was $92.9 million for the quarter. That was a year-over-year decrease of 17.9% and a sequential decrease of 2.3%. Our Off-Net revenue results are impacted by the migration of certain Off-Net customers to On-Net, and the continued grooming and termination of acquired low-margin Off-Net contracts.

Speaker #1: Our total off-net revenues decreased to 40.7% of our revenues for this year, from 43.8% for full year 2024. Some comments on pricing: our average price per megabit for our installed base decreased sequentially by 12%, to $0.14, and by 34% year over year—essentially in line with historical trends.

Tad Weed: Our total off-net revenues decreased to 40.7% of our revenues for this year, from 43.8% for full year 2024. Some comments on pricing. Our average price per megabit for our installed base decreased sequentially by 12% to $0.14, and by 34% year-over-year, essentially in line with historical trends. Our average price per megabit for our new customer contracts was $0.06, sequential decline of 18% and 46% year-over-year. ARPU for the quarter. Our on-net IP ARPU was $509. Our off-net IP ARPU was $1,234. Our wavelength ARPU was $2,114. Our IPv4 ARPU was $0.30 per address. Churn rates. Our churn rates improved sequentially. Our on-net and off-net churn rates improved from last quarter.

Speaker #1: Our average price per megabit for our new customer contracts was $0.06, a sequential decline of 18% and 46% year over year. ARPUs for the quarter.

Tad Weed: ARPU for the quarter. Our on-net IP ARPU was $509. Our off-net IP ARPU was $1,234. Our wavelength ARPU was $2,114. Our IPv4 ARPU was $0.30 per address. Churn rates. Our churn rates improved sequentially. Our on-net and off-net churn rates improved from last quarter.

Speaker #1: Our on-net IP ARPU was $509, our off-net IP ARPU was $1,234, our wavelength ARPU was $2,114, and our IPv4 ARPU was $0.30 per address. Churn rates.

Speaker #1: Our churn rates improved sequentially. Our on-net and off-net churn rates improved from last quarter. Our churn rate this quarter was 1.2%, compared to 1.3% last quarter.

Tad Weed: Our On-Net unit monthly churn rate this quarter was 1.2%, compared to 1.3% last quarter. Our Off-Net unit monthly churn rate was 1.9%, compared to 2.1% last quarter, and our wavelength monthly churn rate has been less than 0.5%, so relatively insignificant. Traffic. Our year-over-year IP network traffic growth accelerated for the quarter. Our IP network traffic for the quarter increased sequentially by 4% and by 10% year-over-year. And for the total year, our traffic increased by 9%. Sales rep productivity. Our sales rep productivity was 4.1 units this quarter, compared to 4.6 last quarter, and 3.5 in the fourth quarter of 2024. That's compared to our long-term sales rep productivity average of 4.8. Foreign currency.

Speaker #1: Our off-net unit monthly churn rate was 1.9%, compared to 2.1% last quarter. And our wavelength monthly churn rate has been less than 0.5%—so relatively insignificant.

Speaker #1: Traffic. Our year-over-year IP network traffic growth accelerated for the quarter. Our IP network traffic for the quarter increased sequentially by 4% and by 10% year over year.

Speaker #1: And for the total year, our traffic increased 9%. Sales rep productivity—our sales rep productivity was 4.1 units this quarter compared to 4.6 last quarter and 3.5 in the fourth quarter of 2024.

Speaker #1: That's compared to our long-term sales rep productivity average of 4.8. Foreign currency: our revenue earned outside of the United States was about 20% of our revenues this quarter, similar to prior quarters.

Tad Weed: Our revenue earned outside of the United States was about 20% of our revenues this quarter, similar to prior quarters. Based upon the average euro and Canadian conversion rates so far this quarter, so the first quarter of 2026, we estimate that the FX conversion impact on sequential revenues will be positive, about $0.4 million, and year-over-year, more significant, about $3.5 million. Customer concentration. Our revenue and customer base is not highly concentrated. Our top 25 customers were 17% of our revenues this quarter, similar to prior quarters. CapEx. Our CapEx was $37 million this quarter and $187.6 million for the year, and principal payments on capital leases were $8.5 million for the quarter and $33.8 million for the year. Combined, those amounts have declined year-over-year. Comments on debt and debt ratios.

Speaker #1: Based upon the average euro and Canadian conversion rates so far this quarter, so the first quarter of 2026, we estimate that the FX conversion impact on sequential revenues would be positive, about $0.4 million, and year over year, more significant, about $3.5 million.

Tad Weed: Customer concentration. Our revenue and customer base is not highly concentrated. Our top 25 customers were 17% of our revenues this quarter, similar to prior quarters. CapEx. Our CapEx was $37 million this quarter and $187.6 million for the year, and principal payments on capital leases were $8.5 million for the quarter and $33.8 million for the year. Combined, those amounts have declined year-over-year. Comments on debt and debt ratios.

Speaker #1: Customer concentration. Our revenue and customer base is not highly concentrated. Our top 25 customers were 17% of our revenues this quarter, similar to prior quarters.

Speaker #1: Capex: Our capex was $37 million this quarter and $187.6 million for the year. Principal payments on capital leases were $8.5 million for the quarter and $33.8 million for the year.

Speaker #1: Combined, those amounts have declined year over year. Comments on debt and debt ratios—our total gross debt at par, including $623.4 million of financed lease obligations under long-term IRUs, was $2.4 billion at year-end.

Tad Weed: Our total gross debt at par, including $623.4 million of finance lease obligations under long-term IRUs, was $2.4 billion at year-end. Our net debt, total net debt of our cash, and our $203.1 million due from T-Mobile at year-end was $1.9 billion. Our leverage ratio, as calculated under our more restrictive covenants under our unsecured $750 million 2027 notes indenture, was 6.13. The secured leverage ratio was 3.8, and the fixed coverage ratio was 2.38. The definition of consolidated cash flow, similar to EBITDA, under our $600 million secured 2032 notes indenture, includes cash payments under our IP Transit Services agreement with T-Mobile, and the definition and determination of consolidated cash flow.

Speaker #1: Our net debt—total net debt of our cash and our $203.1 million due from T-Mobile at year-end—was $1.9 billion. Our leverage ratio, as calculated under our more restrictive covenants under our unsecured $750 million 2027 notes indenture, was 6.13.

Speaker #1: The secured leverage ratio was 3.8 and the fixed coverage ratio was 2.38. The definition of consolidated cash flow similar to EBITDA under our 600 million secured 2032 notes indenture includes cash payments under our IP transit services agreement with T-Mobile and the definition and determination of consolidated cash flow.

Tad Weed: The secured leverage ratio was 3.8, and the fixed coverage ratio was 2.38. The definition of consolidated cash flow, similar to EBITDA, under our $600 million secured 2032 notes indenture, includes cash payments under our IP Transit Services agreement with T-Mobile, and the definition and determination of consolidated cash flow.

Speaker #1: Payments under our IP transit agreement were $100 million for the last 12 months, so that is added to the calculation. Our leverage ratio, as calculated under the $600 million secured 2032 notes indenture, was 4.67.

Tad Weed: Payments under our IP transit agreement were $100 million for the last 12 months, so that is added to the calculation. Our leverage ratio, as calculated under the $600 million secured 2032 notes indenture, was 4.67. Our secured leverage ratio was 2.9, and lastly, fixed coverage was 3.12. Bad debt and day sales. Our day sales outstanding was 30 days at year-end, the same as last quarter, and our bad debt expense was less than 1% of our revenues for the quarter and for the year. And with that, I will turn the call back over to Dave.

Speaker #1: Our secured leverage ratio was 2.9, and lastly, fixed coverage was 3.12. Bad debt and day sales—our day sales outstanding was 30 days at year-end, the same as last quarter.

Speaker #1: And our bad debt expense was less than 1% of our revenues for the quarter and for the year. And with that, I will turn the call back over to Dave.

Speaker #1: Hey, thanks, Ted. I'd like to highlight a few of the strengths of our network—our customer base and our sales force. Now, for some details around our NetCentric performance.

Dave Schaeffer: Hey, thanks, Tad. I'd like to highlight a few of the strengths of our network, our customer base, and our sales force. Now, for some details around our NetCentric performance. We continue to be a direct beneficiary of a number of trends in the industry, whether it be artificial intelligence or streaming activity. At year-end, we're able to sell wavelength services in 1,068 data centers across North America, with a provisioning interval of approximately 30 days. At year-end, we're selling IP services globally in 57 countries and 1,902 data centers. At year-end, we were directly connected to 7,659 networks. That is the largest number of directly connected networks of any service provider on the internet. Twenty-two of these were peers, and the remaining 7,637 networks were, in fact, Cogent transit customers.

Speaker #1: We continue to be a direct beneficiary of a number of trends in the industry, whether it be artificial intelligence or streaming activity. At year-end, we're able to sell wavelength services in 1,068 data centers across North America, with a provisioning interval of approximately 30 days.

Speaker #1: At year-end, we're selling IP services globally in 57 countries and 1,902 data centers. At year-end, we were directly connected to 7,659 networks—that is the largest number of directly connected networks of any service provider on the internet. Twenty-two of these were peers, and the remaining 7,637 networks were, in fact, Cogent transit customers.

Dave Schaeffer: At year-end, we're selling IP services globally in 57 countries and 1,902 data centers. At year-end, we were directly connected to 7,659 networks. That is the largest number of directly connected networks of any service provider on the internet. Twenty-two of these were peers, and the remaining 7,637 networks were, in fact, Cogent transit customers.

Speaker #1: Now for some details around our sales force. We remain focused on sales force productivity and our disciplined about managing out underperformers. Our sales force turnover rate was 5.4% a month in the quarter down from a peak turnover rate of 8.7% during the height of the pandemic and also below our historical average turnover rate of 5.7% of the sales force per month.

Dave Schaeffer: Now for some details around our sales force. We remain focused on sales force productivity and are disciplined about managing out underperformers. Our sales force turnover rate was 5.4% a month in the quarter, down from a peak turnover rate of 8.7% during the height of the pandemic, and also below our historical average turnover rate of 5.7% of the sales force per month. At year-end, we had a total of 590 quota-bearing reps. Our sales force included 289 sales professionals focused entirely on the net-centric market, 289 sales professionals focused on the corporate market, and finally, 12 sales professionals focused on the enterprise market. In summary, we have made significant progress in a number of areas.

Speaker #1: At year-end, we had a total of 590 quota-bearing reps. Our sales force included 289 sales professionals focused entirely on the NetCentric market, 289 sales professionals focused on the corporate market, and finally, 12 sales professionals focused on the enterprise market.

Dave Schaeffer: At year-end, we had a total of 590 quota-bearing reps. Our sales force included 289 sales professionals focused entirely on the net-centric market, 289 sales professionals focused on the corporate market, and finally, 12 sales professionals focused on the enterprise market. In summary, we have made significant progress in a number of areas.

Speaker #1: In summary, we have made significant progress in a number of areas. We've improved our revenue trajectory and performance, and have returned to sequential revenue growth, which we expect to continue.

Dave Schaeffer: We've improved our revenue trajectory and performance and have returned to sequential revenue growth, which we expect to continue. We are improving our margins and growing our EBITDA due to our diligence, cost reduction, and our focus in selling profitable on-net services. Over 80% of our sales in Q4 2025 were for on-net services. We have a clear plan to refinance our 2027 $750 million unsecured notes with a new, longer duration, $750 million secured note offering. We are actively working to monetize some of the acquired Sprint facilities, which will further accelerate our delevering and allow us to resume a more aggressive return of capital program to our equity holders. We have effectively now completed the integration of Sprint and Cogent's network into a unified network and business.

Speaker #1: We are improving our margins and growing our EBITDA due to our diligence and cost reduction and our focus in selling profitable on-net net services.

Speaker #1: Over 80% of our sales in the fourth quarter of 2025 were for on-net services. We have a clear plan to refinance our 2027 $750 million unsecured notes with a new, longer duration $750 million secured note offering.

Dave Schaeffer: We have a clear plan to refinance our 2027 $750 million unsecured notes with a new, longer duration, $750 million secured note offering. We are actively working to monetize some of the acquired Sprint facilities, which will further accelerate our delevering and allow us to resume a more aggressive return of capital program to our equity holders. We have effectively now completed the integration of Sprint and Cogent's network into a unified network and business.

Speaker #1: We are actively working to monetize some of the acquired Sprint facilities which will further accelerate our delivering and allow us to resume a more aggressive return of capital program to our equity holders.

Speaker #1: We are effectively have now completed the integration of Sprint and COGENT's network into a unified network and business. We have converted all of the intended Sprint switch sites that we intend to convert into data centers as program is material complete and will result in a continued reduction in our capital intensity.

Dave Schaeffer: We have converted all of the intended Sprint switch sites that we intend to convert into data centers. This program is materially complete and will result in a continued reduction in our capital intensity. We are enthusiastic and optimistic about our wavelength business to add to our product portfolio. Our wavelength services are differentiated due to the uniqueness of the routes, the breadth of our footprint, our efficient provisioning, and aggressive pricing. The reliability that we deliver is unparalleled. We have, since inception, offered superior services, a broad footprint of revenue-rich locations, expedited provisioning, and market-leading disruptive pricing. That is why Cogent continues to be a market leader in the products that we sell. With that, I'd like to open the floor up for questions.

Speaker #1: We are enthusiastic and optimistic about our wavelength business to add to our product portfolio. Our wavelength services are differentiated due to the uniqueness of the routes, the breadth of our footprint, our efficient provisioning, and aggressive pricing.

Speaker #1: The reliability that we deliver is unparalleled. We have, since inception, offered superior services, a broad footprint of revenue-rich locations, expedited provisioning, and market-leading disruptive pricing.

Speaker #1: That is why Cogent continues to be a market leader in the products that we sell. With that, I'd like to open the floor up for questions.

Speaker #2: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. At this time, I would like to give an instruction in order to ask a question.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. At this time, I would like to give an instruction. In order to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, simply press star one again. Our first question comes from the line of Chris Show with UBS. Please go ahead.

Speaker #2: Please press telephone keypad. And if you would like to withdraw your question, simply press star one again. Our first question comes from the line of Chris Scholl with UBS.

Speaker #2: Please go ahead.

Speaker #3: Great, thank you. Dave, you had previously talked about returning to sequential revenue growth while sustaining sequential EBITDA growth each quarter. Can you just update us on how you're thinking about total company revenues and EBITDA for 2026 as that Sprint mix continues to fall?

Christopher Schoell: Great. Thank you. Dave, you had previously talked about returning to sequential revenue growth while sustaining sequential EBITDA growth each quarter. Can you just update us how you're thinking about total company revenues and EBITDA for 2026 as that Sprint mix continues to fall? And as we think about the Waves business scaling in 2026, any guardrails you can share on the number of connections or revenues you believe are achievable based on what you're seeing in the business right now? Thank you.

Speaker #3: And as we think about the waves business scaling in 2026, any guardrails you can share on the number of connections or revenues you believe are achievable based on what you're seeing in the business right now?

Speaker #3: Thank you.

Speaker #4: Yeah. Hey, thanks for the questions, Chris. So as we mentioned, we are not in the habit of giving specific quarterly or annual guidance, but I do believe that after the significant runoff in the Sprint-acquired revenues as Tad pointed out, 64% of the revenues that we acquired two and a half years ago have attributed.

Dave Schaeffer: Yeah. Hey, thanks for the questions, Chris. So, as we mentioned, we are not in the habit of giving specific quarterly or annual guidance, but I do believe that after the significant runoff in the Sprint-acquired revenues, as Tad pointed out, 64% of the revenues that we acquired two and a half years ago have attrited. And during that period, the Cogent revenues, which represented 57% of the combined company, have grown at 27%. As a result of that, we have had now about 10 sequential quarters of revenue growth. We will be back to positive revenue growth on a quarterly basis from this point forward, and we anticipate that the annual rate of growth, on average, over a multi-year period, will be in that 6% to 8% range. We also have a small amount of further cost reductions that will contribute to margin expansion.

Speaker #4: And during that period, the Cogent revenues, which represented 57% of the combined company, had grown at 27%. As a result of that, we have had now about 10 sequential quarters of revenue growth.

Dave Schaeffer: As a result of that, we have had now about 10 sequential quarters of revenue growth. We will be back to positive revenue growth on a quarterly basis from this point forward, and we anticipate that the annual rate of growth, on average, over a multi-year period, will be in that 6% to 8% range. We also have a small amount of further cost reductions that will contribute to margin expansion.

Speaker #4: We will be back to positive revenue growth on a quarterly basis from this point forward. And we anticipate that the annual rate of growth, on average over a multi-year period, will be in that 6 to 8 percent range.

Speaker #4: We also have a small amount of further cost reductions that will contribute to margin expansion. But the primary driver of margin expansion going forward will continue to be the revenue mix shift and the focus on on-net services.

Dave Schaeffer: But the primary driver of margin expansion going forward will continue to be the revenue mix shift and the focus on On-Net services. You know, 80% of our sales in the quarter were On-Net. We have improved the base from 47% On-Net immediately after closing to 61%. We think that percentage will continue to improve and allow us to achieve that, at minimum, 200 basis point rate of margin expansion. You know, the reality is we did nearly 800 basis points last year. That is probably not sustainable over a multi-year period, but we do have some tailwinds there. And then for your question around WAVE. You know, we have the largest North American WAVE footprint. We are beginning to gain credibility with customers. We saw an acceleration in our revenue recognition and installations.

Speaker #4: You know, 80% of our sales in the quarter were on-net. We have improved the base from 47% on-net immediately after closing to 61%.

Speaker #4: We think that percentage will continue to improve and allow us to achieve at minimum a 200 basis point rate of margin expansion. You know, the reality is we did nearly 800 basis points last year; that is probably not sustainable over a multi-year period, but we do have some tailwinds there.

Dave Schaeffer: You know, the reality is we did nearly 800 basis points last year. That is probably not sustainable over a multi-year period, but we do have some tailwinds there. And then for your question around WAVE. You know, we have the largest North American WAVE footprint. We are beginning to gain credibility with customers. We saw an acceleration in our revenue recognition and installations.

Speaker #4: And then for your question around wave, you know, we have the largest North American wave footprint. We are beginning to gain credibility with customers.

Speaker #4: We saw an acceleration in our revenue recognition and installations. We expect those trends to continue, and because our wavelength products are virtually all on-net, they are significant contributors to our margin expansion.

Dave Schaeffer: We expect those trends to continue, and because our wavelength products are virtually all On-Net, they are significant contributors to our margin expansion. Another way to kind of look at, you know, the markets that we operate in. In our On-Net multi-tenant footprint, we today have about a 35% market share. That means we can continue to grow there, but, you know, it is harder because we already have over 1/3 of the customers as Cogent customers. In the NetCentric market for IP services, we are the largest provider globally and have 25% market share. We will continue to gain share and grow that business, but again, you know, with 25% share, it becomes incrementally more difficult. And what's encouraging to us about wavelengths is the fact that we have less than 2% market share in North America.

Speaker #4: Another way to kind of look at, you know, the markets that we operate in—in our on-net multi-tenant footprint, we today have about a 35% market share.

Speaker #4: That means we can continue to grow there, but, you know, it is harder because we already have over a third of the customers as Cogent customers.

Speaker #4: In the net-centric market for IP services, we are the largest provider globally and have a 25% market share. We will continue to gain share and grow that business.

Dave Schaeffer: In the NetCentric market for IP services, we are the largest provider globally and have 25% market share. We will continue to gain share and grow that business, but again, you know, with 25% share, it becomes incrementally more difficult. And what's encouraging to us about wavelengths is the fact that we have less than 2% market share in North America.

Speaker #4: But again, you know, with 25% share, it becomes incrementally more difficult. And what's encouraging to us about wavelengths is the fact that we have less than 2% market share in North America.

Speaker #4: We are now establishing our credibility with 518 sites now having actual reference customers in them, and nearly 1,100 sites wave-enabled. We think that our rate of wavelength growth will accelerate and help us drive that kind of 80/20 mix and incremental business.

Dave Schaeffer: We are now establishing our credibility with 518 sites now having actual reference customers in them, and nearly 1,100 sites WAVE-enabled. We think that our rate of wavelength growth will accelerate and help us drive that kind of 80/20 mix in incremental business.

Speaker #3: Great. Thank you, Dave.

Tad Weed: Great. Thank you, Dave.

Christopher Schoell: Great. Thank you, Dave.

Speaker #4: Okay. Thanks, Chris.

Dave Schaeffer: Okay, thanks, Chris.

Speaker #3: Our next question comes from the line of Gregory Williams with TV Calvin. Please go ahead.

Operator: Our next question comes from the line of Gregory Williams with TD Cowen. Please go ahead.

Speaker #5: Hey, good morning. Sam on for Greg Williams. Thanks for taking our questions. Two, if I may. First on the waves business, we mentioned before that the goal is to get the funnel to the waves funnel to about 10,000.

Sam: Hey, good morning, Sam. On for Greg Williams. Thanks for taking our questions. Two, if I may. First-

[Analyst] (TD Cowen): Hey, good morning, Sam. On for Greg Williams. Thanks for taking our questions. Two, if I may. First-

Dave Schaeffer: Sure

Sam: ... on the Waves business. We've mentioned before that the goal was to get the funnel to the Waves funnel to about 10,000. Is the idea to get the funnel to 10,000, and it kind of stays in that range because you install the backlog as it comes in, or do you expect the funnel to grow from there? And second, on data centers, you mentioned the contract changes that pushed out the LOI for the two data center assets mentioned on the Q3 call. Is the expectation this transaction will still close? And if so, is the $144 million a taxable event, or is there some sort of tax shield from the Sprint deal? Thanks.

[Analyst] (TD Cowen): ... on the Waves business. We've mentioned before that the goal was to get the funnel to the Waves funnel to about 10,000. Is the idea to get the funnel to 10,000, and it kind of stays in that range because you install the backlog as it comes in, or do you expect the funnel to grow from there? And second, on data centers, you mentioned the contract changes that pushed out the LOI for the two data center assets mentioned on the Q3 call. Is the expectation this transaction will still close? And if so, is the $144 million a taxable event, or is there some sort of tax shield from the Sprint deal? Thanks.

Speaker #5: Is the idea to get the funnel to 10,000 and it kind of stays in that range because you install the backlog as it comes in, or do you expect the funnel to grow from there?

Speaker #5: And second, on data centers: you mentioned the contract changes that pushed out the LOI. For the two data center assets mentioned on the Q3 call, is the expectation that this transaction will still close?

Speaker #5: And if so, is the $144 million a taxable event, or is there some sort of tax yield from the Sprint deal? Thanks.

Speaker #4: Yeah. Let me take those in reverse order. On the LOI that we announced last quarter, the counterparty came back to us and looked for us to provide more than 50% of the agreed-to purchase price in owner financing.

Dave Schaeffer: Yeah. Let me take those in reverse order. On the LOI that we announced last quarter, the counterparty came back to us and looked for us to provide more than 50% of the agreed to purchase price in owner financing. Since we had a number of other interested parties who had submitted backup offers on those two facilities, as well as a broader set of facilities, we decided to terminate that agreement at our choice, you know, and then reengage with some of those parties. We are far along in those negotiations and hope to be able to announce something soon, and that announcement may be for a broader set of assets. Now, to the tax consequences, I'll let Tad touch on that.

Speaker #4: Since we had a number of other interested parties who had submitted backup offers on those two facilities, as well as a broader set of facilities, we decided to terminate that agreement at our choice and then re-engage with some of those parties.

Speaker #4: We are far along in those negotiations and hope to be able to announce something soon. And that announcement may be for a broader set of assets.

Speaker #4: Now, to the tax consequences, I'll let Tad touch on that.

Speaker #5: Sure. So as a reminder, we paid only $1 for the Sprint business. So the tax basis is essentially the assumed liabilities, which is minimal in both the buildings and the network that was acquired.

Tad Weed: Sure. So as a reminder, we paid only $1 for the Sprint business, so the tax basis is essentially the assumed liabilities, which is minimal in both the buildings and the network that was acquired. However, we have material NOLs this year from the tax bill from 2025, and given the bonus depreciation deduction, we expect to continue to incur tax losses to offset any gain on the buildings going forward. So while it is a taxable event, creating taxable income, we don't think on a net basis it will result in income taxes being paid.

Speaker #5: However, we have material NOLs this year from the tax bill from 2025. And given the bonus depreciation deduction, we expect to continue to incur tax losses to offset any gain on the buildings going forward.

Speaker #5: So, while it is a taxable event, creating taxable income, we don't think on a net basis it will result in income taxes being paid.

Speaker #4: And now, Sam, I'll touch on your waves question. You know, while we were in the process of enabling the footprint, we felt it was critical to give funnel KPIs to show expressions of interest by customers.

Dave Schaeffer: Now, Sam, I'll touch on your Waves question. You know, while we were in the process of enabling the footprint, we felt it was critical to give funnel KPIs to show expressions of interest by customers. We have tried to be clear with investors that we do not give funnel data, you know, routinely for our other products, and we're treating wavelengths now as any other product. Now, we do, in our investor presentation, typically show both our on-net and off-net conversion rates for the previous quarter. We intend to continue to do that. Our funnel is continuing to grow, but we will not be reporting specific numbers.

Speaker #4: We have tried to be clear with investors that we do not give funnel data routinely for our other products, and we're treating wavelengths now as any other product.

Speaker #4: Now, we do, in our investor presentation, typically show both our on-net and off-net conversion rates for the previous quarter. We intend to continue to do that.

Speaker #4: Our funnel is continuing to grow, but we will not be reporting specific numbers. However, we do anticipate that with the footprint we now have, and the credibility we are earning with existing customers, we are starting to see a larger percentage of their wave opportunities being shown to us for bid. As a result of that, we will close more and see further acceleration in the waves business.

Dave Schaeffer: But we do anticipate, with the footprint that we now have and the credibility that we are earning with existing customers, we are starting to see a larger percentage of their wave opportunities being shown to us for bid. And as a result of that, we will close more and see further acceleration in the waves business.

Speaker #5: Great. Thank you both.

Operator: Great. Thank you, both.

[Analyst] (TD Cowen): Great. Thank you, both.

Speaker #4: Okay. Thanks.

Speaker #3: Our next question comes from the line of Sebastiano Petty with JP Morgan. Please go ahead.

Dave Schaeffer: Thanks.

Operator: Our next question comes from the line of Sebastiano Petti with JP Morgan. Please go ahead.

Speaker #5: Hi. Thanks for taking the question. Dave, just a quick follow-up on the waves business there. Could you update us on the level of installed but not yet billed balance in the quarter?

Sebastiano Petti: Hi, thanks for taking the question. Dave, just a quick follow-up on the Waves business there. Could you update us on the level of installed but not yet billed balance in the quarter? Did that grow off of Q3? Because I think last earnings probably talked about maybe a few hundred Waves had been installed, but not yet billed. And so what is the progress there? And then I have a follow-up.

Speaker #5: Did that grow off of the third quarter? Because I think last earnings probably talked about maybe a few hundred waves had been installed but not yet billed.

Speaker #5: And so, what is the progress there? And then I'll have a follow-up.

Speaker #4: Yeah. Hey, Sebastiano. So, two points. First of all, in the quarter, we actually saw the unit number of waves improve, which is an indication that we were eating into that backlog.

Dave Schaeffer: Yeah. Hey, Sebastiano. So, two points.

Sebastiano Petti: It is.

Dave Schaeffer: First of all, in the quarter, we actually saw the unit number of Waves improve, which is an indication that we were eating into that backlog, but we also have been building an additional backlog, and I would say that the installed but not yet built base is comparable this quarter to where it was at the end of Q3.

Speaker #4: But we also have been building an additional backlog. And I would say that the install-but-not-yet-billed base is comparable this quarter to where it was at the end of third quarter.

Speaker #5: Got it. That's helpful. And then I guess maybe just help us think about, back to the data centers to some extent. I mean, I think you did mention that there were some other data centers that had been in active discussions last quarter.

Sebastiano Petti: Got it. That's helpful. And then I guess maybe just help us think about, back to the data centers, to some extent. I mean, I think you did mention that there were some other data centers that had been in active discussions last quarter. And so while the LOI that you just spoke of, in Q3, that's kind of now been terminated, what was the progress on some of the other, I guess, remaining data centers that were in active discussions? Did those progress? And I guess maybe help us think about, as you look at your debt refinancing and the stack later this year, I mean, yes, you talked about trying to perhaps refinance with $750 million of secured.

Speaker #5: And so, while the LOI that you spoke of in the third quarter—that's kind of now been terminated—what was the progress on some of the other, I guess, remaining data centers that were in active discussions?

Speaker #5: Did those progress? And I guess maybe help us think about, as you look at your debt refinancing and the stack later this year— I mean, yes, you talked about trying to perhaps refinance with $750 million of secured.

Speaker #5: I mean, is there some level of assumed cash proceeds from asset sales anticipated in the intervening period as well? Which probably helps maybe reduce the prevailing interest rate you might get at that time.

Sebastiano Petti: I mean, is there some level of assumed cash proceeds from asset sales anticipated in the intervening period as well, which probably helps, you know, maybe reduce the prevailing interest rate you might get at that time? Thank you.

Speaker #5: Thank you.

Speaker #4: Yeah, so really, three different questions. The first one is, do some of the backup offers on the two facilities that we had mentioned previously cover those facilities and others?

Dave Schaeffer: Yeah, so really three different questions. The first one is, some of the backup offers on the two facilities that we had mentioned previously cover those facilities and others. So some parties were not particularly interested in moving forward without those facilities potentially being included. So it was not a one-for-one, meaning that there was a backup just for the two facilities that were under LOI. And our view was that while there was no difference of opinion on price, we felt that we would be better served with an all-cash purchase rather than one that had us taking more than 50% of the purchase price in the form of a secured note against the assets. In our refinancing, we are not assuming that there will be proceeds from the data center sales, although I do think there will be some proceeds.

Speaker #4: So some parties were not particularly interested in moving forward without those facilities potentially being included. So it was not a one-for-one, meaning that there was a backup just for the two facilities that were under LOI.

Dave Schaeffer: And our view was that while there was no difference of opinion on price, we felt that we would be better served with an all-cash purchase rather than one that had us taking more than 50% of the purchase price in the form of a secured note against the assets. In our refinancing, we are not assuming that there will be proceeds from the data center sales, although I do think there will be some proceeds.

Speaker #4: And our view was that, while there was no difference of opinion on price, we felt that we would be better served with an all-cash purchase rather than one that had us taking more than 50% of the purchase price in the form of a secured note against the assets.

Speaker #4: In our refinancing, we are not assuming that there will be proceeds from the data center sales although I do think there will be some proceeds.

Speaker #4: They are not baked into the point that I made around the timing of the refinancing. Our plan is to refinance the unsecured notes with secured notes, dollar for dollar—no increase or decrease—in aggregate face value.

Dave Schaeffer: They are not baked into the point that I made around the timing of the refinancing. You know, our plan is to refinance the unsecured notes with secured notes, dollar for dollar, no increase or decrease in aggregate face value, and do that in a way that allows us to avoid paying the make-whole, which would be due in June, anytime between now and mid-June of about $13 million. The final point I will make on that is that the proceeds for the data center sale would be reflected as cash on our entire balance sheet, but the proceeds do not go into Cogent Group, which is the borrower group of both the secured and unsecured debt.

Speaker #4: And do that in a way that allows us to avoid paying the make-whole, which would be due at any time between now and mid-June, of about $13 million.

Speaker #4: The final point I will make on that is that the proceeds from the data center sale would be reflected as cash on our entire balance sheet.

Speaker #4: But the proceeds do not go into COGENT Group which is the borrower group of both the secured and unsecured debt. We may elect to contribute some of that cash to Group, but we're well within the coverage ratios both in terms of secured and total debtedness and also in debt service coverage.

Dave Schaeffer: We may elect to contribute some of that cash to Group, but we're well within the coverage ratios, both in terms of secured and total indebtedness and also in debt service coverage. So there's no requirement for us to contribute that capital, but it would be available at an unrestricted sister entity, Cogent Infrastructure, and therefore could be used to either inject that capital into Cogent Group, the borrower, or dividend back to Cogent Holdings, which can then be used for the benefit of shareholders.

Speaker #4: So there's no requirement for us to contribute that capital, but it would be available at an unrestricted sister entity, COGENT Infrastructure, and therefore could be used to either inject that capital into COGENT Group, the borrower, or dividend that to COGENT Holdings, which can then be used for the benefit of shareholders.

Tad Weed: Thank you, Dave.

Sebastiano Petti: Thank you, Dave.

Speaker #5: Thank you, Dave.

Speaker #4: Thanks.

Dave Schaeffer: Thanks.

Speaker #3: Our next question comes from the line of Frank Luthen with Raymond James. Please go ahead.

Operator: Our next question comes from the line of Frank Lutton with Raymond James. Please go ahead.

Speaker #5: Great. Thank you. So on the data centers, I think you'd originally kind of focused on 9 or 10 million per megawatt. I mean, what do you think the market is for that now?

Frank Louthan: Great. Thank you. So on the data centers, I think you'd originally kind of focused on, you know, 9 or 10 million per megawatt. I mean, where do you think the market is for that now? And why not maybe try and lease those out and then get a multiple on that value? And then what additional room do you have on pricing and maybe leasing additional IPv4 licenses? Thank you.

Speaker #5: And why not maybe try and lease those out, and then get a multiple on that value? And then, what additional room do you have on pricing, and maybe leasing additional IPv4 licenses?

Speaker #5: Thank you.

Speaker #4: Hi. Hey, Frank. Let me take those again in reverse order in terms of IPv4 leasing. We saw a material acceleration in our leasing, but a lower price, as we did two wholesale transactions of large blocks.

Dave Schaeffer: Hey, Frank. Let me take those again in reverse order. In terms of IPv4 leasing, we saw a material acceleration in our leasing, but at lower price, as we did 2 wholesale transactions of large blocks. We are continuing both on a retail and wholesale strategy. Today, we're about 46% of our addresses are leased, and approximately 4% of our addresses are allocated to customers at no cost. This is nothing new. It's been part of our strategy to win business since, you know, Cogent's inception. But we do still have half of our address space that is sitting fallow. We have greatly improved the marketability of that address space by being able to deploy RPKI or additional security features across those addresses, which have made them more desirable to counterparties. And we anticipate continuing to see growth in our IPv4 leasing business.

Speaker #4: We are continuing both on a retail and wholesale strategy. Today, about 46% of our addresses are leased, and approximately 4% of our addresses are allocated to customers at no cost.

Speaker #4: This is nothing new. It's been part of our strategy to win business since COGENT's inception. But we do still have half of our address space that is sitting fallow.

Dave Schaeffer: But we do still have half of our address space that is sitting fallow. We have greatly improved the marketability of that address space by being able to deploy RPKI or additional security features across those addresses, which have made them more desirable to counterparties. And we anticipate continuing to see growth in our IPv4 leasing business.

Speaker #4: We have greatly improved the marketability of that address space by being able to deploy RPKI or additional security features across those addresses, which has made them more desirable to counterparties.

Speaker #4: And we anticipate continuing to see growth in our IPv4 leasing business. The 44% year-over-year growth in that business, again, was extraordinary. I'm not sure we can repeat that, but we will continue to see further growth.

Dave Schaeffer: The 44% year-over-year growth in that business, again, was extraordinary. I'm not sure we can repeat that, but we will continue to see further growth. Now to the data centers. You know, I think when we established a go-to-market strategy in the spring of 2024 and announced that we were going to begin the capital investment to convert these facilities, we looked at both public trading comps as well as transactions in the private market. If anything, over the past year, data center space has become more scarce and valuations have improved. Now, we are fully conscious of the fact that our data centers are repurposed switch sites and not purpose-built campuses, which are different and attract a different customer base. We have done a minimal amount of leasing and have been focused mostly on the sales process.

Speaker #4: Now, to the data centers. I think when we established a go-to-market strategy in the spring of 2024 and announced that we were going to begin the capital investment to convert these facilities.

Speaker #4: We looked at both public trading comps as well as transactions in the private market. If anything, over the past year, data center space has become more scarce and valuations have improved.

Dave Schaeffer: If anything, over the past year, data center space has become more scarce and valuations have improved. Now, we are fully conscious of the fact that our data centers are repurposed switch sites and not purpose-built campuses, which are different and attract a different customer base. We have done a minimal amount of leasing and have been focused mostly on the sales process.

Speaker #4: Now, we are fully conscious of the fact that our data centers are repurposed switch sites and not purpose-built campuses, which are different and attract a different customer base.

Speaker #4: We have done a minimal amount of leasing and have been focused mostly on the sales process. I think we feel that, based on the number of sites that are in active discussion and the number of counterparties, we will absolutely be monetizing through sale a significant portion of the footprint.

Dave Schaeffer: I think we feel that based on the number of sites that are in active discussion and the number of counterparties, that we will absolutely be monetizing through sale, a significant portion of the footprint. And in terms of exact price per megawatt, we are not going to disclose that because that would impact our ability to maximize value through these negotiations. But as Tad pointed out, other than the capital that we've invested, we have no real basis in these assets. And in fact, because the assets sit at Cogent Infrastructure, they represent a negative EBITDA cost that's not burdening the borrower, Cogent Group, but is a drag on the entire complex. And by selling these data centers, we both get the cash proceeds as well as a reduction in operating expenses.

Speaker #4: And in terms of exact price per megawatt, we are not going to disclose that because that would impact our ability to maximize value through these negotiations.

Speaker #4: But as Tad pointed out, other than the capital that we've invested, we have no real basis in these assets. And in fact, because the assets sit at COGENT Infrastructure, they represent a negative EBITDA cost that's not burdening the borrower of COGENT Group, but is a drag on the entire complex.

Dave Schaeffer: But as Tad pointed out, other than the capital that we've invested, we have no real basis in these assets. And in fact, because the assets sit at Cogent Infrastructure, they represent a negative EBITDA cost that's not burdening the borrower, Cogent Group, but is a drag on the entire complex. And by selling these data centers, we both get the cash proceeds as well as a reduction in operating expenses.

Speaker #4: And by selling these data centers, we both get the cash proceeds as well as a reduction in operating expenses.

Speaker #5: Great. Thank you very much.

Frank Louthan: Great. Thank you very much.

Speaker #4: Thanks.

Dave Schaeffer: Thanks.

Speaker #3: Our next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Please go ahead.

Operator: Our next question comes from the line of Brandon Nisple with KeyBanc Capital Markets. Please go ahead.

Speaker #6: Hi. Thanks for taking the question. And we appreciate the analysis on the sprint revenue versus COGENT Classic. Wanted to understand and ask a few questions there.

Brandon Nispel: Hi, thanks for taking the question, and, you know, appreciate the analysis on the Sprint revenue versus Cogent Classic. Wanted to understand and ask a few questions there. First, maybe just can you help us understand how you came up with that analysis? Because I think in the past, you've said it's sort of difficult or impossible to sort of delineate between the two businesses once you integrated. Second, you know, what, what changed versus your expectations? I think, Dave, when you closed that acquisition, you said you'd probably, you know, be at more of a run rate of $350 million versus the $190 million annualized run rate that you gave us today. And then, where do you think the bottom is? What do you think that business does in terms of revenue in 2026? Thanks.

Speaker #6: First, maybe, can you help us understand how you came up with that analysis? Because I think in the past, you've said it's sort of difficult or impossible to delineate between the two businesses once you integrated.

Brandon Nispel: Second, you know, what, what changed versus your expectations? I think, Dave, when you closed that acquisition, you said you'd probably, you know, be at more of a run rate of $350 million versus the $190 million annualized run rate that you gave us today. And then, where do you think the bottom is? What do you think that business does in terms of revenue in 2026? Thanks.

Speaker #6: Second, what changed versus your expectations? I think, Dave, when you closed that acquisition, you said you'd probably be at more of a run rate of $350 million versus the $190 million annualized run rate that you gave us today.

Speaker #6: And then, where do you think the bottom is? What do you think that business does in terms of revenue in 2026? Thanks.

Dave Schaeffer: So, I'll take those again in reversal order. One, I think that business is continuing to deteriorate, both based on the nature of the customers and the discipline that we have applied to ensuring that the services we sell have an adequate margin. While we realize that the Off-Net enterprise customer base is inherently less profitable, in fact, even after a diligent effort of trying to bring enterprise business On-Net, we have only been able to get to an 88% Off-Net and 12% On-Net mix, because many of these enterprises operate globally across a footprint that is just not economic to bring On-Net. And therefore, we're going to be saddled with that lower margin portion of our revenue stream, but we do intend to make sure that the margins are adequate.

Speaker #4: Sure. I'll take those again in reverse order. One, I think that business is continuing to deteriorate, both based on the nature of the customers and the discipline that we have applied to ensuring that the services we sell have an adequate margin.

Speaker #4: While we realize that the off-net enterprise customer base is inherently less profitable, in fact, even after a diligent effort of trying to bring enterprise business on-net, we have only been able to get to an 88% off-net and 12% on-net mix.

Speaker #4: Because many of these enterprises operate globally across a footprint that is just not economic to bring on net. And therefore, we're going to be saddled with that lower margin portion of our revenue stream.

Speaker #4: But we do intend to make sure that the margins are adequate. We have virtually completed the burn-off of the non-core products and the vast majority of the undesirable revenue.

Dave Schaeffer: We have virtually completed the burn-off of the non-core products and the vast majority of the undesirable revenue. But with that said, we're still experiencing significant monthly and quarterly sequential degradation in that business. You know, I had projected the 10.9% rate of decline that we were seeing from Sprint. We thought that we could maintain that rate of decline and migrate customers to more profitable products. What we, in fact, found was that many of those customers actually intended to go away independent of our acquisition at an accelerating rate, and then that was further compounded by the discipline that we applied. You know, I think it will continue to decline. We will continue to report on it. Now, in terms of why we did this and how, it was a very arduous and manual task.

Speaker #4: But with that said, we're still experiencing significant monthly and quarterly sequential degradation. In that business, I had projected the 10.9% rate of decline that we were seeing from Sprint.

Speaker #4: We thought that we could maintain that rate of decline and migrate customers to more profitable products. What we, in fact, found was that many of those customers actually intended to go away independent of our acquisition at an accelerating rate.

Dave Schaeffer: What we, in fact, found was that many of those customers actually intended to go away independent of our acquisition at an accelerating rate, and then that was further compounded by the discipline that we applied. You know, I think it will continue to decline. We will continue to report on it. Now, in terms of why we did this and how, it was a very arduous and manual task.

Speaker #4: And then that was further compounded by the discipline that we applied. I think it will continue to decline. We will continue to report on it.

Speaker #4: Now, in terms of why we did this and how, it was a very arduous and manual task. We had to go into the nearly 1,300 acquired customers and look at every individual order on an order-by-order basis.

Dave Schaeffer: We had to go into the nearly 1,300 acquired customers and look at every individual order on an order-by-order basis. It was a very manual process, but I do believe, based on concerns I was hearing from investors, that this was an extremely important metric that they cared about, and we then basically invested what was effectively a full-time person to do this analysis. We will be able to do this going forward, and I think it gives an investor a better lens on how Cogent's business is performing versus the acquired business, as well as the mix shift that we are focused on in being more On-Net. You know, the way to improve our cash flow going forward is growth in top line, but growth in top line of more profitable business.

Speaker #4: It was a very manual process. But I do believe, based on concerns I was hearing from investors, that this was an extremely important metric that they cared about.

Speaker #4: And we then basically invested what was effectively a full-time person to do this analysis. We will be able to do this going forward, and I think it gives an investor a better lens on how Cogent's business is performing versus the acquired business, as well as the mix shift that we are focused on and being more on-net.

Dave Schaeffer: We will be able to do this going forward, and I think it gives an investor a better lens on how Cogent's business is performing versus the acquired business, as well as the mix shift that we are focused on in being more On-Net. You know, the way to improve our cash flow going forward is growth in top line, but growth in top line of more profitable business.

Speaker #4: The way to improve our cash flow going forward is growth and top line, but growth and top line of more profitable business. And the 80% on net that we sold in Q4 is actually better than we did the quarter before we acquired Sprint.

Dave Schaeffer: And you know, the 80%, On-Net that we sold in Q4 is actually better than we did the quarter before we acquired Sprint. So in Q1 of 2023, we actually only were 76% On-Net and 24% Off-Net. So this focus on On-Net is going to be a significant driver of margin expansion.

Speaker #4: So in Q1 of 2023, we actually only were 76% on and 24% off. So this focus on on net is going to be a significant driver of margin expansion.

Speaker #6: I'll just add one thing to the complexity. So, when we acquired the business under the TSA, T-Mobile was billing the customers on our behalf.

Tad Weed: I'll just add one thing to the complexity. So when we acquired the business under the TSA, T-Mobile was billing the customers on our behalf through their billing system. We worked an incredible effort to bring all of those customers into our billing system, so we have one billing system for November 2023. But for that period from close, so May 2023 through October 2023, we were relying on the information that we got from T-Mobile billing on our behalf. So bifurcating that and post billing on our system was complicated. I'll just leave it at that.

Speaker #6: Through their billing system, we worked an incredible effort to bring all of those customers into our billing systems. We have one billing system for November 2023.

Speaker #6: But for that period, from close—so May 2023 through October ’23—we were relying on the information that we got from T-Mobile billing on our behalf.

Speaker #6: So, bifurcating that and post-billing on our system—it was complicated. I'll just leave it at that.

Speaker #5: Understood. And if I could just follow up with one quick one: Where would you estimate the EBITDA contribution of the Sprint business is today?

Brandon Nispel: Understood. And if I could just follow up with one quick one. Where would you estimate the EBITDA contribution of the Sprint business is today? Thank you very much.

Speaker #5: Thank you very much.

Speaker #4: I think it's close to zero, but slightly positive. But still far below our aggregate margins. It's probably in the 0% to 5% range.

Dave Schaeffer: I think it's close to zero, but slightly positive, but still far below our aggregate margins. It's probably in the 0 to 5% range, but we are working on improving that, which does include, in some cases, price increases. Next?

Speaker #4: But we are working on improving that, which does include, in some cases, price increases. Next.

Operator: Sorry. The next question comes from the line of Nick Guldeo with MoffettNathanson. Please go ahead.

Speaker #3: Sorry. The next question comes from the line of Nick Del Dello with MoffettNathanson. Please go ahead.

Operator: Sorry. The next question comes from the line of Nick Guldeo with MoffettNathanson. Please go ahead.

Speaker #5: Oh, hey. Morning, guys. A couple of questions on the data center front. Dave, you were explicit that the LOI fell apart because of the demand to help you finance it.

Nick Del Deo: Hi. Morning, guys. A couple questions on the data center front. You know, Dave, you were explicit that the LOI fell apart because of the demand to help you finance it. I recall that one of the due diligence items that the counterparty needed to complete was confirming power availability from the utilities. Was that availability confirmed?

Speaker #5: I recall that one of the due diligence items that the counterparty needed to complete was confirming power availability from the utilities. Was that availability confirmed?

Speaker #4: It was confirmed by that party, and we have now made the data available to the backup providers to go through the same confirmation process.

Dave Schaeffer: It was confirmed by that party, and we have now made the data available to the backup providers to go through the same confirmation process. But the reason why we did not move forward with the previous LOI was not a negotiation on price. They got comfortable with both the power availability and title to the actual land, which were their two big concerns. And, they just came back and tried to have us provide them financing, even though when we executed the LOI, they had assured us that they had proof of funds and the wherewithal to pay all cash. They were just trying to magnify their returns through owner financing.

Speaker #4: But the reason why we did not move forward with the previous LOI was not a negotiation on price. They got comfortable with both the power availability and title to the actual client, which were their two big concerns.

Speaker #4: And they just came back and tried to have us provide them financing, even though when we executed the LOI, they had assured us that they had proof of funds and the wherewithal to pay all cash.

Speaker #4: They were just trying to magnify their returns through owner financing.

Nick Del Deo: I got it. Are you able to share when the LOI fell apart? And if you do and have, you know, new deals in hand soon, as you suggested, you know, should we expect a press release to announce those, or would you disclose those on your next earnings call or some other, you know, conference presentation or something?

Speaker #5: Got it. Are you able to share when the LOI fell apart? And if you do have new deals in hand soon, as you suggested, should we expect a press release to announce those?

Speaker #5: Or would you disclose those on your next earnings call, or some other conference presentation, or something?

Speaker #4: You know, I think we would probably announce it in a standalone announcement. And I do think we anticipate something in the next couple of months.

Dave Schaeffer: You know, I think we would probably announce it in a standalone announcement. And I do think we anticipate something, you know, in the next couple of months. That's probably as specific as I can be, but, you know, unless it was, you know, a day or two before the earnings call, I think we would probably announce it separately. And then to when the LOI fell apart, it was fairly recent. There was a negotiation. They had made the request. We went back and, you know, we're trying to keep them moving forward under the original terms, but eventually, earlier this year, we became convinced that they were not going to move forward unless we provided the financing.

Speaker #4: That's probably as specific as I can be. But unless it was a day or two before the earnings call, I think we would probably announce it separately.

Speaker #4: And then to when the LOI fell apart, it was fairly recent. There was a negotiation, they had made the request, we went back and were trying to keep them moving forward under the original terms.

Speaker #4: But eventually, earlier this year, we became convinced that they were not going to move forward unless we provided the financing.

Speaker #5: Okay. Okay. And then, can I ask a couple about the legacy Cogent versus legacy Sprint revenue splits? So it looks like you're talking about a $42 million growth in quarterly legacy Cogent revenue from the time of the deal closing to today.

Nick Del Deo: Okay. Okay. And then, can I ask a couple about the legacy Cogent versus legacy Sprint revenue splits? So it looks like, you know, you're talking about a $42 million, $42 million growth in quarterly legacy Cogent revenue from the time of the deal closing to today. Looks like over that time, your quarterly IPv4 revenue is up about $9 million, Waves are now at about $12 million. So that would imply that about half the revenue growth was from those two line items, and about half came from, you know, call it the core products that you focused on pre-deal. Is that a fair way to think about it? And-

Speaker #5: Looks like over that time, your quarterly IPv4 revenue is up about $9 million, Waves are now at about $12 million. So, that would imply that about half the revenue growth was from those two line items, and about half came from, call it, the core products that you focused on pre-deal.

Speaker #5: Is that a fair way to think about it? And is it correct to assume that the—okay. Yeah. Okay, good. And the T-Mobile CSA revenue, is that in the Sprint bucket?

Dave Schaeffer: Yes.

Nick Del Deo: Is it correct to assume that the T-Mobile? Okay, yeah. Okay, good. And the T-Mobile TSA revenue, is that in the Sprint bucket?

Dave Schaeffer: No, it is not. That was revenue that did not exist previously and was a drag to our revenue. You know, I guess it was about $400,000 for the quarter, last quarter, and I think at peak it was almost $6 million. So that was the services we were providing to T-Mobile that we had previously never provided, and it was not to a Sprint customer, it was to T-Mobile. But they have been able to reduce their reliance on our paid services by about 93, 94%, but that remaining $400,000 is in there. So in fact, the underlying Cogent revenue growth probably would have been a little better if we had excluded the TSA, both initially and today.

Speaker #4: No, it is not. That was revenue that did not exist previously and was a drag to our revenue. I guess it was about $400,000 for the quarter last quarter.

Speaker #4: And I think at peak, it was almost 6 million. So that was services we were providing to T-Mobile that we had previously never provided and was not to a Sprint customer.

Speaker #4: It was to T-Mobile, but they have been able to reduce their reliance on our paid services by about 93, 94 percent. But that remaining $400,000 is in there.

Speaker #4: So, in fact, the underlying Cogent revenue growth probably would have been a little better if we had excluded the CSA both initially and today.

Speaker #5: Okay, got it. That's helpful. And if I can squeeze in one more quick one about the IPv4 leasing revenue—so the revenue was down a little bit quarter over quarter, despite the addresses leased being up noticeably.

Nick Del Deo: Okay, got it. That's helpful. And if I can squeeze in one more quick one about the IPv4 leasing revenue. So the revenue is down a little bit quarter-over-quarter, despite the addresses leased being up noticeably. Can you just talk about the dynamics there?

Speaker #5: Can you just talk about the dynamics there?

Speaker #4: It was actually pretty simple. One of the parties that took the large wholesale block had a small retail block with us. And it was the timing of when we terminated that retail agreement and converted it to wholesale, in conjunction with a much larger purchase.

Dave Schaeffer: It was actually pretty simple. One of the parties that took the large wholesale block had a small retail block with us, and it was the timing of when we terminated that retail agreement and converted it to wholesale in conjunction with a much larger purchase.

Speaker #5: Okay, got it. Great, thanks, Dave.

Nick Del Deo: Okay, got it. Great. Thanks, Dave.

Speaker #4: Hey, thanks, Dan.

Dave Schaeffer: Hey, thanks, Dan.

Speaker #3: Our next question comes from the line of Michael Rollins with CD. Please go ahead.

Operator: Our next question comes from the line of Michael Rollins with Citi. Please go ahead.

Speaker #6: Thanks. Good morning. Dave, I was curious if you could be more specific on the cost base. I think in the past, you described that there's some duplicative costs that the company was incurring during this integration.

Michael Rollins: Thanks, and good morning. Dave, I was curious if you could be more specific on the cost base. I think in the past, you described that there are some duplicative costs that the company is incurring during this integration. How much of those are left and the timing of those savings? And then can you also share with us what the burn rate is for the data center portfolio that you're looking to monetize? Thanks.

Speaker #6: How much of those are left, and the timing of those savings? And then, can you also share with us what the burn rate is for the data center portfolio that you're looking to monetize?

Speaker #6: Thanks.

Speaker #4: Yes. Two very different questions. So first of all, we have achieved the vast majority of the increased cost savings that we had targeted. So if you remember, the initial number was $220.

Dave Schaeffer: Yes, two very different questions. So first of all, we have achieved the vast majority of the increased cost savings that we had targeted. So if you remember, the initial number was 220. We then increased that number to 240, and we probably have achieved over 230 of that 240 million in cost savings. So there is a small tail, but it is not material. Secondly, we have incurred incremental expenses associated with integration activities. Those will continue throughout this year. They peaked at about an annual run rate of $60 million or about $5 million a month. Today, they're down to probably closer to $3 million a month, but there is still monies being spent on various, you know, integration, optimization programs. But we do anticipate those ending by the end of the year.

Speaker #4: We then increased that number to 240. And we probably have achieved over $230 million of that $240 million in cost savings. So there is a small tail, but it is not material.

Dave Schaeffer: Secondly, we have incurred incremental expenses associated with integration activities. Those will continue throughout this year. They peaked at about an annual run rate of $60 million or about $5 million a month. Today, they're down to probably closer to $3 million a month, but there is still monies being spent on various, you know, integration, optimization programs. But we do anticipate those ending by the end of the year.

Speaker #4: Secondly, we have incurred incremental expenses associated with integration activities. Those will continue throughout this year. They peaked at about an annual run rate of $60 million, or about $5 million a month.

Speaker #4: Today, they're down to probably closer to $3 million a month. But there is still money being spent on various integration optimization programs. But we do anticipate those ending by the end of the year.

Speaker #4: And then to the final question, which is the burn associated with the infrastructure that we acquired from T-Mobile. So the infrastructure business, which includes the data centers and the physical fiber network, has a negative EBITDA of about $140 million.

Dave Schaeffer: And then to the final question, which is the burn associated with the infrastructure that we acquired from T-Mobile. So the infrastructure business, which includes the data centers and the physical fiber network, has a negative EBITDA of about $140 million. We have partially offset that because the IPv4 securitization sits under infrastructure and generates about $60 million of EBITDA. So the infrastructure silo of Cogent's balance sheet is about negative $80 million of EBITDA. Roughly 20% of that is associated with the data centers, and we're looking to sell a significant portion of that footprint, probably at least 50% of it.

Speaker #4: We have partially offset that because the IPv4 securitization sits under infrastructure and generates about $60 million of EBITDA. So the infrastructure silo of Cogent's balance sheet is about negative $80 million of EBITDA.

Speaker #4: Roughly 20% of that is associated with the data centers. And we're looking to sell a significant portion of that footprint, probably at least 50% of it.

Speaker #5: And sorry, that 20% associated with the data centers—is that 20%?

Michael Rollins: And, sorry, that 20% associated with the data centers, is that 20%-

Dave Schaeffer: 20% of the hundred and forty million of negative costs associated with the Sprint assets. These are primarily in three buckets. They are real estate taxes, personal property taxes, and right-of-way fees. You know, we got the actual network for $1 with no revenue. We now are completing the repurposing of that, and as we add high margin, the margins accrue, accrue to group, but we can fund those losses over at infrastructure through our ability to move money out of the borrower group through holdings and back down to infrastructure. In fact, that's how we've been funding those to date, using our restricted payments capacity. We do have about $350 million of accumulated, unused, restricted payments capacity at the borrower.

Speaker #4: Twenty percent of the $140 million of negative costs associated with the Sprint assets—these are primarily in three buckets: real estate taxes, personal property taxes, and right-of-way fees.

Speaker #4: We got the actual network for a dollar. With no revenue, we now are completing the repurposing of that. And as we add high margin, the margins accrue to group, but we can fund those losses over at infrastructure through our ability to move money out of the borrower group through Holdings and back down to infrastructure.

Speaker #4: In fact, that's how we've been funding those to date, using our restricted payments capacity, and we do have about $350 million of accumulated unused restricted payments capacity at the borrower.

Speaker #5: Thanks, Dave. If I could just follow up real quick with two other items. First, if you look at the corporate business—that's the heritage Cogent side of the equation—can you share with us a little bit more detail about what's driving this heritage revenue change over the last couple of years and if there's any inflection in trend there?

Michael Rollins: Thanks. If I could just follow up real quick with two other items. First, if you look at the corporate business, that's the heritage Cogent side of the equation. Can you share with us a little bit more detail about what's driving this heritage revenue change over the last couple of years, and if there's any inflection in trend there? And the same, you know, for NetCentric, where it might be a little bit easier to unpack the, you know, IPv4 and the wave, you know, impact, just given the concentration of those products in NetCentric. Thanks.

Speaker #5: And the same for Nextcentric, where it might be a little bit easier to unpack the IPv4 and the wave impact, just given the concentration of those products.

Speaker #5: In Nextcentric, thanks.

Speaker #4: Yes, yeah. So on the Nextcentric side, it is easier because we do break out the IPv4 revenue, of which 85% of it is Nextcentric.

Dave Schaeffer: Yep. Yeah. So on the NetCentric side, it is easier because we do break out the IPv4 revenue, of which 85% of it is NetCentric. We break out the WAVE revenue, which is virtually all NetCentric, and then the incremental difference is the growth in the core transit product. In the corporate business, there was a mix of DIA and VPN services at Cogent, and then a mix at Sprint. At Sprint, the mix was much heavier VPN than it was DIA. At Cogent, it was much more DIA. We have converted some of the Sprint customers from MPLS to VPLS, VPNs, improving the profitability, but we are continuing to support the MPLS product long term. We are trying to move as much on-net as possible, but the underlying growth in the corporate business at Cogent has come mostly from DIA.

Speaker #4: We break out the wave revenue, which is virtually all Nextcentric, and then the incremental difference is the growth in the core transit product. In the corporate business, there was a mix of DIA and VPN services at Cogent, and then a mix at Sprint.

Speaker #4: At SPRINT, the mix was much heavier VPN than it was DIA. At COGENT, it was much more DIA. We have converted some of the SPRINT customers from MPLS to VPLS VPNs, improving the profitability, but we are continuing to support the MPLS product long-term.

Speaker #4: We are trying to move as much on-net as possible. But the underlying growth in the corporate business at Cogent has come mostly from DIA.

Speaker #5: Thanks. Our next question comes from the line of David Barden with New Street Research. Please go ahead.

Michael Rollins: Thank you.

Operator: Our next question comes from the line of David Barden with New Street Research. Please go ahead.

Speaker #6: Hey, guys. Thanks so much for taking the questions. Hey, Dave, how are you doing?

David Barden: Hey, guys. Thanks so much for taking the question. Hey, Dave, how are you doing?

Speaker #4: Hey, good. Hey, good.

Dave Schaeffer: Hey, good. Hey, good.

David Barden: Okay, so thank you for squeezing me in. I've got a few questions. The first one, Dave, and I apologize for asking this, is about your new contract that you've signed in January with the board and how we, as investors from the outside, look at maybe how your incentives have changed. You know, you always took stock as compensation. Now you're getting cash compensation. Does that change how you think about the business, how you think about dividends? It would be really helpful to get some insight there. I think the second question maybe for Tad, is when you talk about secured financing, what specifically are you planning on securing? How much are you planning to secure, and what rates are you expecting? Thank you, guys.

Speaker #6: Okay, so thank you for squeezing me in. I've got a few questions. The first one, Dave—and I apologize for asking this—is about your new contract that you signed in January with the board.

Speaker #6: And how we, as investors from the outside, look at maybe how your incentives have changed? You always took stock in compensation. Now you're getting cash compensation.

David Barden: Does that change how you think about the business, how you think about dividends? It would be really helpful to get some insight there. I think the second question maybe for Tad, is when you talk about secured financing, what specifically are you planning on securing? How much are you planning to secure, and what rates are you expecting? Thank you, guys.

Speaker #6: Does that change how you think about the business, how you think about dividends? It would be really helpful to get some insight there. I think the second question, maybe for Tad, is when you talk about secured financing, what specifically are you planning on securing?

Speaker #6: How much are you planning to secure? And what rates are you expecting? Thank you, guys.

Speaker #4: All right. Great. So, first of all, with regard to my contract, I am still in negotiations with the comp committee for some additional equity going forward.

Dave Schaeffer: All right, great. So first of all, with regard to my contract, you know, I am still in negotiations with the comp committee for some additional equity going forward. The vast majority of my compensation, you know, roughly 80% of it, remains in equity, and that equity does not vest, begin to vest until 2029. So there's both a long-term cliff and a significant portion that needs to vest. Now, so I do not have to pledge shares going forward, which created a cascade of bad events. You know, I now have cash compensation that will allow me to pay both taxes and, you know, to be able to live, but it is a fraction of my total compensation.

Speaker #4: The vast majority of my compensation—roughly 80% of it—remains in equity. And that equity does not begin to vest until 2029. So there's both a long-term cliff, and a significant portion that needs to vest.

Speaker #4: Now, so I do not have to pledge shares going forward, which created and cascaded a bad event. I now have cash compensation at all, which allows me to pay both taxes and to be able to live, but it is a fraction of my total compensation.

Dave Schaeffer: In terms of being able to go forward and how I think about dividends, you know, I'm as committed to shareholder returns as I've ever been. You know, we have shifted our priorities to get our leverage down, and I think we will be in a position where we will see our leverage rapidly fall and be able to return to either buybacks, dividends at a higher rate, or a combination thereof. I'll let Tad touch on the refi, and I may jump in as well.

Speaker #4: In terms of being able to go forward and how I think about dividends, I'm as committed to shareholder returns as I've ever been. We have shifted our priorities to get our leverage down.

Speaker #4: And I think we will be in a position where we will see our leverage rapidly fall and be able to return to either buybacks, dividends at a higher rate, or a combination thereof.

Speaker #4: I'll let Tad touch on the refine, and I may jump in as well.

Speaker #6: Well, I mean, we're in negotiation with multiple parties. We've essentially only kind of come to terms on the amount, but not with respect to rates and the rest of the terms that we are in the process of negotiating.

Tad Weed: Well, I mean, we're in negotiation with multiple parties. We've essentially only kind of come to terms on the amount, but not with respect to rates and the rest of the terms that we are in the process of negotiating.

Speaker #5: Yeah. I think we have a very clear structure that allows us to do this as secured debt. I don't think this call is the correct forum to roll that out, but we will ensure the order.

Dave Schaeffer: Yeah, I think we have a very clear structure that will allow us to do this as secured debt. I don't think this call is the correct forum to, you know, roll that out, but we will in short order. And we also will anticipate that the current secured debt is a pretty good indication of about where our new debt will price.

Speaker #5: And we also will anticipate that the current secured debt is a pretty good indication of about where our new debt will price.

Speaker #6: Got it. And is there anything about the '32s that is relevant to kind of rolling the '27s?

David Barden: Got it. And is there anything about the 2032s that is relevant to kind of rolling the 2027s?

Speaker #5: Not really. I mean, the same tests will be in place and will be governed by the most restrictive covenants, which will probably be the existing '32s, and that will be four times secured leverage and a two times debt service test.

Dave Schaeffer: Not really. I mean, you know, the same tests will be in place, will be governed by the most restrictive covenants, which will probably be the existing 32s, and that will be, you know, 4 times secured leverage and a 2 times debt service test.

Speaker #6: Got it. And if I could just squeeze in one more, I really appreciate it, guys. Thank you so much. Dave, you’ve kind of mentioned that the two kind of things that were going to be advantages for you in the wave market were price and time provision.

David Barden: Got it. And if I could just squeeze in one more, I really appreciate it, guys. Thank you so much. Is, Dave, you've kind of mentioned that the two kind of things that were gonna be advantages for you in the wave market were price and, time to provision. I think you said you're down to 30 days. I think you targeted 2 weeks. Could you elaborate a little bit on the kind of process to get to even better provision timing? And where are you, do you believe, on a price perspective, relative to quote-unquote, market?

Speaker #6: I think you said you're down to 30 days—I think you targeted two weeks. Could you elaborate a little bit on the kind of process to get to even better provisioning timing, and where are you?

Speaker #6: Do you believe, from a price perspective, relative to market?

Speaker #5: Yeah, I'll take the price one first. I think we're probably at a 20 to 30 percent discount. I also believe our advantages are more than you outlined.

Dave Schaeffer: Yeah, I'll take the price one first. I think we're probably at a 20 to 30% discount. I also believe our advantages are more than you outlined. I think the breadth of the footprint, as well as the diversity of the routes and reliability-

Speaker #5: I think the breadth of the footprint, as well as the diversity of the routes and reliability, are all really important criteria. And I think the acceleration you're seeing in our waves business is as a result of that.

David Barden: Yeah, route diversity.

Dave Schaeffer: - are all really important criteria, and I think the acceleration you're seeing in our waves business is as a result of that. And then in terms of getting the provisioning window even shorter, I think it will be three things. It will be, one, our just continued process refinement as we do more, but 30 days is still generally 3 to 4 times quicker than industry averages. A third party, actually just last month, released a report benchmarking us, and in terms of wavelength services, out of all of the providers, and there were several dozen providers, both regional and national, evaluated, we were actually number 2 in terms of provisioning already, and I think we'll end up being number 1, just like we are in IP.

Speaker #5: And then, in terms of getting the provisioning window even shorter, I think it will be three things. It will be, one, our just continued process refinement as we do more.

Speaker #5: But 30 days is still generally three to four times quicker than industry averages. A third party actually just last month released a report benchmarking us, and in terms of wavelength services, out of all of the providers—there were several dozen providers, both regional and national—evaluated.

Dave Schaeffer: A third party, actually just last month, released a report benchmarking us, and in terms of wavelength services, out of all of the providers, and there were several dozen providers, both regional and national, evaluated, we were actually number 2 in terms of provisioning already, and I think we'll end up being number 1, just like we are in IP.

Speaker #5: We were actually number two in terms of provisioning already. And I think we'll end up being number one, just like we are in IP.

Speaker #5: I think the other thing that is a constraint today is, actually, pluggable optics lead times have become more challenging just because of the pressures that some of the massive data center builds have put on the entire ecosystem for telecom and networking equipment.

Dave Schaeffer: I think the other thing that is a constraint today is actually Pluggable Optics lead times have become more challenging just because of, you know, the pressures that some of the massive data center builds have put on the entire ecosystem for telecom and networking equipment.

Speaker #6: Thank you, Dave.

David Barden: Thank you, Dave.

Speaker #5: Thanks.

Dave Schaeffer: Thank you.

Speaker #7: Our next question comes from the line of Mike Funk with Bank of America. Please go ahead.

Operator: ... Our next question comes from the line of Mike Funk with Bank of America. Please go ahead.

Speaker #8: All right. Good morning, Dave. How are you?

Mike Funk: Hi, good morning, Dave. How are you?

Speaker #5: Hey, great, Mike.

Dave Schaeffer: Hey, great, Mike.

Speaker #8: Yeah. I've got one question, Dave. Going back to the sequential revenue growth, I'm looking at the straight forecast and consensus is for about $3.5 million.

Mike Funk: Yeah, I've got one question, Dave. Going back to the sequential revenue growth. You know, I'm looking at the Street's forecast, and consensus is for about $3.5 million sequential revenue growth in 2026. This is not why it's a 2026 issue. I think historically, the Street forecast revenue grows faster than actual, probably in a combination of constructive commentary from the company, the longer-term revenue growth guidance provided, and relative opaqueness of your business. I don't think it's helpful to have revenue growth so much higher than actual. So, you know, maybe help us think about the correct rate of sequential revenue growth in 2026 to reduce some of the volatility that we see in your stock on earnings.

Speaker #8: Sequential revenue growth. And in 2026—and this is not related to '26-ish—I think historically a straight forecast, revenue growth is faster than actual, probably in a combination of constructive commentary from the company.

Speaker #8: The longer-term revenue growth guidance provided, and the relative opaqueness of your business—I don't think it's helpful to have revenue growth so much higher than actual.

Speaker #8: So maybe help us think about the correct rate of sequential revenue growth in 2026 to reduce some of the volatility that we see in your stock on earnings.

Speaker #5: Yeah, and it's a delicate balancing act because, while I want to give clarity and guidance, I am not comfortable giving quarterly or even annual guidance.

Dave Schaeffer: Yeah, and, you know, it's a delicate balancing act because while I want to give clarity and guidance, I am not comfortable in giving quarterly or even annual guidance. You know, I do think that over a multi-year period, that 6 to 8% growth rate is what is absolutely appropriate to model. You know, I'm gonna have to leave it to every analyst to do their own diligence and channel checks, and we're just not going to give a number that says 3.5 is too high or too low on a sequential increase in revenue. What we said is, from this point forward, we're comfortable that our quarterly reported revenues are gonna grow. We think that's going to continue to improve. We think that that growth is going to be driven by high-margin products.

Speaker #5: I do think that, over a multi-year period, that six to eight percent growth rate is what is absolutely appropriate. To model, I'm going to have to leave it to every analyst to do their own diligence and channel checks.

Speaker #5: And we're just not going to give a number that says 3.5 is too high or too low on a sequential increase in revenue. What we said is, from this point forward, we're comfortable that our quarterly reported revenues are going to grow. We think that's going to continue to improve; we think that that growth is going to be driven by high-margin products.

Dave Schaeffer: What we said is, from this point forward, we're comfortable that our quarterly reported revenues are gonna grow. We think that's going to continue to improve. We think that that growth is going to be driven by high-margin products. And, you know, just as you said, maybe Street numbers were too high on top line, they've consistently underestimated our ability to expand margins.

Speaker #5: And just as you said, maybe street numbers were too high on the top line. They've consistently underestimated our ability to expand margins.

Dave Schaeffer: And, you know, just as you said, maybe Street numbers were too high on top line, they've consistently underestimated our ability to expand margins.

Speaker #8: Maybe one more, if I could, Dave—sneak it in here. Rep productivity—I wanted to touch on that. They've been coming down. What are you doing internally—change in processes, people—to improve rep productivity?

Mike Funk: Maybe one more, if I could, Dave, sneak it in here. Rep productivity, wanted to touch on that. They've been coming down. What, what, what are you doing internally, changing processes, people, to improve rep productivity?

Speaker #5: So, the productivity is measured on a unit basis. If you've actually noticed, our RPUs have actually gone up somewhat. Two, we are focused more on on-net services.

Dave Schaeffer: So the productivity is measured on a units basis. If you've actually noticed, our ARPUs have actually gone up somewhat to, you know, we are focused more on on-net services, so there is a higher payout for on-net versus off-net to help get to that 80/20 mix that I referenced. And then third, you know, we continue to train, to promote internally, and try to incent our sales force to grow. But, you know, we do still have 5.4% per month of turnover. That is below the long-term average of 5.7, the peak of 8.7. But, you know, our productivity at 4/1 for Q4 was actually about 18% better than our rep productivity in Q4 2024.

Speaker #5: So there is a higher payout for on-net versus off-net to help get to that 80/20 mix that I referenced. And then, third, we continue to train, to promote internally, and try to incent our salesforce to grow.

Speaker #5: But we do still have 5.4% per month of turnover, which is below the long-term average of 5.7% and the peak of 8.7%. But our productivity at 4.1 for the fourth quarter was actually about 18% better than our rep productivity in the fourth quarter of 2024.

Speaker #5: There is some seasonality to rep productivity. And, while the 4.8 that we average is good, we actually think we can do better than that.

Dave Schaeffer: There is some seasonality to rep productivity, and while, you know, the 4.8 that we average is good, we actually think we can do better than that. And I think you'll see that number trend up as, you know, this focus on on-net and as we kind of roll through the seasonality that I mentioned.

Speaker #5: And I think you'll see that number trend up as this focus on on-net, and as we kind of roll through the seasonality that I mentioned.

Speaker #8: Great. Thank you, Dave and Dave. Thank you for taking all the questions today. I really appreciate it.

Mike Funk: Great. Thank you, Dave. Dave, thanks for taking all the questions today. I really appreciate it.

Speaker #5: Hey, thanks, Michael.

Dave Schaeffer: Hey, thanks, Michael.

Speaker #7: Our last question comes from the line of Anna Goshko with Bank of America. Please go ahead.

Operator: Our last question comes from the line of Anna Goshko with Bank of America. Please go ahead.

Speaker #9: Hi. Thanks very much, Dave. So, just on the plan to refi the $27, sort of dollar for dollar with new secured. In the prior question on the planned use of proceeds of any data center sale, you clearly didn't commit to using it to repay debt.

Ana Goshko: Hi. Thanks very much, Dave. So just on the plan to refi the 27 sort of dollar for dollar with new secured. So in the prior question on the planned use of proceeds of any data center sale, you clearly didn't commit to using it to repay debt. So I think you said, you said you have options. But when you reduced your dividend about in the last earnings announced date, the rationale that was provided for reducing the dividend was that you wanted to focus on deleveraging. And I think implicit in that was the idea that cash on the balance sheet, potential cash from asset sale proceeds, and potential cash from free cash flow would be used to repay debt.

Speaker #9: So I think you said you have options. But when you reduced your dividend around the last earnings announcement date, the rationale that was provided for reducing the dividend was that you wanted to focus on deleveraging.

Speaker #9: And I think implicit in that was the idea that cash on the balance sheet, potential cash from asset sale proceeds, and potential cash from free cash flow would be used to repay debt.

Speaker #9: So I just wanted to revisit that concept, and what the plan is to get leveraged down. And I believe you cited a target of four times.

Ana Goshko: I just wanted to revisit that concept, and you know, what the plan is to get leverage down. I believe you cited a target of 4x.

Dave Schaeffer: Yes, that is absolutely correct, Anna, and we are absolutely committed to not materially changing our return of capital, either through buybacks or dividends, until we reach 4 times net leverage. We, each quarter, have less monies due to us from T-Mobile, which we're counting in our leverage, so that is a bit of a hill that we have to climb. We also are, again, delevering both on a gross and net basis. I think we will continue to do that. You know, holding cash on the balance sheet has the exact same impact on net debt. We have not been specific around a gross debt target, and we may opportunistically even buy back some of our debt if it sometimes trades at a discount, as our current secured debt has. That could also be an effective mechanism to use excess cash to reduce leverage.

Speaker #5: Yes, that is absolutely correct, Anna. And we are absolutely committed to not materially changing our return of capital, either through buybacks or dividends, until we reach 4 times net leverage.

Speaker #5: Each quarter, we have less monies due to us from T-Mobile, which we're counting in our leverage. So that is a bit of a hill that we have to climb.

Speaker #5: We also are, again, delivering both on a gross and net basis. And I think we will continue to do that. Holding cash on the balance sheet has the exact same impact on net debt. We have not been specific around a gross debt target.

Dave Schaeffer: I think we will continue to do that. You know, holding cash on the balance sheet has the exact same impact on net debt. We have not been specific around a gross debt target, and we may opportunistically even buy back some of our debt if it sometimes trades at a discount, as our current secured debt has. That could also be an effective mechanism to use excess cash to reduce leverage.

Speaker #5: And we may opportunistically even buy back some of our debt if it sometimes trades at a discount, as our current secured debt has. That could also be an effective mechanism to use excess cash to reduce leverage.

Speaker #5: But we are absolutely committed. I want to leave no ambiguity that we intend to get the entire complex, not just the borrower group, down to four times net leverage before we materially change our return of capital strategy.

Dave Schaeffer: But we are absolutely committed. I want to leave no ambiguity that we intend to get for the entire complex, not just the borrower group, down to 4 times net leverage before we materially change our return of capital strategy.

Speaker #9: Okay, and then thanks for that. And then secondly, I know you don't provide specific guidance, but in terms of your ability to generate free cash flow,

Ana Goshko: Okay, and then, thanks for that. And then secondly, I know you don't, you know, provide specific guidance, but, but in terms of your ability to generate free cash flow, particularly this year, what is your level of confidence and, you know, maybe some order of magnitude if, if you expect it to be positive?

Speaker #1: Particularly this year, what is your level of confidence—and maybe some order of magnitude—if you expect it to be positive?

Speaker #2: So we absolutely will produce a growth in EBITDA. You know, you can extrapolate what we have done and then layer on the contribution margins with the mix shift that I described.

Dave Schaeffer: So we absolutely will produce a growth in EBITDA. You know, you can extrapolate what we have done and then layer on the contribution margins with the mix shift that I described and then layer in some of the aggregate savings. Two, we absolutely expect our capital expenditures to go down. Those two things will allow us to generate unlevered free cash flow growth, and it is likely that when we refinance the unsecured, our coupon will be slightly higher probably than it is today for the current unsecured, even though we will be converting them to secured. That is highly dependent on how the current bonds trade. But, you know, we do think that even on a levered basis, we will be generating free cash. That's as close to guidance as you're gonna get me.

Speaker #2: And then layer in some of the aggregate savings . Two , we absolutely expect our capital expenditures to go down . Are those two things will allow us to generate unlevered free cash flow growth .

Speaker #2: And it is likely that when we refinance the unsecured , our coupon will be slightly higher probably than it is today for the current unsecured .

Speaker #2: Even though we will be converting them to secured, that is highly dependent on how the current bonds trade. But, you know, we do think that even on a levered basis, we will be generating free cash.

Speaker #2: That's as close to guidance as you're going to get me

Speaker #1: Okay . Okay . Well thank you . Dave .

Ana Goshko: Okay. Okay, well, thank you, Dave.

Speaker #2: Hey , thanks

Dave Schaeffer: Hey, thanks, Anna.

Speaker #3: For .

Speaker #4: And that concludes our question and answer session . I will now turn the call back over to Mr. Dave Schaefer for closing remarks

Operator: That concludes our question and answer session. I will now turn the call back over to Mr. Dave Schaeffer for closing remarks.

Speaker #2: Well , first of all , I want to thank everyone . I know it was an hour and a half . We have actually gone longer .

Dave Schaeffer: Well, first of all, I want to thank everyone. I know it was an hour and a half. We have actually gone longer. I thought this was somewhat unique in that we added a lot more granularity to our disclosures around the trajectory of the Sprint acquired business and also the relative mix of products. You know, I think in summary, there are three really important objectives for Cogent to build value. One is to grow top line, two, to continue to expand margins, and then three, eliminate any overhang of a debt maturity that is, you know, 17 months away. And I think on all three of those vectors, we are and will continue to demonstrate meaningful progress. Thanks, everyone, and we'll talk soon. Take care. Bye-bye.

Speaker #2: I thought this was somewhat unique in that we added a lot more granularity to our disclosures around the trajectory of the sprint acquired business , and also the relative mix of products You know , I think in summary , there are three really important objectives for cogent to build value .

Speaker #2: One is to grow top line , two , to continue to expand margins , and then three , eliminate any overhang of a debt maturity that is , you know , 17 months away .

Dave Schaeffer: One is to grow top line, two, to continue to expand margins, and then three, eliminate any overhang of a debt maturity that is, you know, 17 months away. And I think on all three of those vectors, we are and will continue to demonstrate meaningful progress. Thanks, everyone, and we'll talk soon. Take care. Bye-bye.

Speaker #2: And I think on all three of those vectors, we are and will continue to demonstrate meaningful progress. Thanks, everyone. And we'll talk soon.

Speaker #2: Take care . Bye bye

Operator: This concludes today's conference call. You may now disconnect.

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