Transcript: Cogent Comms Hldgs Q2 2026 Earnings Conference Call

On Thursday, Cogent Comms Hldgs (NASDAQ: CCOI ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

23 times EBITDA. 1 million. 4%. However, the company's market share remains at 3% of the North American long-haul wavelength market.

Gross margin improved by 260 basis points year-over-year to 47%, driven by cost reductions and a shift to more profitable on-net services. 4 million gain. Cogent aims for a multi-year revenue growth of 6-8% and expects to enhance EBITDA margins by optimizing workforce and completing integration projects. 7% sequentially, with expectations for continued declines due to moderation in equipment price increases.

Management is actively pursuing the sale of remaining data centers, with discussions underway and letters of intent received for some facilities. The company is refinancing its $750 million 2027 unsecured notes, expecting completion in Q3 2026, and is considering further debt reduction strategies. Full Transcript OPERATOR Good morning and welcome to the Cogent Comms Hldgs second quarter 2026 earnings conference call. 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 Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Comms Hldgs.

You may begin. Dave Schaeffer, Chief Executive Officer Hey, thank you and good morning. Welcome to our second quarter 2026 earnings conference call. I'm Dave Schaeffer, Cogent's Chief Executive Officer, and with me on this morning's call is Tad Weed, our Chief Financial Officer.

I'd like to focus on a few key events and significant matters that transpired in the quarter. I'd like to recognize these events and give you an update on these important matters. We have made significant progress in several areas: our data center monetization, our net leverage reduction and cost reduction and completion of various integration projects; the continued product rotation into more profitable on-net services; a reduction in our capital expenditures and a reduction in our capital lease payments; and continued progress in the sale of wavelength services. First, for data centers and leverage.

As we stated in our previous call, we intend to monetize 24 of the facilities that we acquired from the Sprint acquisition and converted into data centers either through the outright sale or leasing these facilities on a wholesale basis. In June, we closed on the sale of 10 of these former Sprint facilities that we had converted into data centers for total proceeds of $225 million paid in cash by the purchaser in the quarter. 7 million. We intend to use the majority of these proceeds from the transaction to reduce both our gross leverage and our net leverage.

61 times in Q2 of 2025. We continue to have multiple parties interested in the remaining former Sprint facilities that we have put up for sale. We are in negotiation for several letters of intent on these facilities. 7 million.

Now I'd like to touch on the amendment that we received to our 2032 secured note indenture. In June, we obtained approval from the majority of the holders of these 2032 notes to amend the note with a supplemental indenture. 75 times; a commitment on our part to use at least $175 million in proceeds from the sale of these initial data centers that was then contributed from outside of the borrowing group into the borrowing group to be used for the repurchase of debt obligations at a discount. 6 million.

8 million which will be recognized in the third quarter. 4 million. We are making progress on the refinancing of our $750 million 2027 unsecured notes. Our $750 million unsecured notes mature in June of 2027.

The make-whole period for our 2027 unsecured notes ended on June 15, 2026. These notes have become current and we are in the process of completing our refinancing of these notes. We expect that transaction to be completed in the third quarter of 2026. Now for a couple of comments on our wavelength business.

Our wavelength business continues to grow. At quarter's end we are offering wavelengths in 1,137 locations with 10 gig, 100 gig and 400 gig services available and provisioning intervals of approximately 30 days, which continue to improve. 2%. 4% and sequentially by 8% to a total of 2,445 customer connections.

In addition, during the quarter, to the new installs that we have reported, we reprovisioned 77 existing wavelengths, converting them into higher capacity wavelengths. Most of these were conversions from 100 gig to 400 gig waves as customers have become more confident in the quality of our network. At quarter's end we have sold wavelength services in 608 unique locations and we have sold those wavelength services now to a combined customer base of 546 unique customers. We still believe that we will capture 25% of the North American long-haul wavelength market.

We also today still have only captured 3% of that market. Now for a comment on our gross margin improvement. We continue to reduce costs. Our gross margin percentage increased on a year-over-year basis by 260 basis points and increased sequentially by 90 basis points to 47%.

Our EBITDA as adjusted and EBITDA adjusted margins also improved. We expanded our sequential EBITDA as adjusted margin. 2%. We also have worked diligently on the organizational optimization of our workforce as we are completing various integration projects.

We are evaluating the optimal size of all of our departments as the integration of these former Sprint assets into Cogent is now being completed. We reduced our total headcount to 1,682 at quarter's end, a reduction of 113 individuals from the end of the previous quarter and a reduction of 207 individuals from Q2 of 2025. This reduction represents approximately 6% of our workforce from the previous quarter. The expenses associated with these reductions have been recognized in the second quarter.

Now I'd like to take a moment to talk about our long-term objectives and beliefs around targets. We expect our revenues to grow at between 6% and 8% over a multi-year period. While we acknowledge our revenue growth in Q2 of 2026 was negative, we do believe that the decline in revenue from the acquired Sprint customer base is moderating. We anticipate EBITDA margins to average, over a multi-year period, approximately 200 basis points a year, kind of mirroring the type of margin expansion that Cogent had experienced prior to the acquisition of Sprint.

Our revenue and EBITDA guidances are not intended to be quarterly or targeted to a specific year, but rather multi-year. Now I'd like to ask Tad to read our safe harbor language and provide some additional details on our operating performance for the quarter. I'll then conclude with a few summary remarks and we'll then open the floor for questions. Tad?

Tad Weed, Chief Financial Officer Yep, thank you, Dave. Good morning, 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. The company undertakes no obligation to update or revise our forward-looking statements. com.

Discussion of the results for the quarter and the revenue mix since Sprint closing, which the first full quarter was Q3 2023, versus this quarter: despite our revenue decreases, we have been able to increase our margins. Our increases in our gross margin and our EBITDA margin have been driven by cost reductions and a rotation to our more profitable on-net products. Comparing our revenue by connection type from the third quarter of 2023, which again was the first full quarter we were combined with Sprint Wireline, to this quarter illustrates the material changes to the composition of our revenues and the strength of the underlying classic business.

Our on-net revenues were 47% of our total revenues in the third quarter of 2023. 4% in the second quarter of last year. Our off-net revenues were 48% of our total revenues in Q3 2023 and are much less profitable. 5% in the second quarter of last year.

Eighteen percent of our sales this quarter were for on-net services. 4% of our revenues this quarter. 6 million. 5%.

1 million. 8 million on our sequential revenue results. 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, corporate, and enterprise customers. For the quarter, sequentially, our on-net revenues, including wave revenues, increased by $1 million. 5 million, so most of the decline was related to off-net. 1 million.

2 million. 1% year over year. 40 per month. 8 million IPv4 addresses, and we've leased approximately 15 million IPv4 addresses as of today.

The substantial changes in the acquired Sprint wireline revenue base have masked the underlying performance of our Cogent Classic business. Our consolidated revenue declines have been largely attributed to the reduction in the acquired Sprint wireline, corporate and enterprise, non-core, and off-net revenues. At closing, the Sprint wireline revenues were 42% of our total revenue; that has declined to only 15% of our revenues this quarter. We acquired the Sprint wireline with a revenue run rate of $118 million per quarter.

This acquired revenue base has decreased from $118 million down to $34 million for this quarter. That's an $84 million reduction in quarterly revenues related to our acquired Sprint wireline revenue base, or a 71% decline since deal closing. At deal closing, which was three years ago, our Cogent Classic revenue run rate was $155 million per quarter, and the Cogent Classic revenue base has increased from then by 29% from $155 million to $200 million for this quarter. 9% of our revenues for the quarter.

4%. Our total netcentric business continues to increase and to benefit from the growth in video traffic activity related to artificial intelligence, streaming, IPv4 leasing, and wavelength sales. 6% of our revenues this quarter. 6%.

5% of our revenues this quarter. 9%, primarily due to reduction in the acquired Sprint wireline enterprise off-net revenues, as non-core is down to less than a million dollars. Revenue and Customer Connections by Network Type: On-net revenue — we serve our on-net customers in 3,627 total on-net buildings. 7%.

1%. Our off-net revenue results are impacted by the continued grooming and termination of low-margin off-net contracts, in particular the acquired Sprint wireline customers. 17 for 2Q last year. 08 in the second quarter of last year.

Our ARPUs for the quarter were as follows: our on-net IP ARPU was $513; our off-net IP ARPU was $1,197. Our wavelength ARPU was $2,100, and our wavelength ARPU for new waves this quarter was $2,206, as there were more larger connections installed. 40 per address — very stable. 2% last quarter.

Our off-net churn rate is primarily driven by the reduction in the acquired Sprint customer base. 7% last quarter. Lastly, our wavelength monthly churn rate was about a half percent. Traffic: Our IP network traffic growth continued for the quarter.

Our IP network traffic growth for the quarter increased sequentially by 3% in what is a traditionally seasonally slow quarter for traffic growth, and year over year grew at an accelerated rate up to 16%. 1 last quarter. 8. Comments on FX: Our revenue earned outside of the United States was about 21% of our revenues for the quarter, very consistent.

8 million. Customer concentration: Our revenues and customer base are not highly concentrated. Our top 25 customers are 16% of our revenues this quarter. 5 million for the quarter.

We continued to experience multiple equipment price increases from vendors due to supply chain constraints so far this year. 7 million for the quarter. 3 billion at quarter end. 8 billion.