Cogent Communications Holdings Inc at MoffettNathanson Technology, Media, and Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nick Del Deo - MoffettNathanson - Analyst : Corporate's obviously been hurt by the work-from-home phenomenon, rising vacancy rates in offices, and whatnot. You've managed to get to growth that's roughly flat sequentially for several quarters now, still well below where it was. You've historically been a share gainer in that business. So I guess I'd start by asking, what do we need to see from an office vacancy perspective, such that your underlying share gains can start to shine through in revenue growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:00PM, CCOI.OQ - Cogent Communications Holdings Inc at MoffettNathanson Technology, Media, and Telecom Conference

Question: Nick Del Deo - MoffettNathanson - Analyst : Of the factors you highlighted, is there one that you think is more important or would you weight them all relatively equally?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay, that's interesting. In recent quarters, you've really started to rebuild your sales force, which shrank during the pandemic. Should we think of that as being more about proactively reaching out to these customers, picking up the phone, and trying to induce them to do that? Or is it a reaction to shifts you've seen in interest levels from clients?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay, that makes sense. On the corporate side, during the pandemic, you also had, I think, a bit of a nice ARPU benefit from customers upgrading from -- it was from 100-meg connections to gig. Where do you stand in that transition and what should we expect in terms of corporate ARPU from here?

Question: Nick Del Deo - MoffettNathanson - Analyst : All right, cool. We won't tell them that.

Question: Nick Del Deo - MoffettNathanson - Analyst : All right. You mentioned the trend of corporate customers increasingly purchasing connections in data centers as aggregation points. How real a trend is that today? What portion of your customers do you think would benefit from that sort of architecture? And when we think about the revenue, is that more akin to a corporate price point or is it more like a small net-centric customer price point?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. I have two questions I want to ask on net-centric before we turn to Sprint. Obviously, the net-centric business has posted some pretty remarkable growth rates the past couple of years. You've pointed to a couple factors behind that, including the mix of two-sided traffic, the overseas mix, large versus small customer mix. Where do you think you stand in terms of those drivers acting as accelerants from here? Is it mostly tapped out or are there still opportunities for outsized growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:00PM, CCOI.OQ - Cogent Communications Holdings Inc at MoffettNathanson Technology, Media, and Telecom Conference

Question: Nick Del Deo - MoffettNathanson - Analyst : Dave, you've always noted that the transit market hasn't really expanded in size for two decades plus. So it's interesting to look at the growth you've had in net-centric against that comment. So are we seeing you just take share at an incredible rate, or is the market expanding, or is something else going on?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. Let's pivot to Sprint, which is exciting. You closed on that deal on May 1, so congratulations on that.

Question: Nick Del Deo - MoffettNathanson - Analyst : I noticed that shortly afterwards, you appointed a COO, which at least since I've covered you, you haven't had a former Sprint executive. What should we -- anything we should know about that?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. I think it gives you a little more time to talk to people like us. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:00PM, CCOI.OQ - Cogent Communications Holdings Inc at MoffettNathanson Technology, Media, and Telecom Conference

Question: Nick Del Deo - MoffettNathanson - Analyst : All right. Now, you've only had access to all of Sprint's information as of May 1, and you were restricted for anti-trust reasons, from looking at customers and similar information. Anything interesting that you've gleaned in the two weeks since clothing that's worth sharing with us?

Question: Nick Del Deo - MoffettNathanson - Analyst : But one of the questions/concern regarding the Sprint transaction is what happens to the retained revenue. So you're running off a number of revenue streams, you're keeping the DIA, the MPLS, and whatnot. I think MPLS, in particular, draws people's attentions given what's happened to that product over time. You've talked about proactively transitioning those customers to VPLS or SD-WAN to help keep them. When we think about MPLS to SD-WAN transitions at, say, some of the big incumbents, we generally perceive that to be negative from a net revenue perspective. So what's going to be different here that will enable you to keep it consistent?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. Now, the most exciting part of the deal is your ability to repurpose the network and sell new products, especially wavelengths. A lot of people look at business wireline and write the whole thing off as a disaster. And I think one of the interesting things about your business is how you've focused on niches and a way to attack them to actually grow over time. And wavelengths have been a growing category. Use cases behind that, you've got a relatively concentrated competitor set. Talk about your degree of confidence that wavelengths are not going to go the way of some of the other products that we've seen.

Question: Nick Del Deo - MoffettNathanson - Analyst : All right. You noted you were in 200 data centers today where you can sell wavelengths going to about 800. What's the cadence to get from 200 to 800? And should we think of it as being sequenced in terms of which ones you think have the greatest opportunity or is it more idiosyncratic based on fiber availability or other factors?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. Now, it sounds like most of your growth is going to come from share gains. I think you've also highlighted that a lot of Sprint's routes are physically diverse. So, I guess, to what degree will wavelength growth be driven by share gains versus customers looking for route diversity, such that you add to the market?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. Now, assuming you execute on this and you generate hundreds of millions of dollars of incremental revenue, that could give you a lot of flexibility for capital returns down the road. So it's kind of an open-ended question, but what should we expect on that front and over what sort of timeframe? Maybe leverage targets, dividends versus repurchases, and so on.

Question: Nick Del Deo - MoffettNathanson - Analyst : I think, at least as I interpret it, the Sprint deal seems poised to result in substantial value accretion to Cogent shares. Are you willing to share with us any personal view or estimate as to what you think the deal is worth?

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. We've got less than a minute left. I got one question from the audience. I thought maybe we can quickly --

Question: Nick Del Deo - MoffettNathanson - Analyst : It's something that you and I have discussed before, but it's a question around the quality of the physical asset you've picked up and what that means for your ability to offer waves in particular. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 16, 2023 / 3:00PM, CCOI.OQ - Cogent Communications Holdings Inc at MoffettNathanson Technology, Media, and Telecom Conference

Question: Nick Del Deo - MoffettNathanson - Analyst : Okay. That's great. Well, Dave, thank you so much for doing this.