Cogent Communications Holdings Inc Q4 2024 Earnings Call Transcript

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

Question: Michael Rollins - Citigroup Inc. - Analyst : Curious just to start us off, if you look at the customer verticals that you're now reporting in terms of corporate enterprise, and netcentric, can you give us an update just holistically in terms of where each of those segments are in terms of getting through some of these legacy acquired revenues and what's the opportunity for each of these segments to grow over the, coming years, whether it's, 12, or maybe a 3 year view. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Yeah, sure, Mike, I think those are fair questions. So when we acquired Sprint, we acquired both corporate and enterprise customers, only a handful of Netcentric customers. Our Netcentric business continues to grow, and that growth rate will actually accelerate since virtually all of the wavelength sales will be net. Centric. And approximately 85% of our IPB for leasing is to netcentric. So within the netcentric segment we are growing today and we anticipate that growth rate to accelerate meaningfully as both the underlying IP business performs and we are able to add wavelength revenue to those customers. For our corporate segment, we acquired a number of corporate customers from Sprint who were purchasing non-core services, were purchasing very low bandwidth, not fiber delivered off-net services. And we have been in the process of grooming those less desirable services. It is why our margins have exceeded our guidance in terms of growth rate, and we expect that to continue. I think we're probably still just a couple of quarters away from getting through that grooming exercise and then seeing positive growth. In our corporate segment. Those corporate customers will predominantly purchase DIA and VPN services based on VPLS. It is a segment that has been heavily exposed to central business district office occupancy, and we are continuing to see improvements in that. Many markets that have been negative net absorption, meaning increases in vacancy rates since the pandemic, have actually turned positive now, and we're seeing net positive absorption across most markets across the country. So as a result of the grooming, we will see probably a couple more quarters of negative corporate growth. Stable and then beginning to grow on the enterprise segment. The majority of these locations are off-net. Most of these customers take global services from Cogent, and they take two primary products internet access and VPNs based on NPLS. The decision to support MPLS going forward for at least a decade has actually allowed us to actually win a handful of brand new enterprise accounts that today only have a handful of connections with Cogen but have have indicated they will increase that. So we anticipate that the reduction in enterprise revenue will probably last. Into early 2026, so longer than corporate, and the main reason for that is we are grooming some international operations and bifurcating the service to the customer where we will continue to sell the port. In a country where coaching is licensed, but we are requiring the customer to enter into direct contract with the local loop provider as we are not licensed to resell those. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call Sprint had previously worked through a resale. Structure where they were reselling and then effectively sub reselling and we were uncomfortable with that legal construct. So as a result, as these off-net circuits in non-licensed countries, and remind investors we're licensed in 56 countries. But we provide service in over 170 countries around the world. In the differential, we require the customer to purchase their own loop. Codechi had always used that structure and we are migrating. The acquired Sprint Enterprise customers to that, so probably about a year of continued enterprise decline, then flat to very modest growth probably in that segment we do not anticipate more than kind of a 1% annual top line growth.

Question: Sebastiano Petty - JPMorgan - Analyst : Just in regards to the waves, they can send us, how should we think about perhaps additional investments needed to perhaps unlock the opportunity there, whether it be from a salesforce investment perspective, maybe connection costs, related to, just enabling that from a CapEx perspective, and then if we think about. If we think about just the pace of installs, I think, yeah, part of that is probably predicated on the backlog, but I think you said 500 or so monthly installs in waves is probably a near term target, but perhaps accelerating from there. And so how should we think about the cadence or the trend there, that would be helpful as well. And then I guess one area of housekeeping related to waves on the provisioning times, I think you're down to 30 days now. Can you remind us, where was that last quarter? And what's the timeline to get to the 2 weeks? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Yes, fair enough. I'm going to take those in reverse order, Sebastiano. So last quarter we were at, so in 3. We were probably at 120 days for the waves that we can provision by Q4 for the ones that we provision, we got that down to 90 in this quarter we are down to a 30 day provisioning window, and we are continuing to refine some of the processes and And field deployment mechanisms and feel comfortable that we can get down to the same two week average that we have in IP services which we've been able to do now for over 20 years you know we tested all of these provisioning systems. And configurations, but there are always corner cases in the real world that you learn from, but we feel very comfortable that you know the 30 days, which is far beyond what anyone else in the industry can do, is great, but we have the ability to effectively cut that in half over the next several months. With regard to the pacing of installs, we are ramping up to our full install capabilities, and we have both the field resources and service delivery coordinators to support the 500 a month. The hard part now has been working through the backlog that we have and flushing out which orders are still available for install and which the customers had to go somewhere else, and some of these orders had been in the funnel for over a year, and that is a time. Consuming process and we have groomed the funnel. It did shrink even though there were some new waters coming into the funnel. And now we expect the funnel to actually accelerate in new water intake as we have demonstrated our ability to install. I think we're still probably a month or two away from getting to kind of full cadence of 500. Installs a month as a result of this grooming exercise because it does take an iterative back and forth with the customer. Now to the investment part of the wavelength question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call And I'll answer that in two different areas, both capital in the network and Salesforce investment. I'll take the easiest first, which is CapEx. We are substantially complete in our footprint. There have been additional data centers that have come online over the past, 18 months since we announced that 800 target. And we are rapidly catching up, so we have ubiquitous wavelength capability across the footprint. In fact, the 808 that we ended the year with, 6 or 7 weeks later is now close to 880. There are still probably about 60 or 70 data centers that have IP connectivity from Codegen in North America that don't have waves that have come online in the past 18 months that will rapidly add a wave capability. And on a going forward basis in new data center additions, they will automatically have both services so it won't be a two part process in terms of the capital intensity of that. We think our kind of run rate stabilized CapEx will be in that roughly $100 million a year range that is somewhat dependent on the rate at which new data centers come online, but the amount of incremental capital to bring wavelengths to the data center versus just IP. It is fairly trivial, probably less than $15,000 per incremental data center. So we don't see a material uptick in CapEx. In fact, we see our CapEx declining after mid-year. And the elevated CapEx that we are spending now is being focused heavily on the data center conversion program where we are trying to unlock 100 megawatts in a million square. Feet of the data center footprint to be marketed on a wholesale basis. We targeted 23 of the largest facilities to do that, 3 have been fully converted. 20 are In the process of completing their conversion has been underway. It is capital intensive, and we anticipate by mid-year, by the end of June, all 23 of those facilities will be fully ready to be able to allow a counterparty to take control of them whether they purchase them or lease them. We have been marketing these facilities up. In kind of collecting offers and letters of intent as well as doing incremental tours, we believe that probably in the next 6 to 8 weeks we will be far enough along that it'll make sense for us to do some calls for offers and kind of flush out how many of the LOIs are in fact serious and are ready to transact and of what economics. Now for the salesforce piece, we have invested in our CRM to automate the provisioning and quoting of wavelengths. We actually automatically produce a route map with 1 m accuracy with each wave order. That is something that no other provider can do, and it's in large part due to the fact that the Sprint network. Was based on extremely accurate GIS data since it was not a roll up or a series of acquisitions but it was organically built by one company. We also have a number of sales. Training programs that have been ongoing and are now accelerating due to the ability to actually provision in a reasonable window in these additional sites and the cost of that is not an extraordinary expense. It's just a redirection of our sales training resources. We have a total of 13 dedicated sales trainers. They trained salespeople on all products, but over the past several months, their primary focus has been on wave training and certification, so we do not anticipate any extraordinary sales force investment.

Question: Greg Williams - TD Cowen - Analyst : Great, thanks for taking my question. Maybe dovetailing off the wave answer there, Dave, you mentioned your competitive advantage is obviously getting the two weeks of provisioning, and then you just mentioned 1 m of accuracy for your sales force. We just got back from a fiber conference and Lumen specifically calling out investing heavily in waves. Zao was talking about 400 gig waves across the country. Just trying to understand, the competitive concerns that they ramp up their weight product and, how much of your future growth and your 500 million target is share stealing versus the market expansion opportunity. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call Is there enough to go around for all of you? Second question is just on the IP version for price hikes. It sounds like, it's $0.44 per address. You mentioned that you know you're going to hike your prices on about $10 million addresses, where is that process and how's that going along and you know what's the math there if I think, maybe $0.10 of a price hike on $10 million addresses, that's like $12 million in revenue opportunities just trying to understand if I'm thinking of it correctly. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Yeah, hey, thanks for the questions, Greg, and again, I'll take these in reverse order. On the IPV4 pricing, we initially raised the price of new sales, then we began cycling through the base that was not covered by contracts. We still do have some customers at lower rates that we will be increasing prices on over the next several months. In addition to that, we will evaluate whether we can further raise prices for new sales, we do have. Inventory of addresses that are unleashed, but we also know that there is strong demand. So I do think we can continue to have out. Pace growth in our IPV4 leasing, it has now become much more of a focus for cogent. It represents almost 5% of our total revenues, and it will be the combination of. Governmental leasing activity which you can see the cadence and progress of in our press release as well as raising the average price of the base by both raising new incremental and going back to customers out of contract and raising that. Now to the wavelength question. We should never be naive. We should always believe we have competitors, and we have to win business on a wave by wave basis. The companies you mentioned have access to capital and are established players with substantial footprints. However, each of those companies has a much Smaller number of data centers where they at least tell the market or advertise that they could deliver wavelength services too. We were at 808 at year end and 880 today will be over 900 in the next few months as we close out those remaining new data centers and bring them onto the wave network. That additional ubiquity is important. The second key point is the architecture we deploy. It is radically different than that of Zao and Lumen. And it allows us to provision any to any in this very rapid period with minimum number of field dispatches and accurate fiber inventory. The two companies you mentioned had acquired a number of companies. They operate disparate, unintegrated networks, and for that reason, their typical wave install does take 90 to 120 days, typically requires 6 or more field visits and custom engineering in which they are unable even to produce an accurate route map. To the level that we have, so we think we have unique right of way. We've got faster provisioning, more endpoints, but at the end of the day we also have a much lower cost basis than they do in their assets. So we will be aggressive. I think we're going to grow our business by capturing new opportunities, but we will also Displace current providers by offering a better solution. The switching costs are trivial in a data center because all you do is issue an LOA to the data center operator to migrate the cross connect in that data center from the previous provider to the new provider. It's a very Easy process and then finally on the interface speeds that we can support 100% of our sites can support. 10 gig? 100 gig and 400 gig waves again that's very different than our competitors. We can support all three speeds at 100% of the sites. The caveat I'm going to put on that is in every vector, so every direction out of the site, we can support 10 and 100. With 100% coverage and today with 400 we're at about 82% of the vectors that we can provide so we do have a little bit of work to take some sites that are 400 gig enabled and make sure every direction out of that site can support 400. That work should also be complete this quarter in the first quarter of '25. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call

Question: Walter Piecyk - LightShed Partners - Analyst : Dave, have highlighted the sequential growth in ITV revenue. But I was looking at last quarter's revenue. It was higher, so that shows that there was a sequential decline. Was there some type of restatement in IPv4 lease revenue, and then in terms of you saying focusing on IPv4 in terms of growth, again, the net ads mean new lines, IP IPv4 addresses that you're leasing, I think only increased by like 90,000 in the quarter and used to increase by 56, 700,000. Was that based on some restatement on Q3 or is 90,000 kind of the run rate that you're delivering in terms of focusing on this area? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder So the ITV 4 revenue the entity that has the secured notes, is going to be audited. So we have begun that process in auditing the revenue streams.The data that has been disclosed have been based upon MRCs and Totalling MRCs as opposed to US GAAP revenue per quarter, so you are correct in observing that we adjusted some of the amounts for prior periods to get to the US GAAP numbers that will be audited coming up in the next few weeks here. Right, so that's on the revenue side and on the unit side. As we raise prices, there was some initial sticker shock. We did add just under 100,000 units in the quarter, but we also expect to be able to continue the average growth rate of nearly a half a million addresses per quarter over a multi-quarter period. If you go back and look at the data that we provided, there is volatility in every quarter in terms of the number of net new addresses added.

Question: Walter Piecyk - LightShed Partners - Analyst : Right. So end of quarter MRCs. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Right, that's right. That's right. So you might have been helpful to actually call that out in the press release of the prepared remarks rather than having to have it come up in Q&A. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call But can we move on to wavelength and I mean when you talk about sequential growth and it's actually down based on what you reported, yeah, I mean, I think maybe it's not material in dollars but whatever wavelengths, I guess a similar type of question, the backlog declining 20%. Was this basically like you had had orders from some time ago and then you checked in with these customers and they had gone elsewhere. And I'm just curious like if if we look at what remains after this 20% decline in your in your wavelength orders sequentially, when's the last time you checked in with the customers that have existing orders in your backlog? And is there any chance that we'll see a similar reduction next quarter because they've gone elsewhere for the wavelength? Well, as we have stated on multiple previous calls as we were building an order funnel and backlog, we knew that we could not provision those orders. Some of those orders were provisions, so some of the decline came from the incremental orders that were provisioned. Some of the decline came from going to customers who had previously put in an order maybe 15 months ago and had gone somewhere else. Now that we have established a commitment to deliver today with a contractual penalty if we fail of 30 days in. 808 sites at year end and 880 sites today we are cycling through that. There will be some breakage, but there are also new water intakes at an accelerating rate. I think the way you characterized it as a 20% decline in waves is not correct. What it is.

Question: Walter Piecyk - LightShed Partners - Analyst : Can you also just last thing, my favorite topic is just the, I guess aside from leverage, but I'll leave that for on the next call, which is now north of 5. Your corporate revenue, which was declining 2.7%, I think in the prepared comments again, you talked about off net and shifting off net to on net, but like what can you just kind of cut to the root of it, what's going on in in corporate? I is there any organic growth opportunity? In that business or is this forever just in decline? I'm talking about the traditional cogent corporate, that really drove your dividend growth historically. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Well, dividend growth has been driven by growth and cash flow and that growth in cash flow cash flow, debt leverage there's no cash flow leverage you ask the question. I'll finish answering it. So I already answered the question from Mike Rollins earlier, which is that corporate growth will decline for another quarter or two as we continue to groom, as we groom both non-core and negative margin off-net services that cannot be migrated to onNET that results in a top line decline but an expansion. In IIA, we think this is the appropriate strategy. The underlying on net corporate footprint continues to grow.

Question: Timothy Horan - Oppenheimer & Co. Inc. - Analyst : Back on the wavelength in your conversations, how important is the redundant routes and new architecture and what type of price discount do you think you need to get to to capture share and can you give us an update on, maybe how much revenue you can get in wavelengths now and what you're kind of still expecting in 5 years. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Thanks. Yeah, so. Thanks for the questions, Tim. First of all, I would actually say route redundancy is actually the most important factor to potential customers. If we rank, their concerns, it's route redundancy, data center coverage. Provisioning time and pricing in that order. So price is probably not the most important factor, but it will help us close some business in terms of redundancy even for companies that have chosen to buy or build dark fiber initially you would think that. Demand out of the market, but because the services on either dark fiber or waves are an unprotected service, they actually value the redundancy even more, so it actually generates incremental demand for the same city payer on a unique route. We feel very comfortable about the target that we laid out at the closing of the deal in May of '23. and said within five years we would be at a run rate of $500 million annually in wavelength sales. We think that the demand that we have received both in terms of order backlog and continued customer interest. Gives us a great deal of confidence we're going to make that number, particularly as we prove to the market our ability to actually deliver, the fact that there have been some customers in the funnel for over a year that are still taking waves is to me a little surprising. But some of them had enough confidence in us and we have delivered. For others, I think we have. To build credibility and the way we're going to do that is install these waves, but we're very comfortable with our $500 million by mid '28 target for wavelength revenue.

Question: Timothy Horan - Oppenheimer & Co. Inc. - Analyst : Last week, Dave, can you just give us some, I know you're reluctant to do this, and maybe you can't, some color on what we should expect for consolidated revenue and maybe consolidated even total, for this year. There's obviously there's a lot of moving parts. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder There are, and in 20 at the beginning of 24, we said that our IEDA would be relatively equivalent to 23, and I think most cell side analysts did not believe that and then we ended the year at 3. 48 versus 352, so about $4 million or 1% delta, I think going into the year, the kind of consensus was for about a 20% reduction. And EBITDA due to the step down in payments from T-Mobile, we have demonstrated our ability to take out costs. So I think as we look at 25, we should deliver IIDA effectively equivalent to 24 or 23, so around $350 million. You're right, we don't like to give specific annual guidance. We also, kind of address the various customer segments and the declines and when we expect each of those segments to have flushed through the grooming of the noncore products. I would suspect that we will be delivering revenue. That is slightly up for the full year due to wavelength sales.

Question: Jim Schneider - Goldman Sachs - Analyst : Maybe wanted to kind of get the corporate revenue question in a different way if we could, Dave, maybe you just kind of think about it in terms of either corporate connections or on net connections and core customer trends. I mean, what is, what's going to be required to get those sort of connections growing in a more positive direction. Over the next few quarters, and can you specifically talk to what's required in terms of Salesforce headcount and Salesforce productivity and how much productivity that needs to increase in order to get there? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Yeah, so in terms of corporate connections, we need to groom those non-core products that are sold to on-net customers, so there is going to be some connection, grooming that goes on. And we are also migrating customers from off-net to on that. We've done a significant amount of that, but there are other cases where there were off-net customers and on-net buildings that were trapped in a group contract that we acquired from Sprint that we only migrate that customer once that contract has ended so we can recognize that savings. So I think on a connection basis we've got a couple more quarters of headwinds and then positive. On a revenue base, it will be very similar as we think the ARPUs will be relatively flat. There is some price decline that is typically offset by migrations to larger connections. To address the sales force piece of it. Roughly 39,387 of our salespeople focus on the corporate segment. That is the portion of the sales force that has the highest turnover. That is where we focus the majority of our normal training activities. As I mentioned earlier, we've diverted some of those to wave training to the netcentric sales force, which is very stable, but we will be able to divert back training to the corporate team. And we do need the average number of Connections sold per rep per month to go up. You were at 3.5 today. The long term average is just under 5. We were at 4 the previous quarter. There is some volatility around that, but I do believe that we have the right number of salespeople, the right. A turnover. I'd always like turnover to be lower, and I think we will continue to see corporate on net growth. Now the return to office environment is the backdrop we're working against. It has been tough. It's lasted much longer than we expected, and we're always seeing positive net office absorption turning in a dozen or so markets this quarter, but that is at least a sign that we have reached bottom. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call And we're starting up, so it's a combination of companies making a decision and companies occupying the space. But as I said to Mike's question, we feel comfortable that we're probably 1 to 2 quarters away from positive corporate revenue growth.

Question: Christopher Schoell - UBS - Analyst : Maybe just one on the under monetized assets. Dave, would you say there's a preference for leasing versus selling the data center and IPv4 assets at this stage? And as you think about maximizing value, do you believe this most likely will be achieved through a few large deals or more so through a series of transactions? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder So on the IPV4s at this point we are committed to leasing them while they are liquid and could be sold since Microsoft and Amazon are today not acquiring at least in scale, we think that we would be leaving money on the table. The average price per address peaked at the end of 23 at about $60. Today blocks are trading on exchanges between $48.52 dollars, so that is about a 15% reduction. If prices trade back up, and that is, I think, likely as you look at the long term appreciation. The first trades occurred in 2011 at $4 an address, and today 14 years later they're at about $50. I think the long trend term trend is up, but we would consider being a seller of some of that address space in terms of the data centers. We really are agnostic to whether it is a cash sale or a lease. We're allowing the market to tell us both which data centers they want and which of the two models they would prefer to use. I would say if I looked at the pool of letters of intent today. There are about 60% lease, about 40% purchase. So while there's a slight preference for leasing, it's not overwhelming, and that's out of after several 100 tours by different counterparties. There's almost 50 counterparties still actively working on these assets. We have been reluctant to accept any offers because the assets just are not ripe for monetization. That will happen over the next few months, and that was to my point about calling for offers. If we decide to take a lease deal because the overall economics are better for cogen, we would probably look to securitize that to raise cash off of those leases. So therefore, the credit quality of the underlying tenant would be critical in our decision making process. And then the final part of your question. Is it going to be a holistic deal or one off, while we have several offers for the entire portfolio, they do not maximize value on specific assets within the portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call Again, until we do a call for offers, it can line everything up. I'm just not in a position to answer that. I want to be absolutely clear with investors. This is something we haven't done before. We've got strong indications that our pricing is reasonable and there's strong demand, but we really want the market to answer the question for us.

Question: Nick Del Deo - MoffettNathanson - Analyst : I think you said traffic growth was 11% year by year, which I think is the lowest you've ever had, maybe aside from the quarter when you last mega upload back in 2012. I guess what's going on there and what does it mean for the centric outlook? And then on the data center front, obviously we're, mostly focused on the facilities you're trying to to spruce up for for wholesale or for sale. But I guess if you think about your retail assets, I think they've historically had utilization rates in the 30% range or so, I just have, should we expect that to go up, in light of the broader supply demand dynamic in the data center space? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder Yeah. So first of all, on the traffic growth number, traffic was essentially sequentially flat on a quarterly basis it was up 11% year over year, but for the full year it was up 16%. So calendar year '24 versus full calendar year 23. In terms of what's going on, we are reaching a level of maturity in streaming in the developed world with roughly 53%, 54% of all video now being streamed, and that growth rate in streaming versus the You know hockey stick we saw post pandemic is moderating. I do think that we are going to see a new leg up in growth as AI matures and as inference models become more ubiquitous and more commonly used. I think that will drive a new leg of growth and if we go back and look at Cogen's reported traffic growth over a 20 year history as a public company, there have been ups and downs. Yes, mega upload was a particularly abrupt shot. But we've also seen other slowdowns, when YouTube's casual video business started to mature. That slowed down our traffic growth, when Napster's file sharing business matured. Now these were off a much smaller basis, I think for our net centric IT business, I think we will continue to see growth. At similar historic rates, that's kind of in the 9 10% rate, and there are ebbs and flows in quarterly traffic. I know that several of our CDN customers did have a pretty tough quarter in terms of their traffic volumes, and they are, heavily dependent on us, but, I don't think the internet stopped growing. I think in aggregate we're going to grow as fast or faster than the internet, gaining share, and it's REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, CCOI.OQ - Q4 2024 Cogent Communications Holdings Inc Earnings Call got a long way to go before it's matured. To your data center question, you are correct in the premise that our primary focus today is getting that excess space marketable so we can monetize it. But we did add a lot of these smaller facilities which are More focused on our retail base, the 55 edge data centers that we added average about 40 racks of capacity and about 350 kilowatts, so a third of a megawatt in existing power. With this added footprint, our utilization rate for the retail side of our business has declined fairly materially. We've brought a lot of supply on and haven't sold it. I think we will be in a position to increase occupancy in the retail portion. We've been a little reluctant to put retail into some of the data centers that will also have a Significant amount of wholesale and the reason for that is someone may want to take the whole facility and we may exit our retail footprint. A retail footprint in those facilities typically is about 10,000 square feet and about 1 megawatt. And it didn't make sense to put someone in that 10,000 ft that was taking two or three cabinets, and that could be an impediment. 2 or 3 months from now when someone comes along and says I want to take the whole facility, but I think in general we are probably a couple of years away from getting back to 30% occupancy. Now hopefully the inference phase and the geographic ubiquity of our footprint. Changes that and accelerates that, but today we don't have a lot of data around AI edge cases as a significant driver of co-location. Basically our retail colo business has been aimed mostly at small corporates, and I think that's at least where we're focused today. That may change as some of the AI inference models evolve.

Question: Brandon Nispel - KeyBanc Capital Markets Inc. - Analyst : Just housekeeping questions I suppose given time. Dave, how many waves specifically did you groom out of the funnel? David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder We groomed about 1,500 out of the funnel.

Question: Brandon Nispel - KeyBanc Capital Markets Inc. - Analyst : And then lastly, is there any way you can quantify just with one number on enterprise, corporate, and netcentric, what the grooming activities related to so purposeful disconnects and or provide a turn rate that includes those disconnects and a turn rate excluding sort of the the purposeful disconnects. David Schaeffer - Cogent Communications Holdings Inc - Chairman of the Board, President, Chief Executive Officer, Founder It is hard for me to give you a single number because there are really 3 things going on at the same time. You've got, well, 4 things. You're moving some people from off and on it. You're keeping the customer, but there are other cases where you're turning off a low capacity corporate circuit that there's no fiber alternative for in North America. You're turning off enterprise circuits in international footprints where we are not licensed. And then finally, for both of those segments, corporate and enterprise, we're end of life thing. These products and you know we had about a million dollars dollar headwind sequentially this quarter $900,000 and we'll continue to turn that off. So there's not a single number you really need to look at each of the subcomponents to kind of know what's going on, kind of one headline number would be misleading. Thanks for taking the questions. Hey, thanks, everyone. I want to appreciate everyone listening. We did cut our prepared remarks. We got done in less than an hour and a half and thanks everyone. Take care and we'll talk soon. Bye-bye.