Cogent Communications Holdings, Inc. The KeyBanc Technology Leadership Forumis 2026
Review the key takeaways and the transcript of this earnings call.
- Cogent's CEO Dave Schaeffer rated the Sprint wireline acquisition execution as a B, highlighting strong cost-cutting and integration progress but slower-than-expected wavelength revenue growth.
- Cogent provisioned approximately 2,500 unique wavelengths to 608 of 1,370 locations, serving 548 unique customers, with the wave business growing 9.2% sequentially and 68% year over year.
- The acquired enterprise customer base revenue declined from $485 million at acquisition to about $150 million run rate, with margins improving from negative 60% to break even.
- Legacy Cogent business growth slowed from 10.2% pre-pandemic to about 5% currently, with margin expansion also slowing.
- The Sprint business revenue declined from $485 million at acquisition to about $130 million annualized, with a decline rate moderating to 17-18% from a peak of 25%.
- Cogent's total top-line growth guidance remains 6-8% over a multiyear period, slower than pre-acquisition growth.
- Wavelength business growth faces structural challenges including supply chain constraints, equipment and power availability, and customer business model maturity.
- Cogent sells services in 60 single-tenant locations and has declined most new build opportunities due to low IRR, relying instead on dark fiber from core tenants to serve new facilities.
- Cogent's net-centric business, about 90% on-net, is accelerating with 16% year-over-year revenue growth driven by increased internet traffic from AI applications.
- Pricing for wavelengths remains at about a 20% discount to the market, with no recent pricing changes driving upsells.
- The company does not provide quarterly or annual guidance but focuses on long-term multiyear guidance.
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Transcript
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All right. Hello everybody. My name's Brandon Nispel. I cover comm services for KeyBanc. We have Dave Schaeffer here, CEO of Cogent. Dave, great to see you.
Hey. Thanks for being here.
Brandon, always thank you for hosting me. I'd like to thank investors for taking time out of their day, and maybe most importantly, KeyBank for yet another beautiful venue.
Okay, we're going to start with a little scorecard, Dave. It's been a little bit over three years since you closed the Sprint wireline acquisition. How would you rate Cogent's execution of this acquisition, knowing what you know of the business today?
Probably a B, Brandon Nispel. On the cost cutting, I think we have done well. We actually increased our target and are running ahead of schedule. On the integration of the customers into our systems, processes, and naming conventions, as well as the migration onto our network, I think we have done well. On the conversion of the TDM voice network to a Wave network, we did well. Where I think we have underperformed is on the wavelength growth on that network. It took us almost two years to convert that network to Wave enable 1,139 locations. We were pretty much on schedule for that component. Where we have been behind is on the generation of revenue on that Wave network. We have provisioned Waves to approximately 2,500 unique wavelengths. That is to 608 of the 1,137 locations, and as of quarter end, 548 unique customers.
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