Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q3 2023 Earnings Conference Call November 9, 2023 8:30 AM ET

Company Participants

Dave Schaeffer - Chief Executive Officer

Thaddeus Weed - Chief Financial Officer

Conference Call Participants

Gregory Williams - TD Cowen

Frank Louthan - Raymond James Financial, Inc.

Walter Piecyk - LightShed Partners

Timothy Horan - Oppenheimer & Co. Inc.

Nick Del Deo - MoffettNathanson LLC

Brandon Nispel - KeyBanc Capital Markets

Michael Rollins - Citigroup Global Markets

Operator

Good morning, and welcome to the Cogent Communications Holding Third Quarter 2023 Earnings Conference Call. As a reminder, this conference call is being recorded, and it will be available for replay at www.cogentco.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 Communications Holdings. Please go ahead.

Dave Schaeffer

Thank you, and good morning, everyone. Welcome to our third quarter 2023 earnings call. I’m Dave Schaeffer, Cogent’s CEO. With me on this morning’s call is Tad Weed, our Chief Financial Officer. Hopefully, you’ve had a chance to review our earnings press release. Our press release includes a number of historical quarterly metrics, which we present in a consistent manner each quarter.

Now, for a few comments on our results. We closed our acquisition of the Sprint business on May 1, 2023. This transaction significantly expanded our network, our customer base, and materially increased the scope and scale of our business. Our annualized revenue run rate now exceeds $1 billion. We acquired a number of large enterprise customers, many of which are Fortune 500 companies. Customers that are typically larger than our typical Cogent corporate customer base.

We acquired significant owned fiber optic roots and facilities. We acquired numerous right-of-way in relationships with the underlying landowners, which represent over tens of thousands of route miles of dark fiber. These assets and relationships would be virtually impossible for us to assemble on our own. We hired many valuable experience Sprint business employees. Many of these sprint business employees had an average tenure with the company of 22 years prior to the acquisition.

We acquired a network with an appraised value of over $1 billion for $1. We will receive a total of $700 million from T-Mobile to offset operating losses for serving enterprise customers and for providing T-Mobile IP Transit Services. $350 million in the first year for $29.2 million in monthly installments, and then $350 million over the next 42 months for a monthly installment of $8.3 million per month. We are very optimistic about the cash flow generating capabilities of the combined operation.