Cogent Communications Holdings, Inc. (CCOI) Earnings Call Transcript & Summary

Good morning and welcome to the Cogent Communications Holdings second quarter 2026 earnings conference call As a reminder, this conference call is being recorded and it will be available for replay at www.cogentco.com. The transcript of this conference call will be posted on Cogent's website when it comes 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 it over to Mr. Dave Schaffer, Chairman and Chief Executive Officer of Cogent Communications Holdings. You may begin.

Hey, thank you and good morning. Welcome to our second quarter 2026. conference call. I'm Dave Schaefer, Cochran'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 or 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 AHO sale basis. basis in june we closed on the sale of 10 of these former sprint facilities that we converted into data centers for total proceeds of 225 million paid in cash by the purchaser in the quarter The sale of these assets resulted in a gap gain of $130.7 million. We intend to use the majority of these proceeds from the transaction to reduce both our gross leverage and our net leverage. We reduce our net leverage as adjusted inclusive of our payments from T-Mobile in this quarter to 6.23 times EBITDA from 6.79 at the close of last quarter and from 6.25 to 6.25. 6.61 times in Q2 of 2025. We continue to have multiple parties interested in the remaining former Sprint facilities that that we have put up for sale. We are in negotiation for several letters of intent on these facilities. Our total cash and restricted cash balances at the end of Q2 2026 was $369.7 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. The key features included in this revision are an increase in maximum secured debt leverage ratio, from four times to 4.7 times, 475 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. During the quarter, we repurchased $20.4 million of par value 2032 notes at an average price of $91.955, resulting in a gain in the quarter of $1.6 million. $1.4 billion. Continuing in July, we purchased an additional $118.4 million of par value notes at an average price of $90.071, resulting in an additional of $11.8 million, which will be recognized in the third quarter. The total purchases of our 2032 notes to date have been $138.8 million of face value, at an average price of 90.348, resulting in a cumulative gain of 13.4 million. We are making progress on the refinancing of our $750 million 2027 unsecured news. Our $750 million unsecured notes mature in June of 2027. The May cold period for our 2027 unsecured notes ended on June 15, 2026. These notes have become current, and we are in the process of completing or refinancing of these notes. We expect that transaction to be completed. to be completed in the third quarter of 2026. Now for a couple of comments on our wavelength business. 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 in approximately 30 days, which do continue to improve. or length revenue for the quarter was 14.8 million, an increase of 63.8% from a year ago, and a sequential increase of 9.2%. Our wavelength customers increased year over year by 66.4% and sequentially by 8% to a total of 2,415. 45 customer connections. In addition, during the quarter, to the new installs that we have reported, we re-provisioned 77 existing wavelengths, converting them into higher capacity wavelengths. Most of these were conversions from 100 gig to 45 gig. 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 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 margins percentages increased on a year-over-year basis by 260 basis points and increased sequentially by 90 basis points to 47%. Our EBITDA, EBITDA as adjusted and EBITDA adjusted margins also improved. We expanded our sequential EBITDA as adjusted margin. Our EBITDA as adjusted for the quarter increased sequentially by 9.2%. $900,000 or just under $1 million to $71.1 million. And our EBITDA as adjusted margin increased sequentially by 90 basis points to 30.2%. 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 quarters 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. 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 Cochran 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 a 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.

Yes, thank you Dave. Good morning everyone. This earnings conference call includes forward looking statements. These forward looking statements 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. COGEN undertakes no obligation to update or revise our forward-looking statements. If we use non-GAAP financial measures during this call, you will find these reconciled to the corresponding GAAP measurements in our earnings releases that are posted on our website at cogenco.com. discussion of the results for the corner and the revenue mix since spring closing which the full course quarter was Q3 23 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 criminal classic business. Our on-net revenues were 47% of our total revenues in the third quarter of 2023. Our total on-net revenues, including on-net wavelengths, increased 63%. So close to 64% of our total revenues this quarter, and that was compared to 62.4% last quarter and 57.4% in the second quarter of last year. Our off-net revenues were 48% of our total revenues in the third quarter of 23, are much less profitable. Our off-net revenues have decreased to 35.9% of our total revenues this quarter, compared to 37.2% last quarter and 41.5% in the second half. quarter of last year. 18% of our sales this quarter were for on-net services, In the aggregate, our non core revenues were 5% of our total revenues in the third quarter of 23. And they have decreased to less than a 1M dollars and we're about 0.4% of our revenues this quarter. Our total revenues for the quarter were $235.6 million. revenue declined by 3.6 million to 1.5%. USF tax revenues had a negative impact on our sequential revenue results of 0.6 million and a negative year-to-year impact of 1.1 million. The combined impact of USF tax and FX had a negative impact combined of $0.8 million on our sequential revenue results. We 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 net-centric, corporate, and enterprise customer. For the quarter, sequentially, our on-net revenues, including wave revenues, increased by $1 million. Are less profitable off net revenues declined by four and a half million, so most of the decline was related to off net. non-core revenues decreased by 0.1 million. Our wavelength revenues by themselves, which is almost entirely on that, increased by 1.2 million. IPV4 lease revenue, which is included in OnNet, our OnNet IPV4 leasing revenue increased sequentially by a half percent to $18.1 million and 18.1% year over year. our lease price per address has been stable for the last several quarters and was zero 40 cents per month. We have titled the 37.8 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 code and 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 $118.25. This acquired revenue base has decreased from 118 million and down to 34 million for this quarter. That's an $84 million reduction in quarterly revenues related to our acquired SprintWireline 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 And the coaching classic revenue base has increased from then by 29% from $155 million to $200 million for this quarter. Revenue by corporate, net centric, and enterprise. Our total corporate business represented 41.9% of our revenues for the quarter. That decreased by 9.6% year over year and sequentially by 2.4%. Our total net-centric business continues to increase and to benefit from the growth in video traffic, activity related to artificial intelligence, streaming, ICD-4 leasing, and wavelength sales. Our net-centric business represents 45.6% of our revenues this quarter. Our quarterly net-centric revenues increased by 10.4% year-over-year and sequentially by 1.6%. Lastly, our enterprise business, our total enterprise business was 12.5% of our revenues this quarter. Our quarterly enterprise revenue decreased by 26% year over year and sequentially by 8.9%. primarily due to reduction in the acquired Sprint, Wireline, Enterprise, off-net revenues as non-core is down to less. less than a million dollars. Revenue and customer connections by network type. We serve our on-net customers in 3,627 total on-net buildings. Our total on-net revenue, including on-net wavelength sales, was $150.2 million for the quarter, a year-over-year increase of 6.2% and a sequential increase of 0.7%. Our off net revenue was 84.5 million for the quarter. year-over-year decrease of 17.3% and a sequential decrease of 5.1%. Our off-net revenue results are impacted by the continued grooming and termination of low-margin off-net contracts, and particularly the acquired for wireline customers. From pricing, our average price per megabit for installed base decreased sequentially slightly to 11 cents from 12 cents last quarter and from 17 cents for the second quarter of last year. Our average price per megabit for our new customer contracts also slightly declined with $0.06 compared to $0.07 last quarter and $0.08 in the second quarter of last year. OUR ARPU'S FOR THE QUARTER WERE AS FOLLOWED. OUR ONNET IP ARPU WAS 513. off net IPR was 1197. 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. Our IPv4 ARPU, again, was 40 cents per address, very stable. Our churn rates, our on-net churn rate, monthly churn rate slightly increased to 1.3% from 1.2% last quarter. our off-net churn rate is primarily driven by the reduction in the acquired sprint customer base. And that rate was 2.3%, an increase from 1.7% last quarter. Lastly, our wavelength monthly turn rate was about 0.5%. 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 at an accelerated rate up to 16%. Sales rep productivity, our sales rep productivity materially improved substantially and was 4.5 this quarter compared to 4.1 last quarter. Our long-term average is 4.8. Comments on FX, our revenue earned outside of the United States was about 21% of our revenues for the quarter, very consistent. Based on the average Euro and Canadian conversion rate so far this quarter, so in the third quarter, we estimate that the FX conversion impact on sequential revenues will be negative and 0.3 million and year over year also negative 0.8 million. Customer concentration, our revenues and customer base are not highly concentrated. Our top 25 customers are 16% of our revenues in support. CapEx and payments on capital leases. Our CapEx declined by 16.7% sequentially and 31.4% year-over-year to $38.5 million for the quarter. We continue to experience multiple equipment price increases from vendors due to supply chain constraints so far this year. Our principal payments on capital leases also declined sequentially by 27.7% and were $9.7 million for the quarter. Debt and debt ratios. Our total gross debt at par, including our $630.2 million of finance IRU leases, and our reduced principal amount of our 2032 notes, which a quarter round was reduced from $600 million to $579.6 million. The total was $2.2 million. $2.3 billion and a quarter in. Our net debt, total debt net of our cash, and our 151.5 million amounts due from T-Mobile was 1.8 million. The principal balance on our 2032 notes again has been reduced further after quarter end and is now 461.2 million from the purchases we made in July. Our leverage ratio as calculated under our more restrictive unsecured 750 million 2027 notes was Our secured leverage ratio under the notes was 3.67. Our fixed coverage ratio was 2.28. The definition of consolidated cash flow under our 600 million year 2032 notes and venture includes cash payments under our IP transit service agreement with T mobile in the determination of consolidated cash flow under the indenture. And those ratios were as follows. Our leverage ratio as calculated under the $600 million note indenture was 4.56, secured leverage was 2.81, and fixed coverage was 2.97. cash and restricted cash. 168 million of the proceeds from the sale of the 10 data centers was considered restricted cash at closing of the terms of our supplemental indenture since that amount was reserved for purchases of our debt obligations at a discount. We purchased 20.4 million par value, or 2032 notes, in June. As a result, the balance of restricted cash related to the data center sale proceeds was $147.6 million as of June 30. Again, we purchased an additional 118.4 million par value of our 2032 notes in July, so the remaining balance of the restricted cash, 29.2 million, as of July 31st. The cumulative purchases of our 2032 notes were $138.8 million of par value. That was retired for paying $126.2 million at an average price of $90.348 and the cumulative total gain $13.4 million. Lastly, bad debt and day sales. Our DSO improved and was 29 days at quarter end, a two day improvement from from 31 last quarter and our bad debt expense was only 0.6% of our revenues for the quarter.

And with that, I will turn the call back over to Dave. Hey, thanks, Ted. I'd like to highlight a couple of strengths around our network, our customer base, and our sales force. We remain direct beneficiaries of increased traffic volumes from over-the-top video, artificial intelligence activity, streaming and gaming trends. At quarter's end, we were able to sell WAVE services into 1,137 unique data centers with reduced provisioning windows for approximately 30 days. We sell those WAVES in 608 of those locations as of today to 546 unique customers. At quarter's end, we were signed for IP services globally in 1,953 data centers. At quarter's end, our IP network remains the most connected in the world with 7,000 7,572 networks directly connected. 22 of these networks represent peers and 7,550 networks are paying cogent transit customers. We remained focused on our sales force productivity and continued to manage out underperforming reps. Our sales force turnover was 7.5% a month in the quarter, which is above our historical average of 5.7% per month. At quarter's end, we had a total quota bearing sales force of 506, 263 of these professionals focus on the net centric market, 230 focus on the corporate market, and 13 focus on the enterprise market. We have made significant progress in several areas. We continue to improve our margins, grow our EBITDA due to our diligence and cost reductions, the completion of many of the integration programs that we outlined three years ago, focus and selling more profitable on-net services. In the second quarter, 82% of all sales in the quarter were on Net Services. And as a result in our revenue base, the percentage of revenues that come from on net increase sequentially to 64%. We're actively working on further monetization of the converted Sprint facilities. ability to increase EBITDA margins through optimization and asset divestiture will accelerate our delivering and allow us to resume a program of aggressively returning capital to equity holders. We remain disciplined and our capital investments were focused on expansion projects with the highest return on incremental capital. or wavelength services are differentiated by the quality, breadth, of our footprint, uniqueness of our routes, and efficient provisioning capabilities. Our on-net services, whether they be WAVE or IP, are unparalleled in their value to customers. At Quarters End, we're providing services in 1,781 carrier-neutral data centers and 172 cogent data centers. This footprint and aggregate reaches facilities... with approximately 17 gigawatts of installed power. The cogent data centers that we operate have a total of 155 megawatts of installed and available power and over $1.5 million. square feet. The proceeds that we have been able to garner from these data center sales have allowed us to reduce leverage and has allowed us to add resources to the marketing of the remaining facilities. We are in the process of completing the refinancing of our 2027 notes, which we anticipate will complete in the third quarter of this year. We offer superior products, unparalleled quality, broad footprint into traffic locations with expedited provisioning and disruptive pricing. In summary, we continue to gain market share by the value we deliver our With that, I'd like to open the floor for questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press the star 1 on your telephone keypad. And if you would like to withdraw your question, please press the star 1 again. Your first question comes from the line of Greg Williams with TD Cowen.

Great, thanks for taking my question. First one's just on waves. Your peers over the last two weeks noted some strong wave numbers. Your numbers came in a touch light to the estimates, mine and the streets, I think. And I realize you don't provide the backlog KPIs, but any help on backlog direction would be helpful. As we're wondering here, is this still about customer service? delaying or not accepting orders. And you reiterated the 25% share in the long term. Like what needs to happen? You're a far cry from that number. as you think about the timing of that target now. Second question is on EBITDA. It grew quarter-over-quarter as message, but it barely did so. one-time cost you mentioned head count reduction how much was that and is that in your EBITDA and are we fully done with the cost takeout progress essentially we're just trying to figure out what the EBITDA cadence looks like for the balance of the year thanks.

Yes, sure. Thanks for the questions, Greg. With regard to wave sales, our demand remains strong. We continue to add to our backlog. You are correct, we are no longer disclosing that backlog specifically, we also are encouraged by the fact that customers that have used our services are now coming back and asking to increase the capacity on those wavelengths and helping us push ARPU up. We have been frustrated by the fact that many customers struggle to have the ability to use the waves that they've ordered, whether it be equipment deliveries, power constraints, or data center space. space and cooling availability or even data center completion. So because of the surge in demand for computing, the entire supply chain is adjusting, and that has impacted our customers. It has not to date slowed our ability to provision, but it has increased our capital. And you know, the fact that we were able to have a meaningful reduction in our capital spending sequentially and and expect that number to continue to improve is because of our efficiency and deploying that capital. You know, in terms of wavelength market share, you know, we are at only 3% of the North American long haul market today. You know, we remain encouraged by the breadth of customer base that we have. 546 unique companies using our wavelengths, getting comfortable with Cogent, and the fact that we've now delivered those into more than half of our wave enabled footprint, 608 out of the 1137 wave enabled locations. You know, I think we expect our rate of wave installs to accelerate. But I do think it will be several years till we get to that 25% market share. I'm going to now pivot over to the EBITDA progression and. And. You know, while we experienced a significant revenue decline of $3.6 million sequentially, our EBITDA did grow by nearly a million dollars on a sequential basis. basis embedded in those costs and retarding our rate of margin expansion were some of the expenses that we have incurred in the quarter as we have wound down many of the integration projects just to remind investors. When we initially acquired Sprint, we had targeted $220 million of targeted direct cost savings and we a monthly integration expense of about $5 million a month. We updated those numbers and as recently as last earnings call, we had taken that $220 million number to 240 and we had indicated that of that 240, there was less than $20 million of annual the annualized run rate remaining. We have brought that number down. There is still a small stub of remaining costs, but the vast majority of the 240 million in cost savings have been achieved. We also commented over the last three years on the decline in our spending on integration projects. You know, that monthly spend of $5 million a month had declined to about $3 million a month at the end of Q1. We accelerated that decline in large part through the optimization of our workforce. While we had been gradually reducing our workforce, that rate of reduction accelerated in a quarter and we reduced our workforce by about 6%. There will be further reductions in the third quarter, but at a more moderate rate. The cost of these reductions, severance, benefits, payments, and the fact that many of these employees did continue to work at least partially in a quarter did impact the rate of margin expansion. I do believe that over the next several quarters, we will return to a more accelerated rate of margin expansion through the combination of continued on net sales and the continued discipline around taking out those integration expenses. As we had outlined previously, going back to September of 2022 when the deal was announced, that we anticipated all of those integration costs to be gone by the end of 2026, year end. We will probably be in a position to beat that, but we have materially reduced those expenses, and therefore we'll see uplift in both the third and fourth quarter from that.

Thanks. We have a quick follow-up. You mentioned that CapEx was down and you expect that number to continue to come down. Is that a quarter-over-quarter or near-term target? Is that sort of a longer-term view?.

So it was both on a year over year basis and sequentially that capital declined. We would expect a further decline on both a sequential and year over year basis in the third quarter. You know, as I commented extensively on the last call, it has been difficult for us to give exact capex guidance because of the pacing of equipment price increases. We had experienced five increases from one vendor in the first five months of the year. Fortunately, in the next three months, we've only experienced one increase, and they were relatively equal size. Our other primary vendor has had three increases, and we do believe that that rate of price increase is moderating, and we do expect our total CapEx spend to continue to moderate.

Got it, thank you. Hey, thanks, Craig. And your next question comes from the line of Chris Scholl with UBS. Please go ahead.

Great, thank you. Dave, just to follow up on the status of those 14 Sprint data center sites that have been converted, do you envision selling those 14 as a block or as a piecemeal approach more likely based on the interest you're seeing so far and any color you can give on the number or types of buyers expressing interest at this stage and what the timeline looks like?.

from here. Thank you. Yes, sure, Chris. I think it's most likely that they will be sold in chunks. We do have numerous both operators and private equity looking at these facilities. We currently have signed letters of from purchasers that we have not accepted that we have validated their credit worthiness and those are for four facilities two letters of intent one for three one for one facility and You know, we are also in discussion for many of the remaining 10 facilities, but we do not today possess letters of intent. The letters of intent that we have, Cujon found unacceptable in terms of price based on the characteristics of these facilities, and we are in the process in negotiation. That is not a guarantee we'll get a deal done with those counterparties, but we remain optimistic. I think for the other 10 facilities, the counterparties are still being vetted and We also do not yet have a firm offer from them, in some cases verbal indications of interest, but I think it's our intention to only announce once we have something that we feel will absolutely close. And we're encouraged. by, you know, I squares progress and their professionalism and moving from letter of intent to contract to closing.

If I can just follow up on the 10 sites you did sell, can you just remind us how much expense should drop out in 3Q for those assets, and is it fair most of that spend is in COGS.

Yes, so the expense associated with those facilities on an annual basis was about $7,000,000. So we would anticipate just under $2,000,000 of direct expense comes out. Offsetting that is we remain a tenant and a small footprint in those facilities for a few hundred thousand dollars of expense for space and power for our equipment that we intend, just as we're in other data centers. to continue to operate and in addition to those savings we also will be receiving payments from i-squared for providing transition services to them that will be recognized either as an offset to cost or revenue. Great. Thank you.

Hey, thanks, Chris. And your next question comes from the line of Mike Funk with Bank of America. Please go ahead.

Good morning, Dave. How are you? Hey, great, Michael. Yes, good to hear from you again. So, one of the back to wavelengths, Dave. We really have not seen acceleration and connections, a lot of us had anticipated. So, can you maybe just talk a little bit about the conversion of some of that backlog, and what the impediments have been. And then on the sale or potential sales or remaining Sprint data centers, love to get your thoughts on how we should think about valuation, based on the location, quality, tenants, whether that would be comparable to valuation the data center has already sold,.

you closed on? Michael Sink – yes, sure. Two very good questions, Michael. So first of all, on wavelengths, you know, the constraints I think have fallen into two primary categories. One, customers not being able to accept the wavelengths because of constraints that they are facing. You know, existing data center occupancy is at a record high. Many data centers do not have surplus power available so the customer can't put the equipment in. to accept the wavelength. There can be other supply chain constraints around, you know, whether it be servers, routers, switches, pluggable optics, all of these components that allow the customer to use the wavelength that we deliver have elongated delivery times. I think secondly, and we commented on this several quarters ago and have talked about repeatedly, customers, I think still are amazed at our ability to provision as compared to others you know i know the question and comment came up about others reporting quote-unquote strong wavelength sales to the best of my knowledge none of our competitors give the level of granularity on wavelength sales that we disclose the number of wavelengths the ARPU, and they oftentimes do not break wavelength revenue out as a separate line item. So, you know, it's one thing to qualitatively say things are great. That's another to be very granular and specific. I'm not saying that in a defensive way, but I do think our transparency on this has allowed investors more clarity and more granularity than our competitors. You know, we today have equipment and are able to continue to deploy wavelengths. We have had to make decisions around, is the customer who has an order really going to take the wavelength? And then, two, prioritize some. equipment and resources to customers that already are using wavelengths and are upgrading. You know, I think we did better than the headline number, you know, demonstrates in the quarter with the re-provisioning of 77 wavelengths on top of the 182 that we deployed. These are still relatively small, numbers. You know, we have a strong year over year growth rate, you know, at over 60% percent, a strong sequential growth rate of 10 percent. These are, I think, admirable, but we need to continue to grow the base. We do believe that the demand is real, the customer base is broad, the footprint we have is the footprint that customers want. There's been conversations around Cogent's willingness to go either into proprietary single-tenant data centers or to corporate sites. We do accommodate waves to those locations. We have provisioned them, but we do so in a different manner. We we usually look for the single tenant at that data center to provide dark fiber extensions back to a carrier neutral, where we then interconnect and hand the wavelength off. This allows us to minimize our capital exposure, yet still meet the requirements of the customer. That is primarily the hyperscalers. And then for large enterprises, where we have sold a handful of waves, they are typically buying them in single tenant office buildings. And there we use a combination of Mark Fiber Tales and local providers to interconnect because we cannot justify the deployment of capital for that single tenant opportunity. I'm going to now pivot over to your question around the complexion of the unsold data centers, both in terms of quality and anticipated price. The facilities that we have sold are, I think, you know, comparable to the facilities that we have to sell. There is clearly a divergence in scale from the largest of the remaining 14 being our Fort Worth facility with 14 megawatts and the smallest of the remaining to be sold, having just less of one megawatt in Pearl City, Hawaii. You know, I think some of the remaining sites have incremental power available above and beyond what we have today provisioned. We've got written in confirmation from utilities that there is extra power and we place some value not the same value as fully provisioned power, but that is part of the back and forth on our negotiations with the potential buyers. You know, the geographic footprint remains diverse, and I do believe that, that most of the remaining facilities will eventually transact. You know, it's really only been. a few quarters since these facilities were fully converted. And I think, you know, there are probably some private equity investors waiting to see kind of high squares business strategy and potentially, you know, replicate So I think over the next several quarters we will be able to transact or more. The final point is, you know, based on Cochran's North American NOL inventory, I think it may be optimal for us not to transact in North America until early next year when we will have some additional NOL capacity to offset taxes.

Understood. Just really quickly, can you remind us please the total megawatts in the 14 remaining facilities?.

Yes, so the price per megawatt that we transacted with I2 was approximately $4.2 million a megawatt, and that inventory was 55 megawatts, roughly, and then the remaining footprint, is about 55 megawatts. Great. Thank you, Dave. Hey, thanks, Michael.

And your next question comes from the line of Walter Pysak with LightShed. Please go ahead.

Hey, Dave, I want to go back to the first question. You give a very comprehensive answer, but I just want to dissect it a little bit to understand it. On SG&A specifically, as it relates to... synergies and then ongoing integration expenses. I know in Q1 you have your typical sales meeting. So I thought with, you know, with basically the ongoing synergy stuff, you might see a decline in Q2 that didn't happen. But I think I think you said in that first answer that's because of ongoing integration expenses. I know you were talking a little bit bit more about gross margin, but I guess if we could just focus on SG&A, should that SG&A or is there more room for that SG&A to decline on an absolute basis as we conclude the rest of the year?.

The answer directly to your question is yes, it will decline sequentially into the third quarter and the fourth quarter. Embedded in that SG&A number, in addition to the sales meeting in the first quarter, were, you know, the auto. the credit expenses associated with the first quarter and the increase in employee load due to FICA matches, which do max out and typically go down. But in addition, in the second quarter. We had a accelerated rate at which we ended integration projects. There are still some ongoing, but at a much reduced rate. And we took out 6% of our sales force rather than many companies which put about a press release of what they're intending to do, and then the expenses followed, we took a slightly different approach and took those employees out on a very tactical basis that were related to many of these integration projects. There were severance claims. costs. Those terminations did not all occur early in the quarter, and we would expect to see a flow through in SG&A improvement in both Q3 and Q4.

Yes, that makes sense. And then on the IP addresses, growth seems to have stalled out a bit. So I guess it goes back to the age-old question. kind of given the debt leverage, I know you just kind of detailed what you hope for in the data centers, but like, why not just sell these things? Now, it doesn't seem like it's providing any actual at least on a sequential basis, right? And maybe things will kick back in the second half of the year, but I guess, just why not sell these IP addresses? I know the prices are down, but it's not like you're seeing good lease revenue growth.

and it obviously could help with the debt leverage. And listen, we are very focused on reducing our leverage. We understand that as a result of the Sprint acquisition, our leverage increased and there are really three major tools that we have to improve that. that leverage. The sale of assets is one of those. The growth in more profitable business is more impactful. And then finally, the reduction in costs. We look at the IP addresses and we have leased out approximately 15.2 million of the total 37.8 million that we have on a year over year basis. The revenues associated with IP address leasing grew 18.1%. That's a pretty healthy growth rate. Yes, on a sequential basis it only grew at a half a percent. we will focus on growing those revenues. I don't believe in today's market we will maximize value by selling them. I do believe we maximize value. Michael's question around, you know, the remaining ten data centers and generating meaningful proceeds to deliver. So I actually view our path to delivering as working. We are basically 6.2 times levered today. And that is a material improvement. I think that rate of improvement will accelerate due to further sales and growth in our EBITDA. know, as these integration programs complete, definitely by year end, but are substantially complete now that flows through. And the fact that 82% of our incremental sales in the quarter were on that, it allowed us a nearly 1% improvement in the entire installed base. We are definitely not back to where Cogent was pre-sprint, which was 76% on net and enjoying 40% margins without a subsidy payment from T-Mobile. We are keenly aware of of the fact that those subsidy payments from T-Mobile will end in about two years or less than two years. And, you know, we need to be able to grow EBITDA. And I think the IP address increase Incremental leasing from this point will be a tool in helping us do that.