Operator: Our next question comes from Frank Louthan from Raymond James. Your line is now open.
Frank Louthan: Great. Thank you. I want to talk about the outlook for the business if return to office doesn’t really improve. So how much of that long-term guide that you’ve given out is kind of dependent on an improvement in the return to office environment and what level of occupancy do we kind of need to hit over the long-term to achieve that? And then what are your options if that doesn’t happen to still kind of hit that long-term guidance goal? Thanks.
Dave Schaeffer: Yeah, so our long-term growth targets of 5% to 7% are predicated on office occupancy and corporate performance being similar to the current levels that they are at today. Again, we have diversified our total revenue base, now having three discrete segments, being less exposed to pure corporate growth. Our enterprise customers tend to be much more global in their footprint. Just to remind you, 44% of total revenues are corporate, 34% are net-centric, 22% are enterprise. Our net-centric business has actually continued to outperform long-term averages and our ability to have a total revenue growth rate in that 5% to 7% range is possible with vacancy rates remaining elevated at about 15% in central business districts.
While we believe that vacancy number will come down, we can achieve our growth rate and our guidance targets at these elevated levels. And our guidance is also predicated on our net-centric business moderating, which it continues to accelerate, as you saw in the traffic stats that we provided sequential growth growing from 4% sequentially last quarter to 6% year-over-year growth growing from 21% to 26%. So material improvements in that business continuing longer. And then, finally, we are very optimistic about our wavelength opportunity based on the breadth of our sales backlog.
Frank Louthan: And you mentioned on the waves at an $8 million run rate for sales, what is sort of a quarterly run rate of conversion to that from sales to kind of what you’ll be able to recognize in the quarter?
Dave Schaeffer: So obviously, the growth rate we achieved in this quarter on waves of 88% sequentially is not sustainable. That growth rate will moderate. I would say that for the, I guess, second quarter of 2024, wavelength sales will probably be in the $20 million range for the quarter, but building throughout the quarter.
Frank Louthan: All right. Great. Thank you, Dave.
Operator: Our next question comes from Walter Piecyk from LightShed. Your line is now open.
Walter Piecyk: Hey, Dave. Just some questions on corporate. I know there’s a lot of moving parts now that you have that Sprint T-Mobile business in there, but it looks like on a pro forma basis, it was down sequentially. I’m just curious when you expect that to grow on a sequential basis.
Dave Schaeffer: Actually, I would disagree with it being down. I think the majority of what was down in corporate was the elimination of the SIP product and other non-core products. We did acquire corporate customers from Sprint as well as enterprise customers. If we looked at our MTOB footprint, we actually saw the number of connections grow. So I would kind of disagree with the premise of your statement.
Walter Piecyk: I’d be great if you actually reported, I know, Tad in his prepared remarks gave pro forma sub-growth type numbers, but maybe providing pro forma revenue and EBITDA would have been more helpful. So if we look at the fourth quarter then, is there going to be a similar type of excuse in terms of the shutdown at the end of the fourth quarter? Or should there be actual sequential growth in the fourth quarter?
Dave Schaeffer: Well, as we have said, there are still non-core products that we are trying to eliminate as quickly as we possibly can. These products carry negative gross margin. They were a significant contributor to the losses at T-Mobile, and SIP was the largest of these products. But, the run rate…
Walter Piecyk: So what is the baseline that for corporate of non – like, can you give us some type of comparable? So we don’t always have the excuse of like, oh, we just churned off non-core stuff like what is the baseline in corporate revenue of stuff that’s generating gross margin?
Dave Schaeffer: So we report the non-core products separately, and we had a run rate of those non-core products of about $11 million. That will go to zero, or it’s as close to zero as possible.
Walter Piecyk: So is that $11 million in the $120 million from the quarter for corporate revenue, that was reported? Any of that $11 million?
Thaddeus Weed: $11 million is non-core revenue.
Dave Schaeffer: But non-core counts corporate, yes. So the majority of that is in corporate.
Walter Piecyk: So your baseline in corporate is effectively basically one, whatever it is, $120 million minus $11 million, and we’ll just have to get an update on the $11 million every quarter, and then we’ll figure out where your true organic growth rate is? I would suggest maybe you actually just put that in the press release and provide that as a pro forma number to give better transparency to what’s going on in the business. I also have a question on the lease expense. So you moved, I think it was like $12.5 million out of OpEx, so you boost your EBITDA by $12.5 million into CapEx. So if I look at that lease number on CapEx, I think that was like $40 million.
