Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q3 2023 Earnings Call Transcript

Dave Schaeffer: Yeah. So we’ve been through two similar grooming exercises in the past 20 years. The primary driver of these exercises is to reduce cross-connect costs. So when you say volume, there are really two different volumes. Volume of connections may actually go down as people consolidate 100-gig ports into 400-gig ports, and the remnant of the 10-gig to 100-gig consolidation continues. And then the second volume measure is the number of bits flowing. So the average price per bit is declined for the 23 years, almost 23.5 years at Cogent, since we’ve been in business and will continue to decline. But the big volume growth has outpaced that, allowing us to achieve an average of about 9% net centric revenue growth in a flat addressable market.

I think what will continue to happen over the next couple of years is we will see an acceleration in the 100- to 400-gig conversion, because it cuts your cross-connect costs by 75%. And the cost of those 400-gig portable optics has come down meaningfully in the past year and, today, I would say only a couple of percent of net-centric ports are at 400-gig. So we have a long way to go in this grooming cycle that will depress the number of connections or port sold, but will not depress revenue. We literally had the same exact phenomena, when we went from multiple 10-gigs to a lot fewer 100-gig interfaces, and I think that’s happening. We’re also seeing on the wavelength side, customers looking to take 400-gig wavelengths. Our network is equipped to be able to support that.

We will be selling those. We have some of those in the funnel that I had described. And, I think customers increasingly are sensitive to cross-connect expense.

Michael Rollins: Thanks very much.

Operator: That concludes our question-and-answer session. I’d now like to hand back over to Mr. Dave Schaeffer, for any closing remarks.

Dave Schaeffer: Well, thank you all very much. We’ll be chatting as anyone has any follow-up questions. And we’ll talk soon. Thank you all very much. Take care. Bye-bye.

Operator: Thank you for attending today’s session. You may now all disconnect to the line.