Good morning and welcome to Cogent Communications Holdings Fourth Quarter and Full Year 2024 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 at Cogent's website when it becomes available. Cogent's summary of financial and operational results attached to the press release can be downloaded from the Cogent's website. I would like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings.

Thank you and good morning to everyone. Welcome to our fourth quarter 2024 earnings call and summary of our full year 2024 results. I'm Dave Schaeffer, Cogent's Chief Executive Officer, and 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 consistently reported historical metrics, which hopefully are helpful in understanding trends in our business. Our combined Cogent business had a good quarter and a good year. Our total revenue for the quarter was $252.3 million and $1 billion for full year 2024 compared to $940 million, $900,000 for full year 2023. Our EBITDA as adjusted was $66.9 million for the quarter and $348.4 million for the full year 2024 compared to full year 2023 of $352.5 million. Our EBITDA as adjusted for the quarter increased sequentially by $6 million and our EBITDA as adjusted margin increased sequentially by 280 basis points to 26.5%. Our wavelength revenues for the quarter grew sequentially at 31.8%, or $7 million, an increase of 124% over the previous year. Wavelength revenue was $19.2 million for full year 2024, a 240% increase over 2023. Our IPv4 leasing revenue for the quarter increased sequentially by 11.8% to $12.6 million, and that represents a 27.2% increase year-over-year. Our IPv4 leasing revenue was $44.9 million for full year 2024, an increase of 24.5% over the previous year. Our network traffic in the quarter was essentially flat and up 11% year-over-year. On a quarterly basis, our network traffic for the full year 2024 grew by 16% over 2023. We are in the process of continuing to realize significant cost savings from the integration of the Sprint assets. We have realized over 90% of our targeted $220 million in…

Thank you, Dave, and good morning, everyone. This earnings conference call includes forward-looking statements. These 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. Cogent 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 measurement in our earnings releases that are posted on our website at cogentco.com. We analyze our revenues based upon-network connection type, which is on-net, off-net wavelength services and non-core and we also analyze our revenues based upon customer type and we have three customer types, net-centric, corporate and enterprise customers. Our corporate business represented 44.8% of our revenues for the quarter that was $113.1 million. Our quarterly corporate revenue decreased by 10.7% year-over-year and sequentially by 2.7%. These decreases in our corporate revenue are primarily due to the continued grooming of low margin off-net customer connections and the elimination of non-core products. We have 46,371 corporate customer connections on our network at year end. Our net-centric business continues to benefit from the continued growth in video traffic, activity related to artificial intelligence, streaming and wavelength sales and was $93.6 million for the quarter. Our net-centric business represented 37.1% of our revenues for the quarter which was an increase of 0.5% year-over-year and a sequential increase of 1.9%. Our quarterly net-centric revenue under our commercial service agreement with T-Mobile declined sequentially by $2.6 million and declined by $7.1 million year-over-year, negatively impacting our…

Hey, thanks, Tad. I'd like to highlight a couple of strengths in our network, our customer base and our sales force. We continue to experience significant year-over-year traffic growth in our legacy net-centric business. We're direct beneficiaries of over-the-top video, artificial intelligence activities and streaming traffic. At year end we had 1646 third party carrier neutral data centers, 104 of our own data centers and an additional 55 of the smaller edge data centers connected to our network with Cogent's available power capacity of 197megawatts. The breadth of this coverage enables us to serve our net-centric customers better help them optimize their networks and reduce latency. We continue to expect to widen our lead in this market as we project adding over 100 carrier neutral data centers to our network this year and for the next several years. At year end we were able to sell our wavelength service in 808 of these carrier neutral facilities with reduced provisioning times. This surpassed our year-end target of 800 carrier neutral data centers being wave enabled. At year end we were directly connected to 8,250 different networks or autonomous systems with 23 of these networks representing peers and 8,227 of these customers were in fact purchasing transit from Cogent for their networks. We remain focused on our salesforce productivity and we are committed to managing out underperforming reps. Our sales force turnover in the quarter was 5% per month. That is down from the peak of 8.7% at the height of the pandemic, it's still below our average rep turnover of 5.6% per month. At year end we had a sales force of 288 professionals focused on the net-centric market. These individuals sell both transit and wavelength services. 347 professionals focused on the corporate market and 15 individuals focused on our enterprise…

We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Michael Rollins with Citi. Michael, please go ahead.

Thanks, and good morning. Dave, curious, just to start us off, if you look at the customer verticals that you're now reporting in terms of corporate, enterprise and net-centric, can you give us an update just holistically in terms of where each of those segments are in terms of getting through some of these legacies acquired revenues? And what's the opportunity for each of these segments to grow over the coming years? Whether it's one, two or maybe a three-year view?

Yes, sure, Mike. I think those are fair questions. So, when we acquired Sprint, we acquired both corporate and enterprise customers, only a handful of net-centric customers. Our net-centric business continues to grow and that growth rate will actually accelerate since virtually all of the wavelength sales will be net-centric and approximately 85% of our IPv4 leasing is to net-centric. So, within the net-centric segment, we are growing today and we anticipate that growth rate to accelerate meaningfully as both the underlying IP business performs and we are able to add wavelength revenue to those customers. For our corporate segment, we acquired a number of corporate customers from Sprint who were purchasing non-core services, were purchasing very low bandwidth non fiber delivered off-net services, and we have been in the process of grooming those less desirable services. It is why our margins have exceeded our guidance in terms of growth rate and we expect that to continue. I think we're probably still just a couple of quarters away from getting through that grooming exercise and then seeing positive growth in our corporate segment. Those corporate customers will predominantly purchase DIA and VPN services based on VPLS. It is a segment that has been heavily exposed to central business district office occupancy and we are continuing to see improvements in that. Many markets that have been negative net absorption, meaning increases in vacancy rates since the pandemic have actually turned positive now and we're seeing net positive absorption across most markets across the country. So, as a result of the grooming, we will see probably a couple of more quarters of negative corporate growth stable and then beginning to grow. On the Enterprise segment, the majority of these locations are off-net. Most of these customers take global services from Cogent and…

And your next question comes from the line of Sebastiano Petti with JPMorgan. Sebastiano, please go ahead.

Hi, thank you for taking the question. Just in regards to the waves, Dave, can you remind us how should we think about perhaps additional investments needed to perhaps unlock the opportunity there, whether it be from a salesforce investment perspective, maybe connection costs, related to just enabling that from a CapEx perspective? And then if we think about just the pace of installs, I think, part of that is probably predicated on the backlog, but I think you said 500 or so monthly installs in waves is probably a near-term target, but perhaps accelerating from there. And so how should we think about the cadence or the trend there? That would be helpful as well. And then I guess one area of housekeeping related to waves. On the provisioning times, I think you're down to 30 days now if you remind us where was that last quarter? Thank you. And what's the timeline to get to the two weeks? Thanks.

Yep, fair enough. I'm going to take those in reverse order, Sebastiano. So last quarter, we were at, so in Q3, we were probably at 120 days for the waves that we can provision. By Q4, for the ones that we provisioned, we got that down to 90. In this quarter, we are down to a 30-day provisioning window and we are continuing to refine some of the processes and field deployment mechanisms and feel comfortable that we can get down to the same two-week average that we have in IP services, which we've been able to do now for over 20 years. We tested all of these provisioning systems and configurations, but there are always corner cases in the real world that you learn from. But we feel very comfortable that the 30 days, which is far beyond what anyone else in the industry can do, is great. But we have the ability to effectively cut that in half over the next several months. With regard to the pacing of installs, we are ramping up to our full install capabilities and you know, we have both the field resources and service delivery coordinators to support the 500 a month. The hard part now has been working through the backlog that we have and flushing out which orders are still available for install in which the customers had to go somewhere else. And some of these orders had been in the funnel for over a year and that is a time-consuming process. And we have groomed the funnel. It did shrink even though there were some new orders coming into the funnel. And now we expect the funnel to actually accelerate in new order intake as we have demonstrated our ability to install. I think we're still probably a month…

Thank you.

And your next question comes from the line of Greg Williams with TD Cowen. Greg, please go ahead.

Great. Thanks for taking my question. Maybe dovetailing off the wave answer there. Dave, you mentioned your competitive advantage is obviously getting the two weeks of provisioning and then you just mentioned one meter of accuracy for your salesforce. We just got back from a fiber conference and Lumen specifically calling out investing heavily in waves. Zayo is talking about 400 gig waves across the country. Just trying to understand the competitive concerns that they ramp up their wave product and how much of your future growth and your 500 million target is share ceiling versus the market expansion opportunity? Is there enough to go around for all of you? Second question is just on the IP version 4 price hikes. It sounds like it's $0.44 per address. You mentioned you're going to hike your prices on about 10 million addresses. Where is that process and how's that going along and what's the math there? If I think maybe $0.10 of a price hike on 10 million addresses that's like 12 million and revenue opportunity. Just trying to understand if I'm thinking of it correctly. Thanks.

Yes, hey, thanks for the questions, Greg. And again, I'll take these in reverse order on the IPv4 pricing. We initially raised the price of new sales. Then we began cycling through the base that was not covered by contracts. We still do have some customers at lower rates that we will be increasing prices on over the next several months. In addition to that, we will evaluate whether we can further raise prices for new sales. You know, we do have inventory of addresses that are unleashed, but we also know that there is strong demand. So, I do think we can continue to have outpaced growth in our IPv4 leasing. It has now become much more of a focus for Cogent. It represents almost 5% of our total revenues. And it will be the combination of incremental leasing activity which you can see the cadence and progress of in our press release, as well as raising the average price of the base by both raising new incremental and going back to customers out of contract and raising that. Now to the wavelength question. We should never be naive. We should always believe we have competitors and we have to win business on a wave-by-wave basis. You know, the companies you mentioned have access to capital and are established players with substantial footprint. However, each of those companies has a much smaller number of data centers where they at least tell the market or advertise that they could deliver wavelength services too. You know, we were at 808 at year end and 880 today will be over 900 in the next few months as we close out those remaining new data centers and bring them onto the wave network. That additional ubiquity is important. The second key point is…

Thank you.

And your next question comes from the line Walter Piecyk with LightShed. Walter, please go ahead.

Thanks. Dave, Tad highlighted the sequential growth in IPv4 revenue, but I was looking at last quarter's revenue, it was higher. So that shows that there was a sequential decline. Was there some type of restatement in IPv4 lease revenue? And then in terms of you saying focusing on IPv4 in terms of growth again, the net adds, meaning new lines, IPv4 addresses that you're leasing I think only increased by like 90,000 in the quarter and used to increase by 5, 6, 700,000. Was that based on some restatement on Q3 or is 90,000 kind of the run rate that you're delivering in terms of focusing on this area?

So, the IPv4 revenue, the entity that has the secured notes is going to be audited. So, we have begun that process in auditing the revenue streams. The data that has been disclosed have been based upon MRCs and totaling MRCs as opposed to U.S. GAAP revenue per quarter. So, you are correct in observing that we adjusted some of the amounts for prior periods to get to the U.S. GAAP numbers that will be audited coming up in the next few weeks here.

Right. So that's on the revenue side and on the unit side, as we raise prices, there was some initial sticker shock. We did add just under 100,000 units in the quarter. But we also expect to be able to continue the average growth rate of nearly a half a million addresses per quarter over a multi quarter period. If you go back and look at the data that we provided. There is volatility in every quarter in terms of the number of net new addresses added.

Okay, so there's going to bounce back to 500,000, even though we haven't seen that since Q2. And even though you just increased price and are contemplating new price increases, and this is just because you're focusing, I guess on that business more. And then the revenue restatement was just because it wasn't audited before. So, you actually were generating less revenue in IPv4.

No, the disclosure was based upon adding up MRCs as opposed to pro rating the proper revenue amounts, if a customer installs, for example, on the 20 of the month, we were adding up MRCS. Right.

So end of quarter MRCS. Right?

That's right. That's right. So, you had to go

It might have been helpful to actually call that out in the press release or the prepared remarks.

So, to be honest with you.

But rather than having to have it come up in Q&A. But can we move on to wavelengths?

The total revenue...

When you talk about sequential growth and it's actually down based on what you reported? Yes, I mean, I think maybe it's not material in dollars, but whatever. Wavelengths, I guess a similar type of question. The backlog declining 20% was this basically like you had had orders from some time ago and then you checked in with these customers and they had gone elsewhere. And I'm just curious, like if we look at what remains after this 20% decline in your wavelength orders sequentially, when's the last time you checked in with the customers that have existing orders in your backlog? And is there any chance that we'll see a similar reduction next quarter because they've gone elsewhere further wavelengths?

Well, as we have stated multiple previous calls, as we were building an order funnel and backlog, we knew that we could not provision those orders. Some of those orders were provisioned. So, some of the decline came from the incremental orders that were provisioned. Some of the decline came from going to customers who had previously purchased, put in an order maybe 15 months ago and had gone somewhere else. Now that we have established a commitment to deliver today with a contractual penalty if we fail of 30 days in 808 sites at year end and 880 sites today, we are cycling through that. There will be some breakage. But there are also new order intakes at an accelerating rate. I think the way you characterize it as a 20% decline in waves is not correct. What it is.

Well, 3420 to 2700. That's basic math, Dave.

It's a grooming of a funnel. The funnel reduces, but not the waves. The number of waves installed actually grew.

Okay, can you also just lastly, you know my favorite topic is just the, I guess aside from leverage, but I'll leave that for the next call which is now north of five. Your corporate revenue which was declining 2.7% I think in the prepared comments again you talked about off-net and shifting off-net to on-net. But like can you just kind of cut to the root of it? What's going on in corporate? Is there any organic growth opportunity in that business or is this forever just in decline? I'm talking about the traditional Cogent corporate that really drove your dividend growth historically.

Well, our dividend growth has been driven by growth and cash flow. And that growth in cash flow.

Debt leverage. Debt leverage, not cash. There's no cash flow, it's leverage.

I let you ask the question. I'll finish answering it. So, I already answered the question for Mike Rollins earlier, which is that corporate growth will decline for another quarter or two as we continue to groom, as we groom, both non-core and negative margin off-net services that cannot be migrated to on-net, that results in a top line decline but an expansion in EBITDA. We think this is the appropriate strategy. The underlying on-net corporate footprint continues to grow. Thank you, Walt. Next question.

Thanks Dave.

And your next question comes from the line of Tim Horan with Oppenheimer. Tim, please go ahead.

Thanks Dave. Back on the wavelength in your conversations, how important is the redundant routes and you know, new architecture and what type of price discount do you think you need to get to capture share? And can you give us an update on, you know, maybe how much revenue you can get in wavelengths now and what you're kind of still expecting in five years? Thanks.

Yeah, so thanks for questions, Tim. First of all, I would actually say route redundancy is actually the most important factor to potential customers. If we rank, you know, their concerns. It's route redundancy, data center coverage, provisioning time and pricing in that order. So, price is probably not the most important factor, but it will help us close some business. In terms of redundancy even for companies that have chosen to buy or build dark fiber initially you would think that demand out of the market. But because the services on either dark fiber or waves are an unprotected service, they actually value the redundancy even more. So, it actually generates incremental demand for the same city payer on a unique route. We feel very comfortable about the target that we laid out in at the closing of the deal in May of '23 and said within five years we would be at a run rate of $500 million annually in wavelength sales. We think that the demand that we have received both in terms of order backlog and continued customer interest gives us a great deal of confidence we're going to make that number, particularly as we prove to the market our ability to actually deliver. You know, the fact that there have been some customers in the funnel for over a year that are still taking waves is to me a little surprising. But some of them had enough confidence in us and we have delivered. For others, I think we have, you know, to build credibility and the way we're going to do that is install these waves. But we're very comfortable with our $500 million by mid '28 target for wavelength revenue.

So, can you just characterize how the sales effort's going right now? I mean you're basically there now on provisioning and will be a couple of months from now you're there on coverage all the things we're talking about. Have the, I guess the pitches ramped dramatically?

They have. So, as we went, turned the calendar on 2025, we told customers in 808 sites we would do 30 days. The sales force was empowered to go out and reach into the funnel of people that had already signed and convey that message as well as reach out to new customers. And the cadence of getting new orders into the funnel has actually begun to accelerate. I think that cadence will accelerate even further as we end up with a ability to show that we can provision.

Lastly, Dave, can you just give us some, I know you're reluctant to do this and maybe you can't, some color on what we should expect for consolidated revenue and maybe consolidated EBITDA in total, for this year. There's obviously there's a lot of moving parts.

There are and you know, in 20, at the beginning of '24 we said that our EBITDA would be relatively equivalent to '23. And I think most sell side analysts did not believe that. And then we ended the year at 348 versus 352. So about $4 million or 1% Delta. I think going into the year the kind of consensus was for about a 20% reduction in EBITDA due to the step down in payments from T-Mobile. We have demonstrated our ability to take out costs. So, I think as we look at '25, we should deliver EBITDA effectively equivalent to '24 or '23, so around $350 million. You're right, we don't like to give specific annual guidance. We also kind of addressed the various customer segments and the declines and when we expect each of those segments to have flushed through the grooming of the non-core products, I would suspect that we will be delivering revenue that is slightly up for the full year due to wavelength sales.

Thank you, Dave.

And your next question comes from the line of Jim Schneider with Goldman Sachs. Jim, please go ahead.

Good morning. Thanks for taking my question. Maybe wanted to kind of get the corporate revenue question in a different way if we could, Dave. Maybe just kind of think about it in terms of either corporate connections or on-net connections and core customer trends. I mean what's going to be required to get those sorts of connections growing in a more positive direction over the next few quarters. Can you specifically talk to what's required in terms of salesforce headcount and salesforce productivity and how much productivity that needs to increase in order to get there?

Yes. So, in terms of corporate connections, we need to groom those non-core products that are sold to on-net customers. So, there is going to be some connection grooming that goes on and we are also migrating customers from off-net to o-net. We've done a significant amount of that. But there are other cases where there were off-net customers and on-net buildings that were trapped in a loop contract that we acquired from Sprint that we only migrate that customer once that contract has ended. So, we can recognize that savings. So, I think on a connection basis we've got a couple more quarters of headwinds and then positive. On a revenue base it will be very similar as we think the ARPUs will be relatively flat. There is some price decline that is typically offset by migrations to larger connections. To address the sales force piece of it, roughly 390, 387 of our salespeople focus on the corporate segment. That is the portion of the sales force that has the highest turnover. That is where we focus the majority of our normal training activities. As I mentioned earlier, we've diverted some of those to wave training to the net-centric salesforce which is very stable. But you know we will be able to divert back training to the corporate team and we do need the average number of connections sold per rep per month to go up. You know we're at three, five today. The long-term average is just under five. We were at four the previous quarter. There is some volatility around that but I do believe that we have the right number of salespeople, the right turnover, I'd always like turnover to be lower. And I think we will continue to see corporate on-net growth. Now the return to office environment is the backdrop we're working against. It has been tough, it's lasted much longer than we expected and we're only seeing positive net office absorption turning in a dozen or so markets this quarter. But that is at least a sign that we have reached bottom and we are starting up. So, it's a combination of companies making a decision and companies occupying the space. But as I said to Mike's question, we feel comfortable that we're probably one to two quarters away from positive corporate revenue growth.

Thanks. And maybe just a quick confirmation. I want to make sure that I understood what you said, heard what you said before properly, which is the sustaining CapEx in the business should be $100 million annualized run rate all in. After all the noise is flushed out of the numbers.

That's correct. And we should be at a run rate of roughly $100 million by Q3 and Q4 of this year. We are at an elevated rate for the first half of the year and most of that incremental capital is being spent on the data center enablement program.

Thank you.

And your next question comes from the line of Christopher Scholl with UBS. Christopher, please go ahead.

Great, thank you. Maybe just one on the under monetized assets. Dave, would you say there's a preference for leasing versus selling the data center and IPv4 assets at this stage? And as you think about maximizing value, do you believe this most likely will be achieved through leasing a few large deals or more so through a series of transactions? Thank you.

So, on the IPv4s, at this point we are committed to leasing them while they are liquid and could be sold. Since Microsoft and Amazon are today not acquiring, at least in scale, we think that we would be leaving money on the table. You know the average price per address peaked at the end of '23 at about $60. Today blocks are trading on exchanges between $48 and $52. So that is about a 15% reduction if prices trade back up. And that is I think likely as you look at the long-term appreciation. You know the first trades occurred in 2011 at $4 an address and you know, today 14 years later they're at about $50. I think the long-term trend is up but we would consider being a seller of some of that address space. In terms of the data centers, we really are agnostic to whether it is a cash sale or a lease. We're allowing the market to tell us both which data centers they want and which of the two models they would prefer to use. I would say if I looked at the pool of letters of intent, today there are about 60% lease, about 40% purchase. So, while there's a slight preference for leasing, it's not overwhelming. And that's out of after several hundred tours by different counterparties, there's almost 50 counterparties still actively working on these assets. We have been reluctant to accept any offers because the assets just are not ripe for monetization. That will happen over the next few months. And that was to my point about calling for offers. If we decide to take a lease deal because the overall economics are better for Cogent, we would probably look to securitize that to raise cash off of those leases. So therefore, the credit quality of the underlying tenant would be critical in our decision-making process. And then the final part of your question, is it going to be a holistic deal or one off? While we have several offers for the entire portfolio, they do not maximize value on specific assets. Within the portfolio, again, until we do a call for offers, it can line everything up. I'm just not in a position to answer that. I want to be absolutely clear with investors. This is something we haven't done before. We've got strong indications that our pricing is reasonable and there's strong demand. But we really want the market to answer the question for us.

That's helpful, Dave. And then maybe just one more. You pointed to stable EBITDA in '25. Can you just remember you're contemplating with the step down in payments and your comfort level with the dividend policy as you await the uplift from growth initiatives. Thank you.

Yes. We're very comfortable with our dividend policy. As we mentioned on the previous call, our LQA EBITDA troughed in Q3. On an LTM basis, that is going to trough in Q3 of '25. We are 5.07 today. We will get into the high 5s, 5.7, 5.8 in part due to the expenditures that we're making on the data centers and that drain on capital. We are comfortable with that because we also know that with the growth in EBITDA, we see a rapid delevering occurring starting in Q4 of this year and probably by sometime in mid-'27, we will be actually below the midpoint of our target.

And your next question comes from the line of Nick Del Deo with MoffettNathanson.

Just two quick ones given the time. I think you said traffic growth was 11% year-over-year, which I think is the lowest you've ever had maybe aside from the quarter when you lapped Megaupload back in 2012. I guess what's going on there and what does it mean for the NetCentric outlook? And then on the data center front, obviously we're mostly focused on the facilities you're trying to spruce up for wholesale or for sale. But I guess as you think about your retail assets, I think they've historically had utilization rates in the 30% range or so. I guess should we expect that to go up in light of the broader supply-demand dynamic in the data center space?

Yes. So first of all on the traffic growth number, traffic was essentially sequentially flat. On a quarterly basis, it was up 11% year-over-year. But for the full year, it was up 16% so calendar year '24 versus full calendar year '23. In terms of what's going on, we are reaching a level of maturity in streaming in the developed world with roughly 53%, 54% of all video now being streamed and that growth rate in streaming versus the hockey stick we saw post pandemic is moderating. I do think that we are going to see a new leg up in growth as AI matures and as inference models become more ubiquitous and more commonly used. I think that will drive a new leg of growth. And if we go back and look at Cogent's reported traffic growth over a 20-year history as a public company, there have been ups and downs. Yes, Megaupload was a particularly abrupt shock, but we've also seen other slowdowns when YouTube's casual video business started to mature, that slowed down our traffic growth. When Napster's file sharing business matured. Now these were off of much smaller bases. I think for our NetCentric IP business, I think we will continue to see growth at similar historic rates. That's kind of in the 9%, 10% rate. And there are ebbs and flows in quarterly traffic. I know that several of our CDN customers did have a pretty tough quarter in terms of their traffic volumes and they are heavily dependent on us. But I don't think the Internet stopped growing. I think in aggregate, we're going to grow as fast or faster than the Internet, gaining share and it's got a long way to go before it's matured. To your data center question, you are correct…

And your final question comes from the line of Brandon Nispel with KeyBanc Capital Markets.

Just housekeeping questions. I suppose given time. Dave, how many waves specifically did you groom out of the funnel?

We groomed about 1,500 out of the funnel.

Okay. 1,500. Were there any onetime network expenses? I think last quarter you called out some data center costs?

So the answer is yes. We are spending elevated capital on the data centers and there was about $5 million of COGS associated with some of the clearing of those facilities that is not capitalized. I mentioned that in the Q3 earnings call, we spent that in the third quarter and we said we would spend that also in the fourth quarter, but that demolition component of spending would go away and that is a noncapitalizable expense. So yes, there was some direct costs for that effort.

Perfect. And then lastly, is there any way you can quantify just with 1 number on enterprise, corporate and NetCentric; what the grooming activities related to so purposeful disconnects and/or provide a churn rate that includes those disconnects and a churn rate excluding sort of the purposeful disconnects?

It is hard for me to give you a single number because there are really three things going on at the same time -- well, 4 things. You're moving some people from off-net to on-net, you're keeping the customer. But there are other cases where you're turning off a low-capacity corporate circuit that there's no fiber alternative for in North America. You're turning off enterprise circuits in international footprints, where we are not licensed. And then finally, for both of those segments, corporate and enterprise, we're end of lifing these products and we had about $1 million headwind sequentially this quarter, $900,000, and we'll continue to turn that off. So there's not a single number. You really need to look at each of the subcomponents to kind of know what's going on. A kind of one headline number would be misleading. Thanks, everyone. I want to appreciate everyone listening. We did cut our prepared remarks. We got done in less than 1.5 hours. And thanks, everyone. Take care and we'll talk soon. Bye bye.

This concludes today's conference call. Thank you all for joining. You may now disconnect.