and Asset Divestiture will accelerate our delivering and allow us to resume a program of aggressively returning capital to equity holders. We remain disciplined in our capital investments. We're focused on expansion projects with the highest return on incremental capital. Our 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 languages. 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 27 notes, which we anticipate will complete in the third quarter of this year. We offer superior products, unparalleled quality, broad footprint into traffic route locations with expedited provisioning and disruptive pricing. In summary, we continue to gain market share by the value we deliver our customers. 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. Please go ahead.

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 customers 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, you know, as you think about the timing of that target now. Second question is on EBITDA. It grew quarter over quarter as messaged, but it barely did so. Any one-time costs? You mentioned headcount 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.

Yeah, 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 and cooling availability, or even data center completion. 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 the fact that we were able to have a meaningful reduction in our capital spending sequentially and expect that number to continue to improve is because of our efficiency in deploying that capital. In terms of wavelength market share, we are at only 3% of the North American long-haul market today. We remain encouraged by the breadth of the 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 1,137 wave-enabled locations. You know, I think we expect are 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 while we experienced a significant increase Revenue decline of $3.6 million sequentially, our EBITDA did grow by nearly a million dollars on a sequential 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 had incurred 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 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. 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 the 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.

Yeah, 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 intent 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. 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, cogent found unacceptable in terms of price based on the characteristics of these facilities, and we are 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.

Got it. And I can, 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 today?

Yeah. So the expense associated with with those facilities on an annual basis was about $7 million. So we would anticipate just under $2 million of direct expense comes out. Offsetting that is we remain a tenant in 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.

Hi, good morning, Dave. How are you? Hey, great, Michael. Yeah, good to hear from you again. So, want to get back to wavelengths, Dave. You know, we really have not seen acceleration in connections as a lot of us had anticipated. So, can you maybe just talk a little bit about the, you know, the conversion of, you know, some of that backlog and what the impediments have been? And then on the sale or potential sale of 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 scenarios already sold, the tenant you closed on.

Yeah, 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, customer's Not being able to accept the wavelengths because of constraints that they are facing. 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 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 it 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. It'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 deploy. These are still relatively small numbers, you know, We have a strong year-over-year growth rate at over 60%, a strong sequential growth rate of 10%. 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 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 dark fiber tails 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, 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 than 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. The geographic footprint remains diverse, and I do believe that most of the remaining facilities will eventually transact. 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 it. So I think over the next several quarters, we will be able to transact or more. The final point is, 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?

Yeah, 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 had 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 you said in that first answer, that's because of ongoing integration expenses. I know you were talking a little 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 kind of conclude in 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 the audit 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 an 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 salesful. Rather than many companies which put out 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 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.

Yeah, that makes sense. And then on the IP addresses, you know, growth seems to have stalled out a bit, so I guess it goes back to the age-old question. You know, 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? Or 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 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 to Michael's question around the remaining 10 data centers and generating meaningful proceeds to de-lever. So I actually view our path to de-levering 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. 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 net, 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 the fact that those subsidy payments from T-Mobile will end in about two years or less than two years, and We need to be able to grow EBITDA, and I think the IP address incremental leasing from this point will be a tool in helping us do that.

I hope to see that. And just one last one, Dave, if you don't mind. With the EBITDA declining this quarter at a time when you're trying to do the refi, what should we expect in terms of What that rate would look like so we can kind of factor that into our cash burn analysis?

So, as I said, our EBITDA actually sequentially improved quarter over quarter.

Which it always does in Q2 because of the reduction in expenses.

Right, but we did have these extraordinary expenses that were unique.

The decline year-over-year, so I'm just questioning how that impacts the refi and what rate you might get.

Yeah, so we have taken a number of steps to improve our financeability and cost of capital. One of those was the entry into the supplemental indenture and the expansion of our security capacity. So we are going to be replacing the unsecured notes with secure. That typically lowers your cost of capital. Offsetting that is the fact that our current secured debt is trading at a discount. Witness the fact that we bought it back for 90.2 cents on the dollar, resulting in a $13.4 million gain in the quarter. I think that's an indicative cost of capital. So the yield to worse on those notes is about 8.8, 8.9%. We are working with bankers to determine the optimal enhancements to our notes to potentially lower that cost of capital. I think it's premature for me to announce a rate. Ultimately, the market will set that. And then the final point is, since those 2032 notes were issued, Treasury rates on the comparable benchmark are up nearly a full percentage point. So it is absolutely reasonable that we're going to be paying more for our capital, but I'm not in a position today to give you a rate other than to look at where the current secures trade.

Thanks, Dave. Appreciate it.

Hey, thanks, Walt.

And your next question comes from the line of Nick Dildale with Muppet Nathanson. Please go ahead.

Hey, morning. Thanks for taking my questions. First, Dave, on the sales force, it looks like a lot of the headcount reductions you had in the quarter affected the sales force. Sales productivity went up, so I assume that was concentrated in lower-performing salespeople. But I guess, prospectively, as you're looking to obviously grow your revenues, how do you think about the current size and composition of the sales force relative to what you need?

Yeah. Roughly about 40% of the headcount reduction was salespeople. We have been very disciplined about managing out underperformers, and we had some remaining former Sprint salespeople who were here primarily to transition and maintain the relationship with those remaining Sprint customers. We took a much more disciplined approach to managing those individuals out. They were underperforming. They had been given, I guess, a pass on our normal discipline mechanisms and turnover rules, and we implemented those more evenly in the quarter. I think in terms of the size of the sales force, it is probably needs to be about where it is today. Like one of my board members always jokes, Stalin quote, there are fewer Russians after World War II, but better Russians. I'm not sure I'm ready to go there with my sales force. But the idea that we need to maintain productivity. A metric that we look at, probably even more important than the productivity, is our cost per dollar of revenue acquisition. Ever since the Sprint acquisition, that number had gone up. It is materially coming down with this emphasis on productivity and on net I'm not in a position to give you an exact headcount number, but I think it's probably in the 500 range feels about right. Our corporate market is clearly growing slower than it historically had and has never fully recovered from the pandemic. And I don't see it probably I think it's time to stop talking about the pandemic. Whereas with the added ability to sell wavelengths almost exclusively through the net centric sales team, less than 5% of wavelength sales have been the enterprise and about 10% to corporate. It's not zero, but it is a very small base. It's mostly net centric customers. That's where we need to allocate more resources. So I do think you'll see a continued shift. Most of the Salesforce turnover has been on the corporate side.

Okay. Okay. That's helpful, Collin. Thank you. You know, one other question, you know, think about Waves. Seems like everybody across the connectivity space is, you know, talking about a step up in demand from Neoclouds. that have really exploded on the scene in the past couple of years. So I guess, how would you characterize the demand that you're seeing from that vertical? And what are you doing to make sure that your sales force is in front of those customers, many of which are newer, to educate about your services and be able to capitalize on that opportunity?

Yeah, so we actually have a focused neo-cloud effort. We've identified those accounts. We've allocated them to more experienced reps. We have had great success with all of the household names, and I think we will increase our percentage of their purchases as we demonstrate the ability to provision and the ability of the service to deliver high reliability After its provision, you know, I'm always reluctant to mention names that sometimes can offend customers. But, you know, the companies that are rumored to be going public, those that are public are already today cogent wave customers. You know, I encourage investors to do channel checks and reach out to customers. While I can't disclose your name, the customer can clearly give an opinion on Cogent. What I will say, though, is most of the AI spend is announced but not yet deployed. So even though probably a trillion dollars of capital has been deployed and AI infrastructure, only a small percentage of that trillion is actually in production being used for LLM creation or inference. You know, there's a expectation that over the next four years, there'll be a total of $7 trillion invested. But it's a little bit like a jigsaw puzzle where all the pieces need to come together before it's complete. And for many of these neoclouds, they are either waiting on GPUs, they are waiting on data center capacity, they are waiting on power. There could be rare cases. I know of one specific case of a large data center in North Dakota that's relatively proximate to our network, where the neocloud is desperate to get wavelengths because they have power but unfortunately there's no fiber today constructed between where their data center is constructed and the nearest network which turns out to be cogent to get them back to major markets so you know i would expect in that case that Last mile, and it's a lot more than a mile, is probably going to take a lot longer than three or four months to permit it and construct. We are not going to do that. It will get done, and that backlog of waves will then be available. They've already told us how many they need. We've beefed up our network to deliver that. I mean, that's just an anecdotal example.

Okay. That's great. Thank you, Dave.

Hey, thanks, Seth.

And your next question comes from the line of Frank Lauren with Raymond James. Please go ahead.

Hey, Dave. This is Rob for Frank. Hey, so, you know, obviously, you know, you were just talking about the way of business. You spoke to it a bit in your, you know, earlier remarks. You know, what are some things that, you know, you think you can do in order to drive more sales there as it definitely appears the market is rising and then, you know, What do you need to do to improve the legacy business from here?

Yeah, hey, thanks for both questions, Rob. So, you know, I think, first of all, the best way to win any business, legacy or wave, is provide the best value in the market. Now, as I've commented before, value can mean price, it can mean location, it can mean speed. to install a community reliability. And your reputation is built order by order. In many ways, one of the most encouraging numbers in what we reported is the fact that 77 existing wavelengths in the quarter were upgraded to larger capacity. That kind of demonstrates that someone who dipped their toe in the water with Cogent now is feeling comfortable to upgrade and take more locations. You know, we do have the broadest footprint. We have the ability to provision quickly. And because of our network architecture, we have greater reliability. 90% of Cogent's routes are unique to Cogent. We do know that for the areas of Sprint where they did not have fiber and we have used leased fiber, the fiber often comes from our wavelength competitors and the reliability on those leased routes is far below the reliability we deliver on our own route. So I think it's just proving out all of those components. And again, you know, while we're extremely transparent and granular, I would encourage you to talk to the couple of major competitors that we have for wavelengths and really find out if the wave demand that they are talking about is actually producing revenue today. as opposed to waived demand that's effectively in the funnel. I totally concur that that waived demand is there. It's the question of converting it quickly enough. And because cogent is a new entrant, it's very visible. You know, we've gone from not even being considered on a third party ranking service to now being in the second tier of providers. Our expectation is in the next year or so we'll break into that top tier and eventually we'll be one of the two or three major nationwide wave providers. For the cogent legacy services, I think there's three answers to the question. For off-net services, there is a proliferation of fiber, which is allowing us to serve those locations, but we're going to do it with profit discipline and it is not our primary focus, but there are more locations. Cogent has never sold off-net services on non-fiber infrastructure. We did inherit some from Sprint and then rapidly decommissioned as much of that as our contracts allow. For our on-net footprint for corporate users, I will fully acknowledge that while the market has improved from the depth of vacancies at the pandemic, the office market across North America is still far weaker than it was pre-pandemic, and number of workdays in the office remain at about 60% of pre-pandemic levels. So while I think we are growing market share in our on-net footprint, we understand that that footprint has these structural constraints. And then to that final point on that market segment, we don't intend to build into smaller or less Traffic Rich Locations. And then finally, on our Netcentric business, which is by far and away the biggest part of our legacy business, you know, it's about 46% of our total revenues, and it's 98% of our traffic. There we continue to gain market share with 1,953 on-net data centers. That, I think, is a testament to the breadth of our network, 308 markets, 58 countries. And the fact that traffic grew sequentially 3% and year-over-year traffic accelerated to 16% is a demonstration of we're gaining share in the IP transit market and expect that to continue to grow. And considering we're already the largest player in that market, I think it's impressive that we're gaining share. If you compare our traffic growth numbers to either Cisco visual indexing or open vault data or reliable third parties, we're growing substantially faster, almost double the rate of the market. And considering we're the biggest player in the market, I think that's still a testament to our ability to have market share to gain.

Great, thanks, Dave.

Hey, thanks, Rob.

And your next question comes from the line of Anna Goschko with Bank of America. Please go ahead.

Hi, thanks, Dave. I know this call is going long, so I'll try to just have some quick ones for you. So, first of all, the proceeds from the data center sales on a net basis, I think, was $224 million, and it looks like you spent $125 million to buy back the bonds at a discount, which is a good thing. But it leaves about $100 million, simple math. So on that remaining $100 million of proceeds, are you going to go and try to buy back more of the existing secured at a discount? Or can you take that money and just repay the 27? That's going to reduce the total amount of refi that you need to do. That's my first question.

Yeah, first of all, in many ways, Ana, you can ask as many as you want, because your question may be the most important to our investors on this call. So I think we are expecting to try to raise less than the $750,000 and use some of the proceeds to do that. We may be in the market to buy back some of the $27,000 while their discount is not as pronounced as it is on the 32s. I believe we have met our contractual obligation under the supplemental indenture to the holders of the 32s. We may also buy some additional 32s, but I think our primary objective over the next couple of weeks is to try to shrink the size of the new offering. Because to Walt's question, we understand it's going to cost us more. And, you know, the kind of time value of the incremental payment versus where we capture an immediate benefit kind of washes out. So there's not really, I think, a big cash savings doing one over the other. I think secondly, to Michael's question earlier, we're also going to think about these additional proceeds. And I think we've demonstrated to the debt markets we are extremely committed to de-levering, and we intend to use more proceeds to reduce debt.

Okay. So that was my second. Thank you. So that was my second question. The data centers that are still being marketed, those are technically outside the restricted group for the debt. So I guess one, are you committing to use those sales proceeds to repay debt in the future? And then you addressed or mentioned that you're in discussion with potential underwriters about enhancements to what the new bond will be. So is that part of the enhancements that you're discussing? Is the commitment of future data center sale proceeds to the data group?

Yes, I'll actually kind of answer those together, even though they were two questions. So you are absolutely correct that the data centers and the burn associated with them sit outside of the borrower group. So our intention when we created this structure at the acquisition of Sprint was not to take collateral away from the current bondholders at the time, but rather to shield them from the carry cost of those data centers and be forced to use restricted payments capacity out of the borrower group to fund that burn. I think that strategy was bondholder friendly, and for the more sophisticated bondholders, I think they understand that. I think then, secondly, our willingness to go ahead and voluntarily contribute the proceeds into the borrower group And remember, we contributed 100% of the net proceeds into the borrower group. While they're not all guaranteed to buy back debt, it definitely reduces net leverage at the borrowing group. And we've already spent, publicly disclosed, more than half. And it is our intention to use Most, if not all, of that to just reduce gross debt as well as net at the borrower group. In terms of the other data centers, we are definitely receptive to contributing those proceeds into the borrower group. To be candid, we have ample RP capacity to cover the burn, and since we have dramatically reduced our dividend expense, We have a great deal of flexibility, and that is something that ultimately will be part of the discussion between the underwriters. And, you know, while the underwriters are intermediaries, ultimately it's the holders. And if, you know, new bondholders felt that it was additive to make that affirmative commitment, it is absolutely something that the company will consider.

Okay, and then just finally, I think a bigger picture question for the whole structure. So, you know, CapEx was still, I think, more elevated this quarter, and I think you already asked and addressed that. But, you know, you're not generating positive free cash flow, so obviously, you know, anyone buying kind of a new credit or a new piece of debt is going to want to see that there's positive free cash flow to be able to service the debt. So could you just give us I think it comes down to four inputs. First, our ability to grow desirable revenues.

Two, our ability to continue to expand margins. I believe It is almost unprecedented, I have not seen an example ever of a public company that had 12 consecutive quarters of revenue decline and sequentially in 11 of those 12 quarters grew its EBITDA on an absolute basis in face of those declines. Now, the tools we had to use were mostly We were helped in this effort by the transition and subsidy payments from T-Mobile. And we understand that in two years, those payments go away. And since we're not issuing a two-year debt instrument, we need to be able to show that there is a path to free cash flow without those payments. Inclusive of those payments, we are Okay on cash flow, but not including them, it is challenging. So we do need to continue to grow EBITDA. Third, to kind of Walt's question around sales and trying to raise money, we are absolutely committed to that. Again, that is temporary. It is helpful. We have already demonstrated that we are going to take our leverage down. But, you know, I don't think we can asset sell our way to perpetual cash flow growth. And then finally, we need to not only generate free cash and CapEx reduction is part of that story. You know, we've had both year over year and sequential reductions You know, we are in a challenging environment around price increases for equipment that's unprecedented. But I do think we have some levers to pull to continue to be very capital disciplined. And again, I think our capital intensity per dollar of incremental revenue remains probably the best in the telecom sector. And I know that's a very bold statement. But I think if you look at Cogent's ROIC, since it went public in 2005, we've had an ROIC that's been substantially above our incremental cost of capital for that entire period. We understand that not including the subsidies from T-Mobile, that looked bad after the acquisition. We have worked diligently to spend that capital. We took heat, for example, in spending $100 million on the 20, well, actually 125 Sprint facilities, of which 24 were earmarked for sale. We obviously got way more than that back by selling just 10 of them. We're going to continue to be very capital-focused, and I do think that will help us lower our cash burn and become cash flow positive more quickly. I know that was a long-winded answer to your question, but I get it. Free cash flow is what investors care about.

Okay, great. Thank you, David. Hey, thanks, Anna.

And your last question comes from the line of Michael Rollins with Citi. Please go ahead.

Thanks. Good morning, Dave. I'm curious to go back to your comments about the network traffic growth, the acceleration to 16%. I'm curious if you could talk more about the significance of that between what you're seeing coming out of the corporate building portfolio or the multi-tenant buildings relative to data centers and what that means for the future, Q times Q math, to try to grow that transit revenue for Cogent on the annual basis.

Yeah, so two parts to the answer, Mike. First, our corporate and the multi-tenant office on-net buildings and off-net and enterprise business is irrelevant to our total traffic. It's only a couple percent of Cogent's traffic. 97-98% of our traffic comes from data centers, from net-centric customers. Our end-user customers The footprint is just not big enough relative to the size of our transit footprint. Now, within our transit customer base, we have about 7500 access networks. We have about 6000 content generating businesses that drive That traffic growth and that 16% year over year. What we are seeing are two key things happening. Total traffic growth accelerating, but actually on a bit transferred basis, it's accelerating even faster. So we bill our services on a peak Utilization, either 90 or 95th percentile. So we throw out either 36 or 72 hours of peak traffic and bill on that variable. And we only bill on the higher of the directions, meaning in or out. For our access network customers, it's mostly in. For our content producers, it's mostly out. Three quarters of all Cogent's traffic remains completely on our network. And if traffic patterns were not shifting, then the kind of difference between average and peak would not be relevant. But what is happening with the deployment of agentic AI is we are seeing a market shift in end user traffic becoming materially more symmetric. The result of that is for our access networks, they're generating more bits that they are sending us where previously they had sent us very low volumes. It may not immediately result in an increase in revenue, but over time it will. And then conversely for the content providers, who are providing inference, they are now receiving a lot of bits that they historically had not received. And those also do not immediately generate more revenue. But I do believe that as the internet reverts back to a more symmetric network, which was what it was at its inception, we will see a Thank you very much. We are only about 27% utilized in our IP network and have substantial inventory to sell without incremental capital, where many of our competitors don't have that volume of inventory, have to go out and deploy capital, and in many cases, they can't even get the equipment if they want to deploy the capital. So I think it's all Thank you. Hey, thanks, Mike.

And that concludes our question and answer session. I would like to hand it back to Mr. Dave Schaeffer for closing remarks.

I want to thank everyone. I know today's call went a bit long, but I think these were extremely important topics for us to cover. Thank you. And this concludes today's conference call. Thank you all for joining.