Frank Louthan

Frank Louthan of Raymond James asked for clarification on the practice of capitalizing interest, questioning why it wasn't done previously and what its future impact might be.

Answer

CFO Keith Taylor clarified that Equinix has consistently capitalized interest, but the amount will become a more significant factor going forward. He attributed this to a larger investment scale, higher debt levels, carrying more land for development, and longer build timelines. He stated it was too early to quantify the future impact, as it depends on the timing and cost of new debt.

Frank Louthan of Raymond James asked for clarification on the practice of capitalizing interest, questioning why it wasn't done previously and what its future impact might be.

Answer

CFO Keith Taylor clarified that Equinix has always capitalized interest, but its impact will become more significant going forward. He cited several factors: a larger scale of investment, higher debt costs, holding more land assets under development, and extended construction timelines. He stated it was too early to provide a specific range for the future impact, as it depends on the timing and cost of new debt.

Frank Louthan of Raymond James Financial inquired about the current and future percentage of recurring revenue, the size of the data center opportunity within the backlog, and the potential magnitude of a significant new award.

Answer

CEO Daniel Peyovich noted that the service and maintenance business, a key source of recurring revenue, continues to grow and historically represents over half of the business. He sized the addressable data center market at over $20 billion in the next five years. While declining to quantify the new award, he confirmed it is significant and will be reflected in the Q3 backlog.

Frank Louthan from Raymond James & Associates asked about the pace of working through backlog, the current organic growth rate, and the proportion of the backlog that represents organic growth.

Answer

President and CEO Dan Peyovich noted the pace of business remains consistent and highlighted the backlog's diversification. CFO H. DeFerrari specified that organic growth was slightly positive in the quarter. He added that after lapping tougher comparisons from the prior year, the company sees opportunities for organic growth to increase going forward.

Frank Louthan asked for clarification on the fiscal 2026 revenue guidance baseline, the nature of the 5,100 miles of long-haul fiber builds mentioned, and details on the new Verizon awards.

Answer

President and CEO Daniel Peyovich confirmed the 10-13% growth guidance is based on fiscal 2025's reported revenue, which includes storm work, but the 2026 outlook excludes any new storm revenue. He clarified the 5,100 long-haul miles are from customers other than Lumen, highlighting a broad, multi-year opportunity. The new Verizon awards are for both extending existing contracts and adding new markets, covering a mix of maintenance and fiber-to-the-home work.

Frank Louthan inquired if the Q4 guidance includes potential storm cleanup revenue and whether recent AI-related projects are trending more towards large-scale long-haul builds.

Answer

CFO H. DeFerrari confirmed that Q4 guidance does not include specific storm work, noting that the $46 million of storm revenue from Q3 has tapered off. President & incoming CEO Daniel Peyovich stated that conversations around AI infrastructure are increasingly focused on long-haul networks to connect data centers, driven by hyperscaler needs for capacity and redundancy.

Frank Louthan of Raymond James Financial questioned if GDS still plans a public offering for its Dayone business in 2026, given the new Series C funding round. He also requested a geographic breakdown of Dayone's growth, specifically between Southeast Asia and its European sites in Finland.

Answer

CFO Daniel Newman confirmed the plan for a Dayone IPO within 18 months remains intact, with the primary goal of distributing shares to GDS shareholders. He clarified that the unexpected Series C round was driven by Dayone's phenomenal growth. For geography, he highlighted a major anchor commitment of over 100 megawatts in Finland, establishing a strong foundation in Europe.

Frank Louthan from Raymond James & Associates questioned when GDS's China business is expected to become self-funding and whether new AI demand affects that timeline. He also asked about the funding status for DayOne's 750 MW of commitments.

Answer

CFO Dan Newman stated the China business is already roughly breakeven on pre-financing free cash flow and that asset monetization allows them to lower net debt. He believes this model is sustainable for future CapEx. For DayOne, both Newman and CEO William Huang confirmed that with nearly $2.5 billion in equity raised, it is fully capitalized to deliver its 750 MW portfolio and can access international capital markets if needed.

Frank Louthan from Raymond James & Associates inquired about the breakdown of incoming workloads between AI and traditional cloud business in China. He also asked about the current book-to-bill rate, specifically the time from contract signing to full revenue recognition, and whether these timelines are contractually obligated.

Answer

CEO William Huang clarified that current Tier 1 market demand is primarily driven by AI inference, which also accelerates traditional cloud deployment. He stated that the lead time from obtaining an order to full utilization is now about 12 months, a significant improvement from the typical 2+ years previously. Huang confirmed these faster move-in schedules are contractually obligated.

Frank Louthan asked about the proportion of new business in Mainland China that is driven by AI and the current impact of the Chinese economy on data center demand.

Answer

CEO William Huang stated that approximately 70% of new demand in China is currently driven by AI requirements for training and inference. He clarified that this segment is not negatively impacted by the broader macro environment; rather, it is growing as tech giants and startups continue to invest heavily in AI models and applications.

Frank Louthan from Raymond James Financial inquired about the future strategy for greenfield and edge-out builds following the acquisition announcement and asked about the deal's closing timeline and any potential regulatory hurdles.

Answer

CEO Teresa Elder explained that the company's immediate focus is on continuing to operate effectively while securing stockholder and regulatory approvals for the transaction. She deferred questions about long-term strategy to the new owners, Digital Bridge and Crestview, and estimated the deal would close by late 2025 or in the first quarter of 2026, noting no known regulatory concerns at this time.

Frank Louthan asked for an update on the acquisition proposal from Crestview and DigitalBridge and questioned the liquidity provided by the new financing for the 400,000 homes passed goal.

Answer

CEO Teresa Elder stated there were no updates on the unsolicited acquisition proposal. CFO John Rego detailed the financing, explaining the initial $200 million loan secured in October, with an option for an additional $175 million in October 2025. He noted this capital gets them 'pretty far along' with the greenfield fiber project.

Asked for an update on the go-private proposal, specifically seeking confirmation on whether DigitalBridge and Crestview were still involved or if any other parties had approached the company.

Answer

The CEO stated that nothing has changed from the company's previous updates regarding the proposal.

Frank Louthan sought an update on the unsolicited acquisition proposal, asking if both DigitalBridge and Crestview Partners were still involved in the pursuit or if there had been any other changes or new parties involved.

Answer

CEO Teresa Elder provided a brief response, stating that nothing has changed regarding the acquisition proposal since the company's previous updates on the matter.

Frank Louthan inquired about the investment required to support growth in the mid-market and enterprise segments, and asked about the new AI agent partnership with Semaphore.ai.

Answer

CEO Amar Maletira stated that significant go-to-market investments were made in prior years, so no major new investments are needed, with future CapEx being success-based. Regarding AI, he detailed customer wins in both private and public cloud, including a private AI infrastructure deal for a healthcare client and an agentic AI platform for J. Crew. He described the Semaphore.ai partnership as complementary, combining Semaphore's platform with Rackspace's delivery, infrastructure, and governance capabilities to offer a turnkey enterprise solution.

Frank Louthan asked for details on new logo growth in Q4, including any standout segments, and questioned if the time from booking to billing has changed with the recent success in bookings.

Answer

CEO Amar Maletira stated that Rackspace continues to sign new logos across both business units, with over 250 new logos in Private Cloud alone, focusing on verticals like healthcare and sovereign. He highlighted the Seattle Children's Hospital deal as a prime example of their 'land and expand' strategy. Maletira clarified that deal cycles have not changed, remaining longer for large, complex Private Cloud deals and shorter for high-value Public Cloud services.

Frank Louthan asked about the extent to which including TikTok revenue contributed to the updated guidance and requested more color on the slower-growing 'Other Cloud Applications' (OCA) part of the compute business.

Answer

CFO Ed McGowan explained that while TikTok revenue is now included, the guidance increase is significantly larger, reflecting broad-based strength. Regarding OCA, he noted it includes mature products and that some revenue is being transferred to partners, while the legacy NetStorage platform is being end-of-lifed with a goal of migrating customers to the newer CIS platform.

Frank Louthan asked about new logo growth in the quarter, which business segments were strongest, and the outlook for retaining the customer contracts acquired from Edgio.

Answer

CFO Ed McGowan stated that logo growth was positively impacted by the Edgio transaction, which added over 100 new logos. He noted new logo acquisition is strongest in Security (Guardicore, API Security) and Compute. Regarding Edgio, he explained the migration is complete, they were selective in which contracts they took, and they do not anticipate significant churn from the retained base, seeing potential for future upsell.

Frank Louthan asked if Akamai acquired any network elements as part of the Lumen CDN deal and whether there are ongoing discussions to layer Akamai's capabilities onto Lumen's new AI-focused networks.

Answer

CFO Ed McGowan clarified that the Lumen acquisition consisted solely of customer contracts, with no network assets included. He declined to comment on any specific partnership discussions with Lumen.

Frank Louthan of Raymond James Financial, Inc. asked about the origin of wavelength customers, specifically whether they are new or existing Cogent clients, and inquired about the sales strategy for the data centers, including whether dedicated salespeople would be hired.

Answer

Dave Schaeffer, Founder & CEO, stated that to date, approximately 75% of wavelength customers have been existing Cogent transit customers, with the remaining 25% being new to the company. For data centers, he clarified that the existing 628-person sales force handles retail colocation sales, while a dedicated real estate professional is focused on the wholesale disposition of the larger portfolio.

Frank Louthan of Raymond James Financial asked for the typical profile of a new mobility subscriber, specifically the mix between new and existing customers and any differences between fiber and coax subscribers. He also questioned if there were limitations on LightPath selling mobility services.

Answer

CEO & Chairman Dennis Mathew stated that mobile sales are split 50/50 between new customers and the existing base. He emphasized the rollout across all channels, particularly care and retention, to target existing customers. CFO Marc Sirota added that they are pleased with their T-Mobile MVNO relationship and have flexibility, but did not specify if LightPath directly sells mobility.

Frank Louthan sought clarification on the network strategy, asking about the nature of 'new fiber builds' versus 'overbuilds,' the cost per passing for these builds, and whether any government subsidies were being utilized.

Answer

CEO Dennis Mathew explained that the company plans to add another 175,000 passings in 2025, with the majority being new fiber builds in greenfield areas, which he described as a competitive product with good ROI. He also highlighted the capital efficiency of upgrading the HFC network with mid-splits. He provided cost estimates of $800-$900 per passing for new fiber builds and just over $100 per passing for mid-split upgrades. No mention was made of using subsidies.

Frank Louthan inquired about the strategy to achieve the steep ramp in mobile subscribers to 1 million by 2027 and asked about the outlook for political advertising revenue in Q4.

Answer

Executive Dennis Mathew reiterated that the mobile growth plan hinges on expanding sales into untapped channels like care and retention, building on the momentum of their best-ever quarter for mobile adds. Executive Marc Sirota addressed the advertising question, stating they are seeing robust political spending and feel optimistic about achieving near double-digit growth for the full year in the news and advertising segment.

Frank Louthan from Raymond James asked new CEO Kip Compton to outline his strategic priorities, the changes needed to drive growth and profitability, and whether more management changes should be expected. He also asked for clarification on the new role for the Chief Revenue Officer, Scott Lovett.

Answer

CEO Kip Compton, noting his prior role as Chief Product Officer, stated his focus is on accelerating the existing strategy, particularly in go-to-market execution, security, and tapping the untapped potential of Compute. He views leadership evolution as a healthy part of growth but did not forecast specific changes. He clarified that Scott Lovett was being elevated to President, Go-to-Market, a role expansion that combines revenue and marketing functions, and that he would not be replaced.

Frank Louthan inquired about the capital and personnel investments required for Fastly's Asia-Pacific expansion and asked for a timeline on when the new sales initiatives, particularly the new logo hunting team, would begin to impact top-line growth.

Answer

CFO Ron Kisling stated that capital investment for the APAC expansion would be nominal. CEO Todd Nightingale elaborated that the move is primarily about making the system more efficient by adding a dedicated sales leader to tap into the underpenetrated market. Nightingale also explained that the new logo sales team is largely in place through the refocusing of existing resources, with a continued ramp-up in security specialization throughout the year.

Frank Louthan asked about the nature of the Q3 media business strength, the progress of the company's restructuring and cost savings, and the types of workloads being acquired outside of the media vertical.

Answer

CEO Todd Nightingale explained the Q3 revenue beat was from better-than-projected results in top media accounts but cautioned against projecting this forward, emphasizing the 20% YoY growth outside the top 10 as the key strategic focus. He noted that non-media growth is driven by new logos seeking a full portfolio (security, compute, observability). CFO Ron Kisling added that restructuring cost savings were realized faster than expected, driving about $14 million in savings versus the original 2024 plan.

Frank Louthan from Raymond James and Associates asked for the timeframe associated with the $1.5 billion hyperscaler funnel and questioned the economic viability of building out the 20% of the Kinetic footprint that lacks cable competition, and how that impacts the 40% penetration target.

Answer

President & CEO Kenny Gunderman stated that deals in the funnel typically have a 6 to 18-month cycle. Regarding the Kinetic footprint, he expressed high confidence in reaching 75-80% of homes with direct fiber, noting the cost-effectiveness of the build. Senior EVP & CFO Paul Bullington added that the most rural areas without cable competition are often targeted with subsidized builds like RDOF, making them economically viable.

Frank Louthan inquired about the optimal financing mix between ABS and other debt for the combined company. He also sought details on the accelerated fiber-to-the-home build, including the number of homes planned for 2025 and whether marketing efforts would align with the construction pace.

Answer

CFO Paul Bullington explained that while the company has a strong appetite for more ABS financing, the optimal debt mix will remain flexible and opportunistic based on market conditions. CEO Kenneth Gunderman added that Kinetic plans to build approximately 325,000 homes in 2025, reaching a total of 2 million passed homes two years ahead of schedule. He assured that marketing and construction are 'neck-and-neck' priorities, with recent builds showing strong initial penetration rates of 25-30%.

Frank Louthan inquired about the amount of fiber Uniti retains for its own inventory during large anchor builds and sought more color on the market expansion opportunities and associated revenue potential mentioned in the presentation.

Answer

CEO Kenneth Gunderman responded that Uniti is now delivering much higher fiber counts (e.g., 864-strand) and is building a substantial amount of fiber for its own future use, on par with or exceeding what is delivered to the customer. Regarding expansion, he detailed opportunities across the combined company: taking Kinetic's fiber-to-the-home build from ~38% to a planned 60% of its footprint, lighting up more of its 300 metro fiber markets, and leveraging unique Tier 2/3 wholesale routes for further lease-up.

Frank Louthan of Raymond James & Associates, Inc. asked for an update on the billing system conversion, specifically about when it would complete its first full billing cycle and whether management was confident that it would not lead to customer drops or other operational issues.

Answer

CEO & President Julie Laulis confirmed that the second and final phase of the billing migration has already gone through a complete four-part cycle without any problems in billing, reporting, or provisioning. She expressed confidence in the system's stability, while noting that post-migration work remains, such as decommissioning legacy systems and websites. Laulis characterized the project as very tough but progressing well.

Frank Louthan asked for the rationale behind eliminating the dividend, questioning if debt covenants or going concern issues prompted the decision, and inquired about the timeline for returning to broadband subscriber growth.

Answer

CFO Todd Koetje reassured that the dividend suspension was a strategic capital allocation decision to accelerate debt repayment and was not related to any debt covenant or going concern issues. He reiterated confidence in achieving a leverage ratio below 4x. CEO Julia Laulis added that while she would not provide a specific date, she believes the company will deliver both broadband subscriber and revenue growth in 2025, citing improving month-over-month connect trends.

Frank Louthan asked for the outlook on achieving consistent growth in the 'Grow' and 'Nurture' revenue buckets and inquired if the initial $8.5 billion in AI fiber build contracts had seen any scope expansion.

Answer

President & CEO Kate Johnson confirmed that new PCF deals involve repeat customers who are happy with performance and are coming back for more. EVP & CFO Chris Stansbury noted the 'Grow' bucket has been consistently strong in the high single-digits, while 'Nurture' and 'Harvest' are expected to continue declining, with their shrinking portfolio share being key to the eventual revenue pivot.

Frank Louthan from Raymond James requested more detail on Lumen's Network-as-a-Service (NaaS) product, asking how it is differentiated and where it is gaining traction. He also sought clarification on the previously referenced weakness in the public sector.

Answer

President and CEO Kate Johnson differentiated the NaaS product by explaining that Lumen uniquely combines a digital platform with ownership of a vast physical network, a strategic moat competitors lack. EVP and CFO Chris Stansbury clarified the public sector commentary, stating that underlying booking trends are strong and that the impact of certain off-net service disconnects will be isolated when it occurs but will not negatively affect the bottom line.

Frank Louthan asked for more color on the expected public sector revenue pullback and requested an update on the progress of Lumen's billing system consolidation and other IT transformation projects.

Answer

CFO Christopher Stansbury clarified the public sector headwind is not from lower sales but from proactively disconnecting services due to 'egregious' price increases from a few off-net providers. Regarding IT systems, he reported good progress, with the first ERP phase (quote-to-cash) expected to complete in early Q2. He stressed they are not doing a risky, large-scale billing system conversion but are instead onboarding new revenue onto modern systems as legacy networks are retired.

Frank Louthan of Raymond James asked for details on the annual revenue and margins for wavelength services. He also inquired about the potential for upside to the $8 billion in PCF contracts, especially since customers are asking for accelerated build-outs.

Answer

EVP and CFO Chris Stansbury declined to disclose revenue or margin details for specific products like wavelengths, stating the company will stick with its Grow, Nurture, and Harvest reporting framework for now. On potential upside to the PCF deals, he confirmed customers are asking Lumen to 'go faster' but said there was nothing to share yet as those conversations are ongoing.

Frank Louthan from Raymond James Financial asked about the potential impact of the recent U.S. executive order aimed at streamlining permitting for data center infrastructure, and how it might affect Digital Realty's bookings and future opportunities.

Answer

President and CEO Andy Power viewed the executive order as a clear positive, highlighting two key takeaways: the reduction of regulatory barriers for U.S. data center construction and the promotion of the U.S. AI tech stack globally. He believes these actions will help expedite infrastructure delivery and could accelerate the globalization of AI demand.

An associate for Frank Louthan at Raymond James asked what factors would need to change for re-leasing spreads to decline and whether there is a risk of pricing weakening in any markets.

Answer

CEO Andrew Power expressed confidence in pricing momentum. For the 0-1 megawatt segment, he cited nearly 4% cash mark-to-markets and positive price action across almost all markets. For larger deals, he attributed positive pricing to favorable supply-demand dynamics in key markets. He explained that the company's strategy of focusing on markets with diverse, robust demand and significant supply constraints continues to support strong pricing power.

Frank Louthan of Raymond James inquired about the company's strategy for capacity allocation, asking what percentage of facilities will be set aside for sub-1 megawatt deals and what portion of that space is for high-power density.

Answer

CEO Andrew Power explained that for several years, the company has prioritized ensuring customers have ample runway for growth, including high-power densities. He noted a move towards building dedicated facilities for enterprise/colo customers on large campuses, rather than mixing them within hyperscale buildings, to better serve this growing segment and support its continued acceleration.

Frank Louthan asked if the company is maintaining its discipline of avoiding markets with less certain long-term demand and inquired about its funding strategy for upcoming development projects.

Answer

President and CEO Andy Power reaffirmed the company's strategy of focusing on markets with robust and diverse demand drivers (enterprise, cloud, AI) rather than 'chasing demand for demand's sake.' He emphasized that this disciplined approach, built over 20 years, is key to maintaining pricing power and generating long-term sustainable growth.

Frank Louthan of Raymond James Financial, Inc. inquired about the pace of the fixed wireless deployment and asked for characterization of the promotional activity in July and the third quarter.

Answer

Chairman and CEO Hans Vestberg stated that the pace of fixed wireless access deployment has not changed and continues to follow the C-band build-out, which is on track to cover 80-90% of planned sites this year. He noted that current CapEx levels reflect increased efficiency rather than a change in deployment speed. The company did not comment on the promotional environment for the current quarter.

Frank Louthan inquired about Shentel's plan to use asset-backed securities (ABS) for refinancing, asking about potential rates, timing, and the optimal long-term capital structure. He also questioned the timeline for Glo Fiber's elevated CapEx, its expected long-term capital intensity, and the sustainability of the current EBITDA margin levels.

Answer

SVP of Finance and CFO, Jim Volk, explained that the ABS financing could save approximately 100 basis points in interest expense and that the company plans to access the market in the second half of the year. He stated that elevated CapEx for the Glo Fiber buildout will conclude by the end of 2026, after which capital intensity should drop to 20-25% of revenue. EVP and COO, Edward McKay, added that success-based drop installation costs contribute to this intensity. Jim Volk confirmed the current EBITDA performance is the 'new normal' and projected annual EBITDA margin expansion of 300-400 basis points.

Frank Louthan of Raymond James inquired about the Horizon revenue adjustment, the timeline and financial impact of the T-Mobile churn, and the source of competitive pressure impacting incumbent data penetration.

Answer

SVP of Finance and CFO James Volk clarified that the T-Mobile churn is now behind them, with the $7.1 million revenue loss primarily impacting EBITDA. He later noted that 8% of Horizon's revenue is amortized. EVP and COO Edward McKay added that competition in incumbent markets comes from a 28% overlap with other cable or fiber providers, not from cannibalization by Shentel's own Glo Fiber.

Frank Louthan asked about the potential timing for needing a fixed-mobile convergence product and requested quantifiable metrics on the benefits from the company's customer care improvements.

Answer

CEO Nick Jeffery acknowledged that convergence is happening but stated that current data shows Frontier does not yet need a mobile offer, as it is hitting penetration targets with low churn. He noted they are prepared to launch if necessary. CFO Scott Beasley quantified the customer service benefits, citing a 50% reduction in calls over three years, 75% of interactions now being digital, and these improvements contributing significantly to the $580 million in total cost savings and a 120 basis point margin expansion in the quarter.

Inquired about the strategy to drive growth in the business and wholesale segment and asked for more detail on the quarterly pacing of CapEx, the build schedule, and vendor financing payments in 2024.

Answer

The business and wholesale segment is expected to return to growth in Q1 and be stable for the year, driven by fiber growth. 2024 CapEx will be front-loaded in Q1 due to the timing of build activities, with a material step-down in subsequent quarters. Vendor financing payments are also likely to be weighted toward the first half of the year.

Asked about the potential for legacy copper operating cost removal once 40% fiber penetration is reached and the timeline for fully decommissioning the copper network.

Answer

Management explained that margins will improve from the high 30s to the mid-to-high 40s through a combination of improved fiber mix and aggressive copper cost reduction. While some cost savings are incremental, major step-change improvements from decommissioning entire copper wire centers are part of a multiyear journey that will take a few years to realize fully.