CCOI - Earnings call transcript Q2 2019 | Cogent Communications Holdings, Inc.

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Operator

Good morning, and welcome to the Cogent Communications Holdings, Inc.

Second Quarter 2019 Earnings Conference Call.

As a reminder, this conference call is being recorded and will be available for replay at www.cogentco.com.

I would now like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holding. begin. may you Sir,

Dave Schaeffer

is good earnings everyone. Cogent's call. with morning's officer, and Officer. Chief second chief to quarter and call this on XXXX I'm me Weed, morning you, our Welcome Financial to our executive Tad Thank Dave Schaeffer,

about highlights the optimistic outlook beyond. remainder XXXX underlying for for to some XXXX, continue our and our the from Now strength quarter of second we be the and business of

second quarter gross basis the Our for points increased the XXXX XXX by of margin quarter XX.X%. to from

from cash growth revenue the quarter. quarter the of Our of growth X.X%. from increase by first total quarter operations year-over-year for sequential second flow increased of On X.X% and XX.X% a of of the of an a million from XXXX constant-currency to XXXX revenue basis, and $XX.X achieved XX.X% we

quarterly productivity Our full-time slightly of equivalent month rep installed rep productivity per our per month units X.X long-term full-time X.X rate was historical average a per below rep per at units equivalents. sales for

Our slower growth X% traditionally traffic is sequential in the what and growth a XX% year-over-year we was period of of year. traffic traffic achieved up

of quarter. not During any through our board authorized stock buybacks did we buyback which our stock stock to program shareholders XXXX. total December the dividend. to we our We has during million returned quarter, regular had end, available for $XX.X million At continue the a $XX.X quarter purchase of under through our

of this mature secured accrue $XXX June of notes X.XXX% year, a million. million senior of rate XXXX. notes at in June In proceeds of issued and the of interest $XXX.X net €XXX or we with million These

is our had This ratio increase the is indenture. measured X.XX we of leverage as fact increased quarter. in Our X.XX previous to end an from X.XX, the the at but gross under

flat end ratio the leverage was essentially QX. net X.XX the of remained at end QX of X.XX versus at and Our

held quarter. was dividends at Cogent Holdings and is and defined at use consolidated is our Our unrestricted our X.XX million last cash a and/or leverage indenture company, under X.XX to This is $XXX.X Cash available it ratio as buybacks. end. parent stock quarter for

at level Cash our at company at and operating combined quarter are operating the company cash both $XXX,XXX,XXX and holding $XXX,XXX,XXX the end. held holdings, our is

remain growth generating of our the potential to confident continue We in cash capabilities and business.

As we per result, regular sequential have our quarterly press in as yet quarterly sequential will to indicated per share operational Throughout quarter, a our $X.XX $X.XX dividend. XXth our several quarter our from announced representing discussion, highlight consecutive regular on statistics. per increase release, this share per dividend $X.XX another increase we in

will trends of I business, review the operational and our the financial performance. provide in and additional greater some Tad some detail will highlights on details in

open floor Following for these prepared the remarks, answers. questions we'll and

language. Now to Safe Tad over turn I'd like Harbor to read it

Tad Weed

and uncertainties, forward-looking everyone. morning, made These and These are and good and forward-looking a facts conference number and of be call Thank this forward-looking may you, subject not historical includes materially. intent, belief upon that results statements are based Dave, differ statements. all expectations. earnings risks are statements to call This that other may our on actual statements current

And our SEC over Please or our filings find could for differ. non-GAAP back call reconciled I'll no turn website obligation posted undertakes earnings to refer these GAAP measures cogentco.com. release, will to Dave. during information at you on our the on which call, this in forward-looking actual financial to cause to is to measurement the the results factors revise that Cogent statements. any we more update use if

Dave Schaeffer

Hey, you've thanks, chance review to a release. Tad. our had Hopefully, press earnings

for on a metrics years. consistent have basis that Our a reported press includes of number quarterly a of release number historical been

of long-term guidance XX%. our been growing revenue Our growth above of quarter, this full in XX% business, targeted revenues corporate which our has total represents for

from it XXXX. second fact of grew In the XX.X% quarter

However, impact NetCentric X.X% The basis, primarily declined XXXX. second foreign of from our the decline from however XXXX. impacts second exchange has compared business business did of X.X% quarter and constant-currency been On underperforming a our of the at averages, historical our quarter to NetCentric NetCentric business.

by continue Our quarterly the rates. operating for on EBITDA business, minus minus we Due of cash first XX.X% cash growth leases, months CapEx flow, XXXX, our payments the first capital six grew months by expect our in leverage at as XXXX. our similar excellent flow defined principal to six the of to from

annual guidelines EBITDA are approximately for long-term XXX annual margin basis of expansion improvement an Our points.

Our multiyear XX%. constant-currency approximately is growth revenue target

multiyear and targets are be to to intended specific guidance not intended quarterly goals guidance. EBITDA and are revenue be Our

and will details Tad the quarter. financial Now handle some for operational additional

Tad Weed

customer analyze our Dave. connections, you, our customers productive like NetCentric non-core, entire also which we of results Cogent our and upon their and and to quarter I'd classify into types type we analyzed two our we the efforts off-net and good also another revenues based congratulate again, NetCentric revenue revenues continued and the corporate for customers. Thank hard network customers based thank is And Company. during team work and upon morning, customer On of and everyone. type, and all corporate for on-net,

an by network year. $XX.X in reduction Our of about large second in last We corporate Revenue from of customers and year-over-year, XX.X% our large said, corporate our quarter amounts for the of USF grew had was which as multinenant over sequentially the data at XX,XXX buy sequentially corporate rate and our bandwidth customer A customers quarter quarter by corporate Dave customers annual to $XXX,XXX. on end, increase reduced bandwidth XX.X%. revenue connections from X.X% grew carrier-neutral buy NetCentric million from our office by in us centers, the us buildings.

X.X% revenue X.X%. million NetCentric FX to year-over-year XX.X impacts customers. declined from by customers and sequentially our Quarterly declined by primarily NetCentric

by at by X.X% year. constant an quarter of quarter revenue our year-over-year of X.X% network our currency declined So, increase of on X.X%. declined XX,XXX of a the last instead sequentially, basis, had over quarterly customer instead NetCentric connections end, second from on the We NetCentric and X.X% customers the our X.X%

NetCentric seasonal and revenue revenue impact was than the of growth size connections significant type, million more experiences quarterly by foreign a volatility customer revenues On revenue of and X.X%. customer due of increase and factors. X.X% $XX.X our exchange, our to quarter, year-over-year for on-net corporate Our increase the sequential other

by and customer on-net buildings. carrier-neutral connections network center our year-over-year. connections by total ended and increased on-net on on-net X.X% We our buildings XX.X% with sequentially X,XXX Our data quarter the customer XX,XXX multinenant office in

Our of is off-net a was of year-over-year sequential $XX.X quarterly increase for which X%. X.X% the revenue quarter, a and increase million

ended X% and off-net in buildings Our customer increased off-net and We year-over-year. the serving XX,XXX off these off-net primarily X,XXX connections America. X.X% and buildings customer by connections North are quarter by over sequentially net

pricing, of Some comments average consistent decreased on base the the quarter. price with per installed for historical megabit trends, our

for per average megabit our our from installed for quarter and base ARPU, declined the for was from and off-net $X.XX quarter relatively price and price by decreased ARPU customer second customer modest new sequentially the by Comments new average was our XXXX. and relatively from price with XXXX. year-over-year sequentially flat the declined quarter declined $X.XX the the per to again, on-net on to by a declined X.X% contracts stable decline. XX.X% The sequentially X.X% of from second However, ARPU megabit contracts our $X.XX quarter. both by for X.X% megabit and per The average of

$XXX of includes ARPU, which was centric customers, corporate decline which sequentially. quarter, a for was and net X.X% the on-net both Our

increased which and of during corporate which $X,XXX comprised the Our slightly off-net on-net was decrease Churn customers, rates off-net ARPU, quarter, is for from last churn was of churn quarter. predominantly the a our quarter. X.X% rates,

was Our last on-net X.X% quarter, off-net X.X% rate and that's unit quarter the rate, quarter and our churn churn was X.X% this rate, and unit was was churn X.X% quarter. for last a

all our orders. contract corporate and term Comments related to We on of NetCentric discounts NetCentric change to offer customers.

volume our discounts We customers. NetCentric commitment offer also to

contracts discounts certain During volume Cogent into customers million. their this customer for and over entered increasing to term connections, contract of revenue advantage over commitment quarter, X,XXX our by $XX and NetCentric long-term took

comments on and EBITDA as Some EBITDA adjusted.

the of our of and timing tax reconciled amount gains and expenses our all press meeting our the at of and on EBITDA benefit CPI These increases, quarterly cost EBITDA flow our that of in in costs include SG&A cash and of adjusted quarter the taxes level also each services, our and consequently fourth timing factors payroll equipment typically operations year, our annual living plan the typically sales in Seasonal annual audit increase United EBITDA beginning EBITDA and increases. and impact resetting quarter. to from factors Our adjusted or first and cost of are from SG&A our our the transactions, our seasonal annual expenses our earnings releases. as as States

our a headcount an $XXX,XXX of the expense. quarter first in expense last The the cash collections quarter general quarter in sales two force in receivable our which to debt SG&A falling and primarily from increase we bad primarily increase our of employees, which in on bad XX due our debt our ratio, impacted Our increased increase days a accounts to reduced determining the this customer primarily billings our to in was reserve. cash use and weekend,

sequentially EBITDA million. $XX.X was quarterly Our X% declined and by

Our or X.X%. million EBITDA increased by year-over-year by $X.X

by On $X.X by by an increased or increased X.X%. million FX adjusted basis, EBITDA X.X% sequentially and our quarterly year-over-year

by by year-over-year decreased basis XX sequentially XX margin EBITDA quarterly points Our declined XX.X% basis and points. to

adjusted includes Our as equipment transactions. related our to EBITDA gains

of and for were the $XXX,XXX the from for year only $XXX,XXX quarter. $XXX,XXX the quarter, for was equipment gains which first Our a quarter decrease second last

adjusted, as million $XXX,XXX by million X.X% decreased X.X%. $XX.X and or EBITDA, by or to year-over-year Our increased by quarterly $X by sequentially

our margin quarter, for XX basis $X.XX by XX compared EPS, year-over-year. last XX.X% EBITDA share for and and basic last sequentially basis $X.XX quarter quarter second Our the as adjusted was the year. points income per quarterly decreased by to decreased $X.XX of points to

foreign comments exchange. Some on

about were Our revenues in our the our XX% this about related States in Mexican, of operations. of American earned dollars United Pacific Canadian, X% and total based was outside Asia our of of about revenues revenue quarter revenues, and our Latin were U.S. Europe, reported and XX% to

foreign materially our reported negative foreign sequential on quarterly revenue negative our on a our The Continued do the impacts overall $X.X volatility and foreign in impact exchange revenue financial a revenue results. our rates reported was impact year-over-year and quarterly was currency quarterly $XXX,XXX exchange million. results

$X.XX Our growth our and were $X.XX. is far Canadian revenues. exchange a impact The basis about euro foreign U.S. X.X% so primarily dollar exchange, impacts the rates dollar The NetCentric quarter again, X.X% about this rate is on average constant-currency and revenue of quarterly sequentially to rate average year-over-year.

for material. foreign our third average we conversion year, impact the current of revenues rates not these the will exchange foreign exchange that remainder be this estimate sequential of at average remain Should levels our quarter the on

conversion and customer to be concentration, we the our on our Customer year-over-year that highly base impact believe is concentrated. $XXX,XXX. not negative However, revenue revenue estimated is

than represented revenues quarter. of X% customers less XX our this top Our

Capital and by by sequentially decline expenditures, XX.X% our capital year-over-year. expenditures declined X.X%

compared to second quarter for million $XX.X quarter, the this Our lease million leases capital million expenditures $XX for quarter capital year and on were of $XX.X first and of payments. last the Comments XXXX. capital

IRU dark often lease of XX even terms options long-term obligations initial typically longer, and multiple renewal capital initial fiber leases have years Our for term. the and XX or after are to include

obligations at quarter IRU a contracts totaled with $XXX.X total had lease suppliers. we capital Our fiber XXX million IRU fiber And end, different end. at of lease quarter a

Our capital lease by year-over-year. and declined declined agreements payments principal XX.X% IRU under by XX.X% fiber our sequentially dark

and Our $X million principal the last second $X.X year from quarter, million compared payments quarter. for $X lease last quarter capital to for million were of the

capital with year-over-year. capital expenditures on lease expenditures Our sequentially and improved combined both our payments principal

for quarter, equivalents, XXXX. combined end, issuance cash compared cash cash flow. our were of lease million this Comments first notes proceeds XXXX including million operating principal quarter from million on $XXX net second the the capital million. cash our and quarter the our and payments Our totaled million of capital with to $XX.X and the quarter $XX.X expenditures for At $XX.X $XXX.X

for increased $XX.X included payment million. quarterly million of our the which dividend stakeholders regular on to our spent was our For returned payment semi-annual million cash this by our our million quarter, on capital quarter, We and interest $X.X $XXX.X debt. $XX.X

Our by by and XX.X% sequentially and flow increased XX.X% increased year-over-year. from cash materially operations improved quarterly

the for $XX.X year flow from quarter, last operations quarter. of quarter second to $XX.X compared cash for was last the Our and for $XX.X million million million

debt total capital including million. our $XXX.X gross ratios, Debt our million debt at quarter at end lease obligations, was par, and $XXX.X net was

EBITDA X.XX. month was last debt-to-trailing quarter at and was gross total our net ratio ratio X.X adjusted end debt as Our

and outstanding. on Finally, some days again debt sales bad comments

of quarter bad Our last of expense an from for year. for revenues and X.X% the quarter of quarter, this X.X% increased last our the our the from X% was debt revenues second quarter and from $XXX,XXX quarter revenues by of increase our first

And a in our worldwide collections was the continuing XX billing from call the and who serving to our quarter. That's sales customers again, and a Our days same do Dave. recognize to And back days. ratio or outstanding I turn fantastic I want customers. at job collecting and DSO are thank team, and that our will last was to over

Dave Schaeffer

thanks, Tad. Hey,

a scale expansion. network Cogent's for on and to comments The scale Now grow. our network of and few size continues

square XXX million in North America have over of feet office We multinenant on net. space

network less consists is are route miles Cogent connected X,XXX than of over networks most world to the peers. are network the metro of interconnected The at miles of free over Our Cogent are The settlement end, quarter XX,XXX intercity XX XX,XXX over network directly connected transit networks to paying fiber of which, X,XXX fiber. we and in customers. remaining

the our of We lit are capacity approximately utilizing network. in currently XX%

low these We utilization our capacity and to rates. maintain of routinely augment parts network

another and year-over-year our network growth Carolina. XX data Cogent-controlled floor We and center data North centers at approximately operate in now these of added and capacity. Charlotte, achieved with quarter, sales of X% feet We of the traffic For XX% sequential operating facilities XX%. office of growth square to are XXX,XXX new raised traffic Cogent-controlled we space,

was quarter. turnover the X.X% average quarter Again, than long-term of rep Our turnover better X%. sales rep per for our

productivity productivity month. per units average this rep units rate long-term X.X at X.X equivalent per per But equivalent slightly sales partially in increased rep our force. a per below is our full-time in quarterly due Our month is the hiring to of full-time rate

we of selling selling the largest quarter number full-time reps reps the we at the is is significant ended We reps had, from again which end we've at XXX reps ended had history. equivalent end significant We services, XXXX. with ever sales our XXX quarter a had in our have which most this XXXX. the the sales sales increase of we our from the had with increase And QX, the services, reps of the sales is equivalent XXX full-time QX, XXX a

low transit our the the remains in Cogent cost provider remains access value summary, of Internet unmatched in So proposition services and industry.

co-location Our IP center business on are focused the services Internet, remains our and data for utilities these completely and customers. connectivity necessary

basis expansion constant-currency multiyear approximately is approximately target long-term XX% long-term EBITDA Our year. revenue XXX points to is be our rate expected and growth per margin

another quarter. Our board share our sequential a our of increasing yet increase quarterly by in dividend directors to approved $X.XX per regular per share dividend, $X.XX

of the increase flow dividend generating demonstrates increasing our regarding continued Our cash business. optimism capabilities our

of in year-end. quarter's under authorization, end, about our stock At the which a remains opportunistic had open the be will We of through market. place timing of million total we purchase common $XX.X buyback remaining our in current

of to We now are I'd that like to returning amounts for the a committed questions. to increasing floor our on With basis. open shareholders capital regular

Operator

JP going from Thank you. is first question come instructions] Morgan. Our to [Operator Philip Cusick from

Your line open. is now

Reed Kern

growth We've Thanks good for quarters Reed Hi, for is morning. Phil. question. consecutive This my really taking seen with strong on sales two headcount. in

and trade-off quarter was a going productivity a from folks. then, again trends progress XQ opportunities? the there some of investment And about, maybe with sales talk be rep less you the to the can training? full seen sales in But is Naturally tenured of

Dave Schaeffer

Sure. Thanks Yes. both for questions.

same significantly first rate year's our pace ahead we did ahead focused we year are the to most continuing sales additions the hiring the of year force we curve year. hires. rep we latter this half part the in at of in the really last getting So and on of of last year. This exited were of year the the of Last

of to tenure impacted number in productivity. in increased hiring a the has XX the declined rep which a of category, reps and month as average have large we rep Our six negatively has result maturity this increase

full-time in months. being job equivalent the As after have is counted mentioned a rep as three on for the a past we

productivity However, the rep's at months linearly increase of XX to approximately for rep a first continues career Cogent.

their our So an to benign These in our of rep at investments to our the reps customers of slightly fairly X.X. effect demand at has XX percentage this average increase taking in buildings. of sales it's the from had in X.X this part in from the recognize productivity, rep increased six a but formative productivity force career months depressing on

our and in it's levels increase we Cloud meet requirements. have to necessary available our due penetration rates and over use of of heightened those year to reps feel fact, the buildings has to software the past accelerated In in corporate customer's SaaS

recent deliver, past strategy on invested of training that continue impact investment That come will margin basis saw, to margin in and leverage significantly we coming most and have being efficiency. we about you saw We continues. the from the our as XXX the in network that this leverage network efficiency over i.e., we our did years. XXX this several operating think up have hiring. quarter, to an fact improvement about from virtually of half some points due the our expansion leverage quarter, but in was points, increase in gross SG&A SG&A It will negative half In on side, all operating do basis

But continue as the many acquisition in the years industry. of our dividends our the to remains for pay force cost going in is to investment sales revenue lowest

Operator

And you. from Cowen Synesael Company. and Colby comes our Thank question next from

Your now is line open.

Colby Synesael

term expansion goal, been us And it's a two the for Where you'll now just it see on do that. the you. up that that to typically do long-term following your down Thank we left? as CapEx, you since quarters mentioned longer part expenses Maybe and XXXX be where while then, being in have just up refresh that as expect think remarks, as bit, relates you point guys on in of you basis CapEx Would prepared to that. third SG&A it's margin you where debt bad quarter? just relates to mentioned XXX you've was that quarter-over-quarter going secondly reverse a And in on business? then it you

Dave Schaeffer

questions, the first Sure. take to Tad debt Thanks grab the I'll the Colby. let questions. bad going I'm and three other for then one

Tad Weed

of Yeah. cash and quarter the Hey, U.S. while, happened we the weekend, in days from in Colby. were had a Unfortunately, but two hasn't collections on customers. this reduction material last the a our

July. For that month reversed the in June, the of quarter for

July cash of for In fact, to we expense determine And general collections in we collected to calculations in than is our bad-debt billings. our in ratio $X more a reserve million did of June. cash one

SG&A. in So really our reserve are just lower the, in and of if increase increase abnormal that in under that results math resulted collections required the mechanics cash the to that

quarter And the to in of directly in following answer your the third revert came in kind cash that question, expect since to do that I week July.

Dave Schaeffer

know to DSOs debt and the feel as remain And pretty you and industry, bad line Cogent Yes. while Tad at in be pointed some expense due our debt averages. the calendar, we bad that of with than experienced out, rest much comfortable remain fluctuations, better there historical the could the will

require, question two will margin, full Now around of for not year point expansion probably in be have amount improvement year. your an achieved in XXX expect basis would quarters With we at because in expansion our that half just basis year. XXX we expansion the we and latter points and I have think margin this below points the of it substantial see the the of extraordinary half in said, to do of margin second

or having our roughly another from of or eight-year long-term XX% XXX take to arithmetically, margins year. about basis years enough probably again, over continue However, that now period period today, have a seven EBITDA not expect over to to a will that we've XX-year it for XX%. continue that to year us points delivered to points that's expand basis and But seven XXX about and the trend be multiyear up eight full to a

different our two on both our the leases. question, Now capital to places principal your as on CapEx flow know payments CapEx shows and cash up you statement, CapEx

last be was $XX that will year where million. about down combined We from number

both several this next beyond This be capital to payments We to that were to for to first for and year. principal absolute combined down. of $X or and and down the full year, continue year leases, extend total number and that in go half probably reduction year expect the million capital million we year do down from continue years next the to into that will continue expect $X number

Operator

Thank MoffettNathanson. Deo from next And our you. Del Nick question comes from

Your line is now open.

Nick Del Deo

taking questions. Hey. my Thanks for

in are You in market? know the the was there Were NetCentric a market I think persist the upload. does you if points And the least years sequentially, long break at a growth, that to before versus both pricing the dozen What mega is quarter? about today we and sense, general how any historically? forget more this the guess hit that seeing lowest, in year-over-year different large I fundamentally in customers something we have conclude about

Dave Schaeffer

Yes.

mix our revenues our have a going years through declines the underperformed continuing points, neutrality against Orange's now we've as on shift continuing then beginning represented versus Clearly, of seen largest from then customers growth mega. couple accelerated our with for and So six net But of long-term NetCentric customer Nick. loss with some from smaller broadly price our base. more to of customers a trends

it stabilize that improve. think We will and

the Internet. calls, the connect As a either do or will line decline bottom. method now Internet improve. not bottoming to we gradually distribute have access where either companies said that think road previous at as We lumpy rate get this have view remains a network the and will greater the we of of who from regional to revenues Transit to improvement we NetCentric on who primary a for are and near straight rather

typically networks, that. And may expensive in are at We they direct have generate difficult connections, may that and or then content, more doing for look be manage. those alternatives secondly, while more X,XXX companies to CDNs fact, using

of In transit fact, in intermediaries buying CDNs from just are us. the many turn

aggregating get power because customers. multiple Now, they're clearly they aggregated buying

the is Transit and content you and substitution way alternate cost is Internet, Clearly, you're that change we most seeing producer know we and would the easiest a an customers NetCentric not the predicted public lowest whether the a bottoming market your technologies of signs in ubiquitous pull out the application have allowing network, and term low the comment the permanent times. market applications to we depth access long pushing is to of multiple or use, the are heal. the business volatility slowly to an out But what on down. been access beginning and or Internet to of expect performance

Nick Del Deo

Did customers based? breakpoints the the pricing any more in broad was quarter performance large hit or

Dave Schaeffer

And broad-based, some that point enough that price say could material several was to as There Tad price few none this prepared of approximately we but under-performance more some X,XXX mentioned was for repriced, Nick. this quarter. were not existing remarks, a we breaks. quarter. customers prices our a were It would customers, get in were large having and and again, customer that had contracts breaks lower NetCentric those but the were that Orange There customers, specific

Nick Del Deo

Okay. off And I'm bright falling other because excess get attributable has to for stabilize? what to and factors, been has what expense spot. a that trying then pricing sense to network starts what degree attributable circuit costs the like for it a might look degree it to has To off-net that been been if

Dave Schaeffer

Yeah.

can off-net get is the in best So price one delivered roughly our X,XXX,XXX sell XX where we can double we model the to our of vendors from typically services very then and locations pricing that. off-net fiber via

at able and we've whether X% pass only long-term multinenant all tension up have be the a markets, about buildings, come some to down we been for benefit we're and whether and those down expanding that the we have it'd X.X% slowed. But customers. short-term, competitive year, then use year rate when a gone from and new be network, have of cable office of incremental we centers average and out the obviously adding We the to which capture for telcos to new of on data along companies or that a immediately network, over we leverage it'd drive those fixed pricing been between getting pass operating also renewal, contracts

capped maintenance slowdown then expansion some has fixed in also low that also on-net improve So terms the we've that gross world, the helped has of with in finally, And and payments us have than less rate the inflation to cases, business. gross in where able pay a us CPIs; been margins of in margin. CPI improving helped our

margin roughly to points these factors continue and a over of equal EBITDA And split network the the we of efficiency So long from term. all basis XXX think likely expect forward. we of are come again, going efficiency to SG&A

don't increasing Clearly, in we and hurt a our the addressed view that rather single quarter hiring bad this debt that the Tad the quarter, as salesforce quarter long-term mechanic of specifics but SG&A trend, of the rate more as of a increase did anomaly. but

Operator

Thank our you. comes James. And question Louthan from next Frank from Raymond

Your line now open. is

Frank Louthan

Great. Thank you.

how do what with So churn corporate? current been be expect trend what get And in I'd and curious the is NetCentric the to of NetCentric to the kind both the reps? full And has in your then, up long you the productivity? salespeople

Dave Schaeffer

Yes.

there, So Frank. multiple questions

of So, we entire average turnover commented first long-term on, is sales the of all, as our the force X.X% of force month. per

quarter was X%. it This

greater due we of of have averages, been tools side. are half where training there bending have term a some the turnover. corporate turnover is to that usually that better for our place. reps cost the Almost in long all below put U.S. Over the lower and and curve on that is XX% almost significant, we of So outside NetCentric of management

reps all tenure. reps, those have tend make more They substantially Secondly, to NetCentric money. more

Some been promoted. internally have

outside. from Some the have come

months of most been reps roughly previous to two that effort almost demand is in But the is We're as our where XX% XX utilization And switching and seeing Cogent. approximately rates those side. an catalysts side. are increasing the the has greatest on corporate on on and six tenure a encouraged has it's XX% of exclusively that I answering of and customer that environment NetCentric in corporate side, catalyst the the question, have really and reps BOJ between increasing uptick the a we're commented this us Cloud corporate it adoption corporate for in SaaS software,

building about circuits We increase customers per total our XX.X us we buildings. and per or seeing have from are circuits execute office about building in per XX.X building, buying multinenant in rates an penetration in

of year, building a the increased We making optimistic it's sales we're the aggressive pretty investment did heightened got of in and has though the that fall behind slow behind. rate the first us in not as has the we level penetration committed to year were additions we we the half. last and I said sure to This little about were slowed last half Even And that it. year force. in network that of making the

fact than growth stated XX% to X% today a In that rate higher at year-over-year year-over-year XX%. of we're is goal about our

we'll target. of in of in the slight part force see rate the growth sales suspect corporate I latter So a year our the year meet slowing the to

Operator

from question our Michael you. comes next Rollins from Thank And Citi.

is Your now open. line

Michael Rollins

good Hi. Thanks, questions morning. Two could. if I and

First, the selling also services, Dave, biggest of such side, but the if maybe proposition, the the by NetCentric on corporate customers, you're the to success progress some look give in buildings. on in side could referencing a as just barriers you're you adoption touch the you the you value are what because making especially at

then something to in just or that a at that that free time payments flow secondly, a considered of should vendor, conceived considered on gets cash it's be follow-up installment And disclosures the the the the around some calculation? is CapEx

Dave Schaeffer

Sure.

a one take I'll finish part and he one Tad of because is than will Let the and better accountant first me, I am. much the up second

proposition, value each our of customer terms our bases. of very for different it in So is

competitors by NetCentric side, we to customers guarantee undercut the On potential XX%.

years. That has consistent number for been of value proposition a

volume We also an driven. have term adjust and basis that we usually standard on annual rate cards, which are

use will networks. virtually NetCentric meaning customers multihome, Now, they multiple all

networks world. in more anyone from stated the than we buy us As have else

them have inducements But of of it's showing offer that traffic us majority from we the majority traffic. to traffic, don't our No. the X that help in reason, we customers. additional shift for these And because we're

a We XXX% market. will that never have of

our to showing our by for connect. from with models fact and are fact than as multiple share we lose that share customer in NetCentric the to whether it'd feel deliver increase that to CDN share that is to a connect, that higher our our are rates multiple value market or proposition while gaining we continue and customers product. direct ways a continues we alternate a But competitors We growth locations growth, superior market to hear internet through traffic be in industry transit market that the witnessed traffic

in of other impediment inertia building not problem. connectivity multinenant Now, having internet a some customers; shifting other the corporate is all of our The today have potential to quarters than office three on-net to sales provider typically the the from an Cogent. customers

sales is IT time to have That sure and less our what longer up SaaS It we service, occurs. we And be with change the of and our reason, And is to grow typically that inferior, force lower that to when however, requirements challenge when for that able corporate make reps. to the that not customer in the to Cloud. front throughput, keep is enough sales and continue is reliability. moves install infrastructure

customers. the also buying in then to that from tenants VPLS, a connection ability we the deployment to not lot our building are the us. why and That's secondly, corporate of have the those addressable increase to for three we an and rate there penetration there to at market rate in that a continues are quarters of with And of SD-WAN still second that feel increasing capture add us

the allowed primary software to support contract order interest. from give I'll program outside our we were was in required for. how and history Now of that the installment touch then it's vendor was program implement accounted was that That purchase implemented on will a of program new previous when sale to and that installment on Tad through this our us that, zero to the vendor the, little of

in that to on And accounting? a portion continued place you touch do requirements. of our infrastructure want has for the Tad,

Tad Weed

Sure.

with associated installment for costs think the really customers wanted you differently. network buckets are or and they I new there also accounted main there's and Now, the know adding basically three expanding to either

add that's is with monthly there payment capital the payments new recorded are as if payments capital we amortization that on included an when and So the upfront lease and upfront principal lease table. a have payment, we in

So that the section goes statement. of in the cash financing flow

sold third our a paying a the there are costs. install CapEx and do upfront, a under we customer is that prepaid expense. as charge is If and amount is depreciation recorded off-net are circuit goods threshold to non-recurring asset that a and to If that that's recorded of as we amortized amortized new is customer to over to cost party and an installing

statements. wind different three that on those areas help? financial components the in Does actually are, up three So

Michael Rollins

sheet, now not the or installment in and then was amount, the upgrades and for and CapEx capital the the time so that talking But, Yeah, this more about Dave lease, that was in included is is in was balance included that that, like equipment does. It software treated at specifically, it CapEx a was the initial incurred? that

Tad Weed

included payments in the you financing payments is on the is agreement. know installment the not CapEx, principal the in section, notes then under the That amortization and No. associated of

Operator

Capital. our from comes Nispel KeyBanc And question from you. Thank next Brandon

Your line is now open.

Brandon Nispel

might AT&T new NetCentric you are on any what Thank issuing guess, do accelerate missed ultimately Disney bonds, we can process curious, the growth? growth? that traffic sure, I into should question. of of our And I'm coming those but think taking use some business, bonds, from the European for you guys. assuming for terms the debt? European about launches I your, and Then, embedding have lower just thought expectations Hey, but of financing, proceeds? traffic products intended I some are I'm not be is next you I'm year assumptions of Dave, issued for curious the this, also NetCentric your this cost guess streaming that in

Dave Schaeffer

in Brandon. reverse take Sure. order. for questions, both I'll them Thanks

U.S. of Euro On the outside roughly the bonds, our revenues XX% are of

are have wider interest there North so hedge We lower substantially the was rates. here slightly of than is outside American are of debt in profitability our it rates the Spreads base in equal cost U.S., a Europe, than the is all-in in natural business. European but about U.S. lower

about X.X%. short our American at duration, which trade have So two very bonds, North

instrument, Europe We added would have in in new duration. longer because able the probably it by about in had to basis it fives looked XXX issuing we points been American North we're and save a would have low If Europe.

So Europe, in will we very cash that that rates. it service then low was euros. carry didn't immediately negative And and want or out of negative the suffer because the just capital U.S., we to truly with to a interest in question profitability we've cost then repatriated of the

continue So balance we flexibility hedge also our I us there bondholder it to continue naturally to dividends. equity the at of debt delever continue broadened as look as and to natural we'll returns just markets built to base investor capital through is and cost to gave margin additional expansion, and a and through revenues sheet buybacks supplement grow a low our our think that in some

business few Now, to player. by tied one video. been last of our of for The operating dominated question, NetCentric the over the is major streaming years to market somehow has XX%

are successful. of launches streaming these of gone advantage and their already Cogent and of an that new as expand relationship some content anticipate fact and products will think acknowledgment and mainstream in the we quality become these our choices, has they companies to are broaden I the take some value continue customers

the more You said of grow we've the losers The winners XX% rapidly. all as eventually here over opposed long here we toward in about is video XX% streamed kind and we or broadcast only pick know, world, and not go view price to all XX% of there way support via to as of their in streaming or think of lower the developed the we're them step media. with the We're today, buy, in streaming want past, several and a where years stored gaps they And delivered a providers. some in was to we world AT&T a to and as war. to the streaming Disney video next

companies NetCentric in to what transit the are and asked do And and increasingly listen, these it. transit earlier, they all So should cheaper, encouraging their in layer of our customers fact, than use all get easier way was that. streaming a they business of for major if use on trends could to

So market. we encouraged about remain the transit long-term

that stay improve. transit here but Of happy will to the underperformance, course then, long and short-term about is we're not term, we feel

Operator

William our comes from Thank you. Blair. Breen from question and next James And

now line open. Your is

James Breen

the taking capital and talk notes hasn't you're the for balance sheet how shareholders Thanks raised about about leverage cash returning Dave, you and all that thinking and you just given that assuming just the I'm levels can changed? questions. have, the you to

Dave Schaeffer

It thanks Jim. has not question. the and for changed

a our Company are returning the and the is, So XXth I that all, first an dividend we shareholders. raised Board for of $X.XX again quarter the committed quarter think to sequentially the to our that fact indication capital consecutive We through were had very purchasers buybacks borrowing equity European debt dividend in proceeds, to were clear and the through use of than that the return opportunistically. money an we we other with to of increase no the

the net of two X.XX quarter, additional times quarter, were though interest effectively slightly raised leverage a We remained times and target We a a dividend bonds. our these the flat increased midpoint range of a and last the to have half X.XX on range. and basis. half at We this three with expense EBITDA we times below even

from I environment, benefit. for a with borrowed in holders' think capital Company remains reason, for to low the remain free interest we our and rate that supplementing cash committed operations equity

disbursing is more Now more carry to that aggressive But $XXX we'll needs balance get Company in cash be as we we the our on stock. sheet committed its are than slowly million back of stock, and volatility far to in cash buying the shareholders. to

Operator

would officer chairman you. the for Dave over of Thank to I turn like call further Cogent showing no back and Holding Schaeffer, chief now questions. to And Communications remarks. further executive I'm

Dave Schaeffer

conferences. soon of we'll support you couple just Thanks everyone. want Take thank Well, Thanks. for to at Bye-bye. everyone. I see a and the care,

Operator

you gentlemen, conference. conclude for Ladies This participating in and program. thank today's today's

may You Everyone all disconnect. day. have great a

Cogent Communications (CCOI) 11 Aug 192019 Q2 Earnings call transcript