CCOI - Earnings call transcript Q3 2019 | Cogent Communications Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Cogent Communications Holdings Third Quarter 2019 Earnings Conference Call.

As a reminder, this conference call is being recorded and it 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 Holdings.

Dave Schaeffer

Thank you and good morning to everyone. quarter conference third our to XXXX call. earnings Welcome CEO me Weed, on am Chief Dave morning’s with Cogent’s Schaeffer, Tad I this and call Officer. Financial our is

continue results We by business and and the underlying of beyond. to for our be outlook of the strength are of optimistic the quarter remainder pleased our the about and XXXX

XX-year Our greatest margin the both increased corporate EBITDA history. to margin and EBITDA margin in adjusted our as percentages

XX.X% by EBITDA margin second from margin to to for basis Our our increased adjusted points the increased of as XXX and quarter XXX XXXX XX.X%. quarter points the EBITDA by

Our the X%. of million growth XXXX, $X quarter revenue XX.X%. to third SG&A XXX constant quarter or quarter margin year-over-year growth gross the of by for of the basis, revenue XXXX second sequentially sequential expense a we our achieved declined On of increased from X.X% currency and points by X.X% year-over-year from basis

up Our a was year-over-year we and quarterly increase growth achieved sequential traffic to XX%. growth XX% and traffic

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

gross X.XX decreased from to leverage ratio Our X.XX.

was X.XX Holdings holding is and compared Our end. at and both operating Cogent $XXX.X cash quarter. is net in leverage dividends end at remained our million operating X.XX company parent of million company declined in and-or at $XXX the quarter’s the available stock company company for level the buybacks. our unrestricted to last held This and combined at slightly essentially cash held as for flat was and and used held million Cash quarter. our to $XXX,XXX Cash $XXX

increase $X.XX we operational generating regular our detail cash increase business We release, sequential financial review we our result Tad potential consecutive XXth capabilities, another and in discussion, in indicated remain to announced press in our regular from additional $X.XX highlight on quarterly flow continue Throughout confident several dividend on share as and growth representing some $X.XX a per highlights operational our in our more to provide as details this and dividend. performance. our trends certain quarter will statistics. I greater will will per

these answers. Following for and open we’ll prepared remarks, questions it

would over to I Tad read turn Now to it Harbor. Safe the to like

Tad Weed

Thank all website could These you, made risks current differ. our actual based factors call at Dave our materially. more If use our statements subject not Please number posted the that refer for other the and statements. facts and results call cogentco.com. which are Cogent on are includes uncertainties or and our find good These that SEC to any to forward-looking a that obligation actual conference upon measures no statements statements may on GAAP information earnings earnings financial results historical to reconciled to expectations. may differ will this of forward-looking these call, to are statements. we during release and you non-GAAP belief everyone. update forward-looking measurements undertakes morning this be This in is filings forward-looking cause and intent, on revise

to Now call turn Dave. I over the will back

Dave Schaeffer

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

a includes historical release metrics. press number Our of

of represents against has expectation approximately our Now and our for which the goals, in our targeted of our growing long-term long-term been fact corporate corporate of XX% business, guidance XX.X% growth XXXX. from for third XX% of revenues some views the on grew our quarter quarter above

declined XXXX. third currency exchange, and business. primarily declined by our quarter to impact of compared net-centric the from X.X% a X.X% net-centric business of constant quarter from net-centric impacts On our business our XXXX. foreign However, underperforming The average the has third of been business, historical our

on However, half the increased one X% to return revenues basis, second growth from and did currency our by business of sequential net-centric quarter a constant of XXXX.

on Our EBITDA flow our leases. capital payments quarterly CapEx as minus cash minus principal defined by

Our at our nine flow grew the compared Due as to months quarterly continue operating our by to nine we leverage the in of rates. XXXX period to the month first XX.X% excellent to for cash flow expect XXXX. same business, in cash grow similar

expansion XXX annual of year. basis long-term have margin Our is improvement approximately points to EBITDA per an guidance

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

are not Our to in intended targets multi-year XXXX. and nature guidance revenue be for intended to be quarterly specific annual and EBITDA are either guidance or

the details cover our will from quarter. Tad about additional now operation results financial and some

Tad Weed

Thank our good net, Dave team our and would and continued during of large centers, buildings. congratulate efforts NetCentric we for for their two thank of under revenues Cogent. productive and analyze to work customers by our customers our and network We types, multi-tenant like on and corporate type. off carry based also again customers, customer results very from our corporate entire I you, and from morning customers also by We is large hard analyze everyone. amounts upon bandwidth revenues data customers two another bandwidth classify NetCentric non-core and into quarter type, office to all and which us based upon our net, us

constant network customers currency by of year-over-year by quarterly and X.X%. million increase declined sequentially an quarter mentioned. connections revenue year. and from on annual customer last as had quarter over corporate sequentially sequentially third customers X.X% an at customer connections by our network on grew customers our quarter X.X% which increased X.X% year-over-year XX,XXX X.X%. third to XX.X% We to of NetCentric last We our Dave end, year. quarter had $XX.X On for our grew which the declined X.X% corporate end, XX,XXX increased NetCentric by Quarterly the by is XX.X% million was revenue from Revenue our of $XX.X over of our from basis, NetCentric and by quarter the a increase year-over-year at

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

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

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

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

and megabit and to and our new by quarter the by installed the The quarter. the $X.XX quarter installed XX.X% decreased third pricing base last to per for declined customer XX.X% declined megabit for our third average by on of contracts The comments megabit for declined average contracts XX% Some consistent year. sequentially price average the per historical with customer from $X.XX sequentially of X% our quarter trends, base by for our price the from declined per for new price XXXX.

Some comments on ARPU.

the ARPU quarter. Our on-net for and for sequentially decreased ARPU was flat our off-net the quarter

same this customers both corporate last ARPU, quarter, which as was $XXX for was ARPU NetCentric includes on-net which the quarter. and Our

of quarter, of a predominantly comprised which ARPU, customers sequentially. decrease for X% corporate was off-net which Our was is $X,XXX the

this both both comments churn quarter. off-net on churn and on-net unit and Some are improved churn rates

and an off-net corporate churn on-net terms was quarter quarter, which X.X% last which our all last churn of related NetCentric quarter X.X% and improvement this improvement rate to was contract for the our unit We offer was was from from rate discounts unit an X.X% Our X.X% quarter. to customers.

also We volume customers. commitment offer to our NetCentric discounts

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

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

Our quarterly X.X% increased sequentially by EBITDA to million. $XX.X

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

on Our as our XX.X% by adjusted sequentially our and points adding basis margin equipment basis in is EBITDA which quarterly transactions. increased XXX and gains EBITDA points, year-over-year EBITDA XX by to

$XXX,XXX third from gains quarter, last were $XX,XXX of $XXX,XXX from this quarter. only decrease and last equipment a for quarter Our year the

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

quarterly adjusted Our sequentially by points margin to XXX basis XX% increased XX EBITDA and by points as year-over-year. basis increased

quarter Earnings year, million per of last was notes diluted on quarter and was income basic our of were $X.XX diluted represented $X.X to quarter quarter income unrealized Euro gain impacting the third our compared the that per exchange share, and share this per our per that share. this foreign gains $X.XX for earnings basic $X.XX $X.XX share and and for per last million XXX and quarter

exchange. foreign Some comments on

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

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

NetCentric sequentially estimate levels rates The quarterly the Our these primarily currency rate XXX,XXX. of dollar quarter, and exchange quarter. that should quarterly conversion of average XX The for fourth top to and we of FX customers highly X.X year-over-year. impact rates for and about the our foreign this Canadian is and less constant growth a euro to exchange negative the X.X% revenues average so customer revenues $X.XX, dollar the the estimated is foreign X% impacts revenue our sequential far our a exchange $X.XX U.S. will not is on negative our represented at remain is that X% were year-over-year our revenue average concentrated million and revenues. a our impact basis quarter believe We quarter remainder rates impact this than on current base be conversion be about fourth

increased flat and expenditures X.X% capital were by year-over-year. Our sequentially

million $XX.X quarter million last the of quarter quarter, were third the and of $XX.X Our capital second expenditures XXXX. year this for is same the $XX.X million

Capital lease leases and capital payments.

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

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

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

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

payments Our last principal quarter capital quarter compared third $X.X year. quarter X.XX and the combined with rather million to $XX.X CapEx of million million last totaled lease for $XX.X this

at quarter equivalents $XXX.X and operating cash million. cash our totaled flow, cash and Cash end,

our decreased our stakeholders to We cash quarter, by million. returned $XX the capital million $XX.X this quarter. For of

paid we million quarterly payment for payments $XX.X interest was and During quarter, our our the on $XX debt. semi-annual on spent million dividend regular

quarterly this increase paid interest to decreased sequential quarter. operations sequentially XX.X% the due cash from flow in Our by

quarterly our from year-over-year. cash However, increased flow X.X% operations

compared gross par, million at year. our of was million $XXX.X quarter operations obligations our the was third lease $XXX.X including net capital end and total quarter $XX.X debt ratios, the for quarter from the quarter flow year Debt of million at our IRU cash $XX.X to second for million for million. Our $XX.X last and this was debt

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

weekend. our outstanding sales being and expected by as with bad days customer significantly from last and last quarter collections the accounts quarter, debt receivable, calendar the debt our improved last where of from bad on the quarter the in this on two on comments in Finally, expense impact days quarter XXX,XXX decreased

of Our X.X% bad an quarter, X% of revenues the our same third the was year. which debt percentage and last of from last of improvement our for revenues was quarter at expense the X.X% quarter

worldwide want our was always, billing Finally, job and recognize our I outstanding to our was DSO for sales to in last and accounts And as customers days quarter customers. members as serving or XX worldwide collecting for days. the from and receivable a collections thank our continuing and same fantastic do team

will call back And that, turn Dave. with I over now the to

Dave Schaeffer

Tad. Thanks,

comments Now have space square over multi-tenant our North we net. few of scale for a of the network, office and America million scope on in on XXX feet

building Our our on-net into is the common meaning riser center a up or point. meet to tenants definition of into of have the fiber to a literal, each data we

XX,XXX of XX,XXX metro intercity route fiber and miles fiber. of consists over network over Our miles

XXXX Our network peers. interconnected world. remains are networks with It purchasing than Cogent XXXX are from The the the networks. customers service networks in XX most these remaining directly Less network over connects settlement-free transfer of us.

of in and our utilizing the to width currently our utilization augment segments low approximately network XX% of these capacity routinely are We maintain network we rates.

now of centers We operate square of these feet facilities traffic quarterly accelerated approximately the raised XX% floor XX% year-over-year. XXX,XXX quarter-over-quarter with are at Cogent we For occupancy. and XX% space data and operating XX achieved control quarter, growth

two We network centers data year in have this added our to XXXX.

rep quarter our Our X.X% better the in than long-term sales was rep turnover X.X%. turnover of monthly average

X.X below long-term our Our equivalent average productivity of per per quarterly units however rep full-time month. equivalent full-time that rep. per reps rate Productivity is X.X was

has However, of ended the for with and been reps We seats sales These selling XX% selling at end sales We from the ended with for sales than quarter services, XXX in we our decreased approximately reps. have reps from of year more less. at and most have end Cogent our reps our have or increase the reps XXX increase quarter XXXX full-time had with and ever quarter sales of months XXX services that XXX our equivalent equivalent the tenure reps rep X significant second QX. full-time had. a the the been the we one

Internet low Cogent remains access provider of cost services. transit the

remains the industry. value unparalleled in Our proposition

and IP Our business center Internet, connectivity, remains services. completely data focused on the co-location

EBITDA are be We currency constant basis, utility necessary XX%. should long-term approximately providing a and multi-year our points will growth basis our XXX revenue approximately to a customers. our On expansion margin be

Directors per of $X.XX quarterly approved share, on of that per per has quarterly $X.XX dividend quarter. increase Board Our to dividend another our regular bringing share

and generating in business the Our flow continued dividend our demonstrate and optimism our of increases our historical capabilities prospective business. cash

remaining end, our will that We in through common continue program At the of December $XX.X had stock be of to buyback intended in timing current market. we our purchase quarter’s and opportunistic million XXXX. the open under program is

to increasing our of committed to a amounts consistent returning basis. shareholders on are and We capital regular

With that, I would like to now open the floor for questions.

Operator

of Instructions] proceed. [Operator line first from Cusick your Schaeffer, Please Thank you. Mr. question comes JPMorgan. the from Philip

Reed Kern

for Hi, I my good may. is if morning. taking This question. Two for Reed Phil. Thanks

the any entrants may why quarter it was talk First part benefits one you largest larger? is in talk Thanks if have USF with And so the year-over-year the you rates, business you in but higher disproportionately? have much very in this especially could as within step second, NetCentric also out it but much. you about about and new the up benefits mix both can shift transitory, actual emerging, visibility get streaming called services the of

Dave Schaeffer

Yes, sure. Thanks both for questions.

the business is based. NetCentric usage with that business start business. Let’s a That is

charge them. commit have for on most with of is component our a per we megabit a the fixed of and on NetCentric While ports, ports associated price virtually price determined those all usage a

in of Cogent. services driven the grow over entrants to We range the intend large to in services. market historical many at the utilize new on expect Cogent Internet see proposed to continue the the traffic top also and streaming Most streaming use by part of existing

is those opposed and and or rate averages. is of their much indirectly our factors, traffic line our It to us mentioned rate the will doing build targeted and historical and X.X% to we product, improve return their continue to for every both We more in impossible services third-party very we to there, growth of we markets. content bandwidth historical of indication models, With growth success constant has offerings anticipate CDNs of per network out CDNs. own growth the in Tad we as to and But virtually those existing megabit of underperformance globally that two that our be is different fact project quality have to in more the many NetCentric sequential most good starting as been each the this with do utilize rates price a continue decline improving and these trend they their recently, different hold. business currency that streaming bandwidth drive pricing to also experiencing take of delivery as quarter of expect their supply providing to to so, will and less

or the USF to whether in reported charges meet have wants to that, From it charged increase apply it The quarterly primarily USF. of not result corporate the pass-throughs schools, USAC corporate and and level that in the way Now adjusts delivered to that also to hospitals Those so target. We services Internet VPN have are the FCC congressionally USF, those SD-WAN was companies services over USF. the changes almost broadband are for is mandated and VPLS. to services, the of tax Congress a charge on organizations. of rate that determined the set other dictates transit to in to subsidies Other increases and industry USAC. calculation does rate does collection applicable products our outsources or order internet. a municipal dedicated apply customers. our products for It the not all do question, apply does not our of as to

year, this services. this to saw So non-exempt you but year all of unusually applies what this up low catch a rate was bit earlier an we and know

Reed Kern

Thanks, Dave.

Dave Schaeffer

you. Thank

Operator

you. Thank

Please of from Del Deo comes Nick MoffettNathanson. question next Your proceed. the line from

Nick Del Deo

my thanks question. Okay, for taking

you to said on I exact NetCentric the apply pretty split So Q-over-Q the in corporate you of growth follow-up Can quantify that. want it there it’s because step math meaningful down my corporate. corporate, First was understand if I a mostly between from to USF, corporate better most year-over-year? and to

Dave Schaeffer

in XX% corporate reduction pass our a which of off-net did our corporate Yes. continued customers. growth we approximately And corporate we you loop to in costs, see XX% our see are rate, Nick, did and slowdown on revenues, of connections

a deceleration ARPU the is exclusively corporate of growth So declines. off-net as the almost in result

VPN not do are data own the of that data centers. terms USF they in are with over extend their a those services customers sometimes largest of NetCentric have centers limited data services In services we On of buy because customers over unique that basis, to XXXX not layer to networks NetCentric two footprint present subject corporate that the any to customers. provider centers to XX% we globally are service carrier-neutral have of to

Layer Sometimes, some services buy small some of our of even of X smaller total our reach is a X it as a or way to Layer VPN markets. very those competitors But services. portion

Nick Del Deo

Okay.

productivity, the are rather priced trying at if installs that I sales Regarding guess what disproportionately like unit to unit similar. responsible were whether looked terms, EPLS terms the is I’m in look trend And at dollar get we lower change? than to lines would pretty for

Dave Schaeffer

Yes, look decline the they I ARPUs as result would and the comparable of group with off-net a of costs. corporate lower think exception relatively

be our dollar increased a result of basis, lower productivity the most larger So would productivity than the down hiring has on rate. basis as in a unit come on step of a slightly

after and a data declined, increase XX full-time we probably important equivalent of equivalents, most months have rep we and rep on wrap tenure till have of Those Cogent the than full-time previously maturity our sales total fact remains three plateaus. of average true XXX, that and a months an count of is slightly the service. Yet, tenure them about XX based XX% XX have we point productivity take improves and month reps. our but then quota while additional as linearly So less that stated bearing a at

the on have in both on productivity median a negative rep for and on and tenure, So corporate units it this decline rep slightly impact with the average a dollar worse reps. basis did

first than there time, that Now, XXX offset and more slight meg that connections. positive corporate quarter we one for actually was gig sold connections the are this actually is

corporate service. meg XXX-megabit connection full up always of quarter, Ethernet have Our a gigabit as been primary or corporate to this opposed on-net a connection customers a that. customers more product and taking XXX ticked fast But a result ARPU actually in saw we our slightly actually symmetric as actually

Nick Del Deo

That’s of a there confirm was interesting. reversal debt. the for mean driven calendar you accounting quick full can I the Tad, at One one bad quarter? that XXX,XXX last

Tad Weed

XXX,XXX. was debt bad in change quarter-to-quarter The

Nick Del Deo

Okay. If the you quarter hundred said effect calendar I correctly was XXX,XXX. last that remember

Tad Weed

But Well, impact that declined to it the QX. XXX,XXX. from QX, to was QX by QX

Nick Del Deo

Okay.

think XXX as of we being calendar the So attributable should effect. to

Tad Weed

X.X%, Essentially, yes which reverted that’s rate, revenues. to kind of fine. We back normal X.X% our about is of

Nick Del Deo

alright. guys. Thanks, Okay,

Dave Schaeffer

Thanks.

Operator

you. Thank

comes from Sir, please Mike Your next from question the McCormack of line Guggenheim. proceed.

Mike McCormack

comment those looking a I the going in spark there just Thanks, then bit pricing RFPs. there carriers larger you anything And little interest, on we are guys. the out better Hey, Thanks. as to bigger have no presuming there, the couple quick that environment secondly, seeing of as that guess assets. retention. heard some have that I have am there? could some Dave. Maybe companies of on are of divest your these a to far you’re interest just out potentially out aggressiveness a What

Dave Schaeffer

Thanks the Mike. two questions, for

let all, competitors of of because I both differently. question corporate the think the competitive at looking think separately answer me NetCentric them first So market our and

that undercut On decline NetCentric as by say teams to to segment. of Transit our continue have share industry a focus to line side, to product market all and our are of us in XX% our virtually has de-emphasized the with competitors and we for willingness product pricing on their the declines incenting allowed not pricing gain and to sales competitors continue rate

think more So become and improve to benign. our continues competitive environment NetCentric I

Now specific. very side, it’s much corporate competitor on the

Our competitors really have two challenges.

revenues of migrating MPLS managed come from are voice like legacy services large and a that portion is and first The services Internet. their to other

opportunity to So to there is the some as carriers. internal well switch as product other substitution

see Secondly, different on DIA pure we carriers reacting differently. offering, a

more be to less aggressive, has tended AT&T little Verizon think aggressive. a I

not tend be geographies. on very think focus are straddle and that those but customers to particularly customers in competing cable on the small can environments, more aggressive companies suburban larger very I to multiple

corporate So wireline are to I carriers. been. the to of going multiple in continue headwinds would similar the across has is environment I do think though industry, years what see to traditional we say it that to general,

question, of asset Cogent at That was actually know the we’re or not any. very to its Now for not acquirer assets become doesn’t rational the that have you will that a It priced active markets and since we XXX interested. there are networks targets be over means building acquisition those mean potential most are sense either looked make and in inappropriately. and have irrelevant business may to our done XXXX, some point assets us. acquisition At

makes horizon So for on our at there to is it acquisition logical but this us total look, continue to no time. sense

Mike McCormack

it. Thanks, Appreciate Dave.

Dave Schaeffer

Okay. Thanks Mike.

Operator

Thank you.

Your of line Blair. Sir, comes Breen next the from James please from William question proceed.

James Breen

Thanks question. for taking the

assuming lower How costs, don’t the revenue for Just of as come much impact that a the a dollars that of loop from comes given or you have that? are have EBITDA I side of am some those margin help of down. it actually see couple, in as you revenue those the sort decline one out on you? Does impact that does margin? off-net

Dave Schaeffer

we and just become becomes comes gross the double revenue So but we same. smaller on cost If loop does the competitive. number as that down, customer. in in benefit loop until that negotiate then still we we is deal capture new while term, margins improve the typically discounts, fact The will customer margin and remains loop the a more customers we term the a the of so re-rate that to has able are matured

in loops. constantly off-net averages. for that and to confidence cell address different market remain extremely for of telcos the to Telco still is is provider see offer on-net for we promoter ARPU is out times by about much trust customers, those their off-net and for what and customers, new for lowering remember our prices overbuilt the product as will mid and to win than and our which being for backhaul existing we scores corporate continued a continuously cable about high proactive reasons. the so both more. the X.X our And with ARPU we small need belief XXs, in to higher typically foundation think lower is oftentimes prices part value double But Cable telecom over five both why lay we times reason comparable Our going a of their net service

is lot still than on-net that a to there value So delivers more Cogent off. customers its

James Breen

And thanks. about where leverage balance just that how then perspective ratios? think can you sheet, debt a do now about you certainly from Great, the of talk you

Dave Schaeffer

net euro-denominated this only Yes, we were so outlined, leverage I that out mean, X.XX declined our from have minimally year. did we some the to range X.XX within raise debt

OpCo. company capital We and the holding $XXX of at have adequate balance million capital nearly at XXX total on the sheet Holdings, XXX

capital. be that measured will returning We and

leverage. next raise any increase we premium, of no will to year, and some that then may becomes probably that more Our debt is our early with that not elect year this debt of we expectation callable total call some will evaluate our

therefore additional leverage. returns a this low using makes are to strategically And all to add continue and to we will our X.XX is have but HoldCo gross sheet probably increase environment, balance the basket basket the and about We million environment then look that additional rate OpCo $XX appear our today, we equity leverage amplify from of sense. OpCo on to breach at returns interest score will interest does builder to logical it available contingent and rate in in builder

James Breen

thanks. Great,

Dave Schaeffer

thanks. Hey,

Operator

you. Thank

line please from from question Michael the next Your proceed. of Rollins Citi. Sir, comes

Michael Rollins

the for strategically? the business fitting Thanks. in if the Cogent Good cloud just Dave, seen strategic way you wondering where evolved, a opportunities run and you morning. we as how have also your could the to bit of talk has do the other see you long little Internet about see a just in entities evolution

Dave Schaeffer

focused So, entirely Internet top services business of we XX% only from revenues of X% over are co-location. our come XX% the on revenues the from and is Internet. VPN about Approximately, fortunate and that come from access, about

primary the input and software As Internet XX% Internet. to output connectivity public move and computing of occurs the over Over mechanism. off the is cloud site,

play As carrier, have the a to largest Internet obviously second strategic we world’s role that. in

Secondly, networks purpose-built increasingly positioned form that. away to MPLS VPNs Cogent over-the-top migrating uniquely and of is are some like from help to on

Finally, third of in represents office space of largest the XXX amount America. square office That space North on-net feet million net is strategic. on the

Now asset cash That’s software place a flow than decision greater could to could could make. look company, this a the potential else someone the value of their cloud at business. a really provider, and

business a it, to free always DCF, pay executing with been to have cash this recommend strategic But that our transparent shareholders ever we shareholders execute our You if to generating know, makes but flow. it we increasing fully our exists. point, any at and with intend wanted are we amounts sense, that comfortable logical currently operator at business to would premium of just

Michael Rollins

Thanks.

Dave Schaeffer

Thanks Mike.

Operator

you. Thank

line Your next of Horan Oppenheimer. the Tim question proceed. comes from please from Sir,

Tim Horan

of how I ever on traffic taking And United know you if Do Thanks. don’t NetCentric your outside is think much States. the that you’ve number? given

Dave Schaeffer

for We Tim. have, the question. Thanks

more generation. the It’s North different regions. XX% U.S. and The outside last XX% is about versus roughly Canada, of in each XX-XX. U.S. traffic the rest content of roughly of quarter been America tends world. while to slightly have So, application the and was U.S. the The

the more North XXXX business, you tends and draw there of do more doesn’t That in outside upstream expand the as over from the access access tends access American network NetCentric is but America to to and of no of North to and a with increasingly outbound mean is significant and well. more in have U.S. we our the business rest becoming around North buying tends heavily content, international be down our we of markets. the global But as So Most traffic be networks America it here in know non-US content. us. world world

We have in now both direct and metro fiber. Paulo Brazil, opened up in Sao are in Rio markets by networks buying in those we constructing

of South We process beginning and are year up have at recently Columbia, in Taipei probably turning launched of have actually the in America. Taiwan the we the in in

to So us. markets, which primarily NetCentric for we international continue markets look are at

Tim Horan

it it seems but like mean, wireless you are seem going some them would lot forward basis. like it it of been historically, adopting larger markets are and on a a international LTE. be Well those a could of a seems to impact but like impact huge still has the XG, I

Dave Schaeffer

correct. is That

Wireless globally, is So wirelessly about have ever no remember, only line global about people it connections. who Internet of fixed-line twice pace the used of for fixed the of accounts have growth. and the over traffic X.X% at and only used XX% have growing

look going wireless and from fixed it secondly the more growth outside we come forward, two will come traffic of inside from as things are of if U.S. then than one at I will line. think it than true, more So

Tim Horan

that? I below year Any trajectory? that growth causing And color last bit traffic change on line what is lastly, of guess the quarters that? two you we in might is ‘XX. And What’s with the a more kind saw think last what

Dave Schaeffer

a I slowdown been has of the there today major of products expectation generation But in that think that beta little a of set impact. right and think of with of I kind the that Yes, a have operators end the of are next to year so applicability. there mostly limited, of a a number at bit of current in phase, will OTT OTT a the are are growth bit launch offerings test

Tim Horan

Thank you.

Dave Schaeffer

Tim. Thanks,

Operator

Thank you.

Brett the Goldman Your Feldman question please from from comes of proceed. Sachs. line next Sir,

Brett Feldman

Thanks.

an it’s you growing been at Dave, is highest noted the sales growing, force rate. that merely accelerated So, that’s your ever not it’s and

XX The up to can great like opportunities in such a you any in make your grew way the as are I business you over the and front XX% only only make significant to visibility investment It noted full-time months. business feel equivalents you workforce new about a you into it year, think very could workforce understand Last X%. sense take tsunami just up this to well. obviously as productivity. you absolute have an if you of full is hit XX of months last

investment maybe you’ve in hoping when you trends could made I that? you of revenue shareholders what And to the So type coming? driving the your should force? to you. sales What’s your see expect in some ultimately reflect Thank see was do explain improvement

Dave Schaeffer

So Cogent centric sales organization. is a

are We quota organization, of the XXX have XXX people bearing. in those sales

optimal is to and about that opened closer person physical that fully probably additional every ticket we’ve sales hiring to hire at management meant looked We of who customers We We the increase were XXXX, talent. X,XXX hiring. process for employees. talent. have joins have develop new total a a in greater to not We’ve needed we offices, and source sales our us. to rate only not and admit that And XXXX

We it we have a while working turnover, it’s of constantly organization. are outbound sales reduce telesales on expect the turnover we’ve but an worked to that, force say we to continue so down, trying on bringing just it’s over of still month, nature to X%

types more building addressable those multi-tenant of market, move needing XX.X see cloud as about sold they and corporate SaaS. Now potential, to customers XX to to office more our out the we we the connections customers of to products move XX our have per and of

those our VPLS. as look SD-WAN at they also or MPLS customers We see turn products same and needing off either

to and see add to we penetrate a to continue buildings selectively So buildings. further tremendous other opportunity our

and of side, moving On NetCentric growth. gaming, migration that just the Internet will it’s video and really consumption the continued drive to

we to have been the always is funnel hire, takes because and a And staffed training relative we ahead And incorporate comfortable dipped possible productive a Rep It process so. all that can possible, limit time. are hires market force under Productivity but we steps a how and there It’s bit plenty a is as to taking Cogent this Sales not dipping. opportunity saw feel culture. It’s our the But our this be attention to We and quickly and we of market large addressable those rather into mature of of little building is less of appropriate sales management very quickly you and us. as to have make from a realistic. little train new people has hiring. our part with our that and bulge market a that changed. as quarter need remain as of you

Brett Feldman

That’s helpful.

on video your so, DirecTV type forthcoming consumer say came as thinking the previously NetCentric you mind direct just follow-up discussing about if experience generation had and If YouTube, with the recent back most question the they when when you to now a were what don’t I you just guess as services, if think what we see products to on through play way traffic effect up you. come next could a ended growth, of market, to the Thank these market? what maybe out having of XX or over months new that you

Dave Schaeffer

it a XXXX and upload It from One, within step the function in increase replace of it shutdown months. a two the early couple mega actually did traffic lost to allowed us of had things.

website we a we in sole And, source So largest was the world lost of XX% a the that literally to represented rebound traffic, within nearly Cogent. our quarter.

time neutrality of are quickly violations a next growth Secondly, net in those These we period companies. this a because will became that short see saw a capitalized of I to we XXX% with better year-over-year. thing don’t believe But for the spike types nearly up of much traffic issues. products. generation of muted,

to yes, think will So I benefit. we continue

Brett Feldman

thanks. Great,

Dave Schaeffer

Thanks.

Operator

Thank you.

KeyBanc proceed. Your next Brandon line the question of comes from Capital. Nispel from Sir, please

Brandon Nispel

Thanks Great. numbers. I the growth traffic question. the missed for taking

could traffic maybe perspective new fast of how gigabit migrate greatest that an markets are then or gigabit Tad, from you? lot mentioned, understand you you was the and connections. video gaming, Separately, Dave to then are any you incremental services are Thanks. I So growth? your just base shift hoping could growth means seeing to you beyond seeing And a to us Dave And customer what you applications help those? customers traffic then which provide seeing seeing ARPU maybe etcetera. please you driving

Dave Schaeffer

Sure.

XX% growth traffic our sequentially, year-over-year. was So XX%

the side think content growth OTT video and on applications driving that are gaming. traffic are the I

get I improvements the from continued allow decline much and be from will on it recipient mobile broadband begins LTA think the XG, side, that in as come rolled out the that pricing to and it’s are people down, unlimited plans with once plans, those there but have unlimited are they in going rates, they name typically carriers slowing cap, a unlimited, certain are unusable only off. even though are caps bigger to bucket customers to

think we will and accelerating continue growth. both to I content, So greater driving access see greater

allows unlimited XXX Now fell saw while clients burstability, if accept. port are to rate future there does business, ago connections lands available on-net are corporate we is on that’s XX years effectively and could corporate XXX and them universally, to what sold XX.X% interesting average corporate the a connections using times now port. searches actually than proof traffic. as Fast that now And chose we they it Almost corporate from allows that’s the down more what a CPA gigabit. in quarter, What’s megabit area weren’t gigabit the they Ethernet event is, about our and the are interface, customers wide reason bigger, the to XX% being in of utilization but it corporate have because to them is XX

So we de interfaces. is since minimis, see the differential I will cost gigabit more-and-more think

Brett Feldman

Dave. Thanks,

Dave Schaeffer

Thanks.

Operator

you. Thank

Synesael We have coming line of Company. from proceed. your next question Please & from Cowen Colby the

Colby Synesael

questions. Great. Thank you for my taking

bounce or Curious pricing, probably level year-over-year, around continue the on one that the recent noted or that’s think five First maybe probably seen more think was you we’ve last seen in is do few will down sustainable it if to we’ve quarters you quarters. XX% you it so. this the with improvement best levels the

to then the incremental just the was of occurred as housekeeping you more different was but And all increase just it it XQ you. just may or I And item, there corporate on or Thank get XQ based can those and a give curious a assuming quarter see stay comparable impact XX,XXX. I basis said a the and that that us USF connections. it in reference full you we on the number constant, in XQ? numbers, on-net lastly, have think as tax relates through a in Secondly, do will, when you benefit if is will full we benefit, did quarter

Dave Schaeffer

has I’m second. On one. I’ll rate of price So pricing, Cogent been over the the XX.X%. about take to give decline past going for Tad years first XX the the average

Yes, even historical based averages. a the a volume get that pricing it XX% the spreadsheet, it’s is unit think in with much not weighted. lower customers I averages bigger line those it’s is basis also distort and sometimes very on can not then a on actual sales The business.

what is low of XXs forward. price run variables over decline the you going in of but the the So that should rate you’ve think expect underlying happen, will got I long a lot

Now, let I’ll connections. and USF take Tad corporate the

Tad Weed

its calendar Sure. our set quarter. rate is quarters Yes. The that and USF quarterly mirrors

change etcetera, adjusts. October for connections quarter-end X, for XX,XXX. up quarter or X us a it on-net down, the impact were The the July however, on so full So, USF is corporate at

Colby Synesael

you Great, much. so thank

Tad Weed

Colby. Yes, thanks,

Operator

you. Thank

from Your Raymond from the next proceed. comes of line please Sir, question James. [indiscernible]

Unidentified Analyst

question. is Hey, This for the thanks for actually. Frank Rob on

you focus wondering earlier buybacks if specifically for had buybacks. through of frame Thank XXXX that the within guys You mentioned you. prepared that time and provide million $XX.X that I available heavily remaining will have remarks might on was you on could your color still continue when in about some December

Dave Schaeffer

we also of programs and I’m We’ve market them. taking had X been opportunistic So and volatility. buyback advantage exhausted always have

Our could the always view should on that the buybacks is done in and twofold, always secondly, buy buying to be do DCF down market. that have we must today. But we always discount we

wouldn’t I will because on question, can’t go answer to when the So probably market be we’re or the this smart enough down. I call. know up Yes.

do market we’ll chances methodically have the the opportunity will more lack both. if is, say of dividend and we and volatility, can I are aggressive be all mean, continue volatile, I to just grow our So will to becomes

Unidentified Analyst

Dave. Thanks, Great.

Dave Schaeffer

thanks. Hey,

Operator

Thank you.

comes of from Walter Piecyk proceed. the next question line please from Sir, LightShed. Your

Walter Piecyk

Dave, is how it going? Hi

Dave Schaeffer

great. congratulations your Wal, firm. new on Welcome back Hi,

Walter Piecyk

going stuff, going a And but you? was or down kind quarter this that little for new this it a pal. I Is strip Thanks abnormally. looks it was kind came of to you it just even the there in a one-time is employee SG&A. like picky comp anything out even like run-rate on if question, looks there of nature

Dave Schaeffer

will Tad it. take Now,

think I pretty it’s much as…

Tad Weed

in a little is the There seasonality of quarter. bit third Sure.

components can I reduction. some So you the of give

Walter Piecyk

Sure.

I time it you type just one bit had a if maybe any any more like, seems if quarter? little are helping this in was you little credits or quarter. bit employee that wondering, a exaggerated were costs You the

Tad Weed

seasonality. as wouldn’t necessarily I there a little anything characterize is but one-time,

you components. give So I’ll the

reverted debt revenue was benefit of regular which We expense. the percentage typically the quarter that happens get their lot a each we vacation $XXX,XXX. do is limit, you’re to about the and of just down get mentioned, was that hit that’s sequentially, charging And benefit was bad to of that people of as always $XXX,XXX. change we there under opposed when normal so about a the quarter, as was We quarters $XXX,XXX say buildup quarter $XXX,XXX. new our vacation, this accrual, but always about That need another decrease do and commissions, pronouncement comes the in some make be that estimate, to which FICO to and third prepaid compensation take that First, quarter. for as and happens the to it back that rate then seasonal that an seasonal, employees adjustment more there to accounting it’s some is decrease would to difficult a happens was

kind quarter. exception it’s and the of that help? run in So, the with of a Does rate is normal third seasonality some here there some

Walter Piecyk

or expect XXXX occur is benefit them any And Plus Dave, do any to going you have any to is that and from indications at you Got it. your in in Thanks. Disney going XXXX NetCentric business? revenue from traffic do Apple growth

Dave Schaeffer

new reasons as a the the very relationships So, I those be I think my my take We Cogent providers. a cutting a never that OTT top. be that successful, of think OTT will preferred phenomenon to price. switch I up the have this but also more there’s lowest because accelerate producing cost, we the is and some generally existing have provider be we customers should the latency, it directly networks will operators the over additive, for core should entrant as don’t disproportionate me we believe will of successful. believe But which is too minutes and have also They same are do about products lot going explicit to globally we yes, more different so it choose like to evaluates their of connected our be why ends granted, a but I Cogent. of material relationships, companies geographies, with win more also lot to it’s and share business. that – but OTT just customers of

Walter Piecyk

the in to the here years, of past next Netflix. an event, seems we pretty a like I when of mean have can’t times business you’re NetCentric us industry of it couple And like about asked a predict front you’re well, lot material over app. responding I entire the

even it are of share, would growth? like help kind So, revenue seem material you maintaining NetCentric if that’s our your enough to something

Dave Schaeffer

operators. go several I hope think quarters going other these from don’t of hope Listen, predictions. just I all comfortable what making of out successful want in couple and so. they’re predict I have of do. I experience to these guys more be a more I’ll wildly to are I and if

Walter Piecyk

Okay. Thanks, Dave.

Dave Schaeffer

Thanks.

Operator

you. Thank

proceed. of question Deo Nick follow-up a have the Del We line Sir, please from from MoffettNathanson. coming

Nick Del Deo

sorry for the back on and on Hey, call. hopping dragging

Dave Schaeffer

Nick. okay, That’s

Nick Del Deo

the cost it USF responsible loop been many I on revenue your understanding trend growth. costs corporate have my been years. ongoing to for lower in follow-up step were at just off-net that Is for off-net wanted comment an adjusted the the lower down has

growth there because is that specific again quarter break the front, happened revenue pretty So in something corporate meaningful. on trend that this was the

on understand If you adjust for there? USF, I want to that ensure I fully what’s going

Dave Schaeffer

able were to in in loops negotiate earlier two discounts flat significant largest to us of We impact this the actually had the that suppliers net pretty from some the quarter. the off year

than So it normal. little a quarter pronounced this more was

Okay.

history. is that right. That’s with So corporate would normal absent recent large consistent than in growth be your your view trend reduction that

Nick Del Deo

Okay, terrific. Thank you.

Dave Schaeffer

XX.X business. corporate you for year-over-year of X.X% And that net corporate in growth the saw versus the deceleration off was only entire

Operator

Schaeffer. the to time, back no conference you. at turn this Dave to showing am now I further would Thank questions Mr. like I

Dave Schaeffer

but going take soon were Cogent think few will first we to I like I thank team apologize Well, minutes they care. the talk great I’d again and all, Bye-bye. thank and a entire of everyone. longer, questions for

Operator

today’s participation Ladies your for conference. and day. have you and gentlemen, this Thank concludes a wonderful

disconnect. may You all

Cogent Communications (CCOI) 11 Nov 192019 Q3 Earnings call transcript