CCOI - Earnings call transcript Q3 2020 | Cogent Communications Holdings, Inc.

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Operator

Good morning, and welcome to the Cogent Communications Holdings Third Quarter 2020 Earnings Conference Call and Webcast.

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.

begin. may You

Dave Schaeffer

is good quarter and Cogent's everyone. to morning's Welcome Executive Officer. Chief Thank earnings morning conference third call this on XXXX With Schaeffer, Wallace, call. our our Officer. Financial you, me to Sean I'm Chief Dave

and believe in importance profitability operations. of continue of the to of business, and the our in We our strength network long-term our growing breadth increase the

that of utilize our base, We that Internet products carriers, services businesses, to also the extremely rates, continues supports remain mission-critical customer to confident service grow centers to interconnectivity of high their growth. which for and importance continues the and Cogent’s infrastructure in services our providers, Fundamentally, operate traffic we data at and operations. and volume among important

remains previous averages changes to in earnings historical are seeing churn base. our calls, any within not discussed our significant we and As customer

a new as we continuing offices customers to see new smaller at corporate in as for well existing and upgrades satellite our to customers. cautious take continued for services and However, approach demand reduction are configurations

and related We see challenges related COVID-XX uncertainties continue directly to incremental to to the sales pandemic.

quarter revenues to million year-over-year at revenue on of two-tenths X.X%. increased achieved year-over-year nine-tenths grew of and a $XXX.X we a constant a a quarterly of basis. growth revenue X.X% percent on currency a basis of decline sequentially and On constant basis, third quarterly Our experienced a currency percent

our an within growth to operate continued network. which to handle number buildings able on those traffic continue We is markets, a volume and efficient and network serves growing markets of the

decline margins. year-over-year, of grew despite a Our a percent sequentially by profit and eight-tenths non-GAAP X.X% in modest gross

margin year-over-year. gross basis points non-GAAP improved XXX Our by

the selling a us sequential for increase number a expense to our supported the reps At in our level disciplined SG&A Continued of X.X% same time, products. we enabled of controls quarter-on-quarter. sales a reduce

and was to sequential a result, a which improvement. historic XX.X% of improvement our XXX XX-basis year-over-year As a basis high point EBITDA points margin improved

cash EBITDA continued performance within X.X% X.X% sequentially churn, impact the these quality year-over-year. customer customer existing norms our base services be importance credit grew remained for of performed of to despite believe and Customer by historical indicate the The base statistics Our our DSOs collections to above debt the COVID-XX. those that strong and and We strong, our expectations. and the bad of our quarter Cogent organizations. of

traffic. reinvigorated Towards sporting end network of quarter, we to trends the events the began schools, the traffic The growth. see of learning, remote of with positive and reopening reintroduction in even

traffic sequential growth traffic growth. of terms volumes than grew quarter, the in XX% month on acceleration was of best traffic quarter X% and of continued less above third slightly X% grew the the approximately a And our year-over-year. traffic growth was For basis September. September and the October

to $XX.X During the through shareholders our dividend. our million returned quarter, regular quarterly we

We us stock as authorized XX. buyback December approximately authorized XXXX. also continue Board purchased $X.X has to our XX.X which through our under program, available to And had stock October XXXX, XX of million million we of through common October

was be our Holdings quarter’s was companies at our end. is million available That dividends was and unrestricted end. at quarter's used $XXX XXX.X Cogent held Our at at operating to million combined stock million or to cash end, flows Cash and and XXX.X cash quarter’s buybacks. for cash total

value dollar increased related X.XX in ratio primarily increased million from quarter-over-quarter from These the leverage leverage Our our X.XX $XXX denominated gross the $XX.X our leverage to translated to ratio and of outstanding. X.XX. increased U.S. net million to euro of X.XX to increase ratios notes

end. was indenture under X.XX consolidated ratio at calculated that’s Our leverage our quarter’s debt

rate sequentially, dividend of strong by opportunities, cash increase looked has per decided reflected other at Directors, our from dividend of which to quarterly in per And on increase our QX quarter investment business dividend our Board the regular quarterly represents sequential generation growth $X.XX our consecutive Our dividend. XX.X%. in $X.XXXX our increase share. per the capabilities another to is share XXrd and The raising $X.XXX

read an some Sean review have additional Harbor Safe to COVID-XX like operating and and on give some update language of performance. I’d Now, our

Sean Wallace

workforce, and by IT cause Virtually Cogent this during reconciled accompanying on the update other in which results in Thank of to to GAAP a to to remains. made and statements We these conference what measures all of to this work and the responses use can statements the customers and These department are governments update are network unknown more our factors release, by not This will times. expectations. good pandemic statements. our Cogent risks many significant our a may our employees around for posted response entire continue intent, call the not installing in our I to to on is the on particular, The that work forward-looking frontlines, A engineers, during their includes the duration Web the that could of measurements other you, that contractors, amount forward-looking upgrading and Dave, Cogent everyone. is to governments pandemic These economies on facts statements that morning pandemic, and actual so how at world. materially. information volatility forward-looking subject I these our and on scope find to refer filings site you on may workforce to do based continue future Like uncertainties, and companies, thank on challenging our our be differ. and to impact obligation forward-looking the for impacted entire ultimate want to to serve we world. Please work number the uncertainty earnings actions our revise impact customers. of may little thank the COVID-XX we the maintaining our who are as the statements. want also new current financial call, pandemic take be our will non-GAAP of the or and historical remotely. Cogent differ and actual results call know and earnings belief SEC in other the undertakes the no If COVID-XX. continues pandemic www.cogentco.com. field hard continues and

our affected equipment in multi-tenant where the necessary our buildings and office elect serve While adversely basis. have We slowdowns existing buildings served and our difficulties the as a find find our related customers procuring, demand Cogent not adversely office restrictions the that office install is our new new network. base, the encounter distress, customer shipping by no or in this may collect are remotely, to we financial also locations customers, and have be may either We space difficult customers to or on-net, has continue. temporary be to our accessing business central working primarily experiencing of assurance sufficient key workforce that Moreover, return may our largest to may falling in or see corporate space installing on operations as which who customer it districts, affected protect in future from difficulties pandemic be these customers their in employees. even commercial orders, permanent government for on buildings we companies will our and results located a

for access be in offices ended locations and XX-Q the our as elect we Form December or report more statistics. economic network connections XX, may XX, Throughout XXXX, virtual Internet risks detail for this shortly XX-Q offices. satellite COVID-XX into in Form prolonged are quarterly smaller quarter the office quarters certain on for certain The in that on June have certain I reports will We either purchase XXXX detail disconnect seen decline year filed ended annual call in operational pandemic that and customers operational XX, our well in will after highlights review trends. direct not to XX-K the discussion, other highlight effects Form global private the our our on and impact described the report will and or and of for XXXX. our March several also our These have business impact future. quarterly

Following our remarks, open will the we call Q&A. for up

turn it I'd over Dave. to to Now like

Dave Schaeffer

earnings to Thanks, our a Sean. release. review chance Hopefully, you've had press

a includes a presented and is consistent in number accurate historically release press Our metrics basis. of

few and targets. expectations against for comments Now a

our Our our which this and of of quarter from third by corporate the represents from X.X% corporate the XX% quarter, XXXX of X.X% revenues by XXXX. business business, quarter grew fell year-over-year second

sequentially, revenue. business, changes basis On has constant impact XXXX quarterly and changes and USF rate negative The rates of which QX represents the in on quarter Volatility basis. a our and XXXX. corporate of X.X% primarily of increased exchange Our tax on impact on X.X% third XXXX. of on by the the a basis, strong cannot year-over-year basis and USF in positive USF a grew NetCentric business our future quarter business. NetCentric And revenues, sequentially rates of impact from grew quarter-over-quarter a a a an revenues year-over-year X.X% had by NetCentric increase X.X% tax on from we our rate quarter predict but third a from in XX% impact currency our sequentially our

guidance rate expansion annual targeted of EBITDA long-term Our improvement at basis a a year. remains margin XXX annual points

currency revenue growth constant target multiyear long-term XX%. Our approximately remains

specific and guidance be EBITDA annual and intended revenue goals any are be multiyear for are not to intended to Our targets used guidance.

give on some bit business. our then provide a a come summary. detail Now, to of Sean will And additional back operational I'll

Sean Wallace

Thanks, morning, everyone. Dave, again, and good

customer about talk into and and based NetCentric network analyze two upon off-net of NetCentric corporate Let's revenues our analyze and our and based our upon customers type, corporate customers. we connections. classify also and on-net, customer We all non-core revenues We type. revenue types, customers

building Our centers. buy large data corporate office carrier from in us well as neutral bandwidth as customers multi-tenant

by year-over-year We us significant in rate customers our slowdown by customer to our XX.X bandwidth neutral was amounts customers from sequentially revenues in the customer the centers. of NetCentric COVID-XX. by by grew million and and for type. Our connections Revenue believe by the of impacted the Revenue quarter from fell corporate concerns growth data buy carrier that directly corporate raised X.X% continuing X.X%.

normal network at to satellite as network While we of had sales purchases was over the customers, historical and as our has corporate have of quarter only reducing regarding savings many mostly XX,XXX of corporate corporate and to connections number local of new USF pass virtual this end, existing second customers sales quarter private X.X% customers. are COVID-XX, services over which third continuing with of our of showed orders, we levels off-net to at modest XX,XXX locations churn combined growth, services new XXXX. in versus office X.X% with and customer by XXXX. increased contributed a The revenues, which rate, their period. results the the corporate NetCentric of new a a are reduction the customers revenue and continue customers continue The delaying on the end, third of We lower from trend of this X.X% our increased to uncertainty Quarterly or X.X% upgrade of revenues sequentially due by sales lower to potential increased significant decline for X.X% aggregate an NetCentric customer dialogue sales annually. reduced those applies revenue buildings. connections to connections, network quarter loop in higher quarter corporate some We off-net had in increase pricing slowdown the In offices. in to while on our decrease on quarter improved

per for demand second Our ports. business strong NetCentric continued our and gigabits XXX second larger gigabits from XX per benefited

corporate the certain Our exchange, impact due large significantly NetCentric seasonal of customer experiences our volatility revenues growth foreign and factors. than more size revenue to

this customer of Talking in increase customers, great partially by traffic only a traffic, was for by on-net X.X%. type, some our in of particularly connections revenue While largest year-on-year, network network traffic increase X.X% primarily traffic of quarter, sequential XXX.X NetCentric as XX% a created million offset traffic a result year-over-year of increase growth. in discounts deal a this and of the revenues grew our our a in about volume corresponding increase mix, quarterly for increased and revenue

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

XX.X% trends, price per our decreased megabit off-net in installed sequentially contracts buildings into off-net X.X%. was per with the decrease the over lowers a by off-net we and North our revenue megabit and These $X.XX declined by for X,XXX for customer quarter. Off-net our new by customers by savings historical million for declined incorporate quarter XXXX. quarter, lower and Consistent ARPU. The connections new local average of the base from X% a We of our megabit price megabit. quarter circuits, new per and customer The sell sequentially install and declined XX% serving XX,XXX the megabit customer both America. from off-net prices quarterly are into XX.X% we base Pricing buildings. pricing the were customer ended connections from increase loop average for X.X% these flat quarter the our per and $X.XX by third to increased third of customer year-over-year. price in Our our XX.X for decreased average the year-over-year quarter essentially base off-net of to When the X.X% overall primarily contracts of sequential XXXX. off-net per the sequentially introduction of located

talk about ARPU. Let’s

ARPU basis. off-net and our year-over-year mix increase and for decreased our on-net importance on products Our The the markets. and our on-net and larger growing of in the a corporate ARPU year-on-year ARPU sequentially NetCentric bandwidth increased reflects

contributing X second a Ethernet our surpassed growth size, its popular our ARPU. XXXX, port gigabit Fast is on-net continued higher to and product per product most primarily as our customers During corporate our to sold

customers. to a that the product XXX primarily positive and of our is sold ARPU second NetCentric per on respective gigabits units the Another contributing effect our product ARPUs having higher growth on-net on-net size in is ARPU. to is The

quarter. NetCentric includes corporate Our the increase both on-net from X.X% of was ARPU, $XXX an for quarter, which and customers, last

from Our on-net quarter XXXX. the ARPU X.X% increased third of by

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

from at more a the impact loop us profitability the lower Our quarter level off-net X.X% passing of Churn is competitive pushing consistent decreased XXXX. third by lower, ARPU of Again, rates. on of prices making while ARPU

churn and increased rates on-net for both sequentially the Our off-net quarter.

this for X% churn X.X% slight unit increase was on-net a last from Our quarter, quarter.

from was this churn quarter, X.X% unit an for last off-net Our increase quarter. X.X%

in services. As for of our retain these of of reduce customer that lower offices level and in or to dedicated satellite need vast our their we we slightly indicated primarily resulted has have sales In orders. in group, works the customers elevated they to Mac churn. mentioned, the who more typically a reduction considering have extend sales discounts We turnover, customers off-net to are off-net a employed are which to services, pricing term NetCentric induce the customers. contracts. Due terminating the orders to offer purchase commodity to their these order and/or services to them change nature NetCentric the add to related majority of move, order

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

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

a and our million on-net a primarily sequentially, improved EBITDA of $X.X revenue $X.X in our increase expenses. SG&A in reduction result a Our million

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

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

per by to Our points. share. XXX EBITDA and year-over-year XX.X% quarterly basis basis points increased margin XX increased by sequentially Earnings

and income was last basic XXXX. of to $X.XX share quarter, quarter the per the of quarter for $X.XX share third $X.XX loss for Our per compared

the share this are translation XXXX notes loss and $X.XX was on variability to losses XXXX. dollars income, gains for particular the contributor of of euro $X.XX third quarter quarter, our in consequently for per last to compared quarter. share income U.S. and the in in net income per Our in diluted primary our share, $X.XX quarter our the loss of or the per Unrealized and

Approximately Revenue in quarterly and approximately this of Foreign of United based the in was Europe currency. U.S. our total revenues. of is outside earned reported XX% XX% quarter our States dollars our about were We our currency operations. our Mexican, payment and Asia X% of related American do euro obligations, our revenues including to African Canadian, foreign not hedge and Latin notes. our Pacific, on revenues

fund cash Our generate international to believe a sufficient foreign liabilities. which provides these these for hedge operations obligations we natural

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

quarterly fourth conversion our our quarterly on Our impact so quarter exchange NetCentric the quarterly revenue X.XX average rates primarily that dollar of Variability base The levels will our X.XX. X.X% will remainder the was rate rate in quarter FX for a customer sequentially a not on U.S. and euro year-over-year exchange average X.X rate on foreign the Should quarter revenues we concentrated. positive to this constant fourth that currency remain believe our million, at dollar of revenues be these We basis and positive is million. rates conversion X.X year-over-year. current for average revenue X.X% sequential XXXX, far foreign the for Customer our concentration. and a estimate FX growth the average impacts be is our exchange impact is customers. and highly Canadian

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

and million X.X year-over-year. by decreased Our by million sequentially expenditures increased quarterly capital X.X

Finance for the quarter and Our for million lease second payments. expenditures of to were quarter XXXX million and finance million XX.X third the compared XXXX. of XX.X leases capital XX.X this quarter

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

we Our of IRU a lease different finance million lease total XXXX. at At XX, contracts September IRU fiber suppliers. end, XXX fiber XXX.X quarter with totaled obligations had dark

Our to for X.X of payments fiber were purchases X.X finance to dark quarter primarily quarter due compared XXXX X.X international million for million XXXX. second in principal the for dark of lease million the of and quarter, the markets third

flow. capital the operating Cash combined quarter, million million for million XX.X lease this payments expenditures our to quarter Our last finance XX.X with cash XXXX. compared of XX.X and quarter were principal third were and

cash As of and our September cash XX, XXXX, million. totaled equivalents $XXX.X

the our and a decrease XX.X million cash For activities. in flow decrease decreased our in operating by our from cash cash a quarter, from financing

cash by sequentially quarterly operations $X.X Our of million from decreased flow in working capital. decline due XX.X% a to

Our quarterly cash by flow from X.X% operations decreased year-over-year.

from quarter Our flow XX.X million operations debt of second was to compared quarter and million quarter $XX for million third XXXX and Debt for the the ratios. of for the XXXX. XX.X cash

Our million. par, lease finance our our obligations, $X.X was September debt as total $XXX.X and debt XX, at gross IRU net was including XXXX billion

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

our Our currency consolidated X.XX was at agreements debt leverage XXXX. as September calculated XX, and under ratio

share loss and last an debt or this million per quarter euro converted notes unrealized days and unrealized exchange Our quarter, dollars XX.X to using unrealized and our foreign XXXX. of and USD to on sales the for was Bad euro U.S. unrealized as third outstanding. X.X month quarter each exchange the $X.XX XXX million an notes USD to million X.X euro The in reported gain are of of million end rate. compared loss month

expense of year-over-year. debt our a percentage as revenues sequentially improved bad Our and

our third bad of X.X% X.X% of revenues of debt for to the quarter of XXXX, compared XXXX. X.X% quarter our Our the and was quarter in for the second revenues expense

thank Dave. members call our very and quarter, I a I for and accounts during unchanged our billing XX for to Our worldwide days last collecting fantastic recognize customers customers DSO now worldwide back team will serving receivable times. days and continuing from to job do sales collections turn for was want the outstanding to from quarter. the or challenging in our

Dave Schaeffer

the customer highlight operate of expansion network, to I'd due to our our network. our scale in XX to Sean. of and base strengths like grow network Cogent’s force. countries. couple now Thanks, physical a We of sales our continues

markets, services network, in new competitive our our introduced to force services these pricing our of we've locations. As helped grow us our demand and new and sales model breadth the has

network initial model Our that new more into America Africa success extend indicates South business markets can profitably our we into in our and and many countries.

square at centers feet XX million multi-tenant operate XXX on-net square data with capacity. over operating of of XX% America. North We in Cogent space today have floor office raised directly We feet over controlled XXX,XXX space

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

the Internet of The positions majority up Cogent push or us connected to users. connections upgrade corporate the in strategy phone customers of develop employees. providers. collection continues content now to to focus connections This greater for to to eyeballs users from the their work home service with at and Internet world, to the year. from companies, and collection vast for networks, their large cable end home mobile access interconnected network on-net mobile support to companies, one operators, Internet the time Internet our Our last directly continues X,XXX infrastructure and This high applications Cogent most larger environment go-to-network of work fruit. connected world's broadband X,XXX other backbones carriers subscribers as and We capacity over the that of remains telephone have bear provides providers, networks this from

the to gig over corporations typically provide these need remain out downstream many traffic for outside main symmetric overall positioned in employees NetCentric significant robust which capacity high advantages other we're of demand limitations only capacity circuits larger premises. pipes. customer circuits, believe well benefit with of from and have office, Cogent’s capabilities. and growth X have networks, both As We asymmetric bidirectional

and sales countries market in dedicated XXX who in the that huge needs. NetCentric a and us this people of customer of on to operation in access centers, connect solely of nearly networks give our the understanding X,XXX number advantage we ubiquity, data focus our focus Our large and network terms XX over

continue to rates. grow NetCentric and XXX gigabit Our at gigabit customers ports for accelerating XX

third of third and experienced we our do, a trends increased the with reacceleration March in typically In in returning the part individuals modest huge a earlier as homes, reintroduction reopening traffic from summer saw the have growth and September we early in the And the October. of September a traffic, growth. their seen spike of traffic we're slowdown we've sports busiest our and schools, in October quarter While quarter, we in similar in with quarter significant year seeing the sequential month. was through also sequentially the improvement to to

comments for below We opportunities. Now few experience long-term on corporate on sales our our did those our that force. sales force a corporate continued multisite historical and sales was individuals productivity that in particularly focus trends,

and Our full orders our XXX time reps grew in were by services full to equivalent equivalent end force sequentially the X.X%. time quarter installed at down sales quarter’s selling X.X% our

As for which quarter is that average. installed per continues was a X.X to a productivity sales per orders month, the force below run result, rate our our rep be historic

to higher increase However, our size continues by port our in fact was reflected offset as that partially average ARPUs. the this

the of earlier, orders, office from described a and and in believe corporate related configuration COVID-XX result was uncertainty existing of we As new number of to this for both branch as locations customers. decline exact our the customers,

effectiveness has also home, from which has from salespeople. exit impacted been limit our our their and managing of to ability force train that productivity force somewhat and our the lowered our underperforming view We sales work sales in does believe

quarter, the still rate was in Sales reps. a experienced than turnover long-term X.X% turnover to taken in sales underperforming force force of month. of our have below X.X% we the month higher second those per more of the We our closely increased quarter, number which to but sales per X.X% steps monitor

While Cogent, we underperformers. remain leave wish those in we diligent no managing sales individuals must would

new impacted system sales to were years. past resulted and as the software two August adversely customers. Partially customer was the time focus Training reaching July a performance sales the in Our July sales management of reduced two out our system, by in months result, also August. people fixes to this on weakest relationship for implementation in and for

the and best – best month that of in second significantly reversed sales was trend month the sales September the Our year. sales September

and We our management are and our make the work are in and relationship new and will that sales the of optimistic much by sales gratified the force team the compass hard marketing effective future. in system customer it more productive investment

bad quarter. churn, within comments our customer this norms. Some additional On and our historic debt were around performance net all DSOs

the remains in of these of Cogent’s credit the makes industry. customer quality importance shows business. our statistics Cogent growth in the our customers our to bad customers. the cost showed and in and services expense debt of and number Our transit the unmatched is continued have these we strong decline we that of and trend Internet customers offices. necessary of an We base our NetCentric and pay to our value of services choosing as acceleration versus corporate checks, customers our fully a electronically nature low the access sell us Overall, the provider many to proposition that an believe returned their saw are improvement service paper and corporate not

for located increasingly and of all are medium-sized which integrating business to the America. center in buildings office data cities to unique small critical on-net districts Internet these completely and major multi-tenant in Cogent’s These our about serving optimistic Our co-location central than more businesses, making our remained in of their business utilities businesses Internet architectures businesses. are North reliable access the data IT in focused dedicated on position IP and remains centers services, ever plans, connectivity, We've customers. necessary

our Promoter level Score are of and service by reactions demonstrated superior qualities been XX. Net customers’ by to our how strong We service have gratified our

been customer to the criticality concerns. Our our Net in responses Promoter our increase industry the Scores of service a historically result highest and among have our of and as continue to prompt

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

The our in dividend. $X.XXX growth represents in dividend. Our per annual improved rate of increase dividend share has increase our of the our rate consecutive increase quarterly and sequentially quarter. a our in by our Board This $X.XX regularly dividend XX.X% Directors per share XXrd in per to

line cash flow increasing that increases drives drives generation to we how we and choices believe of to XXXX. the our of and shareholders. to million on make ability purchased grow the management the expenses. purchase grow consistent continued shares the X.X in Our capital through our We around of our and shares top stock disciplined team this for capital We stock. the of manage quarter, end of dividend our highly October our our allocation, business, we continuing returns be In also optimism

is this XX, we to and our everyone We the have hope which authorization all these safety October value remaining current of call million We on of in program of remains take around in healthy XX.X continue world. safe and As We buyback place times. uncertain under December are XXXX. challenging the our economy. through current about And employees on long-term necessary precautions. stay-at-home a all the that of beneficiary the deployed we implications being net of we are are COVID the models believe macro and

growth floor of intact, like shareholders profitability regular open for With amounts and capital targets to for I'd on committed questions. that, the Our increasing and to basis. returning remain remain we our a

Operator

Instructions]. [Operator

comes JPMorgan. from Phil Your first with Cusick question

You now ask your may question.

Philip Cusick

big And in are September. Thank October? just terms more go again You of momentum you. traffic your that from or as lower Hi. really talked then coming on customers about see Thanks. What Dave, comments that through at like did is average seeing growth you can in good October? you sales price? well, September you in prices and

Dave Schaeffer

been in in we IT understand going both We efficacy to start Thanks put decisions in of to their to as our sales the in improvements NetCentric the the and corporate saw from as they Sure. our activity a customers customers summer make be. earlier vacations, corporate what begin and requirements both NetCentric saw that question, maybe permanent Phil. hold And sales many return reacceleration are corporate costumers. had pandemic. their saw We business for on

We customer a our Our is NetCentric volume-driven any of of business a from great customers base. business. continuing saw a in large not or customer growth and one handful breadth traffic, but broadening our of a deal even

hit. saw to The October March we That our April, of Our the the traffic and growth kind of that grew sequentially being as seen from grow type number growth growth that streaming remains traffic mirrors acceleration X%. the customer that pandemic offered dramatically September are drives providers in base. number of and key broadened has we've but the application of streaming, choices first

of over of from access any these customers the with downloading than comes changes With some have environment physically would buying there about And just been employees that force was remote more X,XXX those new kind it system. access significant to offices. Secondly, saw challenging we change in all traffic. a came is our overlying CRM networks probably networks if us, the And trends were sales in acclamation of in access deploying improvement a our disruption. that and the

the great emails a training see of improvement did in these to understand expect terms of calls made, an job those sales teams on capita see with with learning created and productivity we're made, per continuing Our benefits productivity we numbers. opportunities and helping acceleration record new basis. that, in in systems, individuals the to productivity a actually our And

sales of report We services. sales don't we report bookings. Just to on upon installation remind the numbers only investors,

numbers. the to for So few will few our productivity up off-net of weeks fourth showing a begin quarter sales in a lag months

Philip Cusick

everything's the remind of think And and was Can was of what you me you – when quickly, implemented? normal? CRM sort timing do that now system that just new when

Dave Schaeffer

did the And So more not it provider, service. in of other quarter actually June. end our and new typically at to in And week levels issue. of By Cogent’s into extra August, the off end migrated related a CRM September, were slow We the initial deployment issues tools have implemented July to this sales measured which want the that because we been and month July. sales relatively systems, would historically We sales some anyhow, retraining. are and was And deployment months in KPIs was all completely say said, went as smooth. it did high now. of SaaS disrupt integrated previous I take these are resolved. tools had the by which really first But activities of I

Philip Cusick

Thanks, Dave.

Dave Schaeffer

Thanks, Phil.

Operator

from Louthan with comes Frank Raymond question next James. Your

may You your now ask question.

Dave Schaeffer

hear you you. -- can’t I Can

Frank Louthan

It’s Dave. Frank. Hi,

Dave Schaeffer

Hi, Frank.

You’re loud and clear.

Frank Louthan

right. All Great.

you the there And in in you us thoughts there? in made QX? NetCentric FX And should there. So QX Anything impact the we any about? good quick one-time was can move know revenue sequentially. average and buyback or the on question on that Have give purchases your price

Dave Schaeffer

Yes.

those take in me reverse let So order.

impact, material. First of There some but FX did have in not NetCentric. we not all, impact any was material

volume November, order large only of fourth small numbers hit of being Europe, the or participation a some customer place, broad We was Second, the out and to particularly content accelerated in we're pandemic those continue of there few seeing reactions on no benefit. was growth deployed. And base. where large daily records. modified in reported markets, days a returning any our kind quarter. is our majority footprint providers October's in to access networks significant of into actually customers kind have our and one-time those growth or are Both This shelter as of of we but customers, traffic many access lockdown those into and trends

the to pivot I'll Now, program. repurchase

more the in just share. $XX purchased over at an were October at and of We over slightly a purchases average in price share. repurchases third aggressive $XX Our relatively modest were a quarter in our we

same We going monitor we we when continue buyback. have We that our not to selling. market us don't activity, compound current our do our have advantage shares just comment to market on We're and and they're to want tell value as shareholders a shareholders. as for buying the

Sean Wallace

back just to And million, $X.X We not shares, bought worth. clarify.

Frank Louthan

housekeeping there in from for may cost get a one first purposes? know the a kind thing. you And that's savings Is of your be Any hit I Great. that annual on modeling usually delta virtual. quick thoughts I just quarter? might a for sales – assume

Dave Schaeffer

Yes.

sales a virtual be event virtual. that XXXX meeting first time adopting already we're have sales be format, the well. By a as customer concluded also our we launching going will to So for for

traditionally, because spent think a first meetings virtual $X.X in Even This million a quarter customers well to last recognize the larger savings million been are exclusively much So, sales we'll migrating internal. have $X.X sales we actually a with participation, as our year. about year, have to or going we probably people. participate as we're we platform, versus what

Frank Louthan

Great. right. much. you Thank All very

Dave Schaeffer

Frank. Thanks,

Operator

comes Synesael Your with from Colby next Cowen. question

ask You may question. now your

Colby Synesael

Two may. you. Thank if Great. I

First sub off, on trends.

adds on-net versus net already some us we sub that on in the you're in trends quarter fairly fourth off-net. the what historical the whether saw versus the see. productivity notable we comments you're seeing up really total quarter, anticipate Based color it's you third on And – We $X.X for should going deceleration in that also can speaking million typically So forward? what then give a trend. IRU payment also or notably

we has going of X How about going as think last those mentioned think of those You so or obviously you Thank since type Africa? we IRU at payments million forward about network? continue you you. to mentioned maybe the end America, you consequence? day year? How I expand some forward cash should that to referenced look the South think should

Dave Schaeffer

A Yes. Sure, different here. of Colby. couple questions

and our on Let's drag take the trends. unit sales. been primary sub actually The our business productivity off-net corporate has

primary sales Our on-net customers bolstered our a until almost to ARPUs corporate what slightly an support we sell we Companies will migrating gigabit look VPN really to by our but we very decisions X gigabit below with locations. any actually the secondary sale those well sales the are in We're footprint still our don't offices. begins pretty real that locations exclusively megabits X XXX network corporate continuing is suffered. at sales understand much are are historic with new It line the sale. pulling customer, existing trend are Those connections final When make And in employees line, have been averages. estate from like. say, up. that fact to on-net work. have to going not They've

is really quarter, below selling did much are our year-over-year any has revenue on-net better declined VPN actually slowed. able environment, far why But provider. business. our on-net basis. connections, to than in corporate those for But corporate well a off-net then Those off-net to our and services, X,XXX growth in grow support a decelerated. that acceleration traffic centers grow has of our It but sell actually slightly SD-WAN want both that NetCentric impacted buy As the those customers secondary a whether to also primarily business that, a slightly that this And sizes performing or result which would customers We off-net Most basis, that of to pivoting over historic general, wireline seeing in sales locations. our few secondary That we same have other we trends. is off-net. it's at cross-connect and problem a why less and rate. in look Internet be On average, data volume. metered in greater nearly in the on also VPLS are typically That's optimize rate do larger we're expenses locations as off-net. on we those port real operate and the to

NetCentric sales So now those NetCentric into force quarter we're seeing effectiveness broadly force throughout that monitor seen base. overall our revenues productivity improving. the traffic we The trends we five of is are across continued for customer quarter weeks our continue is as the And this improvement. expect and And And improving. our sales also to improving.

Now, to to pivot question. IRU your

globally. expand footprint We have our to continued

in well extremely grow that a of those regulator ago. that three markets. to American Mexican Brazil had of well the we we're markets giving two as Mexico as crossings discrete and seen border in a implemented the largest result fiber and as fiber Latin terrestrial in dark in part several our now much more Sao in rate having as two additional significant additional dark purchased in I Rio footprint us markets new an markets; connect to metro years expanded XX high out We countries. Now purchased significant we fiber in dark Mexico, some deregulation large provide as And diversity have think Paulo, of at some the market as

Sean Wallace

in just million. Can that, We spent obviously $X.X quarter, to million in second up $X.X and Dave? to add million went I the first the $X.X it

back range million that come million to it $X in We'll million of the to down we’ll call expect $X into We future. million. $X $X

that was So that of Latin we bit American a two into was as those expanded an – anomaly. countries,

Dave Schaeffer

Yes, it was one-time.

Colby Synesael

you. Thank Great.

Dave Schaeffer

Thanks, Colby.

Operator

Your next comes with from question LightShed. Piecyk Walter

now may question. your ask You

Walter Piecyk

Thanks. Hi, Dave.

back the if – it questions. dividend now which One back you. could for because thought I two has That's in up get guess traditionally averages. in clearly may steady that do With ratio gone the May, you to think doesn't obviously business, rate When up deceleration that happen, on you And is of your been going the that's not leverage you payments. and corporate historical increased pretty we happening. going happen? has

So if this at normalized I'm continue sense back grow a like it growth pace? you does doesn't are to the to revert like, to like make just curious, corporate dividend rate,

Dave Schaeffer

Okay.

in reverse let So take there and are going order. to I'm three – them there me questions

dividends incremental be the on roughly been returned in buybacks, more to in And aired our committed are We because to absolutely being return that growth dividend can dividend do than the feel flow. and been consistently way to we of effective but we more has very capital returning be characterized a has able capital, absolutely each a growth XX.X% shareholders. have supported Cogent to has and every rate our capital by of Also, quarter dividend free as efficient XX% rate in that. cash our

elected operations raised to in change our not can are a and our was million ratios. European a that debt the than translation. because currency European euro out to you foreign Europe chose it second U.S. points almost we cost of of XXX our service the leverage as we exclusively The debt. We capital, in the basis raise in debt almost repay that hedge mentioned was point result was lower because denominated XXX less debt script, of that as operations. expensive in profitable, And And We

So against increase the value as that our not basis, debt million million is probably in was quarter. And will over true but on constant our $XXX non-cash it rather the a that the remain time, the where euro that the a currency bet of occurred dollar. on is ratio result optical for $XX.X incremental swing leverage a and of That's non-realized cost debt. about

corporate growth on-net a about is been shortfall question, We're secondary long-term growth, We've the XX% considering been the environment bit really probably the is of has really home tale I averaged growth. locations. It's pandemic, growth a that's do first estate the of reevaluation. which through within impact The will corporate and lines. being corporate to your real close Now, impressive. from on-net very to going in trend rate companies is They pretty and we And not off-net. around corporate the best work believe is We do But of X%. for U.S. a architecture which that be footprint corporate are what there off-net, needs. on customers’ exodus cities. our I corporate doesn't, back business has our because up NetCentric business. core permanent versus our it improving, actually trends. than believe on-net But will for from sufficient will estate our them. is decide growing have historic at real even our should end And cash our the off-net a business believe ultimately a much generation remain margin absolutely if flow higher and that contribution of percentage pretty

continue ability the very and comfortable to dividend. our So all-in-all, grow we're flow grow cash with to

Walter Piecyk

growth rate saying to X.X%. corporate the third your to get on-net would I be you're know, math X% challenging in quarter, because that's don't was So the –

Dave Schaeffer

Since beginning so the you pandemic, the take if No. -- of

Walter Piecyk

I'm looking the the And on just right. quarter, euro. the But Okay. thank at for you clarification

corporate growing couple only right So your was now business XX% ago. at X.X%. It a of quarters is

type I'm X.X dividend or can't the return you rate like you if annually could sense is, continue that it your currency, you again, for this growth, And it to we normalized growth. at back in corporate, increase X% thought that question, to this that of will in make the at growth rate? guess then and I – May, return So leverage to notwithstanding any just to does changes scenario, stay back to And in rise X.X.

Dave Schaeffer

answer So to the increase will we continue is the dividend.

ratio leverage X.X have We between and X.X. a that's

or that is referenced you X.X still the that So X.X within guidance.

accelerated have is that opportunity sheet. last investors The ourselves on you the as have method we accelerated And buybacks consistently we to disgorge to this we both that quarter, messaged to cash requirement took avail to a Secondly, through our techniques. only dividends. do of saw excess on balance either or

Walter Piecyk

to whether leverage the you growth set? way it gets we the should the X.X have not wonder should maybe start only dividend if remain So above

Dave Schaeffer

I stone. set think that's right, Walt. And again, in X.X is not

evaluated targets and Board. each our quarter the historically have with every We leverage

predictability was the beneficial X.Xx macro actually evaluate a the turbulent to that, is breached right new target leverage even and environment, the debt. businesses a we interest we whether initial in our you, borrowing compare raised established we environment, range when very to stream substantially remind more have of revenue ourselves Board continue to of X.X may first X.Xx. we of target. And When low And with shareholders X.Xx to rate in capacity. growth, it the then be durability the our to other guidance Just when to

here don't answer range. I below have So because target today we’re sitting the an

Walter Piecyk

Okay. Thank you.

Dave Schaeffer

Walt. Thanks,

Operator

comes with question Citi. next Michael from Your Rollins

may ask now You question. your

Michael Rollins

time? the curious as base? how the was the could on update increase you where I are shares morning. baseline over that Good different you look business? your How NetCentric to for at Hi. us you opportunities if look the market, corporate, the of speed do corporate tiers that at view durability pricing Thanks. for points you're then into the you And your in price selling market

Dave Schaeffer

Yes. Sure, Mike.

under office feet. X,XXX multi-tenant million buildings XXX So we’re square and just on-net

XX.X one connection, VPN the X.X sold way from We with customer. some about because last have We add That's to not slightly XX.X do sold much we're likely more quarter did new services. closer have selling it's selling per we're connections in Today, quarter. late of typically the building. connections per very the We down customers. no buildings in

higher The will tend connections sold to are I change. of that be think that speed.

is home ARPUs those competitors our firewall and going may up. ARPUs a products employees ad have need non-blocked sold service. our our implications many their level and gigabit symmetry. that VPNs products in has services are Cable for have we're of offer concentrated That work that don't type of usage product And at at typically So at real as symmetric that higher hoc and of to have selling that non-oversubscribed, can have Also, telco caps. symmetric. are

all reliability, of think all give better volume install, I customers, price for and corporate greater Xx our our a and us performance, superiority. So Xx throughputs, deal faster great

our services basis, sell also some corporate to buildings. on off-net on-net We customers a limited and

since a they company why be wanting wants in realized They backup in absolutely concentration that very its more down. actually interested redundancy. in And that are become getting that's mode, customers lower be network. VPN to And on critical they're But that the No operation. going would to a diverse said, it’s You a pandemic. backup bandwidth that? you do service network

up a on migration to that's off-net NetCentric significant traffic any flows. we're redundant VPN And the to from metered have you some it. the not primarily and picking port ports. is with And The the on centers that ports the size does market feel by data so larger we connections but have pay associated then us So world. But the connections, side, customers. to We idle more provider additional majority megabit. to fewer more XXX capacity other are is for fee in on-net continuing in the gigabit for than allowed we centers, gain data based share. gigabit reservation mean in a surface of And cross-connects XX see revenue

gains. about good market our share feel So in our markets, corporate pretty we both and NetCentric

Michael Rollins

Thanks very much.

Dave Schaeffer

Thanks, Mike.

Operator

comes Del with next Your from Nick question Deo MoffettNathanson.

You question. may ask now your

Nick Del Deo

Hi. morning, Thanks my Good guys. questions. for taking

effect on or that space Q&A. or you First, that earlier be Then that made your got a you expressed ultimately thinking evolved in office to perspective okay through A a whether Dave, we from Has timing pandemic. Class at confidence more would more comment as all quick front become factors? fundamental the nuanced, the

Dave Schaeffer

on we've the admit, been eight quite a living bit pandemic this. evolved to over have the my thinking has I months So, that with

going I my return talking resembling is we're much This me another think and be think for is year. least First duration to as an observations to the to customers. and and all, of anything at to both don't longer. I people individual sales normality going

me to would disruption have April expected that back pandemic, If life. you an XX-month or asked would have not May, question I in

continue rates believe occupancy I will we operate house businesses will skyscrapers business which have than that to in previously higher did. Secondly, central districts they to and the continue substantially

on result of The tenants XXx of buildings. average, certified. lease buildings footprint, a about national nearly lower XX% will buildings As from to marginal majority our The the are are, better more tend average. migrate rents, into

equity to are get disappear. wiped buildings owners a think many work may employees buildings change, of remotely. week out. think going are But the the those won't some a to in I habits days to will some where of going I also model hybrid go work the

a with think the not office of will like companies year I Regus shared ago return probably was anywhere Secondly, WeWork. model and growth the like it

requiring will offices the floor plans. more offices, think I and capita be open square typically foot Third, doored per less

usage go actually aggregate employee the think I So per will up.

bathrobe. branch Employees The meet branch piece to said, but office categories. really You won't do continue. the fall of will hard those office an the days week, with want it's employees sharing as into law partners was to an that at for great home with still Like come Those many business. that offices Those is hour his in happens I I have one many final remain as and offices in a in clarity in separate firm cities, really offices? on are business. the two occasionally and I I don't bill think have will transact into on what customer, $X,XXX the

that New has may commute still and want is to company to firm Connecticut It Stamford, required. in office That's law in who maybe offices in Manhattan Morristown, in Jersey the to and not a have offices Philadelphia. downtown has partners be be accommodate Cleveland. not What an required and in. You headquartered did that’s going Chicago satellite

you offices I think hybrid home the those of see model. see will will you from work cases, and consolidation in

is evolve. my will evolved. to the continue So thinking answer has It probably

adequate a I when when just as think people will distribution life therapeutics including to be have We're vaccines robust normal. unknowns, that lot there will of return there's and not even we’ll still sufficiently yet.

Sean Wallace

see acceleration Dave's months. actually buildings, look would an buildings those we in in if And If indeed, for types add look multi-tenant connections, those X,XXX I churn in of we and declining, down were Can color, circuits. offices about talk gone we business the at Internet central couple churn Nick? a to of of has some the at we direct those our buildings just world office access

that, firms really in and benefit in who floors because until might pandemic go floors, three is things any from we deciding are I mentioned, seeing the of be to decisions We So commercial in churn. and and return buildings. brokers, don't the a do discussions potentially might we where we tenants We're as in two of more change not those corporates see change we’ll tenants, normalcy. yes, to do law But see space be more now. see from of think number won't levels delaying over normal material people to that sort

Nick Del Deo

call Dave be made to the Is off-net the to Got metro into connections it. other? I there a drag way area much, metro category – you but one corporate your I locations fall versus don't of in off-net in versus what interesting. within size want share was too thought areas regarding comment would the different a

Dave Schaeffer

I where markets. that have as within minority XX,XXX say So nearly on the significant those would in XX,XXX MSA in different or operate well. is are, and a are data majority, they’re connections given obviously buildings. approximately greater MSAs we a than X,XXX XX%, But there

where there. been. pain have didn’t. has And do exposure that's the I'd really if we we be lying So

Nick Del Deo

Thank great. you, That’s Okay. you, Thank Sean. Dave.

Dave Schaeffer

Thanks.

Operator

question Tim from Your comes Oppenheimer. next with Horan

now may You your ask question.

Timothy Horan

Thanks.

your on up but guess. maybe just question it's not? a be that and it’s move XX questions out. previous COVID? areas on up of guess Dave, you those anymore, will going see business. the another that of these spaces want XX was to if I the happen, But months the or very doesn't want I or if Class Are pick next look, office following people because million happen hear to A be I give some I in just in is year good to I Just churn for we these dollar That and deciding, thread, will downtown Obviously, leases people question here bit, out don’t

Dave Schaeffer

I'm a And had in I question. my business leases a continuing answer work function experience it some district be I also question more talking I how answer think law permanent to see not customers going from sign going been Yes. home. on flex large its new space. to in wish for fact as because am lease of the that the to there with that the number law rethinking footprint is central sign a will do firm workforce actually have firm in landlord. a But their will basis. without, I net to able how housed. say, be building. the tenants If portfolio. office. in downtown about positive my I That's do I anecdotal be an And to can a companies increases discreet think shrinks to evidence. can a actually us, week I be are a think it new

has in X,XXX Our average today XX feet is customer housed and desktops. about square

chose business Zoom an of conferences. is I talking by lifestyle. and still distancing customers, social refrains But X,XXX Now, desktops. Zoom to law up X,XXX I'm or I We're a for firms physical footprint, cities. probably do And clearly, and positive wait going much know back There have had voluntarily be get I building just I But the a can't large in office. that to to totally individuals XX getting see a and one on shift. We're with us. we will net in have pandemic. urban making If exhausted. they my some here a floors abandoning people half of very lot a end that's of don't that depends contact common to interaction. and

York feedback, will be don't the just San will Chicago is But turnover going anecdotal I Francisco will There come competition. again, down. these There New I ownership this be or or skylines So assets. dark. all of rents increased in but think see

Sean Wallace

Can district. they're like Minneapolis. not I don't just these XX central surveyed Zero a said add one – a they said places and they Pittsburgh and thing and business XXX, These commercial tenants in to have insights group. has Chicago said that LaSalle we not sure. Lang went the are in Dave’s They are research know, Midwest. did that is X% Jones they're Of businesses leaving they're XXX leaving.

business be firms difficult successful very, We very a in largest law aren't It's United very their work other their for they where it's law for very do XX service them can’t think they I in States. the smart, their to in are. firm to they very, attract suburbs, clients clients. do difficult. near to people They can't XXX it the of have districts if and them. out, And central tracking come vendors intelligent

again, firms, districts. knowledge remain central in our firms, clients these to we business the of of Internet accounting – have be haven't workers direct infrastructure in to access who are no again, lifeblood those any of whatsoever medium-sized law which in And So firms, consulting folks uptick small types are business of ports, who multi-tenant seen we are office our these buildings that Internet uptick, the for companies.

Dave Schaeffer

a partners, person of track is need and one that's We one the I'll greatest and on environment? attract partner customers much figured challenges McKinsey talking Cogent or than at white partner a that's was smart and at he away. for they in or very mentoring different in a our close talent a a a one a senior I track Those partner training to not law in BCG. out shoe curve new and of Bain And firm the how individuals train said, organization, remote a do or of going telesales young, comment.

pandemic. So something the we It will get happen to to life and we happened the going it's taking resembles before will but is return evolved. through lead again. that this. XXXX My It in thinking has we longer,

Timothy Horan

color a seem guys. term. a great That’s like longer does Thanks big positive and lot,

Operator

turn I further time. Mr. this Schaeffer. I'm back at like showing no the questions Dave now would conference to to

Dave Schaeffer

on circuit. the anyone But has everyone. talking Take normally to you forward say, your wear conference are if questions. everyone. myself to to free want social to any distance, hygiene. a aren't wash And look I I thank hands, forward safe, Please or you conference care, see Sean feel to to I political now Those circuit. look out Those the mask. reach I stay statements. on good would

Operator

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

may all disconnect. You

Cogent Communications (CCOI) 8 Nov 202020 Q3 Earnings call transcript