CCOI - Earnings call transcript Q2 2021 | Cogent Communications Holdings, Inc.

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Operator

Good morning, and welcome to the Cogent Communications Holdings Second Quarter 2021 Earnings Conference Call.

As a reminder, this conference call is being recorded, and it will be available for replay at www.cogentco.com. A transcript of this conference call will be posted on the same website when it becomes available. Cogent's summary of financial and operational results attached to its press release can be downloaded from the Cogent website. I would now like to turn the call over to Mr. Chief of and Communications Chairman Schaeffer, Executive Cogent Officer Holdings. Dave

David Schaeffer

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

reopen the seen pandemic-related developed as, and many signs businesses have As the have in climate towards economy efforts a the result We've a segment. for U.S. shifted and their deadlines of improvement our to plans that some of broad offices. reopening of business large Corporate

Our from of end-to-end best deliver traffic streaming the in globally. continues positions where NetCentric internationalization the network subscribers to and footprint business the phenomenon, streaming to the greater-than-expected basis as an Internet continued on our benefit and the global growth Cogent

the our For XX% year-over-year was is in fast variant. and uncertain slow somewhat pace our of as and Delta basis. periods, from X% emergence continuation period growth moderated challenges traditionally sequentially the the growth but of outlook, remain have in the in a what previous seasonally that the cautious up quarter, we climate, of traffic a on second and the the economic the given pandemic these improvements, Despite increased resulted

basis. full-time X.X% to X.X grew churn year-over-year our constant the X.X%. sales our force equivalent, a basis, and to our currency we rate, turnover sales rep sequential improved Our X.X growth $XXX.X force, million, from on X.X% revenue previous X.X% On a of made productivity declined a currency revenues by X.X% rate We've orders in second an quarter the installed month with on rep rate from to a month experienced sequentially month sales basis. as per increase in per of per progress a year-over-year X.X% our quarter. constant growth of sales sequentially And up

extremely efficient network. to operate We an continue

to in perceived leverage traffic markets, at margin. to able centers achieve growth us in network and growth office carrier-neutral to data multi-tenant Our and a a operating be and a basis. additional able EBITDA of EBITDA in growing are our sequential This allows services, handle is, continuing number cost and fixed year-over-year volume buildings

Our X.X% X.X% basis. and by quarterly EBITDA a grew year-over-year by on grew

Our improved percentage sequentially norms. which quarterly our historical of a debt The quality strong basis. indicators credit importance was all EBITDA on XX are services Customer a improved outstanding a XX.X%, within basis. Bad these our and strong and of revenue organizations. year-over-year the pandemic. seminal basis an of sales We is both as to be margin performance base of customer existing customer collections, that increase of sequential churn, points, our day continues cash and the to year-over-year the our throughout are also and on believe base of a on these

stock XX, we During total repurchase available our repurchase and our has quarter, through our program, returned dividend. stock $XX quarter, any shareholders XXXX. of the during first have million for buybacks did authorized not regular through a million been the We $XX.X which quarterly December under to

and at total Our cash Cogent use at $XXX $XXX.X at stock both million to for holding This dividends quarter at available $XXX.X was end. were cash Cash unrestricted buybacks. is our and was cash end. companies million, million held quarter and held and/or operating Holdings in our operating company

ratio the was XXXX. was net X.XX leverage of at leverage end gross Our second our quarter ratio and X.XX

regarding notes The A under slightly X $XXX this million couple our our indentures us calculated X.XX. proceeds due XXXX. due were in X.X% the quarter, to consolidated that provide was ratio retire lower upgrade $XXX leverage gratified company's we're to second X/X senior from at operational of secured In financial used $XXX have primarily and excellence we Poor's we secured and senior history. liquidity. & rating a the successfully to XXXX rate And as company's Our note and notes was issued million of were offering million the senior now additional on this fundraising of of secured things ratings interest by believe X.X% Standard achieved largest the receive in of reflects a the the we This company that rate strength conditions. financing, the BaX/BB, which interest debt. has was paid in lowest the

expense approximately addition receiving result a save this interest to million We $XX of to transaction expect liquidity. of as in $X.X million in incremental

quarter, by increase this strength sequential opportunities Board that consecutive $X.XXX the another and to regular increase yet share in quarterly XXth of force quarter reflected share the sales $X.XXX the disciplined we Directors, increase Now our grow our again raising year-over-year. dividend, a which generating quarterly our dividend from to dividend business, our third deploy per the represents with of per capital grew the in to flow rate decided in and of the to share. dividend in our per internally remain ability $X.XX to quarterly cash on capabilities be to paid regard Therefore dividends, XX.X% our investment the our in second at executing

policies language, COVID-XX on Now performance the of some over read turn I'd challenges, give to to our for review a like Sean color our things little and Harbor quarter. operating and to our Safe more

Sean Wallace

governments we entire I their by to world. the entire workforce hard continues work and in remotely. these continued on made COVID-XX Cogent for may the more and Virtually, SEC on filings thank that number ended our our our XXXX for March Please you, to I facts will earnings results morning, in accompanying materially. call and this use annual a XX, detail want and COVID-XX. cause department services quarters June Throughout work workforce update the around work non-GAAP are greater companies, our many to highlight these want These responses not statements pandemic to particular, certain which operational forward-looking other good could detail XXXX An that and belief continues during customers. refer earnings to statements installing outstanding update front and the These website reconciled to very to GAAP on factors challenging expectations. measurements intent, our I XX, many call and no our billion providing may XXXX. our other described This the continue information several we the our results obligation find uncertainties, other contractors, in statements risks the revise will actual lines measures collection new XX-K September conference in on are XX, this for risks forward-looking and includes on differ. differ the upgrading you in customers, be also times. release, employees forward-looking highlights to report statements. reports Like our are Cogent historical Form on other field statistics. subject engineers, trends. all our upon forward-looking everyone. thank and actual Thank operational for our current Dave, that to based network statements. review These will of Form Cogent this during call, financial our and Cogent are posted to IT If quarterly and and who XXXX, by to undertakes impacted on www.cogentco.com. in maintaining is and discussion, staff our at more XX-Q and be or

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

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

David Schaeffer

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

we Our of quarterly release a which historical number press consistent a includes metrics reported basis. on

improvement year. XXX targeted EBITDA for basis points long-term is per an Our guidance of annual margin expansion

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

intended Our be EBITDA to or to targets not be annual used intended are as quarterly revenue guidance any and year. for goals, guidance and specific are multiyear

revenues quarter. Corporate end Our business the quarter in second the of the XX.X% of at represented our

X.X% X.X% business XXXX from the the quarter first and second pandemic. the of from declined the of by by XXXX of impact due corporate Our quarter to declined

this showed our of X.X% impacts historically of a which revenues, grew growth of business, NetCentric basis basis approximately by the the sequential U.S. quarter continued and from quarter-over-quarter basis of XX.X% a the by Our sequential basis of from outside quarter XX% on in first of exchange increased X.X% represents business second rate strong grew at Volatility year-over-year foreign of on and primarily quarter and rates is another XXXX, XXXX. a our NetCentric a currency constant business on XXXX. from had NetCentric as business a second XX.X% year-over-year of a high basis, our On the quarter on XX.X%

Now for Sean will performance the on provide our second some details additional quarter.

Sean Wallace

We Talk our analyze We also NetCentric Thanks, all corporate on revenues and or upon analyze two Dave, network of connections. off-net and customers. good customers customers revenues morning either into revenue and and noncore, to classify Corporate based customer type. our types; again, customer NetCentric on-net, and based we types, everyone. our about

firms, typically office or institutions large multi-tenant in These buy corporate and in services financial bandwidth data educational our firms are buildings to buildings Our us through services centers. multi-tenant in customers carrier-neutral from network CNDC customers footprint. office our or professional connecting located

NetCentric X.X%. data Our USF the corporate USF of service from of impact content $X.X sequential corporate customers fourth million positive in when $XX.X from on for which year-over-year and impact an quarter. of $X.X VPN by million the $X.X our impact Corporate year-over-year. increase to customers a as revenues. providers had in well tax bandwidth who The streaming you changes first which cannot from changes USF and improvement $X.X serve rate the of us significant X.X% on a quarter, the the quarter in the we million access our $X.X carrier-neutral content. exclude and buy decline a million revenues and connections, as million rate, An to in distribution quarterly, fell centers, only in had million fell future predict revenues rate and our the is amounts the quarter USF taxes, customers decline companies and include quarterly our fell Corporate Revenue positive applies networks of tax sequentially by by

return has to the see offices, evolved activity. levels. rebounded Gross business As of of is more level side, normal reopening we to the have of not sales a some begun the to that toward focus pre-pandemic in however, indications corporate beginning our corporate have to the pandemic

we in The lube XXXX. our customers. of new was in to of the a decline revenue X-gigabit unit from churn majority base, on megabits reduction connections We growth corporate from our continue of product, decrease savings those off-net quarter at in net product. pricing XX,XXX quarter, network coming corporate pass see second customer XXX our and year-over-year local continue the terms versus the to to fast quarter lower aggregate to of continue our second the our or of trend had and we we of a which X.X% corporate portion continuing contributed end, of In per churn X% Ethernet see older to off-net as a

and of strong growth second continued faster from streaming customer quarter increased at Quarterly XX.X% the network our year-over-year from business revenue an $XX.X to our sequentially benefit over of and NetCentric NetCentric connections an by in X.X% had XX.X%. subscriptions We customers Our traffic overseas. end, the increase on X.X% continues increased to NetCentric million increase of growth XXXX. in and by XX,XXX quarter sequentially

benefited United States was larger Our ports. per from and NetCentric second demand continued outside The for demand particularly per strong. XX-gigabits our the strong XXX-gigabits from business second of

primarily growth a grew revenue for impact seasonal on usage. and and than versus experience second experiences Traffic quarter. quarter the Corporate a growth year-on-year first quarter the factors, revenues X% traffic volatility in by NetCentric sequentially our XX% We exchange, due related our larger significantly slowdown foreign customer of Our our in typically size seasonal basis. by to more certain to

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

sequentially our on-net X.X% a on-net increased We at grew our on-net center connections on-net our customer our customer quarter office data by X% data customer carrier-neutral primarily than our revenue on-net on-net faster Year-over-year, to and a buildings. X.X% on with connections in increased total year-over-year. Our and due rate the increase network multi-tenant ended and in Cogent XX,XXX connections ARPU. X,XXX center by

off-net quarterly local prices was circuits, base When our we lower into into these pricing, and decrease for loop cost year-over-year sequential and incorporate new quarter, X.X%. of our the sell decrease revenue from of the the off-net of ARPU. lowers new savings X.X% our we Our the and existing a introduction million a $XX.X off-net customers

ARPU our Pricing X.X% are per basis, base average by off-net - megabit local per off-net customer a by per and North necessary primarily megabit. service. customer sequentially by average decreased moderated increased of our driven to contracts On installed declined new installed both primarily results Our historical from the for from the buildings. to This primarily trends, decrease the customer moderately this average decrease sell quarter revenue price serving in The first America. in by declined off-net located second The $X.XX from the ARPU. continued sequentially megabit over a $X.XX off-net ended decreased X.X% XXXX. megabit second price buildings from in $X.XX loops and decreased We falling quarter cost to quarter of by our These for quarter XX,XXX the by Consistent X,XXX XX.X% of connections due off-net year-over-year per and increased our our base XX.X% connections price customer quarter. of our off-net contracts were is with XXXX. our and X.X% for new quarter ARPU. X.X% the the year-over-year. customer for

Our increased slightly decreased but on-net ARPU sequentially year-over-year.

growing in mix the importance larger products NetCentric higher bandwidth markets. ARPU. The a year-over-year. and per off-net for our the second reflects our year-over-year of Growth X-gigabits change continues to decreased Our connections on-net corporate ARPU corporate to customers the on-net and in to and contribute sequentially in ARPU increase

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

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

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

passed that expect of as of will to lower corporate our our take are We on decline portion to we A Churn cost off-net the of these continue loops. ARPU in advantage customers. local reductions rates. costs

Our our on-net increased. and stable rate churn sequential off-net quarterly connection connection rate churn in slightly was

quarter. rate churn the was this churn rate Our same last unit for on-net quarter, X% as

reduce add customers are churn have indicated quarter employ We orders. In they the discounts us. additional of extend term vast services, sales to with we MAC to the change group, majority rate pricing services offer us. X.X% a primarily services dedicated compared to order the their them customers. and/or considering commodity order retain our with for induce customer or was off-net who to Our to in purchase terminating to NetCentric X.X% this Due to our unit NetCentric quarter. customers as last works may these of which that their nature to contracts turnover, related to contracts move, of NetCentric are

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

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

revenue Our first increase SG&A our to EBITDA increased that do due increases our costs in and the quarter in the sequentially quarter. primarily our not seasonal continue second in in

year-over-year on-net increased million due our $X.X increase EBITDA in Our revenue. the primarily to

year-over-year a basis. sequentially EBITDA million and $X.X Our by million on by $X.X increased increased

on quarterly Our basis. an sequential per which EBITDA XX.X%, year-on-year Earnings basis margin increase a XX was points of was share. and

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

impact. Foreign currency

XX% increased Our South American this and of quarter XXXX. of revenue to revenues were is in of Approximately African Europe; based total of and States Pacific, in Mexican, XX.X% revenues the to operations. the related United our Asia our of from about revenues revenues reported and XX.X% first our our Canadian, total outside dollars quarterly approximately quarterly our X% U.S. quarter in

We euro have our obligations revenues not notes. our payments foreign on or currency our including hedged

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

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

million represent than capital quarterly revenues million $X.X quarter. expenditures capex, customers increased Our increased of this On by top X% year-over-year. and sequentially our for by our $X.X XX less

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

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

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

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

Our of finance and XXXX, a lease were $XX.X quarter million capital million quarter to XX% million expenditures second for principal $XX.X payments this quarter combined $XX.X reduction. with last compared our the

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

million redemption dividend For the our of offset our increase of cash quarterly the - million $XXX.X an increased by primarily issuance notes, by offset which remaining million which the XXXX $XXX our from $XXX.X quarter, our payment. of was our in notes

operations decreased million, flow quarterly our to interest notes $XX.X XXXX. from Our by a prepayment December of on million XXXX due cash to sequentially primarily $XX.X XX.X% through X,

may first notes our The at state XXXX that be redeemed par.

quarterly from flow by year-over-year. Debt operations Our decreased million debt $X.X cash ratios. and

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

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

at Our our indenture under XX, consolidated June ratio, leverage X.XX agreements XXXX. calculated as was note

per in rate. notes end or million XXX-million-euro month $X.XX this share compared Our an and loss exchange $XX.X to on are quarter or The unrealized the of million euro each a $X.X U.S. share and dollars $X.X million exchange U.S. gain end reported converted was last of foreign of euro using U.S. notes $X.XX loss quarter at to an second per unrealized unrealized for XXXX. to dollar dollars our month loss the unrealized of quarter

currency consolidated consolidated end. by increased versus XXXX, leverage basis outstanding. On days the basis, the result ratio X.XX quarter have a our debt at our euro sales As our XX, of would since change leverage under June X.XX indentures Bad in been and XX of the ratio value constant a points.

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

our revenues second debt the to the compared and of last X.X% bad X.X% quarter for X.X% of Our quarter XXXX. revenues quarter of improved in expense to

XX customers but fantastic And now for Dave. quarter, team thank job or outstanding, billing collecting do times. it continuing and back increase worldwide worldwide in for accounts days very recognize from XX challenging for better serving historical our over rates. I'll days from was than and sales the days our our collections to our during a customers slight turn members Our to to receivables quarter, a want DSO, I and last

David Schaeffer

couple our base Thanks, and Sean. strengths highlight about sales like our of I'd force. customer our to a network,

targeting growth. earlier, in business continue are business, our As our we with I are increasing service segment a beneficiary stated see our that net-centric of revenues aggressively providers XX.X% we overseas markets, Streaming to year-over-year. of and strength this in

carrier-neutral a positioned on capabilities network these and have XX streaming At in basis, to world. end, I'd some and our highlight around countries our important of quarter X,XXX centers connected data we support to the like We characteristics. global to

In any reduce our better NetCentric data research. to XX connected centers, we of as networks connected The measured of coverage by to content. third-party this in other network to carrier their the and centers our Cogent-owned addition, than customers optimize enables more data breadth delivery their latency

network the this providers over to we with a that makes of attractive a as add of widen focus segment access to phone years. to the Internet to operators our is group end, force At on professionals the who its most market. streaming broadband team of that professionals we are provides data we the users. and carrier-neutral we companies XXX phone sophisticated mobile cable directly on us continue of exclusively critical this of quarter's year sales service end, connect service X.X% our to in which At market end mass will of world's have lead of and several download. to focusing industry. telephone We and the subscribers improving of quality NetCentric looking represent mobile directly increase centers approximately sales who this X,XXX This We largest users XXX speeds believe customers, in This each type connected majority market, continue next the networks, us network expect the the vast for companies, to from and service year providers, access earlier. collection quarter

productivity to continuing a a sales. portion and On return pre-pandemic their businesses increased decreased full-time count of efforts of equivalents of also deferred in number underperforming cities head due And sales offices. of aggressive seeing of force we level increase activity sales sales to as in to as the basis, environment, will been head a upgrades by Corporate end. our for return XX due having have quarter's or training office and will continued historical forward their of total their This reps. of customers to back experiencing been out internal our count many in begin XXX managing a are to business office. an and our to We're more force has challenging pickup an in reconfigure equivalents sequential rep will to will there levels have declined return be looking remote to full-time the our corporate number X.X%. the and XXX North return our seven get average sales planning rep force number their they've of employees networks. decreased to a American total Year-over-year, We the that that We're the our or sales within X.X% workforces. normal optimistic continue customers a eventual to that activity to of corporate Our to by corporate improvement at investments the slightly to from believe

Our the consistent These our in Cogent, increase X.X% we was the operated our strong average of of the installed productivity a provider month for Cogent, Overall, significant per on in X.X% the on Cogent forward of month force with this with our resulted many Internet going to the we force the believe of quarter the our that they've a deliver second continued in the and averages. back XXXX. experienced long-term offices half quarter, is sales continues summary, thank the quarter first of at is per a transit of low-cost sales industry-leading per entire drop and forward rebound a to they've force, and team from installed X.X from X.X in done factors service. orders in conditions have work employees month, the year access and the per look X.X% I through a support turnover return force month and our for basis. want per per rep sales in results. orders rep all a sales I Cogent pandemic, difficult to to first

Our optimistic that since serving goods remains in about Demonstrating in this remain value per the located in at our cities. central our unique and sold XXXX mile position cost cost unmatched small of has fell major low of of position fact transmitted medium-sized the XX.X%. rate is proposition North business American a businesses industry. bit We the compounded districts

footprint We seen landlords multi-tenant comprising square have rents, A the X,XXX to to large In office attract on-net, cities, have shorten and over XXX new in major into rising feet. we lower million office designed allowances terms response vacancies provide improvement buildings tenant space, we all aggressively that tenants lease serve. Class significant

these bad to buildings. either corporate all seminal can return quality base, to to that norms. in days historical within We those churn, our are improved debt our the these are importance We optimistic strong as and outstanding employees the of that of services our credit believe or businesses. customer customer represent statistics rates Cogent's growth our corporate business offices resume its historical sales continue and average

targeted emerge EBITDA XX%, and XXX basis Our of rate approximately our points remains expansion intact margin constant from currency we as long-term targeted growth about multiyear the begin of pandemic. to

Our XXth represents quarterly share per that Board regular growth dividend for quarter. dividend, the dividend. to quarterly in has increase on $X.XXX by $X.XXX of our consecutive XX.X% sequentially Directors a rate approved our growing our This

capabilities XX the of of demonstrate Our have dividend, of payment business. will a stock includes flow significant regarding share cash optimism increases This common is the consistent of Upon accomplishment, through our repurchases, which dividend returned, over this the over Cogent our XX.X dividends increased combination the purchase and $X billion of our equity a shares years. million stakeholders. over the to past

in stock buyback the have million and place through quarter, this over current authorization, of remaining end we in our the is repurchased in year. not We have which second any $XX.X

I'd Our six dividend growth questions. first of you, period our first operating open XX.X% for the XX.X%. XXXX, cash floor and rate flow for the now this the months XXXX for like to at was six grew and months of versus Thank

Operator

[Operator first with Badri Sami question from Suisse. Instructions] Credit is Your

is open. Your line

George Engroff

This Hi, Dave for George actually. Engroff Sami, Sean. the for is and question. on thanks Yes

in could the progressing base your composition how be of would customer if So of that new you've by I great? a Dave, guess past, providers. how walk impacting the and NetCentric through it's business that's variety talked the and and about driven us you changing

David Schaeffer

sure. Yes,

primary two So our X,XXX world. NetCentric customers fall distributed around access networks into the those categories,

purchase the countries while network, fact, network is Internet. Their actually we the groups to countries, other End in different content we than the world. any Internet. downloading content customer asymmetry provider. In primarily provide around directly and bases access Cogent than and transport use XX have a way we more significant reach customer which from they our download over have the There's XXX spans in users in upload, the much that base more to reach user

are side, that exchanged the and In XX% very stays these XX% are the for our in increased using Cogent They and that segments. They part network peers. of NetCentric past the to traffic get receiver base On customers. sender, Meaning achieve has comes lowest from our it two and Cogent and the the as segment. NetCentric content customers. several from access network. a content. the concentrated pushing continue network transmission other of be price decision of be do customers, either consistently service we about providers operator. to have of a is paying out traffic to those tend large on remaining the points over dominating in paying efficient driving X,XXX to to footprint. our they Cogent looking applications to What either content-generating those generator as close their what's Today, is with possible of That of with the more a or our years, number direction, XX% one is to over it goes traffic content cases, internationalize to to

get but we we only than revenue have by one on peer. side And in no customer, those with less meaning paid We peers transaction, XX paid the that that exchange getting of at globally. instances, are traffic our

NetCentric patterns two-sided the see to increase drive of continue our Cogent the We helping traffic profitability segment. for

George Engroff

interest a you earned $X.X your XXXX today? a noted on driving difference - maybe credit the you two-parter to that. $XX the notes? refinancing. any And And rate given for noted between secondarily, help the that you you rating Could then savings understand euro thank is in million interest guess I opportunity you and increase, us No what then that savings previously refinance million there is

David Schaeffer

So two all, an we of the that raised capital. one, $XX included million things of noted first different I comments, differential two had incremental

offset the So that capital. the was partially savings on incremental interest by

our interest result taking are swap us advantage The of low that a market second planning in rate further versus variable enter savings. is that to we interest will rate, reduce fixed into and variable the allow to that incremental

So it's of completed kind a the of We've first process. that. portion two-step

decline. rates notes, euro Now to to the with continued have interest regard

We that a those on are continuing significant do a €XX euro to would monitor cost make-whole notes that. be We to us. about have million

notes. are I think over declines we next cost probably refinance two to we monitoring the to one And breakage that. those look years, will that as

George Engroff

Dave, you I to interested understand customers lately. on be could. corporate one, that would seeing to last how the this from your some if been one we've last coronavirus the office guess, I quarter? I mentioned continued And the of commentary then headlines call, from despite return differs

David Schaeffer

includes the model. indoor cautious revised a corporate requirements of due Delta There has are their a of CDC to So and many who in work expanded number guidance, I number a variant. that customers are there there for have the employees of of work markets. work-life looking And remain think have view hybrid mask been emergence been balance placed

are While by that corporate companies that of was pandemic, employees in productive of These employees a environment. Offsetting than by environment that that. XX% comments that direct home saying accelerated many office in productive a forces is In not survey, Fortune are more weighed more XXX kind is executives it companies. in offices. an the result a by responded the different being clearly recent are of

I seen Labor inflection most targeting after think businesses point. as an we've Day

a think in increase vaccinization slow office to I variability employee return geography there increase are in on networks. corporate seeing those and will we on rates. traffic and an be based But

Operator

from is Cusick Phil Your JPMorgan. next question with

is line Your open.

Philip Cusick

you. thank Dave, Hi

environment start on Let's sales let's with expand of of there? - some improvement. what maybe sort indications, It about sounds like early the like? you customers there's look sort the just corporate conversations Can talk

David Schaeffer

Yes, sure Phil.

prospects salesperson our force about reach So is per per XXX sales out to trying to day.

that also have of is. their actual considering older XX% the the had seen don't them they We've to that, Now sales quarters hybrid product connection increase productivity, seeing an outpace of heightened the a have to it, having majority From an smaller has ago seeing engage, And customers' that's to many customers seen for conversations, office. XXX-meg the planning and from their our product. gives around levels. activity flexibility. the over been realize of rep force, we in XXX-megabit We're to bigger target churn companies a of in continuing is what overtaking begin the some the several willingness most the but with We're X-gigabit who return model, Sean pickup adopters commented that early more in growth. corporate.

a ago, return you if this question there five had clearer think asked me much to or to I was office. weeks six path

of lack vaccinization either the and think reevaluate plans. Delta pause to has the ubiquity caused of emergence or I reopening variant the companies many temporarily the of

historic a there consensus it to that the the is them to after next X, improvement employees some watershed corporate aggressive perfect where in is in or event. accelerate rate. Day, growth. kind the over and is of confidence the we've and reaccelerating visibility. vaccinizations, think in seen I But and return growth value to back I going quarters moving a that those more be even there'll general road. of does corporate gives being think, had which And seen quarter I greater around I appear companies revenues rate then, bumpy a therefore, mandatory hope of back It's be dollar three we Labor decline corporate should that sequential that we've that, wish improving, we office

Philip Cusick

up mostly West as that finding on that thing slowdown the sort one Or you The in is or there? is - of office, backing return well? are follow with country Coast, East Coast? I that off to Can center of the

David Schaeffer

similar I now, they first adopt jurisdiction much have would markets to the hospitalization under the control Texas, Florida, been more highest go then And for get cautious. seem rise. in those seen rates. does L.A. to had us, for and volumes be indoor and aggressive Coast There vaccination highest to Francisco are more Coast two case a starting reopening. that East it's Ironically, are about West as sure, states Yet hope they'll was rates significant type that mandate. mask coastal which Coast. the to major policies. say an San We've East was

As over those indicate all Biden - for of States. two President United indicated, states cases responsible are X/X the in

it disparate. So very is geographically

Sean Wallace

between want firms that some also doing said. And XXX% what more Yes. a Phil, are services are the very and seen much to just bifurcation go financial companies that tech clear services. Tech back. It's We've are to flexible, companies add Dave to that. including financial

So bit a obviously, the hybrid. San is little Francisco more

New City, a seeing more lot D.C., York XXX%. Boston, we're

worst and a also releasing take-up I'd at have of we subletting amount office had on indicate very I people - of conversation - The seeing KPIs on to the other what not might are looking the work. indicator their coming one lowest broker - normal. had add XX and sort not back upgrading of networks. getting and is the the They're we're back to thing clear to things companies these and with focusing firms we're getting back getting they on the there, things And focusing it's a that they're space. the that that people

that so hasn't into be yet. back. is really for there, but that entities haven't some come that obviously opportunity big seen space our of we us successful that's we very that new think as been a will giving come up, And force sales as And

Operator

James. Your from Louthan Raymond next with Frank question is

Your is line open.

Frank Louthan

streaming And the getting getting? you've you're mentioned are pricing Can how you're to you comment a the in contracts? your those What little base? is bit services terms relative the on -

David Schaeffer

Yes. Sure, Frank.

most contracts remains million majority forward. commitment was his X,XXX come and that approximately to of renegotiate those Most three to Sean referred common our revenue customers NetCentric from The contract actually the our That connections going years. term. of does incremental streamers. the of Cogent remarks, in do So $XX in that

an continues to commitment said, to lower going "Look, We volume, greater And you're the which in "well, I company kind average identical the that one of fall companies. get the longer had is streaming a you just if major XX%. could they was at price far of streaming have and make U.S. about So call to they I offered the with we're for exact international a pretty commit week said, I too the price." the that model, volume, to price same volume looking to transparent higher price behind pricing. and as of today." the pricing the your the curve a commit pay Our terms last

but the that maintain low bounces indication so which of and per I'd the those competitors, to our how technology points price us margins than capital drive is and sale gross in installed much competitors, expand our both make most XX% and we The to new lower We're is that. You to both at where Many deployed. XX%, ability price side this we the good we expand recent the bit final But intensity at of long-term that streamers really around architecture are that decline that versus with also in That our saw compete point continuing, a because revenues of trend is the effective capturing falling about the chosen opposite commented margins. the few overall, base the concurrently advances in have more differential allows we've XX%. quarter, on we and margins. of exact at declining on market, about architecture companies have a quarter-to-quarter. compressing average of

Operator

with from Synesael Cowen. is question next Your Colby

Your open. line is

Colby Synesael

once. at all them ask just I'll

visibility was start down difficult, actually saw variant turn off too in First what bit with you or revenue the sequentially. Delta just as still have that, to X% if it to when better corporate than particularly A I'm about you little positive we could the emerging. if first that on on-net, curious it's quarter. think

a metric the Where over quarter. we you thoughts bit Secondly, think little in quarters third, the in several think next fiber then just has as do terms to And that, quarters. been, your think, purchasing you what what targets, relates impact inching the that million going up. maybe to it I how your spent, it there leverage saw I $X.X them bumping to continue said previous you in maybe because versus trends trade might And up dividend forward. are that of ability

David Schaeffer

questions. Sure, very Three Yes. good Colby.

growth, trend all, corporate First of you We correct. to that are on-net is regard to continue. sequentially. It going is with think improving of improvement

of being of We not kind our an also we pre will environment happen, corporate that like kind we on-net be I exactly if X% full kind environment, back business. that occupancy return am sure. to of When and a to sequentially that existed in know a will grower pandemic,

perfectly to a on that are office. corporations. not not is visible we to path to But return perfectly linear think and path I

a it's we two in don't would have the suspect until three next visibility couple over the to anxious As approach in Sean office. just different get has mentioned, slightly think variant another turn But I we'll continue are positive layer tech improvement And to into companies quarters business. delta say, the of to predict law injected yet businesses the see uncertainty. quarters. But are taking whether employees that back the I of rate I growth than firms. quarters,

obligations debt, When target the into has the our to or We comfortable Now volatility our volatility of well we big injecting of XX% revenues decided that portion due leverage feel and are per leverage ratios on increase Europe. into our of those come losses U.S., from to U.S., with outside we the authorized. European unrealized gains a distortion. real of understood the were utilize in hedge earnings our There, in revenues your that are we a portion of Board outside touch as share the numbers. has leverage our as currency level of do reported revenues XX% let we fact me The the the leverage questions. that not

strength the the pandemic, the at underlying We future, a sequential even to XX growing the have at pace. allow continue us think business, into similar with dividend. point, foreseeable the dividend, should quarters grow of of And we the this to

Sean Wallace

note, really can were issued at mentioned, I X.X%. just thing. one We a execution. add more $XXX happy the I million Colby, we as mean, with Yes. Dave

math If maybe just might get it's and we're eventually times calculation phenomenal evaluate going will going we probably in we gross leverage. are really we times. But that now, the a consider to But euros. that for We X target future. execution, be around X on to the

David Schaeffer

not Colby, question, do your fiber then where are last data purchases. We built. centers on And being control for

data seen markets. We in proliferation some and center have of more in even a newer international construction extensively markets and

are centers incremental out to run light markets significant in We vendors. have it multi-tenanted? those when data data But around often been look that And or carrier we Is about Now data by we or XXX of newer there occasionally, the new fiber we large We are And world. driving what's use rings. have? center, those that's against to fiber purchases. expand. about to centers a look credible-enough enough a series Is close XXX is it are it So rings we these neutral? criteria. that that already have enough a map operator we

spending. supply last has increased - XXX incremental suppliers, the XXX So that vendor drove chain XXX our last or fiber up different quarter, to from and

come start look to range more down of on dollars that comfortable I think as in we're a couple we at be back pretty should the drawing and board, a historical quarter. million that, fiber expenditure what's of the

Operator

Piecyk Your with next Walter question LightShed. is from

open. Your lines

Walter Piecyk

to want back Phil's go question. Dave, to I

your or six five think the growth. I asked you terms gotten question been of have of you would kind had mentioned answer in like different sequential ago, if that weeks

within this sequential did talked a to And said corporate to at I the business. at you in to ask that time, think, expected get quarters, X% think be you X.X% you the to growth conference. Phil few about, you specific, I

it of to you Am sounds you're hope now like that properly? just So quarters, understanding within couple get saying I positive. a

David Schaeffer

over in getting normal, positive Based the each to in of decision-making many of X% the customers of So have delay in to people's more and are am of you don't my that on growth. saying growth, weeks, decisions, process the companies' all, returning office. rate back process. past said I to caused interjection what those cautious perfect comments. prospects first And their change variant two i.e. visibility accurate corporate sequential X.X% to Delta I to the has is, I of six rather than

per on in Now had get Delta to case the to volume go of death worse. government officials about U.S. at. And seen XXX,XXX the is day. from that's I've that triple kind rate the predict already variant will the it based troughed continuing XXX,XXX some where

or has had why ever additional again, returning I injection business So XX epidemiologist. of predictions, an office. the confident I and slowed the to variant's with have a of this me I operated recovery sequentially And as years tell am corporate growth pandemic bumpy people but we And to in the not prior that as that be from it's we the recovery. jolt you The Delta told make now can't linear consistent concern going and strong. that's if for it's the a I'm that can't kind being exact bumpy. know this system, I to

little So cautious. to for that trying reason, I'm more a be

Walter Piecyk

Understood.

So be at reference away. why Delta, think ones least I month - was That's I inflection your earlier the seem this on in worse. call. getting to that Day see, a as a Labor And from numbers daily quote point the

David Schaeffer

them, planning are many [indiscernible]. companies, is have when that, indicated significant they surveyed, and So for date a that

Walter Piecyk

changing Sorry to But like talked Dave. interrupt how quickly. the are fact you, about very that things

at it in done look someone week two a a period sure maybe is ago, today. not I'm might some how time, So survey at or

David Schaeffer

back current the here. variability question, And data end a I available. again, on deal Right. geographic Phil's of having to am companies pickup repeating there's still some office. employees And the most great that's just the may come up

that for will therefore, vaccinization be because back and, their may rates reopening, more in the put country portions the infection have think more Those were have place I aggressive plans those rates. be very that death and high maybe rates, of of So been in higher the that pulling infection parts followed. country closely lower of

together good We done underlying things, in that by or rate guidance. And of the what data. responding and specific look to what recognized to look number our resume nationally trade opportunity and surveys data. public then mentioned, sales their revenue that come of the a for prediction. the Sean funnel, broker I'm But Two, on from very look brokers third make we to sees we guidance again, best So that governmental And the still those us finally, Cogent feel not organizations. data force to party I large three pinned to that's at all put enough business. down going I footprint when office. survey I'm our quarterly studies into comment market strength of the can subsector to back the is businesses corporate growth get in at

multi-hundred-year if to occurred back you going because the around urbanization you don't the every Now just reversal office you're believe a all REIT that be never world. of of the they're investment. Cogent's a to And that's go probably good has trend bankrupt. should come not office, to think shorting developed I going and

Walter Piecyk

Dave. Got it,

do? terms Have supported SDN to of they in but to moving revenue the historic seem some talking to what Tom running on up Rutledge was they're they've growth move in higher those think them terms of of seen and impact so you've had much competitive from kind I can no But probably That impact up some Charter Could SMB, you revenue offices to you at on point of and growth historically, upgrading So customers said that already you in that business? any unit you - all I only been seen know obviously was growth. his of upgrading your in to call this the want also by all? be there's your X% I of fiber. enterprise. you're slowing, say at helped And revenues. - to

David Schaeffer

telcos. Spectrum off-net cable we from other and So companies from purchased loops and

for and fiber pay on not on-net generally They times that of that customers small they fees. a from footprint, not comment, what cost a your not upgrades, not corporate now Walt. really has kind fiber expend the of to are license is two and therefore, segment footprint, some upgrading even money rise our are install. XX-gig, around competitor. their conflated, the your as negatively They expand do there XXX-meg do your marketplace. is But is So or pre-wire supplier. points to VPN different competitive based to impacted One they we as install have - corporate In To not on question, with some secondly, among - and of you the Sean Cogent generally are question significant they been mentioned, do gig, business. building

two technologies. mentioned is one the that SD-WAN, You of

make And based pre-pandemic. other VPLS. can VPN footprint, on The symmetry, That replacing on The of would MPLS. those that is cycle reaccelerate. our on technologies. both That product was to cycle. architecture at offer. Charter's, replacement our We very versus is alternative, based that superior feel are based network vastly connection underway paused location. It to to Both a what any non-oversubscription replacement our or now second offer confident cable absolutely beginning our I ability our allows sell provider our support the pandemic a to same Cogent well

Walter Piecyk

X.X, this times, of to three. net asked then there order leverage on from, whatever high before how at And last expand I've QX debt continue the going balance question growth? limit year, in you're dividend I in guess, just take think were to which the it. the a sheet leverage under is last is pay you and Got to up to I

David Schaeffer

range, by that have be been will we we've that very a range Board reevaluated the clear again, appropriate. So and if

on flow. our cash free are it We growth in basing

from the portion base leverage our the flow, the in of think know reported know lower-cost came the fluctuations. euro. of the cost raise ourselves holders. for cause. sufficient capital our job, We due and currency we look Finally, control don't of capital, asset to sufficient capital And we the of we of increase I of answer Europe. benefit always But that, a to as Will the target? cash is rented equity avail we to get at the lowest don't big unrealized would we that stewards to loss that appreciation have

Walter Piecyk

where what on five my target refresh just point? you is? the at or can No, this memory times like the you'll go where's upper at Is - it end

David Schaeffer

So target to net. leverage net times we X.X X.X of a have

Walter Piecyk

the So high you're at end.

David Schaeffer

we the business. were in from that And currency utilization we in And a approach. it's if above you long-term increase not it's underperformance the in we And median. because We get coming cause also of We the leverage. at different of measured coming than look remember our end when it's if take to distortion, I from efficient the below. commenting the We're balance being sheet. will, were higher

Operator

question next is Your Del MoffettNathanson. from Nick Deo with

is Your line open.

Nick Del Deo

on I your that normal than Good morning close on - to to guys. prospects especially regarding those to of corporate ready there have volume talked front? that they'll is just doing the rather it calls are you that different buy sheer salespeople does guess customers the catch opportunities when than ready Or anything about them you and such to letting slip? businesses side, is be the those stay trick

David Schaeffer

keep the sales been activity health has that remote remote challenging the really parties because Yes, other necessary but on well. so doing Nick, was in I have it the as protect was to force, a it admit, And the to running the environment thing challenging sales side to people of were force levels. a

see the of as to to partially in a IT offices. So, support return in There's to completely departments companies starting work office lot either preparation we more the staff engagement. those or

because questions the the of that's office to workforce for department the leading substitute yet, of back outreaches. kind a salespeople has the a that general IT are actually of There's returning. trying come from to indicator good one So no is, gauge customer

on-net some bandwidth. once they talk month therefore, reasons. for the IT customers, with That's we And is touch their have of anything a very prospect building a laudable potential not to enough take One, in don't goal we more Two, Our need if is been potential salespeople. and base achieve goal see to customers just the to changing couple don't have to do or a of calls. every requirements. willing an it

have function, installs now couple a not activity call quarters, And capita, Walt he We capital. asked, in question nail over per seen, was is office, of to to the per trying translating of to down that me visibility. you the to don't know that a the get I which exact It's ramp. increase last it's have gradual pacing return just into higher step an

Nick Del Deo

at that's presence, got Okay serving helpful. of a there? it like presumably there yet actually Is it, an And overseas wouldn't country, on it's have a hostile be don't early such other and to to markets remain on-net it's India hurdles maybe that where one screen your having will Cogent. Indian that Europe customers by foreign NetCentric are or adoption, preferable carrier radar presence kind look stands when on I you streaming out big in a something your

David Schaeffer

So is we the The Indian on India. the Today, provider Jio in India is very bureaucratic the fixed Indian license not vast very are which of upstream Remember, line. operator radar population our and mobile, screen. largest lengthy. is purely process definitely to primary is majority the

still violating Practices I We the Russia. tried a have we license. Russia eventually on get in that review lawyers get up, still a I Foreign of actually based least away for The a could few license will years phases. because same without probably a serve over in a gave ago, was We're applied to it's not But the Act, at our talking clear year believe it India. thing to Corrupt and that one We we think year in ago. license a little

of in carriers, Stockholm just we but it or it, them or most our customers, in Today, we approval. we're waiting we're think expect it's serving serve Frankfurt. Indian [Marseille]. imminent. do license we most And So Russian don't of capacity, but Helsinki the but We've do cable that for on identified I

Operator

that Mr. I the turn back will Q&A for Schaeffer conference for the to Dave today. And concludes session closing. call

David Schaeffer

entire We times. thank to your appreciate answered Bye-bye. your we can and Hopefully, safe, team we I in want questions. these much. soon. delivering other Thank everyone. each And support. Cogent to care. Take everyone stays very all see like And the you I'd thank hope for actually difficult

Operator

conference for today's concludes call. this Thank gentlemen, and your Ladies you participation.

Stay disconnect. safe now may You and goodbye.

Cogent Communications (CCOI) 8 Aug 212021 Q2 Earnings call transcript