CCOI - Earnings call transcript Q4 2021 | Cogent Communications Holdings, Inc.

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Operator

Good morning, and welcome to the Cogent Communications Holdings Fourth Quarter 2021 and Full Year 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 Cogent's 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 Inc. Communications Chairman Schaeffer, Executive Cogent Officer Holdings, Dave go Please ahead.

Dave Schaeffer

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

and continue we with to our out efforts. of First hope they thoughts that our all, to I'd like go are remain safe colleagues their to and able start Ukrainian

Now results. for comments on some our

the of and business shift seen We've most to the This climate. activity, global For focus has plans subleasing the which continued data prospects leasing back Despite office consider corporate increased Cogent's of fourth offices. improved and that corporate a in US indicated signs includes pandemic-related greater to activity of economies large efforts developed their as of businesses an have below broad the we improvement by use an activity indicates reopening reopen the our improvements Omicron and and and our to these and services corporate remains building sales new overall of as back another plans a work variant, customers the and many delay notice result quarter in averages. to introduction funnel, and historical beginning did business are companies upgrades. in

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

the quarter sequential X% our by basis. on on and sequential a growth grew in For growth the quarter, traffic previous network and fourth accelerated year-over-year XX% increased the to X% from sequentially

million. higher-than-normal a For full of revenue $XXX.X experienced reduction a on revenues X.X% our X.X% slightly increased in primarily XX%. quarterly $XXX.X We grew by traffic and our and impact Cogent GAAP due our We requirements orders we turnover in year-over-year sequential On per X% foreign X.X X.X% workforce the to the rep. from orders to in modest month force quarter. the have of revenues primarily sales to due year USF declined and per In decline implemented fourth of quarter. X.X%. million of our full-time by basis requirements year-over-year in taxes installed US productivity equivalent X.X month in growth annual saw to exchange quarterly return our a our the experienced force quarter, sales network basis, and to revenue boosted the per at vaccinated our to growth On currency the by XXXX, installed entire office to constant sales

our growth continue rebuild order strengthen the identifying incremental our We and in and salespeople team success aggregate continue to associates. sales in and to hiring have in sales

We continue of growing number markets serves and to operate an extremely a efficient network, buildings. which

able Our network continued growth cost. handle is traffic a fixed at in to

margin, our growth year-over-year margin as adjusted. EBITDA non-GAAP on profit, margin experienced EBITDA profit have gross non-GAAP We and gross a

non-GAAP Our million. X.X% to by profit increased $XXX gross

XX.X%. to points basis XX by improved percentage margin gross non-GAAP Our

margin Our X.X% full by our EBITDA And million. increased year year-over-year $XXX.X a XX XX.X%. points EBITDA for increased on to basis to basis by the

quarter XX%. in was fourth margin EBITDA Our the

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

to January Board And compared of will return We has to being a as XXXX our we that as $XX.X the repurchase quarter through $XXX.X million buyback fourth our for XX, for of of December our our program, return be not is XXXX. any continue shareholders the available year XXXX. shares treated under did dividends and stock approximately capital. authorized XXXX, to have during buybacks which of capital This dividends in Our XX.X% full XX.X% year as were million. of of treated

unrestricted and operating for cash companies and is is Holdings total $XXX.X Cogent or the Cash at at of was dividends use cash million Our available at million our $XXX.X buybacks. million our That immediately cash are $XXX.X consolidated year-end. held at year-end.

XXXX at X.XX% slightly leverage X.XX. and increased net Our gross ratio third year-end from ratio from in leverage decreased to the X.XX our quarter to X.XX% of

under Our consolidated our indentures X.XX. gross is leverage as calculated

Now for a comments couple of dividends. on

per quarterly XX.X%. per dividend has generate XXth Board quarterly our to of quarter. regular increase dividend quarter, in the in $X.XXX sequential consecutive Directors to quarterly ability business' growth reflects of our Our on our which This raising represents opportunities our ability organically cash $X.XXX on per $X.XX another to share rate dividend by increase our and dividend continue share to from investment per flows increase strong annual our an to grow decided

stock We now of returned shareholders via combination dividends. buybacks a our over have $X and to billion

are approach continually a committed that returning and disciplined to our are to maintain We we increasing to capital capital. shareholders of continuing return to

of a Now give language, I'd read our like results. review Sean update and our business safe to little few COVID-XX harbor impact some operating a the on on

Sean Wallace

and website billing the be earnings to use on financial statements other will the filings to future pandemic customers. their no during facts to work that companies, with the on want factors number all is will Cogent to this their morning IT impact remains. by these this amount and take and on our cause statements. offices. we differ remotely. the uncertainty to our to you is our for could times. more actual contractors, significant and maintaining how forward-looking the during differ. Cogent staff majority do upon we I a continues very in the entire and upgrading challenging historical employees workforce non-GAAP what This want are economies hard may of statements. work scope governments network, update work and COVID-XX serve many results unknown, Canadian actions ultimate their our department of which in responses our returning call, workforce call of engineers, or reconciled X, of www.cogentco.com. that update the accompanying our in the and Dave safeguard measures customers continued these we in business to We thank to thank on US The who employees, of March risks of taken pandemic to the earnings conference front pandemic that continue expectations. measures COVID-XX. to may and a new the and be and around materially. I and so undertakes pandemic the release, may Please continue obligation Cogent GAAP our measurements to based duration to installing intent, are forward-looking it you, grow will field our governments employees the also and know revise particular actual our to other everyone. and refer that pandemic by find and for If collection our lines, and to can These our our impacted safe believe our impact not world. health. and the offices sufficient be volatility The the have forward-looking our These Cogent statements at into the bring that information world. back We response is Cogent Effective Quick subject continues to Like call posted and current forward-looking are and Thank good belief not other statements uncertainties our includes on made results SEC on

this restrictions office corporate buildings, our affected that primarily find also no assurance the customer Moreover, will for which business office customers, may may and falling However, workforce space our be We adversely we may the sufficient pandemic in to our central have results the and base, operations adversely be served government related is affected key our in continue. on-net, our as that protect of our by multi-tenant demand employees. be future, largest districts. commercial in

not June We for a reduction to impacted smaller also certain as the companies the network locations. and see Access connections services have are shipping in that's offices we those may equipment of either additions Internet companies office from office by Direct We or in purchased as or installation customer purchase Virtual of continuing quarterly and Network report of for other DIA, our quarters the their customers These XX-Q the disconnect also seen delays for other in and Private XX-K satellite locations, certain elect operational annual detail detail our Form Form March XXXX are pandemic. will XX, we on described and several discussion, Throughout more in September and review XXXX highlight XX, this in reports trends. greater ended in XXXX. risks on will highlights XX, operational XXXX, statistics. I

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

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

Dave Schaeffer

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

number includes metrics release a helpful of our press find understanding performance Our you in that hopefully historical business. the of

our long-term Now, overview of for our a of bit targets. guidance expectations against little

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

XX% rate target. multiyear was revenue constant currency long-term a Our growth approximately

Our to be be and specific intended intended are multiyear used and EBITDA not annual for long-term quarterly guidance. revenue targets or to are goals

recent Our our the long-term below COVID-XX to business. due are on rates, impact corporate results of largely these

Our corporate quarter. at end the business, XX% which our represents of revenues the of

will tax had from by rate our of primarily changes rate for to declined reduced be rate in quarter applied third The X.X% Fund the sequential the VPN we The of cannot a declined X.X% year-over-year quarter XX.X%. the from XX.X% revenues first the revenues. on quarter corporate USF XXXX tax tax future on revenues. our USF quarterly fourth US for Service and by Our changes predict quarter rate -- to $XXXXXX impact fourth rate the of are of taxes of and These Universal negative the USF XXXX, XXXX quarter services. decrease of the corporate a from impact our

of third XX.X% of and sequentially on year grew business is represents NetCentric or NetCentric and XXXX. half of increased constant US. basis from year quarter revenues strong impacts from sequentially X% for the X.X% fourth and experienced on-net outside fourth from currency another full And the by XXXX. Our NetCentric the our the that Volatility XX.X% rates basis year-over-year XXXX. the primarily the quarter a quarter our business by of in On quarter is of a by full XX.X% XX% from XXXX over business of which exchange our foreign grew business

Our provide by NetCentric additional details some business now quarter. Sean grew can And our XX.X%. on

Sean Wallace

Thanks Dave. Good everybody. morning again

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

services their but into do corporate to or use the products bandwidth not customers bandwidth incorporate Our businesses our that they sell. support

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

streaming include service and amounts NetCentric customers significant connections content. us as serve well consumers who by in of type. as carrier-neutral centers and ISPs buy content the customer from companies distribution Our and bandwidth data of Revenue providers

businesses of experienced results. Our two types and different customers vastly

year full our corporate X.X%. by XXXX, declined business For

business off-net by million XX,XXX rate quarter This activity declined a which corporate district X.X%. declined We average. the year-over-year and performance continued quarter in sales market vacancies NetCentric lower and in business in experienced XX.X% business a On million customer activity. estate corporate for the year-end had has sequentially new was XXXX. of of customers quarter corporate However, customer A to but corporate our at turnover decrease trend X.X% $XX.X the our third our Revenue our by decline reduction central continued continued our of a -- increased the on weakness the correlates fourth leasing seen is growth our business commercial $XXX.X circuits. and new momentum a network in from with of by X.X% the our of than our decline in from of gross to XXXX X.X% in business versus this basis historical sequential connections over X.X% real a selling which for positive a decade. best

number local we to These million of ability ARPU multiple North position our these our loop overall footprint our and off-net gigabit to off-net base off-net comprehensive grew on new growth costs of service X reduced XX%. pass improving our the enhances Our fiber basis with revenue circuits off-net serve off-netX The corporate customers On off-net in lower across growing marketplace. which while drives America a our savings by circuits competitive customers. year-on-year over locations. corporate buildings of

fourth our our network earlier, We third the fourth XXXX. mentioned XX.X% increase international was and NetCentric of NetCentric customer connections of revenue to traffic As from full X.X% year increased year-end, XXXX. Dave year-over-year an sequentially and in business from our streaming our services by the and $XX.X NetCentric of at to contributed Quarterly over X.X% customers growth million customers NetCentric million by growth from continued had for $XXX.X on quarter XX.X%. in XX,XXX quarter. an quarter, Revenue increased increase our

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

due revenue volatility usage. network by NetCentric larger customer exchange, result and by certain sequentially primarily type. growth and experience Revenue traffic. related to in the NetCentric seasonal of can our Our connections Traffic grew X% grew increased XX% of size a impact network to factors, year-over-year, and foreign primarily customer by

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

million of year, was full XXXX. on-net Our for increase full year $XXX.X the revenue over an X.X% of

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

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

cost Our $XXX.X from quarter. for XXXX, off-net the X.X% our incorporate declined new circuits, we and off-net loop the introduction local full of sell year revenue the our into lower we the which savings these lowers off-net million pricing of by a this When base of into prices ARPU, our of over year was full customers XXXX. X.X% decrease

Our off-net increased sequentially and year-over-year. customer connections by X.X%, X.X% increased

with customer primarily year Our X,XXX fourth our quarter. price the base for declined The third by for trends, of connections per We buildings declined from average ended XXXX. contracts per our Pricing our are fourth of customer customer contracts both declined off-net our quarter XX.X% predominantly per XX,XXX new in of and megabit quarter customers. The over new megabit. average $X.XX, North quarter XXXX megabit and of from buildings. Consistent the the declined installed base for customers off-net the fourth installed historical by price These by X% for corporate off-net our quarter megabit XX.X% X.X% America. this the from are sequentially off-net for decreased price XXXX. by average $X.XX quarter in serving and per fourth customer to the to

lowering gigabit larger in at price connections customers, price our continue to change greater our we per ARPU. gigabit our XX have selling the of changes As connection. XXX to succeed effect this gigabit, megabit rate connection a in mix per XXX change will our and the than in

off-net ARPU decreased Our and sequentially quarterly our year-over-year. on-net ARPU decreased and

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

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

costs We Churn more to we our us this reductions corporate in in are competitive ARPU time-based of expect customers as These of passed are off-net that our continue discounts local and to in volume and our making will order market. rates. decline lower the cost take to loops. advantage on

connection stable. Our sequential on-net were and churn off-net quarterly rates

X.X% quarter. unit on-net this churn was X% Our quarter was rate for last and

to upgrading indicated rate primarily that Our a and our off-net unit customers works turnover, quarter. group, MAC orders. us. order NetCentric considering was majority X.X% of to or pricing orders to of to with dedicated from are the not of who them this reduce services, have the commodity MAC these unchanged for their in churn or move, these add, term We us. to last with and/or our their customers contracts related to which employ are NetCentric Due purchase discounts In the change our NetCentric NetCentric vast we terminating customers. additional services customer retain sales quarter, to nature they may offer or services to order induce extend

services, include resetting in During EBITDA, and This term XXXX for timing annual cost level each of year, customers of into the customer the took impact and tax beginning flow States typically expenses periods CPI potential taxes from Earnings any that or our include the in account contract long-term our our to the quarter of of is releases. at payroll quarterly benefit connections. total our our over United our increases. costs, million. EBITDA certain commitment vacation SG&A press EBITDA and that increases, CPI and the Cogent contain advantage increases. contractual volume us NetCentric all factors revenue CPI our Most our of our share. per over audit earnings reconciled discounts of with annual to consequently contracts of and our annual increased sales living, obligations and entered $XX.X provisions seasonal meeting cash plan cost Seasonal on of by our operations

share respectively diluted $X.XX, basic XXXX. the and income quarter Our of and and compared $X.XX $X.XX $X.XX and basic of for for diluted per per share income to the quarter were respectively third

per basic for notes our Our on losses share contribute rate rate dollars was diluted gains income fixed and income swap our translation and our the US fourth non-realized loss the quarter Unrealized our Euro as net of into gains losses on well and as loss the interest net share. XXXX to $X.XX of and in and variability consequently, XXXX. per

currency impact. Foreign

Our Mexican, of our and dollars quarterly reported Asia-Pacific, was in Canadian, XX.X% States revenue and US operations. to about of of X% our related American, African United of Europe South this were and approximately revenues. outside were revenues the is quarter revenues total Approximately based our earned XX.X% in our

our obligations for on our notes. our have not foreign entered into We Euro and hedges payments revenues currency including

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

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

year customers X% represented our Capital expenditures. XX quarter for the full both top this of of Our revenues and less XXXX. than

million XXXX. were to quarter of quarter XXXX of expenditures and million $XX fourth quarter $XX.X million capital the for third Our for the $XX.X compared this

shift to equipment finance network for our our were the XXXX that expanding investments ensure Finance new million levels schedule. expenditures payments. and investments, expenditures Supply capacity, causing us inventory were satisfactory network of network purchasing reflects and to year scope increase building lease XXXX. and have anticipatory leases of $XX we investments designed equipment. in in The our and geographic, $XX.X full our uncertainty chain Our million is capital capital

with to for XX multiple IRU Our typically long-term dark a after options initial diverse XX longer. These terms have leases years obligations group finance or and lease include fiber initial their of suppliers often term. are leases renewal of

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

include primarily were in Our lease the for finance and markets. million for dark principal quarter leases fiber payments $X.X international

principal were the payments million quarter the for quarter XXXX fourth of lease for Our $X.X $X.X million finance of XXXX. third and

$XX.X principal payments $X.X to million million compared lease $XX.X and year finance Our decreased for last by were million full year. XXXX

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

principal expenditures year payments our this lease $XX capital year. finance with were compared million last Our operating million and to Cash flow. combined $XX cash

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

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

full Our year ratios. XX.X% for cash flow million compared from to Debt $XXX.X and operations the $XXX.X million increased for for year debt by to XXXX. the year

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

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

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

above our net our COVID-XX with comfortable unprecedented are of slightly impact being due leverage the to business. long-term range on We Corporate of

million gain each US Euro or to $XX.X and this was million unrealized on gain loss loss end our was foreign unrealized to share this compared the year $XX The quarter million and share. fourth exchange Euro for an or reported XXXX. an Bad days rate. the and $X.XX month million last share exchange year quarter $X.XX USD our of million debt on of exchange of million per Euro or notes notes receivable. per using unrealized accounts on sales $XX.X outstanding quarter last gain unrealized $X.XX dollars foreign Euro of month compared an at are XXX end to notes to USD $X.X Our converted in unrealized $XX.X The per

-- for for collections expense excellent bad debt customer the the cash Our quarter. and were results year

full as Our percentage year. a expense the improved revenues our and for bad sequentially of debt

for was which Our of for the bad the debt revenues third was from XXXX. expense X.X% an X.X% quarter, revenues quarter improvement our of for our

expense X.X% year our of of was year X.X% XXXX. XXXX, improvement debt an full full revenues from for for revenues bad our Our

improvement for for a of two outstanding day but sales or receivable last the an quarter, was accounts Our increase one XX end I days members DSO year. of of from quarter last I'll worldwide to slight fantastic the days days from collecting team want worldwide our our job recognize serving do customers. for our it to thank collection that, turn back to billing and With a Dave. and continuing in and customers from

Dave Schaeffer

now and Sean. I'd I NetCentric trend. to some earlier, of service of business, details see the we some the force our strength continued that In our continue have Thanks, business. Streaming in Okay. on to as NetCentric year additional aggressively trends revenues of sales our that XX.X%. like markets, provide targeting performance full are strength are business NetCentric beneficiary been stated impacting we corporate had our business, this increasing with a overseas providers and

We and a support X,XXX data growth network connected key global year-end, to these basis, are X,XXX to to Cogent streaming our highlight network. capabilities to our on with we for in globally and carrier-neutral At positioned a centers centers total centers our and XX characteristics. of connected some of like data I'd data

than other networks and to improve This as service optimize independent allows We quality in reduce better services. of our of by to those data measured are centers carrier NetCentric more the customers third-party connected breadth delivering coverage our latency research. their any

Cogent network the year subscribers networks. telephone over At and gap from increase we we cable X,XXX a world's the companies, This of several widen with per broadband years. adding X.X% mobile next the companies, directly connected XXX This vast allow phone to operators, provider's earlier. that, a Internet expect of our to phone over to as majority our centers other providers users. will approximately carriers carrier-neutral directly mobile we collection anticipating and other are and is year We service access year-end, data lead

of Asia to as programming Africa. the this more segment. on sales believe Our of connectivity this of we and We focusing predict mobile year-end, that phones the largest us and professionals industry had be on will an Pacific region group sales focused more this entirely professionals experts mobile At NetCentric operators most in particularly seasoned a one consumed market. sales for sophisticated force and advantage is is on in teams market the XXX in

Corporate in business. some for trends our Now

Our focused North the major districts Corporate office in cities. is central American business on of buildings business multi-tenant

positions rate. have us its believe well to their we return office, product growth our reaccelerate to begin business businesses this will employees Our to and offering as Corporate historic allow to

performance in seven our and data, into resulting moderate. proposal And declines districts. we a activity Corporate Based time. we leasing our office moving customer, will and occupancy central impacted has Cogent over the buildings XX% opportunities. vacancy are moderated networks in resumes have quarters when that win the in we the been example, to therefore encouraged buildings industry these the corporate the by this submits we are will that segment these business a of optimistic new begin past a declines activity their as monitoring the the in declines these in are For rates of on pandemic, and return to tenants we office new also Typically, connections designing win disproportionate share commercial

choosing XX our or of Corporations these reduce customers seen increase to one all create Another data migrate are infrastructure now XXX-megabit to Corporate port leverage their latency. and their better of their In order between centers from to exciting corporate data trend many circuits we to locating locations and this to corporate increasingly are legacy infrastructure, critical centers data. carrier-neutral our some circuits networks. store as increasingly corporate and size product demand gigabit gigabit have in customers is also the for

end locations and breadth these over differentiates At gigabit capacity. of was multi-location America. with the provide X or levels million one marketplace providers four able gigabit of to North fiber to us locations cannot off-net of served the ability deliver provide circuits Our coverage in across this XX versus XXXX, service speed Cogent and who to other service

one connected billion directly the to space feet network. the Cogent of to is square that approximately In addition office

Now details back performance. sales US in-office to completed on we of our for status. their some XXXX, entire transition the force our workforce of and In October

reps sales we transition to those part of and of out transition, office return Cogent's As force. intended sales this underperforming to identify them

Year-over-year, transition performing Due decided On and due to period, our experienced a in sequential office the the fourth by our of force XX or quota-bearing rep the quarter During at head sales decreased our to head to to combination two desire not this a return reps XX.X%. return sales by lifestyle XX XXX to of did company. we who sales to not were be count level vaccinated or basis, higher count to decreased reps some of rep end. these quarter. a factors, turnover not

reps continuing XXXX of and hired that increasing manage the our and in an Despite and as was the turnover have around resources reflects X% our sales X.X% sales are the encouraged continue our sales force train aggregate quarter This month. in Overall, opportunity force of to growing primarily segment. unprecedented we our to we greater of our rate sales in accelerated sales by Cogent sales per long-term mentor a to divert number purposeful rate decline by force to hiring a identify we was is environment and our month that Corporate hire Our sales and average the size force to optimistic are NetCentric of new per an related return sales build into we of reps XXXX. salespeople. office reps turnover our to opportunity to and Corporate volatility, uncertainty can shift in offices force. recent and segment greater versus We

has Our full-time reps. our It fourth the in reps by from in to encouraged commitment, Corporate quarter operating was productivity slightly force performance Overall, our what environment XXXX. unchanged of drive of are the quarter been quarter X.X third sales very professionalism, the at from X.X equivalent for of challenging a business. XXXX of we the fourth the X.X the declined

transition once our offices. We of the with are back encouraged to force sales again

about just X,XXX activity to X Our productivity. sales increasing are and remain with in their space. in workplace XX manage can on-net and of located billion Cogent serving we offices leasing will the in we In square small- business position productive reducing cities, environment the force in and a indicators about optimistic and mentor buildings and of key activities. market multi-tenant train office feet more located return businesses unique the indicate globally increase medium-sized rentable in return-to-work and that become Currently, sales North turnover containing teams office American central XX with better sales an our subleasing major the summary, districts

However, below these still levels. levels pre-pandemic are

We that encouraged return new that are indicated many offices have also months. office past has six over our customers are of leasing to encouraged they that are in XXXX. intending in we these And increased the to activity

mentorship coupled see of allow a the and as to continues more in normal to and We in to services US return our work our segment having combination customers our and work strong office us the our training we in the business to are where in These provide tenants sales remain to strength grow we office due continuing this to landlords new to fill trends Canada global that We optimistic the has continue among with are and space opportunity remained Omicron their of that business. surge in our will encouraged NetCentric our fade. sell environment streaming. to an can business robust teams aggressively Corporate growth as

share Our Directors dividend regular This Board approved quarterly sequential annual dividend. to a XX.X% by represents share. a $X.XXX in XXth $X.XXX consecutive increasing that increase our a has of our our dividend to increase

our to increase operating of commitment leverage, the the capital consistent optimism growth cash business, increase ability continued in Our about dividend the continue to returns our to our and increases to our flow demonstrate shareholders.

floor questions. the for to open I'd Now like

Operator

Please [Operator our Thank the line first Instructions] Raymond I show ahead. Frank you, James. sir. comes of from from go Louthan question

Frank Louthan

of back versus more your XX you. standpoint months from you average do the take at where think you you within think you how to give an a Thanks. within get with an some it year your are you tenure now the sales standard done dislocation end ago? And you of of will hiring with long then force. any of idea are do Thank had you us cannibalization and the to Can reps level [Technical – XX-year seeing the Difficulty] you've Great. and

Dave Schaeffer

on out Frank, Yes, cut cannibalization. you

your answer. that then you and If part could repeat question of I'll

Frank Louthan

out mentioned cannibalization take them change you moving is of ports larger Are it? the that any and with larger seeing up taking some having Yes, on as any you fewer earlier impact about call folks ports.

Dave Schaeffer

Yes.

critical productive. all-you-can-eat realize those connectivity on basis is Companies an So a environment our is work in sold having location. product making hybrid better corporate to employees a in that

So megabit of for customers or X gigabit out for payments XX XXX having seen we those have a trend trade services their services increasing gigabit those locations.

there of We corporate those an XXX-megabit to request customers And take product on have consider unless so, is we individual larger the a to will our to basis. electing services. case special also see new actually do on coming customers we sale these end-of-life

is no of As corporate a occurring cannibalization real in segment. this, our result there

ports. a to and size, the pivoting peak over Remember to the month. Cogent Having to And then use. predominantly their that the course NetCentric and the towards meet requirements. metered Now the sold ports trend utilization that larger to can on greater meaning level And customers growth gives is since burst helpful the based on customer larger our service have revenue basis. revenues our available ability are now having the larger capacity to surge more of The capacity capacity customers is generate their the XXX-gig revenue. to these NetCentric big over enough XXX-gig port ports

in our actually Now to pandemic never among of in question. new been sales force foot Cogent and the during Virtually the all had set a typically tenure your office. turnover hired hires, has

did of Cogent earnings not On trend. on many remotely this well call, transition hired I reps third into commented offices. the quarter those And

remained had to from our and the And up Cogent. As our of months months XX office to of back environment continue average tenured have in by under reps tenure tenure. rep who over remote this, be just with a and to our coming XX% been has productive going year-over-year productivity over productive result XX increase increased a

Sean Wallace

up Also normal? to going to get how back we're

David Schaeffer

office And in firmly we the record working we continuing. and successful believe record what and will sales been benefit that to is allow reps hiring turbulence the terms America flow had on the But even of in the That equip over to growing home. better in-office several North past see that and X force. the through reduce candidates sales the during to hiring us resignation added coming great from again adequate of will be our training is and an continue back force, of reps we of have to that now months turnover get those in March these hired we're

So levels to we think our sales force to below. turnover historic has continue even or peaked and decline should

Frank Louthan

much. Great. you very Thank

Sean Wallace

Thanks, Frank.

Operator

Thank from ahead. I go JPMorgan. next Cusick show you. question the Please our Phil of from line comes

Phil Cusick

Thanks, Dave.

into ordering? little dig like interest customers the can of What's talked in New but already, we Francisco? should the funnel terms think of bit How indications include in, coming sort York a about that? San about you sort You Does from more return-to-office? this of, that and look of

David Schaeffer

Yes.

at look is increases where customers rate. we've it to we vacancy correlated when highly So in lost

definitely In the our and in What increases we and we've in South correlation fact, best there is San increase like XX% footprint performed have to vacancy where worst. New continued with across in our growth Cogent declines customers. in the performance have Southwest seen very and Francisco York the and is places rates penetration

their as endemic decision both that going from Companies of companies to in are those an I to strategy, think offices. work they made firmly in that but have to transition to now are office environment. know they we pandemic return a environment solidifying hybrid many the have markets employees

and increased businesses leasing because those building that And to San seen an the and result corporate to in that in increase come our increased positive the is quarter activity surge allowing we think quarter, will activity in best not York. in saying I as And first subleasing to it to with the growth quarter and fourth growth see be growth markets prepared going win is our would new We're rate comfortable should less the corporate rates, XXXX. in than be customers. see of like decline the Omicron we've in should peaked of Francisco but of get year. are us that decline we we in positive rate opportunity fourth New the in say into it's So to that last

Phil Cusick

point above. be on should What then regardless Okay. going raised and more And Thank said Leverage if company I we target, you. at running dividend you thinking above you the this slightly here can. comfortable one you're what the forward? does

Dave Schaeffer

Yeah.

about clear very the that been on environment, have over the our low In interest earnings maintain further that have a we swap intention excess balance mitigate third investors with cash we of sheet. rate of So time the discouraging we quarter that was to keeping our steps on cash the negative to that relatively with carry took benign, talked fixed we call. we floating that

and Going reacceleration free growth margin forward, a we cash growth flow, in anticipate expansion. revenue in a continued

circumstances half growth more than impacting year what our X.X% top of were a in at in the toughest historical business But look on we less we pandemic, line of rate constant these think XXXX we in because As corporate history as probably return average. currency accelerate. disappointed had growth. our we our a was we normalized extraordinary environment, is to Cogent's basis the will

are and the rebound. business capital corporate our in as incremental slightly We leverage higher returning having comfortable in short-term

Sean Wallace

what $XXX cash. had up $XXX to We we add last end Yeah. million with Dave year this XXXX, I'll is just of year said finished that at of the million.

several And $XX business and and leverage particularly that corporate next room the our more us that lot with. side grows, as the gives pretty reduced a continue we grow to see of significant about the we of begin a over back will get to number quarters cetera million. the So to into levels That's EBITDA cushion hopefully on comfortable we and re-grow perform. et are breathing

Phil Cusick

right far? And or I inclined is to raise it Board is forward. that but decision, sounds taking X.X not something the that going too that this read, that understand is a Is like it turns you're

Dave Schaeffer

above of that and arithmetically we're under they with of the performance up going actually because that. that raising comfortable margin I and would premature be growth range, point felt couple for felt consider through quarters. we that corporate to end was below Phil, the that The was natural the just going segment temporary is this Board a think expansion. but at the range They

Phil Cusick

you. Thank

Operator

Thank I the Capital. you. comes Please KeyBanc our ahead. Brandon show from Nispel of line next question from go

Evan Young

Evan taking is the Young call. on Hi. Thanks for for This Brandon.

NetCentric the clients speed of bumping risks -- any And in upgrading seeing you. you customers the business? then of from are foresee runway geopolitical to impacts negative any XXX-megabyte up a with how And speeds? XX guys you any you upgrades, are you see one or seeing speed? much higher are do gig to older the your gig First, Thank

Dave Schaeffer

Yes.

different three questions there. So

the question. with geopolitical start Let's

do to incumbent. of the do network Russian have the most to network small of off, to inside While national Cogent. including the the We our it sell Russian the carriers a Ukraine market all and We KIRK we way relatively is for extends and border sanctions NetCentric honoring do them because sell outside sell part of those revenues. would They place we Cogent's in traffic sanctions. put to of a very were if also total portion and represent of customers longer tensions, small Russia, those in no political

no virtually have in those of business Corporate We either markets.

real from So and impact be asked or based it Corporate the with assisting Pivoting But uncertainty that's don't now do we really today. reps for Cogent. as reps need port at that. we're impact I material answer NetCentric. has them those I differently to any don't question, exists that least direct in and any EU sales to see have the there's major geopolitical one to going into of to two have think the Kyiv to We relocate

will feel be On side, to capacity their it seen good just customers paying as but many larger are hybrid environment. strategy. at to on add average second to to have Corporate We've permanent port. a get customers a the incremental some $XXX insurance at they cases, that another many need look particularly an they recognizing, work primary able policy ports support or they work incremental not hybrid In are also Corporate do location location is that

sales the of having new all virtually, gigabit. one So

We no XX go offer gigabit virtually one to customers that are we've and There customers, that to some XX customers some have we much seen directly Corporate bandwidth need gigabit. XXX the go service. but gigabit gigabit from do seen

really that delivers don't particularly are it. gigabit customers though today quality the fee on our they need focused that and And some XX willing pay even a not of are go price-sensitive to our to connection, incremental and are network to

therefore, to the increased size, amount reduce NetCentric capacity connects fees. the have less anticipation been more an the attempt traffic The you same really and of the upgrades traffic. cross-connect it and of port put port On side, an can for the the cross flows through bigger

just to So We're starting continue. multiple ago, our we And some years see a multiple largest customers exercise we now XXX. several XXX interfaces. groom of grooming think XX-gig gig will interfaces taking of converting into that saw and the hundreds as trend

Sean Wallace

business the the unprecedented on growth, massive and XXXX we also would -- circuits across the add NetCentric all side. XXX-gig I XX-gig just pretty that in had board in growth robustly. given grew

Evan Young

Thank you.

Operator

I ahead. the show Please Nick our comes go MoffettNathanson. next from question of Del Deo from line

Michael Srour

sufficient is at Sean, before business? any this shift to for this issues Srour your impacted this Thanks have discuss Michael worse point? And Hey, much point? on things in And you whether do how a the Nick. noted you feel inventories would a at get you you they purchasing with buffer provide you Could questions. the here had CapEx like for schedule. taking securing your

Sean Wallace

that chain than is it difficult more There's the doubt supply was. no

it and in have to I -- a maybe be get our order lucky little equipment -- matter There in bit we get we a purchases little are gone stuff we think that We been weeks. to used need. increased could have out that bit the smart, a in of

in good don't and but dialogue if that inventory given going be Sometimes a bit feel to know want we're given constant our now, comfortable it's add. little longer our I pretty we our you vendor to with shape.

Dave Schaeffer

Yes.

comfortable up two equipment. equipment challenges XXXX Mike, some of inventory and incremental supplies. to We in with warehouse We in space book million reactivated One, accommodate anticipation to that things. spend feel I did additional think, more order have $XX service. we in ability uncertainty still just of items cushion. There are equipment because but that an appropriate warehouse very inventory deliver anticipate our we're the challenges we do of not we to that increase to any looking availability, to

only Our backbone utilized. XX% is

we've to buildings the up big our adding and enough of have a of any done optics support good equipment growth a We transport metro that inventory that incremental we capacity, those then meet for incremental can customers, projections. and do we support need we're are pluggable building but job to ample there we feel

Michael Srour

more, could the you one Dave, Are repurchases. your Thanks. it. the on said share your In getting And and stock you've down. that to us appetizing? update down past thinking we regarding that market levels launched are closer Got you

Dave Schaeffer

by regard helping to seems market. So, Mr. closer we in that the be absolutely us getting of day. terms Putin [ph] in are the

We committed to returning are capital.

As threshold, we the a taxes more it. we a efficiency. of XX% does. cognizant defer fact dividends, return company return skews very the because for from same commented, to We'll us recipient, towards our the of we characterized continue that XX% of much is The went tax we ability We're crossed think to the gives that being in which billion meaningful way size. capital $X buyback to as capital, kind evaluate of those

We have an authorization.

balance the on incremental we liquidity sheet access excess have and to have we said, Sean As capital.

are it. markets will as to be trying volatility volatile, So observing monetize we that and

Sean Wallace

last as We'll is to close purchase Our we're somewhere around $XX disclosed see around $XX. a share what happens.

Michael Srour

it. Got Thanks.

Operator

next the you. line Thank go question Citi. I ahead. from show Please Rollins of our comes from Michael

Michael Rollins

and I if A Thanks follow-ups could. morning. good couple of

deflationary realize has your you're at to curious office, as that trying curious over about some to the incorporate begin you've given the corporate issues those looking if corporate on factors. environment different your focus being us of segment, and little update into time, customers returning I and some that's Dave, passing a pricing? I'm we're change you consistent they secondly, companies pricing, give been an more there's the of buildings? just hearing And bit into an First, leveraging macro if just if business, were very this Thanks. but inflation SMB existing how to potentially their you're environment just on focus competitive also seeing rumblings an adjust opportunity the fiber landscape, a as turning could then

Dave Schaeffer

first Yes. And technologies will a trend deflationary of that like long-term is basis. for on many Mike questions. Telecom the per continue. all, bit thanks

ARPU do Corporate to on a buy service basis. per one the per on increased However, we They experience our customers connection. not XX connection or And bit a when buy basis. a customer it the do gig moves gig

are gives them a more ports to hybrid with It's environment. riser and prices effectively important we raising port So the two bigger respects. question, we fiber. also by in perception your in prewired that we competitive giving have bigger to creating note flexibility that the uniquely are positioned One, customers already

our So, to gig deliver it than for services much makes ability gig Cogent one and competitors. the XX easier

not agreements competitors and license prewire. entered our invested have such of building many Secondly, to capital have as into the we

and they prewiring if ability that building, a in one even So our tends have from them to with $XX,XXX quickly work, gig gig expense coupled is of off-net turn to seen need most building up true fiber and locations. differentiator. the to our riser from be the XX services for and broadband front suburban secure $XX,XXX, disincents in agreement, the We've competition license passing a competitive cable

not the even coax very key In with have service central Score is out These than of trying course, strong. reputation Net a in have is buy not in from fiber, just one answer are And customer that domestic for in And returns of additional our But HFC XX are lot less cable fact, don't been services in usually get and converting and from mid-XXs. the a cable districts, DOCSIS generally service. to it's fact metered. best cable, engineer differentiators. an asymmetric with gig We we Promoter of where has pride buildings seconds. phones services a ourselves XX that we the the in to X.X. companies their gig business We customers and their plant plant still conducive aggressive pre-wire and they the

phone they occur market. residential fiber more been from companies As overbuilds have the some of focused the on

concerns have just level competition the in not footprint of corporate So us. that we seen our

Thanks. is Our just concern businesses offices. back biggest to getting their

Michael Rollins

Thanks.

Operator

further I Chairman for Schaeffer, turn Chief the queue. back this Dave you. ahead. Thank showing to remarks. in Mr. would the Officer closing I'm no Executive call like questions go to At and Please time,

Dave Schaeffer

to office. to continues as safe. First and safe. their to everyone results stay you all, Corporate forward care everyone to look their have business, to better stay the able everyone to I Take teams I our begin And return being we time. Bye-bye. want of businesses give thank for hope on

Operator

concludes for participating. This call. conference you. today's you Thank Thank

may disconnect. now You

Cogent Communications (CCOI) 24 Feb 222021 Q4 Earnings call transcript