Cogent Communications Holdings, Inc. · NASDAQ:CCOI
Cogent Communications — Q3 2019 Earnings Presentation
28 slides from Cogent Communications's earnings presentation, November 2019
Slide 1: Buy Dumb Pipes
C@OeN cei Buy Dumb Pipes
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events and are subject to risks and uncertainties. The forward-looking statements,
Slide 3: Company overview
company overview • Cogent’s network carries ~20% of all Internet traffic and Cogent is a serves 204 markets in North America, Europe, Asia, Latin America and Australia leading global • Currently serves over 85,600 customer connections • 69% of revenues from Corporate end users in multi-tenant provid
Slide 4: Addressable market
addressable market • Cogent focuses on selling Dedicated Internet Access and IP Connectivity • Network has global reach—Helsinki, Finland in the north Our broad to Sydney, Australia in the south, and circumnavigates the globe network reach • Over 57,400 route miles of intercity fiber and over 34,980
Slide 5: Broad, deep, scaleable network
broad, deep, scaleable network • Interconnected with 6,840+ different networks • 850+ metro networks; 34,980+ metro fiber miles • 2,771 On-Net buildings • Over 57,400 intercity fiber route miles • 63% multi-tenant office buildings (1,757) • North America 120-2,120 Gbps • 37% carrier neutral and Coge
Slide 6: Why customers choose Cogent
why customers choose cogent Corporate Market Local distribution Corporate Pricing Dynamics Price per connection is relatively equivalent Cogent competes primarily with incumbents (ILECs) and resellers offering T1 or T3 connectivity • Quality of connection is substantially superior • Fiber based, 65:
Slide 7: Market dynamics
market dynamics corporate netcentric • Most common On-Net product installed this quarter • Product sold on a per Mbps basis in increments is 1,000 Mbps for $900/month with a multi-year from 10 Mbps to 100 Gbps contract • Product is sold in Carrier Neutral and Cogent Data • Product sold on a per conn
Slide 8: Revenue growth
-4% -2% 0% 2% 4% 6% 8% -10% -5% 10% 15% 0% 5% Q2 2005 Q2 2005 Q3 2005 Q3 2005 Q4 2005 Q4 2005 Q1 2006 Q1 2006 Q2 2006 Q2 2006 Q3 2006 Q3 2006 Q4 2006 Q4 2006 Q1 2007 Q1 2007 Q2 2007 Q2 2007 Q3 2007 Q3 2007 Q4 2007 Q4 2007 Q1 2008 Q1 2008 Q2 2008 Q2 2008 Sequential Q3 2008 Q3 2008 Q4 2008 Q4 2008 Q1
Slide 9: Traffic and pricing trends
- 0 10,000 20,000 30,000 40,000 50,000 60,000 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 Q2 2005 Q2 2005 Q3 2005 Q3 2005 Q4 2005 Q4 2005 Q1 2006 Q1 2006 7,480 Q2 2006 Q2 2006 Q3 2006 Q3 2006 Q4 2006 Q4 2006 Q1 2007 Q1 2007 Q2 2007 Q2 2007 Q3 2007 Q3 2007 Q4 2007 Q4 2
Slide 10: Connection trends
- 5 10 15 20 25 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $0 Q2 2005 Q2 2005 Q3 2005 Q3 2005 Q4 2005 Q4 2005 Q1 2006 Q1 2006 Q2 2006 Q2 2006 Q3 2006 Q3 2006 Q4 2006 Q4 2006 Q1 2007 Q1 2007 Q2 2007 Q2 2007 Q3 2007 Q3 2007 Q4 2007 Q4 2007 Q1 2008 Q1 2008 Q2 2008 Q2 2008 Q3 2008 Q3
Slide 11: Customer segmentation
customer segmentation 48,179 Corporate connections 37,513 NetCentric connections • Law firms • ISPs Leading provider to Leading provider to • Education bandwidth-intensive • CDNs professional services • Financial services organizations • Hosting Companies firms • Consulting services • Online gamers
Slide 12: Business breakout
business breakout 3% 3%<1% 6% 31% 18% 16% 24% United States On-Net Corporate Europe 69% 79% On-Net NetCentric 45% Canada, Latin 78% Off-Net Corporate 28% Q3 2019 America, & Asia Off-Net NetCentric Non Core IP (DIA & Transit) VPN Corporate NetCentric Rack & Power 10% 2% 1% 43% 57% On-Net Off-Net Q3 2
Slide 13: Network connectivity at the highest traffic locations
network connectivity at the highest traffic locations Directly Connected 6,840+ Networks (AS) CCOI Peering 199+ 21,300+ Peering Capacity Tbps Sessions 13
Slide 14: Network architecture
network architecture • Longhaul metro backbone is built from 240 IRU suppliers Our network is • IRUs from 10 to 40 years; most are pre-paid • O+M expense substantially less than the cost of maintaining a facilities based— network solely constructed and used by Cogent IRUs on fiber & • Cogent’s netwo
Slide 15: Proven integration execution
proven integration execution Investment Customers Network Building Original Peering Access PP&E Date NetRail Sep 2001 $180 $35 Cogent purchased Allied Riser PSINet* Feb 2002 Apr 2002 $590 $5,180 $335 $2,175 $14 BILLION of (Fiber Network Solutions, Inc) FNSI Feb. 2003 $30 $5 First
Slide 16: Cogent's competitive advantage
cogent’s competitive advantage • Low cost, efficient network is approximately 26% utilized • $14 billion of invested capital ($4 billion of PP&E) purchased for $60 million • More reliable and less costly than IP networks overlaid on Cogent is the traditional telephone networks lowest cost • IP only
Slide 17: Focused sales force
focused sales force Sales Headcount data as of September 30, 2019 Canada BENELUX/ is the key to 45 Sweden UK 10 27 Germany US 16 business success. 410 Spain France 7 6 Quality activity is Singapore 5 Other EU 4 the key to sales Direct Web Tele- success. 7 Sales Rep Productivity (orders per month) Q2
Slide 18: Historical & continuing margin expansion
historical & continuing margin expansion $160 100% $200 100% Total Revenue by Segment 90% $180 EBITDA as Adjusted 90% $140 ($ in millions) & (% of revenue) ($ in millions) & (% of revenue) Q2 2005 – Q3 2019 80% $160 2005 – 2019 YTD 80% $120 70% $140 70% $100 $120 60% 60% $80 50% $100 50% 40% $80 40%
Slide 19: Network expansion
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 0 Q2 2005 Q2 2005 Q3 2005 Q3 2005 Q4 2005 Q4 2005 Q1 2006 Q1 2006 Q2 2006 Q2 2006 Q3 2006 Q3 2006 Q4 2006 Q4 2006 Q1 2007 Q1 2007 Q2 2007 1,757 total Q2 2007 Q3 2007 Q3 2007 Q4 2007 Q4 2007 Q1 2008
Slide 20: Investing to further improve & extend the network
to further improve & extend the network investing from internally generated free cash flow $100 $90 87.8 88.7 ($ in millions) 82.5 CAPEX is used to: $80 77.3 78.2 72.7 76.1 1. Add new markets to the network 72.0 70.0 $70 65.9 62.1 68.4 • Added 132 markets since 2006 61.4 63.7 61.4 61.1 29 18 $60 60.
Slide 21: Highlights
highlights ($ in millions) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q/Q % Y/Y % 2018 2018 2018 2018 2019 2019 2019 Change Change On-Net Revenue $92.4 $93.0 $93.8 $95.4 $97.2 $97.5 $99.4 2.0% 6.0% Off-Net Revenue $36.1 $36.1 $36.2 $36.6 $36.8 $37.2 $37.4 0.6% 3.4% Non-Core Revenue $ 0.2 $ 0.2 $ 0.1 $ 0.1 $ 0.1 $0.1 $0.1
Slide 22: Capitalization use of free cash flow
capitalization use of free cash flow As of As of As of As of As of As of As of As of As of As of As of As of As of As of As of ($ in millions) 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 9/30/19 Cash & cash equivalents
Slide 23: Total return of capital, 2005 – Q3 2019
total return of capital, 2005 – q3 2019 Annual Return of Capital by type $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- 2005 2006 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Share Buyback Dividends Paid Cumulative Total Return of Capital by typ
Slide 24: Ratio of debt to annualized EBITDA
ratio of debt to annualized ebidta 12.0 10.8 10.0 9.7 Q4 2005 – Q3 2019 8.5 8.1 7.9 8.0 7.0 6.8 6.2 5.9 6.0 5.4 5.2 5.1 5.0 4.8 4.7 4.7 4.6 4.6 4.6 4.6 4.6 4.5 4.6 4.5 4.6 4.3 4.4 4.4 4.4 4.3 4.5 4.4 4.2 4.1 4.2 4.3 4.1 4.0 3.9 3.9 3.9 3.9 3.9 3.9 3.8 3.9 3.9 4.0 3.7 3.2 3.2 3.0 3.1 3.0 3.0 3.0 2.9
Slide 25: Investment highlights
investment highlights • Fundamentals provide for continued, consistent growth and profitability • Independent, low-cost international network Cogent is a • Network footprint targeted at high traffic locations leading global • Very strong balance sheet Internet • True free cash flow positive Service
Slide 26: Cogent Communications Holdings, Inc.
Cogent Communications Holdings, Inc.
Slide 27: Appendix
Appendix Reconciliation of non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP 27
Slide 28: Non-GAAP EBITDA and EBITDA, as adjusted, reconciled to GAAP cash flows
Non-GAAP EBITDA and non-GAAP EBITDA, as adjusted, reconciled to GAAP cash flows provided by operating activities Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 ($ in 000’s) – unaudited Net cash flows provided by operating activities $30,179 $31,271 $31,745 $40,726 $28,637 $40,632 $33,443 Ch
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