Cogent Communications Holdings, Inc. · NASDAQ:CCOI
Cogent Communications — Q2 2020 Earnings Presentation
25 slides from Cogent Communications's earnings presentation, 2020
Slide 1: Cogent: Buy Dumb Pipes, Sell Smart Calls
@edgent “2 Buy Dumb Pipes Smart C@Q
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 • We operate a global network carrying over 20% of all internet traffic Cogent is a • We offer high speed internet access to two customer bases: leading, global ― Corporate: 69% of revenues ― Netcentric: 31% of revenues provider of • We differentiate and gain share in a commodity bu
Slide 4: The corporate opportunity
the corporate opportunity Market Players Cogent Advantages Competitors • Price per connection is relatively equivalent • AT&T • CenturyLink • Bell Canada • Superior reliability: ring architecture; fiber; electronics • Verizon • Significant speed advantage: 2.5x to 65.0x Customers • Faster installati
Slide 5: The netcentric opportunity
the netcentric opportunity Market Players Market Dynamics Competitors: Primarily global & regional • New applications drive bandwidth Global Regional ― File Sharing/Gaming/Video/Streaming • CenturyLink • AT&T • Tata • Product sold on a per Mbps basis from 10 Mbps to 100 Gbps • NTT • DT • Verizon • I
Slide 6: Customer segmentation
customer segmentation corporate netcentric Connections: 48,305 Connections: 39,807 Revenue Share: 69% Revenue Share: 31% Traffic Share: 8% Traffic Share: 92% Geography: North America Geography: Global Professional Services (Law Firms, Access Networks ‐ ILECs, Cable, ISPs Accounting, Insurance) CDNs
Slide 7: Large & growing addressable market
large & growing addressable market • Corporate services are sold in NA in 1,771 MTOBs On‐Net and 6,822 Off‐Net buildings Our broad Existing Buildings Existing Potential Connections Connections Market % network reach On‐Net Off‐Net 1,771 6,822 40,560* 7,653 126,250 NA 23% NA results in a * Includes d
Slide 8: Highly focused sales organization
0 100 200 400 500 600 700 Q1 2010 Q2 2010 300 262 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Salesforce Growth Direct Q1 2013 Q1 2010 – Q2 2020 Q2 2013 Sales Force Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 4.0 Q1 2015 Web orders Growing Team Q2 2015 Q3 2015
Slide 9: Business breakout
business breakout 3% 3%<1% 6% 31% 17% 17% 23% United States On‐Net Corporate Europe 69% 80% On‐Net NetCentric 45% Canada, Latin 77% Off‐Net Corporate 28% Q2 2020 America, & Asia Off‐Net NetCentric Non Core IP (DIA & Transit) VPN Corporate NetCentric Rack & Power 8% 1% 2% 46% 54% On‐Net Off‐Net Q2 20
Slide 10: Broad, deep, scaleable network
broad, deep, scaleable network • Interconnected with 7,130+ access networks • 900+ metro networks; 36,400+ metro fiber miles • 2,854 On‐Net buildings • Over 58,000+ intercity fiber route miles • 63% multi‐tenant office buildings (1,771) • North America 120 – 2,520 Gbps • 37% carrier neutral and Coge
Slide 11: Network architecture
network architecture • Longhaul metro backbone is built from a diverse set of 256 IRU suppliers Our network is • IRUs from 10 to 40 years; most are pre‐paid and have diverse end dates facilities based— • O+M expenses are calculated by share of fiber pairs thereby IRUs on fiber & reducing the cost to
Slide 12: Cogent's network advantage
cogent’s network advantage Choice Implication Cogent’s IP over DWDM • Simple, predictable performance • Low network and support overhead network offers Single Vendor / Configuration • ‘Southwest Airlines’ cost and operating advantages substantial LT Lease of Fiber Pairs • Reduced capital intensity a
Slide 13: Big, diverse & balanced global network
big, diverse & balanced global network Access to Business/Residential Leading Share of Content Customers Worldwide Providers • 7,130+ Access Networks in 47 countries • OTT Media Services • ~50,000 corporate connections primarily • Gaming Providers in North America • CDN Networks • 80%+ of all reside
Slide 14: 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 15: Revenue growth
‐4% ‐2% 0% 2% 4% 6% 8% ‐10% ‐5% 0% 5% 10% 15% Q1 2010 Q1 2010 Q2 2010 Q2 2010 Q3 2010 Q3 2010 Q4 2010 Q4 2010 Q1 2011 Q1 2011 Q2 2011 Q2 2011 Sequential Q3 2011 Q3 2011 Q4 2011 Q4 2011 * Q1 2012* Q1 2012 Q2 2012 Q2 2012 Q3 2012 Q1 2010 – Q2 2020 Q3 2012 Q4 2012 Q4 2012 Q1 2013 Q1 2013 Q2 2013 Q2 201
Slide 16: Historical & continuing margin expansion
$‐ $50 $100 $150 $200 $250 $20 $40 $60 $80 $0 $100 $120 $140 $160 Q1 2010 Q2 2010 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 2011 Q3 2011 Q4 2011 ($ in millions) On‐Net Revenue Q1 2012 2010 – 2020 YTD 2012 Q2 2012 Q1 2010 – Q2 2020 Q3 2012 Q4 2012 Q1 2013 2013 Q2 2013 EBITDA as Adjusted Q3 2013 ($ in mill
Slide 17: Investing: increasing returns, demand driven, all funded internally
investing: increasing returns, demand driven all funded internally 90 Capital Expenditures and Principal Payments 700 Growing Returns 30% Revenue ($ in millions) and 80 on IRU Capital Leases CapEx & Principal Payments on IRU Capital Leases (% of Revenue) ($ in millions) 600 25% 2010 – 2019 70 $18.2
Slide 18: Highlights
highlights ($ in millions) Q/Q % Y/Y % Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Change Change On‐Net Revenue $97.2 $97.5 $99.4 $102.7 $103.5 $103.8 0.3% 6.5% Off‐Net Revenue $36.8 $37.2 $37.4 $37.5 $37.3 $37.0 (0.7)% (0.4)% Non‐Core Revenue $ 0.1 $0.1 $0.1 $0.1 $0.1 $0.1 6.6% 15.9% Total Reve
Slide 19: Highly disciplined allocator of capital
highly disciplined allocator of capital • M&A Discipline: Cogent has evaluated and passed on Cogent is over 700 acquisitions since 2005 • Cost Discipline: Cogent has improved its EBITDA and focused on Adjusted Gross Margin consistently over the past driving decade • Returning Capital: Cogent has ret
Slide 20: Consistent return of capital; modest leverage
consistent return of capital; modest leverage Cumulative Total Return of Capital by type ($M) $1,000 $800 $600 $400 $200 $‐ 2007* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD *Includes June 2007 Note Transaction Cumulative Total Share Buyback Cumulative Total Dividends Paid N
Slide 21: Investment highlights
investment highlights • Fundamentals provide for continued, consistent growth and profitability Cogent is a • Independent, low‐cost international network leading global • Network footprint targeted at high traffic locations • Substantial network capacity; very high operating Internet leverage Servic
Slide 22: Cogent Communications Holdings, Inc.
Cogent Communications Holdings, Inc.
Slide 23: Appendix
Appendix Reconciliation of non‐GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP 23
Slide 24: Non-GAAP EBITDA reconciled to GAAP cash flows
Non‐GAAP EBITDA and non‐GAAP EBITDA, as adjusted, reconciled to GAAP cash flows provided by operating activities Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 ($ in 000’s) – unaudited Net cash flows provided by operating activities $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 Changes in operati
Slide 25: Impact of COVID-19
impact of covid‐19 challenges opportunities • Shelter in place began March 13 • Streaming/OTT saw significant growth in • WFH implemented for Cogent employees worldwide March/April • Growth in new, emerging players • Salesforce training shifted to virtual method • Sales productivity was strong • Mos
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