Cogent Communications Holdings, Inc. (CCOI) Earnings Call Transcript & Summary

All right. Thank you, everybody, for joining us. I'm Matt Niknam Comm Infrastructure Analyst here at Deutsche Bank. We're very pleased to have Cogent CFO, Sean Wallace. Sean, welcome to the conference.

Thank you. Thrilled to be here.

Thank you. Thank you. So why don't we start maybe high level, if you can talk a little bit about the top priorities for Cogent in 2022?

I think that was a really interesting question. And obviously, if you look at Cogent over the last 7 quarters, it's been a little bit different than the usual ticking up of growth every year as we've had our corporate problems. And we've been wringing our hands thinking about is there something wrong with the business. There are other challenges and I think the conclusion is that -- and we'll talk more about this is that the business is fine. There's no existential threat. There is a change that has been quite profound as a result of COVID, but -- the business is in really good shape, and we're not going to do something radically different. We are spending more money in terms of CapEx and focus on our sales force and other things on the NetCentric business, which is more because of the advent of streaming and how well it grew last year. But we are optimistic that we were doing all the right things and that we're -- we will continue to grow in historical fashion we've done when the world gets more back to normal.

Maybe we'll start with corporate as has been a big focus. I think it's roughly a little under 2/3 of the business, if I remember correct?

About 60% now.

60%. Okay.

It used to be more.

Got it. Got it. And it has been growing double digits for some time. But obviously, we've seen over the course of the pandemic, it's really taken a toll, I think, on top line growth. So -- maybe just to start, can you talk about what's been driving some of the worsening pressure? And I guess, maybe more importantly, are you seeing any green shoots indicating an inflection is near as we see more businesses starting to now return to the office?

So let me give you some perspective of 3 quarters before the pandemic, 3 quarters after and then the 4 quarters after that. And this is a subscription business. So we have gross adds, we have churn, and we have ARPU. And if you look 3 months prior to, call it, March 31 of 2020, gross adds were growing materially above our churn. ARPU was sort of declining but at a normal rate that we've seen historically. And that business was can you -- as you pointed out, was continuing to grow very, very nicely. Pandemic hits, churn goes up pretty dramatically. We have a small to medium-sized business customer base. They made decisions very, very quickly. On average, a lot of our companies have somewhere around 40 employees. They went and talked to them, figured out what they do. They closed offices, they rearranged things, and we were -- we saw churn levels increase pretty dramatically. They peaked in the fourth quarter of 2020. Gross adds also fell, so for the first time in a long time, we began to see very modest declines in the business, 1% to 2% per quarter in that corporate business. And also ARPU continued to perform in sort of how as we expected. In 2021, I'll just put the whole year together, churn fell. In fact, it's lower than what it was pre-pandemic. So we are not seeing an existential threat to our corporate business. We saw a lot of the folks who decided to have that accelerant as a result of COVID move out of that business, but gross adds have continued to be weak. So we've done some more digging and this is a really interesting study. We worked with our friends at JLL, Jones Lang LaSalle. And we looked on a building-by-building basis to see where they were at the end of March of 2020. So that's really up to pandemic and the end of last year. And then we looked at their statistics for tenancy rates from that same time period, and we inverted them. So they were 100 at the end of March of 2020 and where were they? And so we look at cities like San Francisco, tenancy rates have gone from 100 to 82. Our circuits in buildings went from 100 to 80. So we did a correlation coefficient that's 0.84. So 84% of the explanation of what's happened to our corporate business, is a function of what's happened in the real estate market. And here's another interesting thing just to sort of triangulate around that is, as you go out outside the big cities, which I think have had the biggest impact, you got to realize our cities are New York, San Francisco, L.A., Boston, D.C., Philly, Chicago, these are the cities that are most impacted by COVID. We look at our off-net 1-gig circuit business, and this is sold to companies or different locations in secondary cities, suburban much less impacted by COVID. That business was growing at 20% on a unit basis, for the last several years, it grew 25% in 2021. So what does it say when you look at all these numbers? It's very clear that our corporate business was adversely affected by COVID. The impact were most material in the first 3 quarters right during COVID, which reflects that small to medium-sized business speed. And we are very optimistic that 2 things could happen post-COVID. One is that landlords are going to work very, very hard to fill these buildings, as they've always done. They will reduce rents. They'll make -- they'll increase tenant improvements. They'll do what they can to get tenant levels up. If new tenants come into these buildings, we typically have a very, very strong ability to win. We win 40% of the time when we get a chance to pitch. And secondly, we think a lot of CIOs of these companies will see that work has changed. Zoom has become a very, very important part of the workplace. There are other applications that have been brought in. People are going to need more robust connections. We think there'll be upgrades to 1 gig and indeed, 10 gig circuits.

And so when we think about -- go ahead, keep going.

I was just going to give you the conclusion is that we are highly correlated to the central business district, and if the central business district in terms of tenants and activity improve, and we are beginning to see that, we're very optimistic where we're going to be in the third and fourth quarter of 2022.

And is that -- and I think maybe there was some talk of it on the earnings call, but is that sequential growth? Is that year-on-year, like I don't know how far...

Dave is very careful. I think he -- I think the view is that we will be hopefully that the revenue number in 2022 will be bigger than the revenue number in 2021. It's not a prediction. It's sort of an aspiration, and we are optimistic that in the third and fourth quarter of this year, we'll begin to see that.

Okay. Okay. You mentioned the delineation between gross adds and gross growth and churn. And obviously, you talked about churn maybe peaking late last year 2020. How do you get the gross growth other than just people coming back in terms of getting on more of these RFPs, getting more jump balls? Can you just walk us through the investments you may need to make, whether it's sales force, adding quota-bearing reps, what is Cogent...

I'll tell you. So as part of our study of the buildings, we also found the 80-20 rule. So 20% of the buildings, about 315 buildings accounted for 76% of the losses. So surprise, surprise, we're doubling up on those buildings terms of sales force. We're working with the landlords to figure out what we can do to be part of the whole sales process and make their buildings more attractive, and we're optimistic that it's sort of 6 or 7 circuits per building that we'll get our fair share there. That's -- there's a -- just from those buildings alone, we have about a 1,700 circuit opportunity. So we're very excited about that. So tactically, we'll do things like that. Secondly, strategically, when Dave and the team started this business around the turn of the century, it sounds like a long time ago, people thought he was crazy for selling 100-megabit circuits. Now the 100-megabit circuit is in decline and indeed, we don't sell new circuits anymore, we sell 1-gig. We think that gives us a real advantage versus other competitors who say they do 1-gig, but really don't give you full 1-gig circuit service. We also have the ability to provide 10-gig circuits in most of our bigger buildings. And we also have this off-net service, which we talked about a little bit earlier, we have the ability through 99 vendors to provide 1-gig service in 4 million buildings across the United States and Canada. That is a real opportunity for us to go to bigger operators who want to upgrade their network and want 1-gig service or larger service in multiple locations, we're much better able to do that than a lot of other competitors.

How big of a tailwind to corporate revenue growth can these speed upgrades be? When we think about maybe the popularity of something like 1-gig and how that's accounting for a greater share of new connections? Have you quantified maybe how big of a tailwind it could be?

We don't -- I can tell you anecdotal stories. So we had a consumer products company. It's headquartered in New York, it's a Fortune 500. We typically don't do those types of clients. But they had 25 locations in the New York Metropolitan area and they wanted to get 10-gig circuit connections for the vast majority and 1-gig for the smaller locations. Nobody could provide that service in the time and fashion that needed to be done. And we won that -- that bid with not only getting 100% of all the circuits, but also got pricing that was pretty attractive. So footprint and speed, time to installation, when we're on network, we can install in basically 12 to 14 days. If you're a legacy incumbent, it takes anywhere from 75 to 90 days. So we have real advantages. It's a simple sale. We're not selling security. We're not selling denial of service. We're selling just a dumb pipe that is incredibly reliable and has great value.

Let's pivot to NetCentric. So you mentioned, I guess, close to 40% of revenue right now. Much bigger beneficiary of recent events. When we think about accelerating revenue growth. It's been -- I think it's north of 20% on a constant currency basis the last couple of quarters. Can you talk about your expectations for the business in 2022? And maybe how you expect revenue growth to trend going forward? Is traffic growth may start to moderate off of tougher comps?

So I'm just going to say generically, we don't expect it to grow 25% in 2022. It's just -- it's a higher base and we had phenomenal growth. Let me just peel back and sort of give the understanding of what Dave and the team have done to create a strategy to win in the NetCentric business? First is footprint. We're in 50 countries. We are in close to 1,300 carrier-neutral data centers. That footprint itself in 211 metro markets, that footprint itself gives us a big differentiation. If I'm a streaming company, I want all of my streaming traffic to stay on the same network. It reduces latency and increases the speed with which my clients and the quality of the signal, less wheel of death when you're looking for that new movie. That piece we've done. The other piece we've done, which is a big differentiator is we have over 7,500 access networks. These are ISPs, cable operators, phone companies, mobile operators and we've been beginning to tell people this, but a couple of years ago, 50% of our traffic originated and terminated on network, it's now over 70%. And so what we see is we have streamers looking for those eyeballs and the real big benefit is that all that traffic remains on network, goes directly to those eyeballs, have very good quality and they have the ability to configure that network much more better because we're in more data centers than any other operator around the world. Other -- 2 other things that have been strategic underpinning this -- why we think we're winning more is we have over 200 salespeople whose sole role in life is to sell this product. They know it very, very well. And as you probably will imagine, Dave and the team are very aggressive on pricing. And so you add all those things up, I think we're gaining share. We're certainly getting more and more access networks and more and more streamers on our network. And hence, the business has grown. We want to temper people's enthusiasm. We don't think we're going to decline here. We think we're going to continue to grow, we don't think at the same rate.

And the TAM is still -- I recall, Dave, I think in the past, has talked about a $1.5 billion?

You are absolutely correct. He has a great story. He'll say that 25 years ago, this was a $1.5 billion market with 200 operators. Today, it is a $1.5 billion market with about 8 operators, it's consolidating. And Cogent started with 0% share, it's probably somewhere in the mid-20s now, and that will probably continue.

You mentioned traffic growth. When we think about sort of drivers of incremental Internet traffic growth for the business, are you seeing maybe more contribution from larger scaled players? Or we've seen sort of a plethora of newer streamers platforms getting up and running? How do you sort of break down that mix?

So it's -- there have been a couple of trends on the streaming side that have helped this business tremendously. One is that individuals are buying a lot more subscriptions. And that's benefits. I unfortunately have 3 wonderful kids and each one has their own subscription and I have to pay for everyone. That has been -- it's been a bigger change. It is much more international, and if you talk to -- I've talked to a couple of experts, research people about the streaming business, they said, where are we? And they say we're sort of in the -- probably in the third or fourth or fifth inning in the United States, we're probably in the second or third inning overseas. And so we are not only a beneficiary of that overall growth, but because it's becoming more international, we're really benefiting from that. So Discovery -- Gunnar was speaking this morning. He said a couple of things, says ARPU is much lower overseas, which probably means they'll be able sell more. And he's also saying that the penetration levels for their premium product is about 21% here. It's close to 100% here because you're selling into the actual ISP base not a cable base.

Okay.

So we're just -- we're hopefully in the early innings of streaming, which is depending on what you look at, is probably over 50% of the traffic.

And when we think about pricing, is that still -- is the outlook still -- I think it used to be maybe around 20% sort of declines year-on-year. Has that changed or evolved at all?

It's the $1.5 billion market. It grows -- the network grows 35% a year, and pricing declines about 35% a year. It did a little bit better this year. Things were a little bit supply constrained, but it continues that. It is fundamentally underpinned by Moore's Law. And as you get more capacity, you have to lower your price, but you're able to get -- draw in more traffic onto your network.

Russia and Ukraine. That's something that I know was in the headlines. I think the company made a decision to cut off service from Russia 1 week or 2 ago. Any sort of -- just maybe can you help us frame the impact that will have?

De minimis. It's less than $1 million in revenue and assets and everything else. It's nothing. We have 2 employees in the Ukraine.

Okay. Okay. I want to talk a little bit about the sales force. So productivity per sales rep, I think it's been on a little bit of a downward trend the last couple of periods. Can you help us think about the drivers here, whether it was return to office, vacs requirements, whatever it may be. And I want to maybe better understand how Cogent gets the metric for productivity back up north of 5% relative to around the 4-ish low 4s level that you were at last quarter?

So let's just go back to what happened in March of 2020. The world changed. Our entire sales force went from working in a cube environment where you had managers walking around listening to their pitches, coaching them, mentoring them to one that everybody was working from home. Very impressive pivot to go and put all those salespeople to get from work from home. Productivity wasn't as good, churn fell. And let's just go all the way to August of 2021 when we had the great resignation. Basically, a lot of -- virtually the vast majority of everybody who left the company at that time, their managers never met personally. We were not able to mentor them, improve them, we also weren't able to figure out whether it was a person that they should stay with the company or not. And so in -- as we were beginning to look in October prior to Omicron about everybody coming back to work, we had the great resignation. We had a ton of employees who just never were part of the Cogent piece and just weren't succeeding, and so we had really big turnover in the third and fourth quarter of last year. So unproductive salespeople. You're going to have unproductive sales force productivity or you're going to have reductions in that. Also having a corporate base where we just couldn't sell. Again, those gross adds down. We weren't going to get rid of the entire sales force, but a lot of those salespeople are just can't be as productive as they were previously. So we are below where we thought we would be in terms of the sales force, not materially. We have recruiting teams that can get us around 50 salespeople a month, and we probably lose around 35 a month going forward. So we'll be able to gain anywhere from 15 to 20 salespeople per month over the next year and get back to where we want to be. So we're going to invest in the sales force. We're optimistic that they're back in the office that it's a much more disciplined and focused approach to bringing in new salespeople, hopefully, they'll be more successful. And hopefully, COVID sort of reverses itself and the corporate market is better. That's how we get the better productivity.

And is the company now sort of back to fully in the office or...

There are some areas that are not in countries outside of the United States, but for the most part, everybody is back in.

Got it. Okay. One of the interesting things about the Cogent, I always call it sort of the long-term growth algorithm is 10% top line growth. I'll spare you the question of how you get back to 10% top line growth because I'm sure others have or will ask at this conference season. But one of the other interesting element is around 200 bps of annual margin expansion. Can you just walk us through the drivers for that? I think in the past, maybe you've talked a little bit about a half and half split between gross margins and OpEx or SG&A. But maybe help us think about the forward outlook.

So those are aspirational numbers. They're not -- we don't do projections, and it is not something -- candidly, I don't want to dwell on it. It's been around for a long time. I think you have to also recognize that throughout this really difficult environment, we did increase EBITDA margins almost 130 basis points year-on-year. And that is a function of the fact that every dollar of revenue that we get I'd like to describe it as like a gym membership. There's -- you bring in another gym membership, you really don't have to add any more towels or employees or equipment. You just got huge scaling capability. So $0.90 on the dollar typically falls to the bottom line. And so as in the old days when we were growing at double-digit rates, it did drive EBITDA at very, very high double-digit rates and enabled it to grow margins. That's a big piece of it. The other piece of it anecdotally is that Dave and the team are very systematic. And I'll give you a couple of examples. We found out that certain off-net circuits were not being turned off. So we created a whole database of every off-net circuit. At the end of every month, it goes and ties with the general ledger. And if one doesn't have a revenue-producing piece, it goes on a list, we eliminate that circuit. We've reduced costs by about $120,000 a year. We're going to have a solar array that will open up in Pasadena, probably this summer, we'll probably reduce our electricity costs by about $200,000 to $250,000 a year. There is just a systematic quality of going after cost reductions in this business that enables Cogent to keep their cost base at such a level that they're able to drive EBITDA margins up, half from revenue improvements, half from cost scale -- scaling.

Well, it's a good segue going into my next question. I was going to ask you about inflation and maybe to what extent the company has been impacted by headwinds there, whether it's on the labor and wage side or even on the supply chain front? I'm just wondering how you sort of think about the impact and then the company's ability to maybe recoup some of the margin headwind by passing it on to customers.

So -- a couple of things. We are seeing, for example, in sales force, we're seeing that there are sales people are being bid up in places like New York, L.A. and San Francisco pretty aggressively. And so it's made us less competitive if we don't raise our salaries. Our big vendor for equipment raised rates for the first time in probably 20 years, modestly. At the end of the day, we do have very, very good margins. We will not be able to recoup it by raising prices to customers. We may be able to sell it and get back some of it by selling more volume. As Dave has told me, he thinks it's transitory, we'll see. But it's not a lot of our costs, circuit costs and equipment costs are continuing to sort of go down in function. We're going to have to see where we are with labor.

Okay. Okay. Cap allocation, another favorite topic. I think it's the first time you and I have spoken at least in person. So I'm wondering how you think about capital allocation priorities between things like dividend increases, buybacks, CapEx, M&A?

So let's start with M&A. I think one of the great things besides -- there is -- I don't want to use the word cheap, but Cogent is a place that has an ethos of low costs that is really magical and that drives a lot of our performance. But I think in terms of capital, we think about investing in the business to make sure that we have the proper footprint and can have the competitive edge. We look on a very granular basis, almost everything. So if we are going into an MTOB, it has to meet an algorithm of how many customers we think will be there. How far is it from the network, which will determine how much it cost to be in there? And what are the operating costs? And if the returns aren't above a certain level, we won't go into that building. We do about 120 buildings a year, 100 of them are CNDCs, 20 are MTOBs. That MTOB number will probably continue to fall. Why? Because we don't think that there are enough MTOBs with enough number of tenants and proximity to our network to make sense. CNDCs are increasing because we're in a data center explosion and we've got to be there for our [ MTOBs ]. For other parts and other markets, again, it's all returns-based. Once we are done feeding the network and giving it the proper capacity and footprint, we then have free cash flow. We take that free cash flow and candidly we've been looking to grow the dividend at $0.025. Done it for 38 straight quarters. I think the management team wakes up every morning thinking about how that's going to happen for the 39th. They're very focused on that. And we also, to give another view of that. We look at liquidity. We like to be somewhere around $350 million to $400 million. We're at the low end of that right now and we look at 3.5 to 5x -- 3.5 net debt, 5x gross. We're at 3.58 now, 3.6 if you round up. And Dave said, these are special times. We're going to allow that to go up a little bit. We have a huge cushion of cash. Our cash only went down $41 million last year despite all of the volatility and challenges. We're optimistic by the third and fourth quarter that we will begin to see growth again. And if we do, we'll be in very good shape.

Got it. Okay. So on -- maybe on leverage, with the prospect of rising rates, it sounds like you're still sort of comfortable with that. I think 2.5% to 3.5% has been the target in the past. You're a little bit north of that, but it doesn't seem like at least the prospect of rising rates is a cause for concern just yet?

We have -- we got -- we did a $500 million issuance. We did it at 3.5%. We saved about $7 million of interest expense. We did a swap, which so far has saved us another $3 million of interest expense. Even this quarter, we'll save more money. We don't have that much exposure to rising interest rates. Indeed, we have this floating piece, but we also have cash. And so our huge pool of cash, we weren't getting almost any interest. We're getting like 10 basis points, we're optimistic that we'll start getting a larger amount of interest income from there. So we don't have that much exposure to a rising interest rate environment. We do have a bond that we're going to refinance probably over the next several years, that might cause us some harm. But between the liquidity that we have and the flexibility on margins that we have, we should be okay.

Got it. Got it. CapEx, I think we've seen CapEx maybe rising a little bit the last couple of years, but you also mentioned the number of MTOBs may be tapering as we look out. How do we think about just CapEx, whether it's in absolute terms or capital intensity? What sort of the longer term outlook for CapEx?

The best the way we like to direct investors is to look at a percentage of revenues. And it was in the 20s let's say, 5, 6, 7 years ago, it has fallen all the way to the low-teens. It is bumped back up into the mid-teens. That has been a function of a couple of things. The prices of some of their equipment has gone up. Secondly, we did a lot of forward buying in anticipation of potentially supply chains. It looks like we don't have any real concern about being able to supply our network and maybe we were smart by doing that. It's also a function of NetCentric has become a bigger portion of the network. NetCentric requires new markets, more capacity. And therefore, that's been a little bit more expensive. CapEx fell from the third to the fourth quarter. We expect it to continue to sort of fall into the sort of mid-teen to low teens over the next year or 2.

Okay. One other leg of this that I think comes up from time to time is share buybacks. And when we think about -- you mentioned the $0.025 increase sequentially every quarter for 38 straight quarters. Where do buybacks fall into this? And I only mention it because the stock, I think, is now near levels where you may have been last active with the buybacks. So I'm just wondering how you're thinking about that?

So I've gone back and looked at all the buybacks the company has made since before they had a different dividend policy and sort of understood that and looked at the spread to treasuries. Our stock based on the latest quarter annualized yield of the dividend, we're at the widest spread to treasuries in -- since we've been really looking at it, probably 100 basis points more than when we usually pull the trigger and buy back stock. We last bought back stock in 2020 at about $57.50. We have a lot of cash on hand. Dave is -- he's not prescriptive about it, but if he thinks there's value in our stock, he will buy it back. In some respects, you have an interesting security in that it's yielding over 5% on a quarterly annualized basis. You have a CEO who's the largest individual shareholder and the founder, who has never sold a share. who probably finds the stock very, very interesting near these levels. I have no commitment. He doesn't even tell me, so I don't know. It sort of feels like you've got the downside protection from the CEO thinking about where the stock is and you got the upside potential with corporate coming back. Get paid to wait.

Okay. On the corporate side, so one of the other questions I had is when we think out competitive landscape. I think you've obviously been a share gainer and we think about 10% growth relative to some enterprise businesses and telcos that continue to decline mid-singles every year. I guess how do you think about the competitive position, current landscape? And I guess what gives you the confidence you can continue to do so well going forward? And I mention this because we're hearing more and more about telcos increasing their fiber footprints, trying to invest a little bit more within SMB. Has that maybe changed [ in the pandemic ]?

So we're just as nervous about that as anybody else, but a couple of things. Like I think AT&T is going to go to 30 million buildings.

Homes.

Homes. No, no, 25 million homes, 5 million buildings. So a lot of their allocation of fiber is going to be to different areas. It's not going to be residential, it's not going to be too commercial. The answer is that a lot of the large telcos spend a lot of their times dealing with very, very large corporate customers. They're SMB, they sell mainly through the Internet. They have a great brand. They're great competitors. At the end of the day, we have some real distinct advantages, focus. This is the only product we really sell. We only sell Internet access. It's all the sales force has to sell. We install things in 12 to 14 days. It takes them 75 to 90 days. That is a killer on a lot of -- for a lot of our competitors. And in terms of price, we're very competitive on price. We will add more value. We will do things to differentiate ourselves on a price basis. So interesting, I spent the day with our sales force in New York on Monday. It was one of the first times I really got to spend a lot of time with the sales force. They do see some competition from Verizon, but this is not a market that they spend as much time on or focus on as we do as a direct sales force. So we are optimistic that when the world comes back, we'll get that chance to bid and hopefully, we'll win 40% of the time.

Got it. And can you help frame -- I think in the past, you had talked about sort of connections per building, where you sit, where you could go? If you could just help reframe that opportunity?

We -- if you look at circuits per building and this is not connections, circuits, we have about 7 circuits per building. They are typically around 51 tenants in that building. So it's about a 14% penetration. It's our guess that, that number probably came down a number of tenants in the building over the last couple quarters for what we've talked about. And our numbers probably were still probably in -- if we kept the number 51, we're probably a little bit below, where we are now. If you think about fiber-to-the-home and the penetration levels that folks are talking about, 25% or 30%. IF we can achieve those levels, it means our corporate business could double over the next few years.

On the off-net side within corporate, so I think off-net right now is about 40-ish percent of corporate segment revenues. I think there may have been a little bit of pressure there as well with sort of secondary and tertiary sites maybe being closed. I guess maybe what's the outlook? And I wonder, as we think about broader sort of reopening of the economy, what's the risk that some of these off-net offices you previously had connections to maybe stay closed? Or is it maybe the opposite where you're actually seeing more of these workers move out into secondary and tertiary cities?

The answer is we don't know. But it's interesting. A lot of the decline in our business was our VPN business, Virtual Private Network business, which is now small enough that it's not as meaningful a number. On the ARPU number, when you look at that, we strategically reduced the price of that product. We buy circuits from AT&T and Verizon and others. And every time we get bigger, we ask for bigger discounts. As we get those discounts, we pass them on. So as new customers come in, they're a little bit lower, and that's driving a lot of that ARPU number to go down. Candidly, the VPN business, we got -- we did get very impacted because of COVID and secondary locations. As I mentioned earlier, when we think about this, we have a large, dedicated sales force that sells its products. Every morning, when a salesman walks into his -- turns on his computer. He has 20 or 30 leads, picks up the phone and calls them. We're becoming very, very effective. Again, we can sell 1-gigabit circuit all over the country because of these relationships. And it seems to be a very, very successful product for us. VPNs -- again, we had our challenges around -- as a result of COVID.

Then just last question. As we think about -- we touched a little bit on competition and the fiber aspect of it. But we're also hearing some of the wireless carriers talk more about enterprise use cases that 5G could deliver? Is that a competitive threat to Cogent?

So there's distributed antenna systems. There's a couple of buildings in New York who do that. At the end of the day, when you fiber up a building, and you have fiber going into the back of your land and you're sitting in your office, there's no wireless capability that's going to compete with that. Wireless, however, has mobility. And that mobility is really critical and Cogent is never going to be able to compete with that. If someone wants to have either a data service or something where they can walk around with a mobile phone, the mobile 5G is really going to win there. I don't believe the cost of the spectrum, the cost of the equipment and the ability of line of sight challenges around wireless is going to be able to compete in a lot of these buildings. Remember, a lot of the receiver -- transceivers are up on the top of the building. They've got to wire the building. They've got to put electronics in and then they've got to put Milliwave and flood those buildings to compete with that. It's going to be very tough.

That's a good place to end it. So I'll stop there. Sean, thank you so much.

Matthew, thank you very much.

Thank you.