Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q1 2020 Earnings Conference Call - Final Transcript

May 07, 2020 • 08:30 am ET

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Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning and welcome to the Cogent Communications Holdings First Quarter 2020 Earnings Conference Call. As a reminder, this conference call is being recorded. It will be available for replay at www.cogentco.com.

I would now like to turn the call over to Mr. Dave Schaeffer, Chairman and Chief Executive Officer of Cogent Communications Holdings. Please go ahead.

Executive
Dave Schaeffer

Good morning and thank you very much. Welcome to our first quarter 2020 earnings conference call. I'm Dave Schaeffer, Cogent's Chief Executive Officer. And with me on this morning's call is Jean-Michel Slagmuylder, our acting Chief Financial Officer.

We are pleased with our results for the quarter and continue to be optimistic in the underlying strength of our business and our outlook for 2020 and beyond, even with the impact and uncertainty of the COVID-19 pandemic. Our quarterly gross margin reached a company record high of 60.5%. It increased sequentially by 20 basis points, an increase year-over-year by 70 basis points. Our EBITDA margin for the quarter increased 30 basis points from the first quarter of 2019 to 35.8%. On a constant-currency basis, we achieved sequential revenue growth of 0.6% and year-over-year quarterly revenue growth of 5.6%. A reduction in universal service fee excise taxes for this quarter reduced our revenue by approximately $600,000. On a constant currency basis and adjusting for the impact and a reduction of USF, our quarterly revenue growth would have been water set.

On a sequential basis, our year-over-year traffic growth was 36% for the quarter, and we achieved sequential traffic growth for the first quarter over the fourth quarter of 2019 of 12%. During the quarter, we returned $30.6 million to our shareholders through our regular quarterly dividend. We did not purchase any common stock during the quarter.

At quarter-end, we had $34.9 million available in our stock buyback program, which our Board has authorized to continue through December 2020. Our gross leverage ratio decreased in the quarter to 4.78 from 4.86 from the last quarter and our net leverage ratio increased slightly to 2.92 from 2.86. Our cash held at Cogent Holdings at quarter-end was $80.5 million. This cash is unrestricted and available for dividends and/or buybacks. Cash held at our operating company level was $294,600,000 and our total combined cash was $375,100,000 at quarter-end.

We remain confident in the growth potential and cash-generating capabilities of our business. As a result, as we indicated in our press release, we have announced yet another sequential increase in our quarterly dividend, increasing that dividend $0.02 per share sequentially from $0.66 per share per quarter in the fourth quarter to $0.68 per share per quarter in the first quarter of 2020. This represents our 31st consecutive sequential increase in our regular dividend.

Yes. I'd like to take a moment and just touch on some of the uncertainty related to the global pandemic and COVID-19. Like many companies, Cogent has been impacted by COVID-19 pandemic effects and the accompanying responses of governments around the world. Beginning in mid-March, Cogent transitioned its