Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q2 2020 Earnings Conference Call - Final Transcript

Aug 06, 2020 • 08:00 am ET


Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q2 2020 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Cogent Communications Holders Second Quarter 2020 Earnings Conference Call. [Operator Instructions] A transcript of this conference call will be posted on the same website when it becomes available.

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

David Schaeffer

Thank you, and good morning to everyone. Welcome to our second quarter 2020 earnings conference call. I'm Dave Schaeffer, Cogent's CEO. And with me on this morning's call is Sean Wallace, our Chief Financial Officer.

We continue to be optimistic about the underlying strength in our business, the growing importance and breadth of our network, and most importantly, the increasing profitability of our operations. We remain confident in our outlook for 2020 and beyond even with the continuing impact and uncertainty due to the COVID-19 pandemic. On a constant currency basis, we achieved sequential quarterly revenue growth of 0.2% and year-over-year revenue growth for the second quarter of 5.1% on a constant currency basis. A reduction in universal service fees, excise taxes and the rate associated with them this quarter reduced our sequential quarterly revenues by $450,000. On a constant currency basis and adjusting for the impact of this change in USF rate, our sequentially quarterly revenue growth would have been 0.5%. We continue to take advantage of the operating leverage in our network. We managed also to moderate our SG&A expense growth. Our network scale helped our quarterly gross margins reach yet another company record of 62%. This margin was sequentially 150 basis points higher and 220 basis points higher than a year-over-year number for the quarter ending in June 2020. Our EBITDA margin at 37.8% also improved, and was sequentially 200 basis points higher and 290 basis points higher on a year-over-year basis.

Our cash flow from operations grew sequentially by 45%. Our customer performance and metrics continue to be strong in spite of the impact of COVID-19. Customer churn, bad debt and days sales outstanding all performed within historical norms and our cash collections in the month of June were an all-time record. We believe that these statistics indicate the strong credit quality of our customer base and the importance of Cogent service to these organizations. We continue to see strong growth in traffic across our network as quarterly traffic growth accelerated from 36% year-over-year in the first quarter to 49% this quarter, and sequentially, traffic grew from the first quarter of 2020 to the second quarter by 10%. The rapid growth in traffic was driven by increased streaming applications, a full quarter of the work-from-home phenomena and gaming and other applications that have seen an increase in usage due to the pandemic. During the quarter, we returned $31.7 million to our shareholders through our regular quarterly dividend. We did not purchase any common stock during the quarter. At quarter end, we have a total of $34.9 million available in our stock buyback authorization program, which has been authorized to continue through