Cogent(CCOI) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter revenues grew sequentially by 1.1% to $143.9 million and increased 2.6% year-over-year [9] - Full year 2020 revenue increased by 4% to $568.1 million from full year 2019 [9] - Gross profit grew by 1.4% sequentially and 5.6% year-over-year [10] - EBITDA for the fourth quarter increased by 2% sequentially and 5.6% year-over-year, with a full year EBITDA of $214 million, an increase of 8.1% from 2019 [12][62] - Basic and diluted loss per share was $0.14 for the quarter, compared to a loss of $0.11 last quarter [63] Business Line Data and Key Metrics Changes - Corporate business, representing 65% of revenues, declined year-over-year by 3.1% and sequentially by 2.1% [34] - NetCentric business, representing 35% of revenues, grew by 15.3% year-over-year and 7.7% sequentially [36] - Revenue from Corporate customers fell sequentially by 2.1% to $93.7 million and year-over-year by 3.1% [41] - Revenue from NetCentric customers increased to $52 million for the quarter, a sequential increase of 7.7% [46] Market Data and Key Metrics Changes - On-net revenue was $107.1 million for the quarter, a sequential increase of 1.9% and a year-over-year increase of 4.3% [49] - Off-net revenue was $36.7 million for the quarter, a sequential decrease of 1.1% and a year-over-year decrease of 2.2% [50] - Average price per megabit for installed customer base declined sequentially by 8.8% to $0.41 [52] Company Strategy and Development Direction - Company continues to invest in expanding its network to international markets, positioning itself for the globalization of the Internet [6] - Targeted long-term EBITDA annual margin expansion guidance is approximately 200 basis points per year [33] - Long-term revenue growth target is approximately 10% per year [33] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term strength of the business despite challenges from the COVID-19 pandemic [5] - There are signs of improvement in Corporate customer engagement and expectations for a return to office environments [109] - The company believes its Corporate business has troughed and anticipates steady improvement as employees return to the office [109] Other Important Information - The Board of Directors approved a quarterly dividend increase to $0.755, representing a 14.4% compounded annual growth rate [102] - Total cash on a consolidated basis was $371.3 million at the end of the quarter [18] - Bad debt expense as a percentage of revenues improved to 0.5% for the quarter [77] Q&A Session Summary Question: When does the company expect to return to growth in the Corporate business? - Management noted that the Corporate business had declines during the financial recession but expects to see improvements as customer engagement increases and employees return to the office [106][109] Question: What does the increase in leverage mean for the dividend and stock buybacks? - Management explained that the increase in leverage was primarily due to noncash accounting changes and that the Board will evaluate capital return policies based on various factors, including growth rates and cost of debt [111][116] Question: Can the company provide a timeline for returning to 2% sequential growth in the Corporate business? - Management indicated that while the pandemic has had a longer-lasting impact, they are seeing signs of improvement and expect a gradual return to growth as conditions stabilize [109][110]