Cogent Communications (CCOI) Q2 2024 earnings summary

Executive summary

• Q2 2024 service revenue was $260.4 million, up 8.6% year-over-year, with on-net revenues at $140.8 million and off-net at $111.5 million; revenue declined 2.2% sequentially.

• Adjusted EBITDA was $106.2 million with a 40.8% margin; classic EBITDA margin improved to 10.4% sequentially.

• Net loss for Q2 2024 was $32.3 million, compared to net income of $1.1 billion in Q2 2023, which included a large gain on bargain purchase from Sprint.

• Achieved $135 million in annualized cost savings from Sprint integration, representing 62% of the $220 million target.

• Completed $206 million IPv4 asset-backed securitization and $300 million unsecured notes; repurchased 153,322 shares for $8 million, with $22.4 million remaining authorized for buybacks.

Financial highlights

• On-net revenue grew 10.3% year-over-year; off-net revenue grew 9.3% year-over-year.

• Wavelength revenue increased 128.7% year-over-year to $3.6 million.

• IPv4 leasing revenue rose 4.4% sequentially to $10.7 million, with average price per address up to $0.51.

• SG&A expenses decreased 7.1% sequentially and 16.1% year-over-year; cost of goods sold dropped 7.8% sequentially.

• Ended quarter with $426.2 million in cash and cash equivalents.

Outlook and guidance

• Long-term annual revenue growth expected between 5% and 7%, with adjusted EBITDA margins expanding by ~100 bps annually.

• Guidance is multi-year; not for specific quarters or years.

• Wavelength services expected to accelerate in 2025 as network integration completes.

• Management expects continued revenue growth from expanded network and Sprint Business integration.

• EBITDA will step down in 2024 due to lower T-Mobile payments but is expected to grow in 2025 as cost savings and margin improvements continue.