Communications Sector

[gfp927z]

Cogent Communications - >>> Revenue Surge and Dividend Hike: Cogent Communications' 2023 Financials


GuruFocus Research

February 29, 2024


https://finance.yahoo.com/news/revenue-surge-dividend-hike-cogent-123237245.html


On February 29, 2024, Cogent Communications Holdings Inc (NASDAQ:CCOI) released its 8-K filing, revealing a robust financial performance for the fourth quarter and full year of 2023. The company, known for carrying over one-fifth of the world's internet traffic and providing broadband services to businesses, has reported a significant increase in service revenue, both quarterly and annually. This growth is particularly noteworthy given the challenges faced by the telecommunications industry and the complex economic environment.

Financial Performance Highlights

CCOI's service revenue for Q4 2023 was $272.1 million, a slight decrease from Q3 2023 but a substantial 79.0% increase from Q4 2022. The annual service revenue for 2023 reached $940.9 million, up 56.9% from the previous year. These figures reflect the company's strong position in the market and its ability to grow despite external pressures.

The company's GAAP gross profit for Q4 2023 was $29.7 million, nearly doubling from the previous quarter, although it decreased by 41.1% from the previous year. The GAAP gross margin improved to 10.9% in Q4 2023 from 5.5% in Q3 2023. Non-GAAP gross profit for the year ended December 31, 2023, was $397.8 million, with a non-GAAP gross margin of 42.3%.

CCOI's EBITDA, as adjusted for Sprint acquisition costs and cash paid under the IP Transit Services Agreement, was $110.5 million for Q4 2023, with an adjusted EBITDA margin of 40.6%. The basic net income per share was $4.23 for Q4 2023, reflecting the company's profitability.

Strategic Developments and Dividend Increase

CCOI has continued to expand its customer base, with total customer connections increasing by 42.6% year-over-year. The number of on-net buildings also grew, indicating an expansion of the company's physical network infrastructure.

In a strategic move, CCOI acquired Sprint's Wireline Business, which has resulted in a provisional gain on bargain purchase of $1.4 billion. The company also entered into an IP Transit Services Agreement with T-Mobile USA, Inc., which will contribute $700.0 million in aggregate payments to CCOI over a period of 42 months.

Reflecting confidence in its financial health, CCOI's Board approved an increase in the regular quarterly dividend to $0.965 per share for the first quarter of 2024, representing a 1.0% increase from the previous quarter and a 4.3% increase year-over-year.

Market and Operational Challenges

Despite the positive financial results, CCOI has faced challenges, including the residual impact of the COVID-19 pandemic on corporate results. The pandemic has led to a shift in remote work policies, affecting real estate markets and Cogent's corporate revenue. However, as businesses adapt to new work environments and upgrade their internet infrastructure, CCOI anticipates opportunities for growth.

<<<



---