Cogent Communications service revenues and connections increase; uncertain COVID-19 impact
Backgrounder:
Cogent Communications offers a variety of data communications services which include:
Dedicated Internet Access, Ethernet Point-to-Point, Ethernet VPLS, and Colocation Services to Enterprise customers, Carrier & Service Providers and Application & Content Providers.
For more information about the Cogent, please refer to this IEEE Techblog post.
1Q 2020 Earnings Report:
Today, the company reported first-quarter service revenues up 5.1 percent to $140.9 million for the quarter, up 5.6 percent on a constant currency basis. Total customer connections increased by 5.7% from March 31, 2019 to 87,213 as of March 31, 2020 and increased by 0.8% from December 31, 2019. Gross margins increased to an all time high of 60.5 percent in the quarter, which was a 70 percent YoY increase. Traffic growth was 36 percent YoY.
On-net [1.] revenue was up 6.5 percent to $103.5 million, as the company increased the number of on-net buildings by 117 over the year and 22 since December to 2,823 at end-December. On-net customer connections increased by 5.8% from March 31, 2019 to 75,163 as of March 31, 2020 and increased by 0.8% from December 31, 2019.
Note 1. On-net customers are located in buildings that are physically connected to Cogent’s network by Cogent facilities.
…………………………………………………………………………………………………………………………………
- Off-net customer connections increased by 5.2% from March 31, 2019 to 11,721 as of March 31, 2020 and increased by 0.5% from December 31, 2019.
- Net cash provided by operating activities decreased to $28.5 million for Q1 2020.
- EBITDA decreased by 4.4% from Q4 2019 to $50.4 million for Q1 2020 and increased by 6.0% from Q1 2019 to Q1 2020.
According to Zacks, the current consensus EPS estimate is $0.26 on $145.68 million in revenues for the second quarter and $1.05 on $586.21 million in revenues for the current fiscal year.
…………………………………………………………………………………………………………………………………..
COVID-19 Impact:
During the first quarter, the impact of the Covid-19 pandemic on Cogent was limited, the company said. In the last two weeks of March, it saw a positive impact on net-centric revenue but a slight slowdown in corporate installs. There was also a material increase in traffic on the network. Most of its staff have transitioned to remote working. Field engineers continue to install, maintain and upgrade Cogent’s wireline (mostly fiber) network.
The ultimate impact of COVID-19 is unknown as this time due to uncertainty, said Cogent Communications CEO David Schaeffer on the company’s 1Q-2020 earnings call:
We hope everyone remains safe and healthy during these times. We value our employee safety and take all of the necessary precautions to keep our Cogent colleagues safe in these difficult times. While we believe we are a beneficiary of a stay at home model, we are uncertain about the long-term implications for economies around the world. With the large number of employees staying at home and the increased rate of unemployment globally.
On the previous (4Q 2019) earnings call, Mr. Schaeffer said:
The Cogent Network remains the most interconnected networks in the world, with direct connectivity to 6,950 networks. Less than 30 of these networks that connect to Cogent are settlement free peers with the remaining over 6,920 networks being paying Cogent transit customers. We are currently utilizing approximately 29% of the lit capacity in our network. We routinely augment this capacity, as portions of our network need those augmentations to maintain these low utilization rates.
Cogent’s Network Scope, Scale and Traffic Growth:
On the May 7th (1Q-2020) earnings call, Dave talked about the scope and scale of Cogent’s network:
At quarter end, we had over 961 million square feet of multi-tenant office buildings connected to the Cogent network.
Our network consists of over 36,000 metro fiber miles and over 58,000 intercity route miles of fiber. The Cogent network remains the most interconnected in the world, and we directly connect to over 7,040 networks. Of these networks, less than 30 are settlement-free peers. The remaining networks that we connect to are Cogent customers.
We are currently utilizing approximately 35% of the lit capacity in our network. We routinely augment capacity on parts of our network as we see increases in traffic to maintain these low utilization rates. For the quarter, we achieved sequential traffic growth of 12% and year-over-year traffic growth of 36%. We operate 54 Cogent-controlled data centers with over 606,000 feet of space and those facilities are operating at approximately 33% capacity.
Our business remains completely focused on the Internet and IP connectivity services, as well as data center co-location. Each of these services are a necessary utility for our customer. Our multiyear constant-currency long-term growth target of approximately 10% and our long-term EBITDA margin expansion rate of approximately 200 basis points should continue for the foreseeable future. Our board of directors approved our 31st consecutive increase in our regular quarterly dividend.
During the Q&A, Dave answered a question related to trends in data (non-voice) traffic growth:
We support a number of key applications, video conferencing, audio conferencing, and all of that traffic has materially increased as we’ve gone to a more work from home environment. People will eventually return to their offices, and there will be a reduction, maybe not a complete revert to where we were before, but a reduction in that type of traffic. That traffic is de minimis compared to streaming video traffic, which is the primary driver of unit volume growth.
We see this broad mix of OTT business models, accelerating their displacement of linear television. That is a permanent trend, not a temporary trend. What is temporary as people may be watching more minutes a day of video, but what is permanent is the migration from linear to over the top. And while we saw a material spike up in the rate of acceleration, that rate of acceleration has returned to a more normalized rate of acceleration, but we’re off of a higher base.
And we do expect our rate of traffic growth for the full-year 2020 to be above that of 2019.
……………………………………………………………………………………………………………………………………..
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent’s facilities-based, all-optical IP network backbone provides services in over 200 markets globally.
Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at [email protected].
…………………………………………………………………………………………………………………………………..
References:
https://www.cogentco.com/en/news/events/1392-cogent-communications-first-quarter-2020-earnings-call
https://www.cogentco.com/files/docs/news/media_kit/cogent_fact_sheet.pdf
Cogent Communications still growing strongly -18 years after the Fiber Optic Bust
One thought on “Cogent Communications service revenues and connections increase; uncertain COVID-19 impact”
Comments are closed.
Robots work to fight COVID 19; SK Telecom’s 5G Robot
https://viodi.com/2020/05/27/covid-19-robots/