In This Article:
Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Cogent Communications Holdings Inc (NASDAQ:CCOI) achieved a significant milestone by offering wavelength services in 883 data centers with 10GB, 100GB, and 400GB capabilities.
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Wavelength revenues for the quarter increased by 114% over the same period in 2023, reaching $7.1 million.
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The company has materially reduced provisioning times to approximately 30 days.
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Cogent Communications Holdings Inc (NASDAQ:CCOI) has realized the remainder of its targeted $220 million in cost savings from the acquisition of Sprint.
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Gross margin increased by 790 basis points from the first quarter of 2024 to 44.6%.
Negative Points
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Corporate revenue decreased by 11.4% year over year and 2.1% sequentially, primarily due to the grooming of low-margin off-net connections.
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Net-centric revenue declined sequentially by 1.1% and was negatively impacted by a decline in revenue from the commercial service agreement with T-Mobile.
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Enterprise revenue decreased by 11.3% year over year and sequentially by 4.1%, primarily due to a reduction in non-core and low-margin enterprise revenues.
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Off-net revenue decreased by 9.2% year over year and 5.2% sequentially.
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The company has increased its leverage, leading the board to slow the rate of dividend growth.
Q & A Highlights
Q: Within the waves business, are you seeing any change in competition, and do you think the Crown Castle's Zao deal will change the landscape? Also, can you update us on corporate revenue trends and your new revenue growth targets? A: Our primary competitors in the wavelength market struggle with provisioning and lack our coverage ubiquity. We have a significant advantage in this area. Regarding the Crown Castle Zao combination, it is likely a year away from impacting the market. As for corporate revenue, we expect to be through the undesirable Sprint revenue by mid-Q3, after which we anticipate positive total revenue growth.
Q: On the dividend growth, is the half-penny per share increase temporary, and what milestones would be needed to return to a penny growth per quarter? Also, what needs to happen to reach the target of 500 wavelength circuits installed per month? A: The board is committed to returning capital to shareholders, and as our leverage begins to decline in Q4, we will evaluate increasing the dividend growth rate. Regarding wavelength installations, we have the capacity to install 500 orders a month, but currently, the funnel conversion rate is about 5%. We expect to reach the 500 installs per month target by year-end as the funnel grows.