Cogent (CCOI) Q1 Loss Wider Than Expected Despite Top-Line Growth

Cogent Communications Holdings, Inc. CCOI reported soft first-quarter 2024 results, with both the bottom and top lines falling short of the respective Zacks Consensus Estimate. However, the Washington, DC-based leading Internet service provider reported a top-line expansion year over year, driven by solid demand trends in the net-centric business.

Net Income

The company reported a net loss of $65.3 million or a loss of $1.38 per share against a net income of $6.1 million or 13 cents per share in the year-ago quarter. The decline is primarily attributed to higher operating expenses. Non-GAAP loss in the reported quarter was $1.29 per share, wider than the Zacks Consensus Estimate of a loss of $1.10.

Cogent Communications Holdings, Inc. Price, Consensus and EPS Surprise Cogent Communications Holdings, Inc. Price, Consensus and EPS Surprise

Cogent Communications Holdings, Inc. price-consensus-eps-surprise-chart | Cogent Communications Holdings, Inc. Quote

Revenues

Service revenues rose to $266.2 million from $153.6 million in the year-earlier quarter, driven by solid growth in Off-Net revenues. However, the top line missed the consensus estimate of $274 million.

On-Net revenues during the quarter were $138.6 million, up from $116.1 million in the year-ago quarter. The top line missed our estimate of $148.4 million. On-Net customer connections improved 5.2% year over year to 87,574.

The net-centric business experienced healthy demand, driven by continued growth in video traffic, streaming and wavelength. The company’s Net-centric customer connections improved to 61,599 from 52,857 a year ago.

Off-Net revenues were $118.2 million compared with $37.3 million in the year-earlier quarter. Off-Net customer connections increased to 34,579 from 13,785 in the year-ago quarter. Net sales fell short of our revenue estimate of $119.5 million.

Wavelength revenues were $3.3 million in the quarter. Non-core revenues stood at $6 million, down 16.8% sequentially. Non-core customer connections were 10,037, down 16.2% sequentially.

Other Details

GAAP gross profit was $26.3 million, down 62.3 % year over year for margins of 9.9% and 45.4%, respectively. Operating loss was $59.4 million against an operating income of $24.3 million a year ago. EBITDA totaled $18.5 million compared with $56 million in the year-ago quarter for respective margins of 6.9% and 36.5%. Cogent raised its quarterly dividend by a penny to 97.5 cents for the second quarter of 2024. This is the 47th consecutive quarterly dividend increase from the company.

Cash Flow & Liquidity

In the first quarter of 2024, Cogent generated $19.2 million from operating activities compared with $35.8 million in the year-ago quarter. As of Mar 31, 2024, the company had $118.4 million in cash and cash equivalents with $453.5 million of finance lease obligations (net of current maturities).

Zacks Rank & Stocks to Consider

Cogent currently has a Zacks Rank #3 (Hold).

NVIDIA Corporation NVDA, carrying a Zacks Rank #2 (Buy) at present, delivered a trailing four-quarter average earnings surprise of 20.18%. In the last reported quarter, it delivered an earnings surprise of 13.41%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista delivered an earnings surprise of 15.39%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

Silicon Motion Technology Corporation SIMO, sporting a Zacks Rank #1 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.

It is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers (“OEM”) and other customers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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