More Detail on Cogent From TheJuice

November 6th, 2008 by · 1 Comment

Good morning all. Well Cogent (CCOI) reported this morning and there are quite a few items to discuss. First off, these guys are good traders. Although not impacted in the current financial statements it appears they have purchased back more than 50% of their debt for less than .50 cents on the dollar. Further, as we know they continued their assault on share repurchases retiring another 1.2M shares. They have $32.1M of additional shares they can repurchase between now and 12/31/2009 (I confirmed the date with IR last night).

Balance sheet maneuvering aside below are the results vs. my expectations.

est

diff

q1

q2

q3

on-net

42811

44215

44243

45109

-866

off-net

7994

8459

8995

8884

111

non-core

1305

1185

1356

1009

347

total rev

52110

53859

54594

55001

-407

cogs

21958

22952

24059

23641

418

gross profit

30152

30907

30535

31361

-826

sga

15550

14448

16403

14860

1543

ebitdas

14602

16459

14132

16500

-2368

one-time gain

16

126

9762

0

9762

adjustment

0

0

7

7

adj. ebitdas

14618

16585

23901

16500

7401

interest

671

1986

2159

2500

-341

working cap

2439

250

-5848

211

-6059

cash flow operating

11492

14223

17828

13789

4039

capex

9778

9029

9515

7193

2322

FCF

1714

5194

8313

6596

1717

repay cap lease

-6396

-3638

-5571

-7000

1429

mature short term investments

0

650

0

0

0

disposition

22

44

40

0

40

stock option

53

47

21

0

21

exchange rate

245

100

-836

0

-836

adj. FCF

-4362

2397

1967

-404

2371

stock buy

-18054

-27994

-11984

-11984

0

debt buy

0

0

-9941

-9900

-41

change in cash

-22416

-25597

-19958

-22288

2330

begin cash

177021

154605

129008

129008

0

end cash

154605

129008

109050

106720

2330

As you can tell on-net revenues were a tad light, however, traffic increased on the network by 5% so I’m not concerned about this data-point. Adjusted EBITDAS was higher than forecast due to the one-time gain, but then lower than forecast due to higher SG&A. I’m betting that comes from hiring more sales guys (not unexpected if that’s the case.) Working cap came back strong and was a big source of cash for the quarter. After taking a bath on the euro and Canadian dollar, they still were FCFP, which is what allows these guys to keep buying back stock. All in all, not a bad quarter at all.

Guidance: Ok, this is where it hurts in the short-term, they are taking Q4 adjusted EBITDAS guidance down by around 7.6%. Personally, with the current environment, I’m not surprised. As to the 2009 adjusted EBITDAS guidance for 2009 they’re looking around an increase of 25%. That’s nice. All told, I’m happy and think the market will like it too!

Here is the updated EV/EBITDAS as of the end of the quarter, adjusted for the debt buyback and the impact on cash. Needless to say, they are trading a very low valuation relative to their historical average, or that of their competitive set.

CCOI

cash

61,350,000

equity

217,593,949

44,588,924

$4.88

current/other

8,646,000

8,646,000

100.00%

leases

97,559,000

97,559,000

100.00%

1% 14

38,455,292

90,705,000

42.396%

adj. ebitdas

60,000,000

196,910,000

ev

300,904,241

ev/ebitdas

5.015

debt/equity

0.665

debt/ebitdas

2.411

Let me know if I’m missing something.

thejuice.

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1 Comment, Add Yours!


  • Professor Plum says:

    nice analysis. If you think Dave can pull off $75 next year which does not seem implausible given the implied foreign exchange impact in their guidance, then we’re at 4x fwd EBITDA.

    I also think your cash estimate is a bit low, but that’s splitting hairs.

    All seems a bit silly, but the market is the market.

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