More Detail on Cogent From TheJuice

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.

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.

Let me know if I’m missing something.

thejuice.

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