Cogent Communications (NASDAQ:CCOI, news, filings) reported its fourth quarter earnings this morning. Overall, Cogent continued its streak of steady, increasingly profitable growth. Revenues were slightly low due to currency fluctuations, but the company managed a nice surprise down on the all-important bottom line. Here’s a quick table of today’s numbers in context.
|$ in millions||Q4/10||Q1/11||Q2/11||Q3/11||Q4/11|
|Earnings per share||0.06||-0.01||0.05||0.01||0.12|
|Adj. EBITDA Margin||32.5%||33.0%||33.6%||34.5%||35.2%|
Revenue Growth: The overall revenue number was a bit low due to a negative foreign exchange swing of $1M from the third quarter, else Cogent would have finished just above analyst projections. As has been the trend in recent quarters, Cogent’s off-net services led the way with 5.4% sequential growth, while it’s on-net services grew more slowly. Traffic on the company’s network was up 20% sequentially, and 53% over the same quarter last year – which seems to be in the usual ballpark.
EBITDA and Earnings: Cogent continued to keep costs in line, despite the additional off-net growth. With adjusted EBITDA of $27.8M, margins expanded once again, this time poking a head above the 35% threshold. Meanwhile, earnings per share surged mightily to $0.12, easily outdistancing analyst projections of $0.04 or so. Update: much of the extra EPS resulted from a one-time tax-related event.
Operationally speaking: Headcount increased again by 5% over the third quarter, which I assume to be focused on sales. Traffic on the company’s network was up 20% sequentially, and 53% over the same quarter last year – which seems to be in the usual ballpark. And Cogent added another 37 buildings to its network, finishing the year with an extra 165 on its on-net building list. Update, Cogent had dark fiber expansions into both Turkey and Lithuania in the quarter, as well as Japan via lit capacity.
Followup Thoughts: The company has been very quiet this winter, with the only major news being their peripheral involvement in the Megaupload takedown last month. The lingering question is how big an effect the loss of Megaupload as a customer will be, but that is a Q1 story that perhaps will be addressed on the conference call later this morning.
Megaupload followup: Cogent says that Megaupload was about 5% of total revenues, which would be about $4M/quarter. They do expect a sequential decline in Q1 for revenues, ebitda, and margin due to this customer loss, after which the former growth trend should resume. Growth for 2012 over 2011 will be below their usual 10-20% projections. This seems to be about as expected, at least if one was paying attention.
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