Cogent Communications (NASDAQ:CCOI, news, filings) took a rather public hit back in January when filesharing giant MegaUpload was shut down by an international law enforcement action, but the company was undaunted enough to take the opportunity to declare a quarterly dividend of $0.10 for its shareholders as part of its report today. Here’s a quick summary of their results for the first quarter.
| $ in millions | Q1/11 | Q2/11 | Q3/11 | Q4/11 | Q1/12 |
|---|---|---|---|---|---|
| Revenue | 73.5 | 75.6 | 77.4 | 79.1 | 76.9 |
| EBITDA | 24.2 | 25.4 | 26.7 | 27.8 | 22.6 |
| Earnings per share | -0.01 | 0.05 | 0.01 | 0.12 | -0.05 |
| Gross Margin | 56.9% | 56.2% | 56.7% | 57.8% | 55.4% |
| Adj. EBITDA Margin | 33.0% | 33.6% | 34.5% | 35.2% | 29.3% |
| On-net Buildings | 1609 | 1669 | 1707 | 1744 | 1769 |
As MegaUpload accounted for 5.5% of revenues, the sequential decline was as anticipated – helped a bit further along by some negative currency effects. A bitter pill, certainly, but at least it got swallowed all at once. But it was the EBITDA number that took the biggest hit, dropping 19% sequentially – rather more than I had expected. I supposed I should have anticipated a delay in Cogent’s ability to offset the surprise loss of that revenue. Earnings per share and margins tumbled similarly of course.
Cogent’s headcount went down as well, clearly they have been working to bring SG&A back in line. On-net buildings expanded by another 25, which is where I thought they’d probably be this quarter.
As for that dividend, Cogent has been trying to find things to do with its extra cash for some time now. Returning it to shareholders via a quarterly dividend had been on the list of course, and now the first such payment will happen on September 15.
Cogent’s stock has done remarkably well lately despite the short term trend, which has had me wondering whether the company might be in play for some consolidation. I haven’t heard any actual activity on that front though.
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I don’t know that the pill was fully swallowed by focusing on ON NET revenues as well as gross and EBITDA margins which were pummeled, but declaring a “future dividend” in the wake of margin contractions with full disclosures that who knows what tomorrow brings, is an interesting way to keep incumbent owners like Enron from fleeing this rat infested ship! imo
The payment of any future quarterly dividends will be at the discretion of the board and will be dependent upon Cogent’s financial position, results of operations, available cash, cash flow, capital requirements and other factors deemed relevant by the board.
worst… telecom… evar. with XO doing battle for pole position.
Rob, what did you make of Dave’s statement that, “price per megabit in our installed base actually increased for the first time in at least a half dozen years.” I assume it is just losing Mega as a client but you think there is any fire in all that smoke?
Yeah, I took that as a direct result of MegaUpload’s discounted rates coming off the books suddenly. I don’t think the overall pricing trends have changed materially, though it sure would be nice eh?
Rob, does Enron want to explain the current status of this “MISSING LINK” to your forum including its ramifications which hasn’t been addressed here, i.e. Cogent and China Telecom depeer in favor of Sprint as well as Level 3 paid “transit” routes?
According to a recent Cogent CC, I recall that they were making “individual” inroads–leasing–to the Far East, Japan, I think, to satisfy a single customer with no plans of investing or connecting to that region for mass scale.
What do these Cogent PEOPLE really GOT?
http://www.renesys.com/blog/2012/03/cogent-depeers-china-telecom.shtml