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1. Company Snapshot

1.a. Company Description

Cogent Communications Holdings, Inc., through its subsidiaries, provides high-speed Internet access, private network, and data center colocation space services in North America, Europe, Asia, South America, Australia, and Africa.The company offers on-net Internet access and private network services to law firms, financial services firms, and advertising and marketing firms, as well as heath care providers, educational institutions and other professional services businesses, other Internet service providers, telephone companies, cable television companies, Web hosting companies, media service providers, mobile phone operators, content delivery network companies, and commercial content and application service providers.It also provides Internet access and private network services to customers that are not located in buildings directly connected to its network; and on-net services to customers located in buildings that are physically connected to its network.


In addition, the company offers off-net services to corporate customers using other carriers' circuits to provide the last mile portion of the link from the customers' premises to the network.Further, it operates data centers that allow its customers to collocate their equipment and access the network.The company operates 54 data centers and provides facilities to 3,035 buildings and on-net services to 1,817 to multi-tenant office buildings.


It serves primarily to small and medium-sized businesses, communications service providers, and other bandwidth-intensive organizations.Cogent Communications Holdings, Inc.was founded in 1999 and is headquartered in Washington, the District of Columbia.

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1.b. Last Insights on CCOI

Cogent Communications Holdings, Inc.'s recent performance was negatively impacted by a quarterly loss of $0.87 per share, despite narrowing from $1.33 per share a year ago. Weaker revenues from enterprise and corporate customers contributed to the decline. However, the company's cost-cutting measures led to lower operating costs. Institutional investors have been actively buying and selling shares, with Ceredex Value Advisors LLC and Advisors Asset Management Inc. increasing their stakes. Additionally, the company announced the resumption of its stock repurchase program, which could be a positive factor.

1.c. Company Highlights

2. Cogent Communications Holdings' Strategic Shift Amidst Deleveraging Efforts

Cogent Communications Holdings reported a revenue of $241.9 million for the quarter, with an EBITDA margin of 30.5%, a sequential increase of 70 basis points. The company's EBITDA as adjusted was $73.8 million, a modest increase of $0.3 million. The earnings per share (EPS) came in at -$0.87, beating estimates of -$1.15. The company's financial performance was marked by a significant decision to reduce its quarterly dividend to $0.02 per share, redirecting capital towards reducing leverage.

Publication Date: Nov -16

📋 Highlights
  • Dividend Reduction:: Quarterly dividend cut to $0.02 per share to prioritize deleveraging, maintaining until net leverage reaches 4x EBITDA.
  • Net Leverage Ratio:: Increased slightly to 6.65 (Q3 2025) from 6.61 (Q2 2025), aligning with a target of 4x EBITDA.
  • Data Center Divestiture:: $144 million cash deal for two repurposed data centers, with credible counterparty in due diligence.
  • Wavelength Revenue Growth:: 93% YoY increase to $10.2 million, with 5,221 wave opportunities in backlog.
  • Lease Covenant Compliance:: Secured leverage ratio at 3.49, fixed coverage ratio at 2.62, and $100 million in T-Mobile IP Transit payments.

Deleveraging Strategy and Dividend Policy

The decision to cut the dividend was made after careful evaluation and is expected to allow the company to accelerate its deleveraging strategy. Cogent intends to maintain this updated dividend policy until it reaches a net leverage target of 4x EBITDA on a last twelve months (LTM) basis. The company's net leverage ratio stood at 6.65 this quarter, down from 6.61 last quarter, indicating a still-high leverage position. As Dave Schaeffer mentioned, "as we reach our target of 4x leverage, we're likely to revisit the dividend policy and consider returning to a more normalized level of dividend payments."

Wavelength Services and Data Center Divestiture

Cogent's wavelength services revenue saw a significant increase of 93% year-over-year and 12% sequentially, reaching $10.2 million. The company had sold and provisioned waves in 454 locations, with a backlog and funnel of wave opportunities standing at 5,221. Additionally, Cogent entered into a non-binding letter of intent to sell two of its larger data centers for $144 million, as part of its data center divestiture and monetization strategy.

Valuation and Growth Prospects

With a P/S Ratio of 1.16 and an EV/EBITDA of 17.9, the market seems to be pricing in moderate growth expectations. Analysts estimate revenue growth at 2.8% for the next year. While the company's deleveraging efforts and strategic shift are positive steps, the high Net Debt / EBITDA ratio of 12.75 indicates a still challenging debt position. The company's commitment to returning excess capital to shareholders and its focus on wavelength services and data center divestiture are expected to drive future growth.

Operational Highlights and Future Outlook

Cogent's operational highlights include its ability to sell wavelength services in nearly 1,000 carrier-neutral data centers and its strong sales force. The company expects positive revenue growth in Q4 after a late inflection in Q3. However, it faced some headwinds, including more off-net corporate churn than anticipated. With its unique network and competitive advantages, Cogent is well-positioned to capture market share and drive growth in the long term.

3. NewsRoom

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Edgestream Partners L.P. Sells 34,283 Shares of Cogent Communications Holdings, Inc. $CCOI

Dec -04

Source: defenseworld.net

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Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Given Average Rating of “Hold” by Brokerages

Dec -03

Source: defenseworld.net

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Cogent Communications Holdings, Inc. (CCOI) Presents at Bank of America Leveraged Finance Conference Transcript

Dec -02

Source: seekingalpha.com

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Ceredex Value Advisors LLC Purchases 63,750 Shares of Cogent Communications Holdings, Inc. $CCOI

Nov -29

Source: defenseworld.net

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Liberty Latin America (NASDAQ:LILA) versus Cogent Communications (NASDAQ:CCOI) Critical Analysis

Nov -26

Source: defenseworld.net

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Advisors Asset Management Inc. Buys 3,724 Shares of Cogent Communications Holdings, Inc. $CCOI

Nov -26

Source: defenseworld.net

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3 Wireless Stocks Likely to Thrive Against Industry Shortcomings

Nov -20

Source: zacks.com

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Cogent Communications CEO to Present at Three Upcoming Conferences

Nov -20

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.02%)

6. Segments

On-net

Expected Growth: 10.2%

Growing demand for high-speed internet and Ethernet services, increasing adoption of cloud computing, and rising need for low latency and high reliability connectivity drive growth in On-net buildings connected to Cogent's fiber-optic network.

Off-net

Expected Growth: 10.2%

Cogent Communications' off-net services growth is driven by increasing demand for high-bandwidth connectivity, strategic partnerships with other providers, and expansion into new markets, particularly in the Asia-Pacific region.

Non-core

Expected Growth: 4.5%

The non-core segment of Cogent Communications Holdings, Inc. is expected to grow driven by the increasing demand for digital transformation and the need for companies to focus on their core businesses, leading to divestitures of non-essential assets.

7. Detailed Products

Internet Services

Cogent Communications provides high-speed internet services to businesses, offering fast and reliable connectivity solutions.

Ethernet Services

Cogent offers Ethernet services, including Ethernet Virtual Private Line (EVPL) and Ethernet Private Line (EPL), for secure and dedicated network connections.

Colocation Services

Cogent provides colocation services, offering secure and reliable data center space for customers to house their IT infrastructure.

IP Transit Services

Cogent offers IP Transit services, providing customers with access to its global IP network and enabling them to reach destinations worldwide.

Dedicated Internet Access

Cogent provides dedicated internet access, offering customers a dedicated and symmetrical internet connection.

8. Cogent Communications Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Cogent Communications Holdings, Inc. is medium due to the availability of alternative communication services such as wireless networks and satellite communications.

Bargaining Power Of Customers

The bargaining power of customers for Cogent Communications Holdings, Inc. is low due to the company's strong market position and limited alternatives for customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Cogent Communications Holdings, Inc. is medium due to the presence of multiple suppliers and the company's dependence on a few key suppliers.

Threat Of New Entrants

The threat of new entrants for Cogent Communications Holdings, Inc. is low due to the high barriers to entry in the telecommunications industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Cogent Communications Holdings, Inc. is high due to the competitive nature of the telecommunications industry, with multiple players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 63.88%
Debt Cost 5.59%
Equity Weight 36.12%
Equity Cost 5.84%
WACC 5.68%
Leverage 176.87%

11. Quality Control: Cogent Communications Holdings, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Cogent Communications

A-Score: 4.1/10

Value: 5.2

Growth: 2.7

Quality: 2.1

Yield: 10.0

Momentum: 0.0

Volatility: 4.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

18.75$

Current Price

18.75$

Potential

-0.00%

Expected Cash-Flows