Cogent(CCOI) - 2024 Q4 - Annual Results

Revenue Performance - Service revenue for Q4 2024 was $252.3 million, a decrease of 1.9% from Q3 2024 and a decrease of 7.3% from Q4 2023[3]. - Total service revenue for the year ended December 31, 2024, was$ 1,036.1 million, an increase of 10.1% from the previous year[4]. - Cogent experienced a decline in corporate revenue, with Q4 2024 corporate revenue at $113.070 million, down 2.7% from Q3 2024[41]. - On-Net revenue for Q4 2024 was$ 128.760 million, a decrease of 5.7% from Q3 2024, while Off-Net revenue was $113.190 million, an increase of 1.7%[41]. - The company reported a total service revenue of$ 940,922 for the year 2023, with a projected increase to $1,036,104 for the year 2024, representing a growth of 10.1%[73]. - Service revenue for the three months ended December 31, 2024, was$ 252,291, a decrease of 7.0% from $272,099 in the same period of 2023[81]. EBITDA and Profitability - EBITDA for Q4 2024 increased by 16.7% to$ 41.9 million from Q3 2024, with an EBITDA margin of 16.6%[4]. - GAAP gross profit for the quarter was $69,790, a decrease of 2.3% from the previous quarter[43]. - Non-GAAP gross profit was$ 95,099, remaining stable with a 0.0% change from the previous quarter[43]. - Operating income was $24,312, reflecting an 11.0% decrease from the previous quarter[43]. - Net income for the quarter was$ 6,148, compared to a net loss of $56,723 in the previous quarter[43]. - The EBITDA margin for the quarter was 36.5%, down from 15.8% in the previous quarter[43]. Customer Connections - Total customer connections decreased by 10.3% year-over-year to 123,383 as of December 31, 2024[26]. - Customer connections reached 83.2 million, an increase of 5.0% from the previous quarter[44]. - Corporate customer connections reached 4,457,061, with a decrease of 0.6% from the previous quarter[1]. - Customer connections for the enterprise segment totaled 5,285,576, showing a 2.3% increase from the previous quarter[1]. - Net customer connections decreased by 2.3% from the previous quarter, totaling 4,435,520[1]. Dividends and Shareholder Returns - Cogent approved a quarterly dividend increase to$ 1.005 per share for Q1 2025, marking the fiftieth consecutive quarterly dividend increase[4]. - Cogent's Board approved a quarterly dividend of $1.005 per share, representing a 1.0% increase from Q4 2024's dividend of$ 0.995 and a 4.1% increase from Q1 2024's dividend of $0.965[30]. - In 2024, Cogent paid total dividends of$ 189.4 million, equating to $3.92 per share, with 100% treated as a return of capital for tax purposes[33]. - The company declared dividends of$ 0.995 per common share for the three months ended December 31, 2024, compared to $0.955 in the same period of 2023[81]. Operational Efficiency and Expenses - Network operations expenses for Q4 2024 were$ 154.706 million, down 4.0% from Q3 2024[41]. - Selling, general and administrative expenses were $38,646, reflecting a 2.5% increase from the previous quarter[43]. - Total operating expenses for the three months ended December 31, 2024, were$ 285,058, down 16.3% from $340,577 in the prior year[81]. Acquisitions and Strategic Initiatives - The company plans to explore potential mergers and acquisitions to enhance its market position[44]. - Cogent reported a gain on bargain purchase from the Sprint acquisition amounting to$ 1.4 billion, with a fair value of net assets acquired at $826.1 million[10][54]. - The company acquired 482 technical buildings as part of the Wireline Business acquisition, with 52 converted into Cogent Data Centers[12]. - The company is exploring potential acquisitions to enhance its service offerings and market share, with a target of identifying at least two strategic opportunities by the end of the fiscal year[10]. Financial Position and Cash Flow - Total debt as of December 31, 2024, was$ 1,994,386, up from $1,270,382 as of March 31, 2023, marking an increase of 56.7%[78]. - Cash and cash equivalents at the end of the period were$ 198,486, significantly higher than $75,092 at the end of 2023[80]. - Net cash provided by financing activities was$ 105,925 in 2024, a recovery from a net cash used of $(257,851) in 2023[86]. - Operating cash flow was negative at$ (8,645) in 2024, a significant decline from $17,345 in 2023[86]. Market Outlook and Challenges - The company anticipates challenges in integrating the acquired Wireline Business, which may affect operational efficiency[87]. - Future economic instability and competition are expected to impact spending on Internet services and customer acquisition[87]. - The company is subject to risks related to foreign exchange rates, particularly between the Euro and USD, which could affect financial results[87].