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    COGENT COMMUNICATIONS HOLDINGS (CCOI)

    CCOI Q2 2024: 62% of $220M Savings Boost Margins Despite $40M Headwind

    Reported on Jun 11, 2025 (Before Market Open)
    Pre-Earnings Price$67.48Last close (Aug 7, 2024)
    Post-Earnings Price$69.00Open (Aug 8, 2024)
    Price Change
    $1.52(+2.25%)
    • Robust Cost Synergies and EBITDA Margin Expansion: Management highlighted strong cost control and further cost‐saving opportunities—already achieving 62% of its targeted $220 million annual cost savings—with expectations of continued margin improvements as integration progresses.
    • Accelerating Wavelength Business Growth: The company is aggressively ramping up its wavelength enablement, expanding from 574 to a target of 800 wave-enabled data centers by year‑end with a substantial backlog of over 2,700 wavelengths, targeting $500 million in wave revenue by 2028.
    • Enhanced Pricing Power and Asset Monetization: Executives emphasized plans to raise pricing on its legacy IPv4 leasing base—from an average of $0.30 to $0.51 per address—and benefit from asset monetization through accelerated data center conversions and improved ARPU on on‑net services.
    • Dependence on declining T‑Mobile payments: The step‐down in IP Transit cash payments—increasing the headwind by approximately $40 million—raises concerns that lower operating cash flow could pressure margins and delay EBITDA growth.
    • Execution challenges in the wavelength rollout: The slow conversion of the current 156 sold locations out of 574 wave-enabled centers, with ambitious plans to reach 800 by year-end, indicates potential delays or execution risks that may postpone margin improvement from higher‑speed wavelengths.
    • Risks from corporate churn and non‑core service exit: The intentional shedding of unprofitable, non‑core, off‑net services and low‑margin corporate products—while aimed at improving margins—could reduce recurring revenue if core new sales fail to offset this churn.
    1. Margin Outlook
      Q: EBITDA margins expected to improve?
      A: Management believes that EBITDA classic margins will improve as cost cuts and higher‐margin wavelength services help offset the headwind from lower T‑Mobile payments, supporting ongoing margin expansion.

    2. Cost Savings
      Q: How close to cost targets?
      A: They have already achieved 62% of their $220M cost saving target and expect additional reductions that will drive positive EBITDA growth starting in 2025.

    3. Wavelength Growth
      Q: When will wavelength reach target?
      A: The plan is to enable wave services in 800 data centers by year-end, with a robust backlog of 2,700 circuits that should boost ARPU through higher-capacity offerings.

    4. Corporate Revenue Trends
      Q: What’s driving corporate revenue change?
      A: Management explained that corporate on-net revenue is growing as unprofitable Sprint off-net contracts and non-core products are phased out, leaving a healthier, higher-quality customer mix.

    5. IPv4 Pricing Strategy
      Q: Why raise IPv4 pricing?
      A: They increased the average price to $0.51 per address for new sales to better capture the scarcity value of IPv4 assets, with plans to adjust legacy rates as market demand strengthens.

    6. Dark Fiber Enablement
      Q: When will dark fiber sales start?
      A: The sales team anticipates initiating modest dark fiber deals in Q3, with full capability expected by year-end once network wave optimization is completed.

    7. Customer Churn & Mix
      Q: What are the churn trends?
      A: Corporate churn remains low at around 1.2% per month, aided by the strategic removal of low-margin, non-core contracts and a shift toward higher-capacity, profitable connections.

    Research analysts covering COGENT COMMUNICATIONS HOLDINGS.