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    COGENT COMMUNICATIONS HOLDINGS (CCOI)

    CCOI Q4 '24: Wavelength Provisioning Time Drops to 30d, Sees $500M Run

    Reported on Jun 11, 2025 (Before Market Open)
    Pre-Earnings Price$80.11Last close (Feb 26, 2025)
    Post-Earnings Price$78.50Open (Feb 27, 2025)
    Price Change
    $-1.61(-2.01%)
    • Rapid Improvement in Wavelength Services: The management highlighted a dramatic reduction in provisioning times—from 120 days in Q3 to 30 days in Q4, with plans to reach a 2-week target. This, combined with minimal incremental CapEx (~$15,000 per additional data center) and accelerating installations (targeting 500 installs per month), suggests a strong capability to capture market share and drive revenue toward the $500 million annual run rate target over the next few years.
    • Robust IPv4 Leasing Momentum: The company is aggressively raising prices on IPv4 addresses—current pricing approaching $0.44 per address—and expects to add nearly 0.5 million new addresses per quarter over multiple quarters. This move, supported by strong demand and enhanced leasing focus, creates a recurring revenue stream that now contributes almost 5% of total revenues, bolstering the bull case.
    • Margin-Enhancing Customer Grooming and Sales Productivity: The ongoing grooming of non-core and low-margin corporate and enterprise segments is expected to result in a turnaround after a couple of negative quarters. Improvements include migrating off-net customers to on-net services and increasing sales force productivity from 3.5 to nearly 5 connections per rep per month. This strategy is set to drive healthier margins and, ultimately, positive revenue growth in the traditional corporate market.
    • Corporate Revenue Concerns: Analysts questioned the sustainability of the corporate segment as revenues have been declining (with a 2.7% sequential drop) and only expected to rebound after additional grooming over the next one to two quarters.
    • Wavelength Backlog Shrinkage: The reduction in the wavelength sales funnel from 3,400 to 2,700 orders suggests potential customer drop-offs or cancellations, raising concerns about future wavelength revenue momentum.
    • IPv4 Leasing Volatility: The noted restatement issues and the lower-than-historically typical unit additions (just under 100,000 units versus previous quarters’ run rates of around 500,000 units) signal potential weakness and uncertainty in the IPv4 leasing segment.
    1. Full-Year Guidance
      Q: What full-year EBITDA and revenue expectations?
      A: Management expects EBITDA to remain near $350 million in 2025 with revenue slightly up, signaling stable operations after cost reductions and step‐downs in payments.

    2. Wavelength Revenue
      Q: What are the prospects for wavelength sales?
      A: They are targeting a run rate of $500 million in wavelength revenue by mid-2028, driven by rapid provisioning improvements and broad data center coverage.

    3. IPv4 Pricing
      Q: How will IPv4 price hikes impact revenues?
      A: Management is raising IPv4 prices—with incremental increases on about 10 million addresses potentially adding roughly $12 million in revenue—reflecting strong demand.

    4. Customer Segments
      Q: How are your customer segments performing?
      A: NetCentric business is robust and growing, while corporate and enterprise segments are undergoing deliberate grooming of non-core, low-margin services to ultimately boost margins and revenue.

    5. Corporate Revenue
      Q: What’s driving corporate revenue trends?
      A: Corporate revenue is declining in the short term due to the intentional removal of low-margin off-net products, with expectations of positive growth once on-net migration completes.

    6. Wavelength Investment
      Q: What investments are driving faster wave installs?
      A: Investments in network automation and enhanced sales processes have reduced provisioning from 90 days to 30 days, with plans to hit 2 weeks and support an install cadence of about 500 orders per month.

    7. Competitive Edge
      Q: How does Cogent differentiate its wave services?
      A: Cogent leverages a unified network and highly accurate fiber mapping to deliver rapid, low-cost provisioning, setting it apart from competitors like Lumen and Zayo.

    8. CapEx Outlook
      Q: What is the CapEx expectation going forward?
      A: After elevated spending on data center conversions earlier, the sustained CapEx is expected to level off to about $100 million annually by later in the year.

    9. IPv4 Unit Growth
      Q: What’s the expected pace for new IPv4 addresses?
      A: While recent new unit additions were around 100,000, management expects an average growth of roughly 500,000 addresses per quarter over the coming periods after adjustments.

    10. Wavelength Backlog
      Q: What explains the wavelength order backlog decline?
      A: The backlog fell from 3,400 to 2,700 orders due to a focused grooming of the funnel, with some orders converted to installations and others lost to competitors, while new orders continue to ramp up.

    11. Asset Monetization
      Q: Leasing versus selling: what’s the preference?
      A: For both IPv4 and data center assets, Cogent currently favors leasing to maximize revenue, though it remains open to selective sale if market conditions and asset pricing become more favorable.

    12. Housekeeping Metrics
      Q: How many wavelength orders were groomed and any one-time expenses?
      A: Management groomed about 1,500 orders from the funnel and incurred roughly $5 million of one-time non-capitalized expenses related to data center transitions.

    13. Customer Churn
      Q: Can you provide a consolidated churn rate?
      A: Given the mix of off-net disconnections, migrations, and purposeful service terminations, management explained that a single churn number is not feasible and each segment must be assessed separately.

    Research analysts covering COGENT COMMUNICATIONS HOLDINGS.