Cogent adds business, wholesale customers to score on-net service revenue of $61.7 million

Cogent Communications (Nasdaq: CCOI) reported that on-net network revenue rose 2.1 percent sequentially to $61.7 million with the addition of business and wholesale service customers in Q1 2013. 

The competitive provider added 23 new on-net buildings, increasing its total on-net building count sequentially to 1,890 from 1,867 as of the end of Q4 2012. Out of the new on-buildings it lit in the quarter, half of the buildings were multi-tenant and the other half were data centers.

"We added both corporate multitenant office buildings and data centers to the footprint," said David Schaeffer, founder, chairman, CEO and president of Cogent, during the earnings call. "Going forward, we expect that mix to become more heavily focused on data centers."

In the quarter, Cogent increased its on-net customer connections by 3.5 percent to 30,914 from Q4 2012 and off-net connections 2.8 percent to 4,591. Meanwhile, non-core customer connections it declined to 463. Cogent's total customer connections rose 3.3 percent to 35,968 from 34,811 from the end of December 2012. 

Customer segments are broken out into two main categories: corporate customers and net-centric customers. Corporate customers grew 1.7 percent sequentially, while net-centric customers grew three percent. Likewise, corporate and net-centric customer connections grew 2.5 and 4.1 percent, respectively.

"Our most widely sold corporate customer product continues to be 100 megabit per second non-blocked and non-oversubscribed Internet connection, and our most widely sold net-centric product continues to be a 10 bit -- 10-gigabit connection," Schaeffer said. "We offer discounts related to contract term to all of our corporate and net-centric customers. We also offer volume discounts to our net-centric customers."

Schaeffer added that "certain net-centric customers took advantage of our volume and term discounts and entered into longer-term contracts with Cogent, representing over 1,500 customer connections and increasing their commitment to Cogent by over $7.8 million."

Overall service revenues were $84.6 million, up 2.3 percent sequentially from $82.6 million for Q4 2012 and an increase of 2.1% on a constant currency basis.

"During the quarter, we experienced sequential growth, material gross margin expansion, reduced churn, substantial growth at network traffic and a significant increase in our sales force rep productivity," Schaeffer said. "Additionally, we've returned $5.5 million to our shareholders through a quarterly dividend of $0.12 per share, which we paid in March." 

Shares of Cogent were listed at $29.62, up 0.93, or 3.24 percent, at the close of trading on the Nasdaq stock exchange on Tuesday. 

For more:
- see the earnings release (.pdf)
- here's the call transcript (sub. req.)

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