Cogent Communications (NASDAQ:CCOI) Holdings, Inc. (NASDAQ:CCOI), a $3.47 billion market cap internet service provider with a track record of 13 consecutive years of dividend increases, has announced an amendment to the employment agreement with its Chief Executive Officer, David Schaeffer, which extends his term and sets new compensatory arrangements.
According to InvestingPro data, the company has demonstrated strong revenue growth of 24% over the last twelve months, though it currently trades at a premium valuation with a P/E ratio of 88.7. The amendment, effective as of Monday, extends Schaeffer’s tenure through December 31, 2027, and outlines his compensation including annual cash incentives and equity awards.
The amended agreement sets the target for Schaeffer’s annual cash incentive at $500,000, with a maximum potential of $667,000. This incentive is contingent on the company’s performance metrics related to its Annualized Wavelength Revenue and Gross Profit growth rates, both of which have specific targets set by the company’s Compensation Committee. InvestingPro analysis reveals that while the company maintains a gross profit margin of 40.45%, analysts have revised earnings expectations downward for the upcoming period.
In addition to cash incentives, Schaeffer will receive annual restricted stock awards. Starting in 2025 and continuing through 2027, he is granted 180,000 shares each year, with a portion vesting monthly over the course of the third year following the grant, assuming continued employment. The remaining shares are performance-vesting, tied to the company’s EBITDA and Free Cash Flow growth over a three-year period.
The announcement also covered customary annual grants made to other named executive officers on Sunday, January 9, 2025. These grants are part of the company’s regular compensation practice for its executive team.
Cogent Communications, based in Washington, D.C., is a multinational internet service provider known for its commitment to creating efficient and transparent compensation plans for its executives. This latest amendment is designed to retain key leadership and align the interests of the CEO with the company’s long-term performance goals.
The details of the amendment, referred to as "Amendment 10," are available in the full text attached as Exhibit 10.1 to the company’s SEC filing. The form of Restricted Stock Award to Mr. Schaeffer is also attached as Exhibit 10.2.
In other recent news, UBS and KeyBanc Capital Markets provided their perspectives on Cogent Communications’ performance and future prospects. UBS initiated coverage on Cogent with a Buy rating, expecting growth from its acquisition of Sprint’s wireline assets. They project increased performance for 2025 and beyond, and forecast over $500 million in EBITDA for Cogent by 2028, exceeding current street estimates. KeyBanc also highlighted Cogent’s potential in the AI thematic space through its Wavelength business, forecasting a tripling of Wavelength revenue in 2025 and a doubling in 2026.
In recent developments, Cogent reported mixed financial results for the third quarter of 2024. The company’s total revenue was $257.2 million, and EBITDA increased to $60.9 million. Despite a revenue decline due to the reduction of low-margin off-net connections and a decrease in the T-Mobile commercial services agreement, Cogent realized significant cost savings from the Sprint Global Markets acquisition and experienced a surge in wavelength and IPv4 leasing revenue.
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