Company Announcements

Cogent Communications Reports Second Quarter Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025

WASHINGTON, Aug. 5, 2021 /PRNewswire/ --

Financial and Business Highlights

  • Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.805 per share for Q3 2021 as compared to $0.780 per share for Q2 2021 – Cogent's thirty-sixth consecutive quarterly dividend increase.
    • The Q3 2021 $0.805 dividend per share represents an annual increase of 14.2% from the dividend per share of $0.705 for Q3 2020.
  • Service revenue increased by 0.8% from Q1 2021 to Q2 2021 and increased from Q2 2020 to Q2 2021 by 4.9%.
  • GAAP gross profit increased by 3.6% from Q2 2020 to $69.6 million for Q2 2021.  Non-GAAP gross profit increased by 5.1% from Q2 2020 to $91.8 million for Q2 2021.
    • GAAP gross margin decreased by 60 basis points from Q2 2020 to Q2 2021 to 47.1%.  Non-GAAP gross margin increased by 10 basis points from Q2 2020 to Q2 2021 to 62.1%.    
  • Net cash provided by operating activities was $39.7 million for Q2 2021, $47.1 million for Q1 2021 and $41.3 million for Q2 2020.
  • Sales rep productivity – units per full time equivalent sales rep per month - increased from 4.3 for Q1 2021 to 4.5 for Q2 2021.
  • EBITDA margin increased by 90 basis points from Q1 2021 to 38.7% for Q2 2021 and increased by 90 basis points from Q2 2020 to Q2 2021.
  • EBITDA increased by 2.9% from Q1 2021 to $57.2 million for Q2 2021 and increased by 7.2% from Q2 2020.
  • Cogent issued $500.0 million of Senior Secured Notes due in 2026 in May for net proceeds of $496.9 million.  The net proceeds were used to redeem and extinguish its remaining $329.1 million of its Senior Secured Notes due in 2022 and to provide cash for general corporate purposes including to dividend cash from its operating companies to Cogent Holdings, Inc.

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $147.9 million for the three months ended June 30, 2021, an increase of 0.8% from the three months ended March 31, 2021 and an increase of 4.9% from the three months ended June 30, 2020. Foreign exchange positively impacted service revenue growth from the three months ended March 31, 2021 to the three months ended June 30, 2021 by $0.2 million and positively impacted service revenue growth from the three months ended June 30, 2020 to the three months ended June 30, 2021 by $3.0 million. On a constant currency basis, service revenue increased by 0.8% from the three months ended March 31, 2021 to the three months ended June 30, 2021 and grew by 2.8% from the three months ended June 30, 2020 to the three months ended June 30, 2021.

On-net service is provided to customers located in buildings that are physically connected to Cogent's network by Cogent facilities. On-net revenue was $111.0 million for the three months ended June 30, 2021; an increase of 1.0% from the three months ended March 31, 2021 and an increase of 7.0% over the three months ended June 30, 2020.

Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $36.7 million for the three months ended June 30, 2021; a decrease of 0.1% from the three months ended March 31, 2021 and a decrease of 0.9% from the three months ended June 30, 2020.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell. 

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 3.6% from the three months ended June 30, 2020 to $69.6 million for the three months ended June 30, 2021 and increased by 2.8% from the three months ended March 31, 2021. GAAP gross margin was 47.1% for the three months ended June 30, 2021, 47.7% for the three months ended June 30, 2020 and 46.1% for the three months ended March 31, 2021.

Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $4.8 million for the three months ended June 30, 2021, $3.3 million for the three months ended June 30, 2020 and $4.5 million for the three months ended March 31, 2021.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue.  Non-GAAP gross profit increased by 5.1% from the three months ended June 30, 2020 to $91.8 million for the three months ended June 30, 2021 and increased by 0.1% from the three months ended March 31, 2021. Non-GAAP gross profit margin was 62.1% for the three months ended June 30, 2021, 62.0% for the three months ended June 30, 2020 and 62.5% for the three months ended March 31, 2021.

Net cash provided by operating activities decreased by 3.8% from the three months ended June 30, 2020 to $39.7 million for the three months ended June 30, 2021 and decreased by 15.6% from the three months ended March 31, 2021.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 7.2% from the three months ended June 30, 2020 to $57.2 million for the three months ended June 30, 2021 and increased by 2.9% from the three months ended March 31, 2021. EBITDA margin was 38.7% for the three months ended June 30, 2021, 37.8% for the three months ended June 30, 2020 and 37.8% for the three months ended March 31, 2021.

Basic and diluted net income (loss) per share was $(0.05) for the three months ended June 30, 2021, $0.19 and $0.18 for the three months ended June 30, 2020 and $0.41 for the three months ended March 31, 2021.

Unrealized and realized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Unsecured Notes were $(5.3) million for the three months ended June 30, 2021, $(0.9) million for the three months ended June 30, 2020 and $18.9 million for the three months ended March 31, 2021.

Total customer connections increased by 4.3% from June 30, 2020 to 91,868 as of June 30, 2021 and increased by 1.0% from March 31, 2021. On-net customer connections increased by 4.2% from June 30, 2020 to 79,146 as of June 30, 2021 and increased by 1.0% from March 31, 2021. Off-net customer connections increased by 4.6% from June 30, 2020 to 12,386 as of June 30, 2021 and increased by 1.4% from March 31, 2021

The number of on-net buildings increased by 121 from June 30, 2020 to 2,975 as of June 30, 2021 and increased by 36 from March 31, 2021.

Quarterly Dividend Increase Approved
On August 4, 2021, Cogent's Board approved a regular quarterly dividend of $0.805 per common share payable on September 3, 2021 to shareholders of record on August 20, 2021. This third quarter 2021 regular dividend represents a 3.2% increase of $0.025 per share from the second quarter 2021 regular dividend of $0.780 per share and an annual increase of 14.2% from the Q3 2020 dividend of $0.705 per share. 

The payment of any future dividends and any other returns of capital will be at the discretion of the Board and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent's debt indenture agreements and other factors deemed relevant by the Board.

Impact of COVID-19
Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. The recent spread of the Delta variant of COVID-19 has introduced new uncertainty.  

The ongoing impact of the COVID-19 pandemic, including the spread of variant strains, and related government restrictions on Cogent's business is unknown as a significant amount of uncertainty and volatility remains. Cogent does not know the ultimate scope and duration of the pandemic, the availability, efficacy and uptake of vaccines and therapeutic treatments, government actions that have been taken, or may be taken in the future in response to the pandemic and global economic conditions during and after the pandemic.  While Cogent's workforce is working remotely, it plans to bring its employees in the United States back into its offices this fall on a full-time basis. Cogent is implementing measures to protect its workforce, but it can provide no assurance that these measures will be sufficient.  Moreover, Cogent's results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue or are reintroduced. Cogent may also experience slowdowns in new customer orders, find it difficult to collect from customers who are experiencing financial distress, undergo an increase in customer churn, encounter difficulties accessing the buildings and locations where Cogent installs new services and serves existing customers, or have difficulties procuring, shipping or installing necessary equipment on its network. Cogent may also find that its largest customer base, which is served primarily in its multi-tenant office buildings, may be adversely affected by falling demand for commercial office space in central business districts as companies located in these buildings elect not to return to their office space either on a temporary or even permanent basis or slow the pace of opening new offices.   In addition, Cogent's corporate customer base may reduce their overall number of locations due to adverse economic conditions or new working configurations which may adversely affect Cogent's number of corporate connections and service revenues.  As a result, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact Cogent's business well into the future.  These and other risks are described in more detail in Cogent's Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 5, 2021 to discuss Cogent's operating results for the second quarter of 2021 and to discuss Cogent's expectations for full year 2021. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.  A downloadable file of Cogent's "Summary of Financial and Operational Results" and a transcript of its conference call will also be available on Cogent's website following the conference call. 

About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in 210 markets globally.

Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results



Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Metric ($ in 000's, except share and per share data) – unaudited







On-Net revenue

$103,457

$103,800

$105,091

$107,109

$109,947

$111,041

  % Change from previous Qtr.

0.8%

0.3%

1.2%

1.9%

2.6%

1.0%

Off-Net revenue

$37,321

$37,044

$37,092

$36,672

$36,723

$36,699

  % Change from previous Qtr.

-0.4%

-0.7%

0.1%

-1.1%

0.1%

-0.1%

Non-Core revenue (1)

$137

$146

$119

$120

$107

$139

  % Change from previous Qtr.

5.4%

6.6%

-18.5%

0.8%

-10.8%

29.9%

Service revenue – total

$140,915

$140,990

$142,302

$143,901

$146,777

$147,879

  % Change from previous Qtr.

0.4%

0.1%

0.9%

1.1%

2.0%

0.8%

Constant currency total revenue quarterly growth rate – sequential quarters (6)

0.6%

0.2%

-0.2%

0.7%

1.7%

0.6%

Constant currency total revenue quarterly growth rate – year over year quarters (6)

5.6%

5.1%

3.1%

1.2%

2.3%

2.8%

Excise Taxes included in service revenue

$3,743

$3,298

$3,902

$4,144

$4,528

$4,811

  % Change from previous Qtr.

-13.6%

-11.9%

18.3%

6.2%

9.3%

6.3%

Network operations expenses (2) 

$55,669

$53,581

$54,173

$54,513

$55,016

$56,044

  % Change from previous Qtr.

-%

-3.8%

1.1%

0.6%

0.9%

1.9%

GAAP gross profit (3)

$65,486

$67,208

$66,164

$66,617

$67,715

$69,603

  % Change from previous Qtr.

1.8%

2.6%

-1.6%

0.7%

1.6%

2.8%

GAAP gross margin (3)

46.5%

47.7%

46.5%

46.3%

46.1%

47.1%

Non-GAAP gross profit (4) (6)

$85,246

$87,409

$88,129

$89,388

$91,761

$91,835

  % Change from previous Qtr.

0.8%

2.5%

0.8%

1.4%

2.7%

0.1%

Non-GAAP gross margin (4) (6)

60.5%

62.0%

61.9%

62.1%

62.5%

62.1%

Selling, general and administrative expenses (5)

$34,852

$34,061

$33,546

$33,713

$36,211

$34,654

  % Change from previous Qtr.

9.3%

-2.3%

-1.5%

0.5%

7.4%

-4.3%

Depreciation and amortization expense

$19,508

$19,896

$21,619

$22,455

$21,970

$22,096

  % Change from previous Qtr.

-2.5%

2.0%

8.7%

3.9%

-2.2%

0.6%

Equity-based compensation expense

$5,075

$6,083

$6,522

$5,846

$7,307

$6,874

  % Change from previous Qtr.

2.7%

19.9%

7.2%

-10.4%

25.0%

-5.9%

Operating income

$25,850

$27,574

$26,036

$27,384

$26,291

$28,211

  % Change from previous Qtr.

-7.8%

6.7%

-5.6%

5.2%

-4.0%

7.3%

Interest expense

$15,220

$15,499

$15,760

$16,007

$15,836

$14,236

  % Change from previous Qtr.

0.1%

1.8%

1.7%

1.6%

-1.1%

-10.1%

Net income (loss)

$9,227

$8,564

$(4,955)

$(6,620)

$18,851

$(2,493)

Realized and unrealized gains (losses) on 2024 Euro Notes

$2,908

$(873)

$(17,315)

$(19,170)

$18,870

$(5,280)

Basic net income (loss) per common share

$0.20

$0.19

$(0.11)

$(0.14)

$0.41

$(0.05)

Diluted net income (loss) per common share

$0.20

$0.18

$(0.11)

$(0.14)

$0.41

$(0.05)

Weighted average common shares – basic

45,658,565

45,754,880

45,815,718

45,904,943

46,067,096

46,229,603

  % Change from previous Qtr.

0.2%

0.2%

0.1%

0.2%

0.4%

0.4%

Weighted average common shares – diluted

46,391,066

46,686,665

45,815,718

45,904,943

46,507,258

46,229,603

  % Change from previous Qtr.

0.5%

0.6%

-1.9%

0.2%

1.3%

-0.6%

EBITDA (6)

$50,394

$53,348

$54,583

$55,675

$55,550

$57,181

  % Change from previous Qtr.

-4.4%

5.9%

2.3%

2.0%

-0.2%

2.9%

EBITDA margin

35.8%

37.8%

38.4%

38.7%

37.8%

38.7%

Gains on asset related transactions

$39

$205

$99

$10

$18

$-

EBITDA, as adjusted (6)

$50,433

$53,553

$54,682

$55,685

$55,568

$57,181

  % Change from previous Qtr.

-4.8%

6.2%

2.1%

1.8%

-0.2%

2.9%

EBITDA, as adjusted, margin

35.8%

38.0%

38.4%

38.7%

37.9%

38.7%

Net cash provided by operating activities

$28,458

$41,311

$32,980

$37,571

$47,106

$39,749

  % Change from previous Qtr.

-38.3%

45.2%

-20.2%

13.9%

25.4%

-15.6%

Capital expenditures

$12,866

$13,930

$13,296

$15,860

$15,444

$17,217

  % Change from previous Qtr.

30.0%

8.3%

-4.6%

19.3%

-2.6%

11.5%

Principal payments of capital (finance) lease obligations

$6,167

$3,716

$9,509

$4,598

$5,744

$6,192

  % Change from previous Qtr.

200.0%

-39.7%

155.9%

-51.6%

24.9%

7.8%

Dividends paid

$30,557

$31,738

$32,657

$34,460

$36,081

$37,001

Purchases of common stock

$ -

$-

$270

$4,225

$-

$-

Gross Leverage Ratio

4.78

5.08

5.10

5.14

4.39

5.13

Net Leverage Ratio

2.92

3.07

3.24

3.40

3.31

3.45

Customer Connections – end of period







On-Net

75,163

75,927

76,338

77,305

78,389

79,146

  % Change from previous Qtr.

0.8%

1.0%

0.5%

1.3%

1.4%

1.0%

Off-Net

11,721

11,846

11,849

11,970

12,216

12,386

  % Change from previous Qtr.

0.5%

1.1%

0.0%

1.0%

2.1%

1.4%

Non-Core (1)

329

339

322

325

320

336

  % Change from previous Qtr.

1.2%

3.0%

-5.0%

0.9%

-1.5%

5.0%

Total customer connections

87,213

88,112

88,509

89,600

90,925

91,868

  % Change from previous Qtr.

0.8%

1.0%

0.5%

1.2%

1.5%

1.0%

On-Net Buildings – end of period







Multi-Tenant office buildings

1,769

1,771

1,783

1,792

1,796

1,802

Carrier neutral data center buildings

1,000

1,029

1,047

1,068

1,089

1,119

Cogent data centers

54

54

54

54

54

54

Total on-net buildings

2,823

2,854

2,884

2,914

2,939

2,975

Total carrier neutral data center nodes

1,175

1,203

1,225

1,252

1,274

1,309

Square feet – multi-tenant office buildings – on-net

961,154,384

962,049,183

968,355,695

976,813,678

978,095,164

979,876,141

Network  – end of period







Intercity route miles

58,009

58,009

58,142

58,285

58,761

59,741

Metro fiber miles

36,079

36,438

36,725

37,567

38,058

38,351

Connected networks – AS's

7,042

7,133

7,222

7,338

7,471

7,530

Headcount – end of period







Sales force – quota bearing

542

572

597

569

547

565

Sales force - total

684

716

740

712

693

710

Total employees

1,052

1,083

1,110

1,083

1,066

1,087

Sales rep productivity – units per full time equivalent sales rep ("FTE") per month

4.5

4.0

3.7

4.2

4.3

4.5

FTE – sales reps

522

533

563

542

522

511


(1)

Consists of legacy services of companies whose assets or businesses were acquired by Cogent.

(2)

Network operations expense excludes equity-based compensation expense of $252, $305, $346, $316, $2,076 and $136 in the three month periods ended March 31, 2020 through June 30, 2021, respectively.  Network operations expense includes excise taxes, including Universal Service Fund fees of $3,743, $3,298, $3,902, $4,144, $4,528 and $4,811 in the three month periods ended March 31, 2020 through June 30, 2021, respectively. 

(3)

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue.

(4)

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Management believes that non-GAAP gross profit and non-GAAP gross profit margin are relevant metrics to provide investors, as they are metrics that management uses to measure the margin available to the company after network service costs, in essence a measure of the efficiency of the Company's network.

(5)

Excludes equity-based compensation expense of $4,823, $5,778, $6,176, $5,530, $5,231 and $6,738 in the three month periods ended March 31, 2020 through June 30, 2021, respectively. 

(6)

See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures.

Schedules of Non-GAAP Measures 

EBITDA and EBITDA, as adjusted

EBITDA represents net cash flows provided by operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense.  Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is net cash provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers.  EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.

The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business.  EBITDA, and EBITDA, as adjusted are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of these metrics may also differ from the calculations performed by its competitors and other companies and as such, its utility as a comparative measure is limited.

EBITDA, and EBITDA, as adjusted, are reconciled to net cash provided by operating activities in the table below.



Q1

2020

Q2

2020

Q3

2020

Q4

2020

Q1

2021

Q2

2021

($ in 000's) – unaudited







Net cash provided by operating activities

$28,458

$41,311

$32,980

$37,571

$47,106

$39,749

Changes in operating assets and liabilities

5,325

$(3,232)

$6,255

$1,920

$(9,060)

$2,352

Cash interest expense and income tax expense

16,611

15,269

15,348

16,184

17,504

15,080

EBITDA

$50,394

$53,348

$54,583

$55,675

$55,550

$57,181

PLUS: Gains on asset related transactions

39

205

99

10

18

-

EBITDA, as adjusted

$50,433

$53,553

$54,682

$55,685

$55,568

$57,181

EBITDA margin

35.8%

37.8%

38.4%

38.7%

37.8%

38.7%

EBITDA, as adjusted, margin

35.8%

38.0%

38.4%

38.7%

37.9%

38.7%



Constant currency revenue is reconciled to service revenue as reported in the tables below.


Constant currency impact on revenue changes – sequential periods


($ in 000's) – unaudited

Q1

2020

Q2

2020

Q3

2020

Q4

2020

Q1

2021

Q2

2021

Service revenue, as reported – current period

$140,915

$140,990

$142,302

$143,901

$146,777

$147,879

Impact of foreign currencies on service revenue

184

202

(1,616)

(621)

(447)

(150)

Service revenue - as adjusted  for currency impact (1)

$141,099

$141,192

$140,686

$143,280

$146,330

$147,729

Service revenue, as reported – prior sequential period

$140,292

$140,915

$140,990

$142,302

$143,901

$146,777

Constant currency (decrease) increase

$807

$277

$(304)

$978

$2,429

$952

Constant currency percent (decrease) increase

0.6%

0.2%

(0.2)%

0.7%

1.7%

0.6%


(1)

Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

 

Constant currency impact on revenue changes – prior year periods


($ in 000's) – unaudited

Q1

2020

Q2

2020

Q3

2020

Q4

2020

Q1

2021

Q2
2021

Service revenue, as reported – current period

$140,915

$140,990

$142,302

$143,901

$146,777

$147,879

Impact of foreign currencies on service revenue

746

674

(1,141)

(1,891)

(2,608)

(2,965)

Service revenue - as adjusted for currency impact  (2)

$141,661

$141,664

$141,161

$142,010

$144,169

$144,914

Service revenue, as reported – prior year period

$134,137

$134,789

$136,942

$140,292

$140,915

$140,990

Constant currency increase

$7,524

$6,875

$4,219

$1,718

$3,254

$3,924

Percent increase

5.6%

5.1%

3.1%

1.2%

2.3%

2.8%


(2)

Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

 

Non-GAAP gross profit and Non-GAAP gross margin


Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.



Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

($ in 000's) – unaudited







Service revenue total

$140,915

$140,990

$142,302

$143,901

$146,777

$147,879

Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense

75,429

73,782

76,138

77,284

79,062

78,276

GAAP Gross Profit (1)

$65,486

$67,208

$66,164

$66,617

$67,715

$69,603

Plus  - Equity-based compensation – network operations expense

252

305

346

316

2,076

136

Plus – Depreciation and amortization expense

19,508

19,896

21,619

22,455

21,970

22,096

Non-GAAP Gross Profit (2)

$85,246

$87,409

$88,129

$89,388

$91,761

$91,835

GAAP Gross Margin (1)

46.5%

47.7%

46.5%

46.3%

46.1%

47.1%

Non-GAAP Gross Margin (2)

60.5%

62.0%

61.9%

62.1%

62.5%

62.1%


(1)

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue.

(2)

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics to provide to investors, as they are metrics that management uses to measure the margin and amount available to the Company after network service costs, in essence these are measures of the efficiency of the Company's network.

Gross and Net Leverage Ratios

Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted.  Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted.  Cogent's gross leverage ratio and net leverage ratio are shown below.

($ in 000's) – unaudited

As of March 31, 2021

As of June 30, 2021

Cash and cash equivalents

$237,980

$373,963

Debt



Capital (finance) leases – current portion

15,996

16,004

Capital (finance) leases – long term

202,514

208,588

Senior Secured 2022 Notes

329,080

-

Senior Secured 2026 Notes

-

500,000

Senior Unsecured Euro 2024 Notes

410,471

415,751

Note payable

5,334

3,365

Total debt

963,395

1,143,708

Total net debt

725,415

769,745

Trailing 12 months EBITDA, as adjusted

219,488

223,116

Gross leverage ratio

4.39

5.13

Net leverage ratio

3.31

3.45

Cogent's SEC filings are available online via the Investor Relations section of www.cogentco.com or on the Securities and Exchange Commission's website at www.sec.gov.

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

(IN THOUSANDS, EXCEPT SHARE DATA)




June 30,
2021


December 31,
2020



(Unaudited)




Assets







Current assets:







Cash and cash equivalents


$

373,963


$

371,301

Accounts receivable, net of allowance for credit losses of $1,673 and $1,921, respectively



43,751



44,185

Prepaid expenses and other current assets



36,841



40,851

Total current assets



454,555



456,337

Property and equipment, net



435,996



430,335

Right-of-use leased assets



105,072



99,666

Deposits and other assets



15,124



14,139

Total assets


$

1,010,747


$

1,000,477

Liabilities and stockholders' equity







Current liabilities:







Accounts payable


$

14,601


$

9,775

Accrued and other current liabilities



48,014



51,029

Installment payment agreement, current portion, net of discounts of $41 and $136, respectively



3,324



6,786

Current maturities, operating lease liabilities



11,783



11,151

Current maturities, finance lease obligations



16,004



15,702

Total current liabilities



93,726



94,443

Senior secured 2022 notes, net of unamortized debt costs of $1,052and including 
     premiums of
$544





444,492

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $2,538and 
     $2,961, respectively and net of discounts of$959and$1,142, respectively



412,254



425,160

Senior secured 2026 notes, net of unamortized debt costs of $1,277and discount of$1,698



497,025



Operating lease liabilities, net of current maturities



115,949



111,318

Finance lease obligations, net of current maturities



208,588



203,438

Other long-term liabilities



19,346



14,792

Total liabilities



1,346,888



1,293,643

Commitments and contingencies:







Stockholders' equity:







Common stock, $0.001 par value; 75,000,000 shares authorized; 47,655,131 and 47,214,077
     shares issued and outstanding, respectively



48



47

Additional paid-in capital



533,049



515,867

Accumulated other comprehensive income — foreign currency translation



(4,740)



(1,306)

Accumulated deficit



(864,498)



(807,774)

Total stockholders' deficit



(336,141)



(293,166)

Total liabilities and stockholders' deficit


$

1,010,747


$

1,000,477

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Three Months
Ended
June 30, 2021


Three Months
Ended
June 30, 2020



(Unaudited)


(Unaudited)

Service revenue


$

147,879


$

140,990

Operating expenses:







Network operations (including $136 and $305 of equity-based compensation expense,
     respectively, exclusive of depreciation and amortization shown separately below)



56,180



53,886

Selling, general, and administrative (including $6,738 and $5,778 of equity-based
     compensation expense, respectively)



41,392



39,839

Depreciation and amortization



22,096



19,896

Total operating expenses



119,668



113,621

Gains on equipment transactions





205

Operating income



28,211



27,574

Interest expense



(14,236)



(15,499)

Realized foreign exchange gain on issuance on 2024 Euro Notes





2,547

Unrealized foreign exchange losses on 2024 Euro Notes



(5,280)



(3,420)

Loss on debt extinguishment and redemption – 2021 Notes





(638)

Loss on debt extinguishment and redemption – 2022 Notes



(10,830)



Interest income and other, net



64



735

(Loss) income before income taxes



(2,071)



11,299

Income tax provision



(422)



(2,735)

Net (loss) income


$

(2,493)


$

8,564








Comprehensive (loss) income:







Net (loss) income


$

(2,493)


$

8,564

Foreign currency translation adjustment



1,776



2,913

Comprehensive (loss) income


$

(717)


$

11,477








Net (loss) income per common share:







Basic net (loss) income per common share


$

(0.05)


$

0.19

Diluted net (loss) income per common share


$

(0.05)


$

0.18

Dividends declared per common share


$

0.78


$

0.68








Weighted-average common shares - basic



46,229,603



45,754,880








Weighted-average common shares - diluted



46,229,603



46,686,665

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Six Months
Ended
June 30, 2021


Six Months
Ended
June 30, 2020



(Unaudited)


(Unaudited)

Service revenue


$

294,656


$

281,904

Operating expenses:







Network operations (including $2,212 and $557 of equity-based compensation expense,
     respectively, exclusive of depreciation and amortization shown separately below)



113,272



109,806

Selling, general, and administrative (including $11,969 and $10,600 of equity-based
     compensation expense, respectively)



82,834



79,513

Depreciation and amortization



44,065



39,402

Total operating expenses



240,171



228,721

Gains on equipment transactions



18



244

Operating income



54,503



53,427

Interest expense



(30,071)



(30,720)

Realized foreign exchange gain on issuance of 2024 Euro Notes





2,547

Unrealized gain (loss) on foreign exchange on 2024 Euro Notes



13,590



(512)

Interest income and other, net



807



28

Loss on debt extinguishment and redemption- 2021 Notes





(638)

Loss on debt extinguishment and redemption- 2022 Notes



(14,698)



Income before income taxes



24,131



24,132

Income tax provision



(7,773)



(6,341)

Net income


$

16,358


$

17,791








Comprehensive income:







Net income


$

16,358


$

17,791

Foreign currency translation adjustment



(3,434)



(580)

Comprehensive income


$

12,924


$

17,211








Net income per common share:







Basic net income per common share


$

0.35


$

0.39

Diluted net income per common share


$

0.35


$

0.38








Dividends declared per common share


$

1.535


$

1.340








Weighted-average common shares - basic



46,227,528



45,760,302








Weighted-average common shares - diluted



46,744,070



46,592,445

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS)




Three months
Ended
June 30, 2021


Three months
Ended
June 30, 2020



(Unaudited)


(Unaudited)

Cash flows from operating activities:







Net (loss) income


$

(2,493)


$

8,564

Adjustments to reconcile net (loss) income to net cash provided by operating activities:







Depreciation and amortization



22,096



19,896

Amortization of debt costs, discounts and premiums



453



453

Equity-based compensation expense (net of amounts capitalized)



6,874



6,083

Loss on debt extinguishment and redemption – 2021 Notes





638

Loss on debt extinguishment and redemption – 2022 Notes



10,830



Unrealized losses on foreign exchange – 2024 Notes



5,280



3,383

Realized foreign exchange gain on issuance of 2024 Notes





(2,547)

Gains - equipment transactions and other, net



(129)



(448)

Deferred income taxes



(939)



1,814

Changes in operating assets and liabilities:







Accounts receivable



(2,330)



2,697

Prepaid expenses and other current assets



(130)



628

Accounts payable, accrued liabilities and other long-term liabilities



852



453

Deposits and other assets



(615)



(303)

Net cash provided by operating activities



39,749



41,311

Cash flows from investing activities:







Purchases of property and equipment



(17,217)



(13,930)

Net cash used in investing activities



(17,217)



(13,930)

Cash flows from financing activities:







Dividends paid



(37,001)



(31,738)

Redemption and extinguishment of 2021 Notes





(189,225)

Redemption and extinguishment of 2022 Notes



(339,638)



Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of 
     $2,137





240,285

Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317



496,933



Principal payments on installment payment agreement



(1,969)



(2,562)

Principal payments of finance lease obligations



(6,192)



(3,716)

Proceeds from exercises of stock options



660



271

Net cash provided by financing activities



112,793



13,315

Effect of exchange rates changes on cash



658



1,214

Net increase in cash and cash equivalents



135,983



41,910

Cash and cash equivalents, beginning of period



237,980



375,116

Cash and cash equivalents, end of period


$

373,963


$

417,026

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS)




Six months
Ended
June 30, 2021


Six months
Ended
June 30, 2020



(Unaudited)


(Unaudited)

Cash flows from operating activities:







Net income


$

16,358


$

17,791

Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization



44,065



39,402

Amortization of debt costs, discounts and premiums



894



930

Equity-based compensation expense (net of amounts capitalized)



14,181



11,157

Loss on debt extinguishment and redemption – 2021 Notes





638

Loss on debt extinguishment and redemption – 2022 Notes



14,698



Unrealized (gains) losses on foreign exchange – 2024 Notes



(13,590)



512

Realized foreign exchange gain on issuance of 2024 Notes





(2,547)

Gains - equipment transactions and other, net



242



(935)

Deferred income taxes



3,558



4,253

Changes in operating assets and liabilities:







Accounts receivable



90



(93)

Prepaid expenses and other current assets



2,696



(2,465)

Accounts payable, accrued liabilities and other long-term liabilities



3,804



1,523

Deposits and other assets



(141)



(397)

Net cash provided by operating activities



86,855



69,769

Cash flows from investing activities:







Purchases of property and equipment



(32,661)



(26,796)

Net cash used in investing activities



(32,661)



(26,796)

Cash flows from financing activities:







Dividends paid



(73,082)



(62,295)

Redemption and extinguishment of 2021 Notes





(189,225)

Redemption and extinguishment of 2022 Notes



(459,317)



Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of 
     $2,137





240,285

Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317



496,933



Principal payments on installment payment agreement



(4,347)



(5,128)

Principal payments of finance lease obligations



(11,936)



(9,883)

Proceeds from exercises of stock options



875



989

Net cash used in financing activities



(50,874)



(25,257)

Effect of exchange rates changes on cash



(658)



(112)

Net increase in cash and cash equivalents



2,662



17,604

Cash and cash equivalents, beginning of period



371,301



399,422

Cash and cash equivalents, end of period


$

373,963


$

417,026

Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.   Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.  The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.  Numerous factors could cause or contribute to such differences, including the impact of the COVID-19 pandemic and the related government policies; future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules  by the United States Federal Communications Commission and in the area of data protection; cyber-attacks or security breaches of our network; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.  Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time.

 

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SOURCE Cogent Communications Holdings, Inc.

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