EX-99.1 2 tv526729_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 FOR IMMEDIATE RELEASE

 

Cogent Contacts:  
For Public Relations: For Investor Relations:  
Jocelyn Johnson John Chang
+ 1 (202) 295-4299 + 1 (202) 295-4212
jajohnson@cogentco.com investor.relations@cogentco.com

 

Cogent Communications Reports Second Quarter 2019 Results
and Increases Regular Quarterly Dividend on Common Stock

Financial and Business Highlights 

 

·Cogent approves a $0.02 increase per share to its regular quarterly dividend to $0.62 per share for Q3 2019 from $0.60 per share for Q2 2019 - the twenty-eighth consecutive quarterly dividend increase.

 

oThe Q3 2019 $0.62 dividend per share represents an annual increase of 14.8% from the dividend per share of $0.54 for Q3 2018.

 

·Cogent Group issued 135.0 million Euros ($153.7 million) of senior unsecured notes in June 2019. The notes accrue interest at 4.375% and mature on June 30, 2024.

 

·Service revenue, on a constant currency basis, increased by 0.7% from Q1 2019 to Q2 2019 and increased from Q2 2018 to Q2 2019 by 5.4%.

 

oService revenue increased by 0.5% from Q1 2019 to Q2 2019 and increased from Q2 2018 to Q2 2019 by 4.2%.

 

·GAAP gross profit increased by 10.4% from Q2 2018 to $60.4 million for Q2 2019 and non-GAAP gross profit increased by 7.3% from Q2 2018 to $80.6 million for Q2 2019

 

oGAAP gross margin increased by 250 basis points from Q2 2018 to Q2 2019 to 44.8% and non-GAAP gross margin increased by 170 basis points from Q2 2018 to Q2 2019 to 59.8%.

 

·Cash flow from operations increased by 29.9% from Q2 2018 to $40.6 million for Q2 2019 and increased by 41.9% from Q1 2019.

 

[WASHINGTON, D.C. August 8, 2019] Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $134.8 million for the three months ended June 30, 2019, an increase of 4.2% from the three months ended June 30, 2018 and an increase of 0.5% from the three months ended March 31, 2019. Foreign exchange negatively impacted service revenue growth from the three months ended March 31, 2019 to the three months ended June 30, 2019 by $0.3 million and negatively impacted service revenue growth from the three months ended June 30, 2018 to the three months ended June 30, 2019 by $1.5 million. On a constant currency basis, service revenue grew by 0.7% from the three months ended March 31, 2019 to the three months ended June 30, 2019 and grew by 5.4% from the three months ended June 30, 2018 to the three months ended June 30, 2019.

 

 

 

 

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 $97.5 million for the three months ended June 30, 2019; an increase of 0.3% from the three months ended March 31, 2019 and an increase of 4.8% over the three months ended June 30, 2018.

 

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 $37.2 million for the three months ended June 30, 2019; an increase of 0.9% over the three months ended March 31, 2019 and an increase of 3.0% over the three months ended June 30, 2018.

 

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 10.4% from the three months ended June 30, 2018 to $60.4 million for the three months ended June 30, 2019 and increased by 1.1% from the three months ended March 31, 2019. GAAP gross margin was 44.8% for the three months ended June 30, 2019, 42.3% for the three months ended June 30, 2018 and 44.5% for the three months ended March 31, 2019. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.2 million for the three months ended June 30, 2019, $3.4 million for the three months ended March 31, 2019 and $3.1 million for the three months ended June 30, 2018.

 

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 7.3% from the three months ended June 30, 2018 to $80.6 million for the three months ended June 30, 2019 and increased by 0.6% from the three months ended March 31, 2019. Non-GAAP gross profit margin was 59.8% for the three months ended June 30, 2019, 58.1% for the three months ended June 30, 2018 and 59.8% for the three months ended March 31, 2019.

 

 

 

 

Cash flow from operating activities increased by 29.9% from the three months ended June 30, 2018 to $40.6 million for the three months ended June 30, 2019 and increased by 41.9% from the three months ended March 31, 2019.

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 2.6% from the three months ended June 30, 2018 to $47.1 million for the three months ended June 30, 2019 and decreased by 1.0% from the three months ended March 31, 2019. EBITDA margin was 34.9% for the three months ended June 30, 2019, 35.5% for the three months ended June 30, 2018 and 35.5% for the three months ended March 31, 2019.

 

EBITDA, as adjusted, increased by 2.2% from the three months ended June 30, 2018 to $47.3 million for the three months ended June 30, 2019 and decreased by 1.7% from the three months ended March 31, 2019. EBITDA, as adjusted, margin was 35.1% for the three months ended June 30, 2019, 35.8% for the three months ended June 30, 2018 and 35.9% for the three months ended March 31, 2019.

 

Basic net income per share was $0.16 for the three months ended June 30, 2019, $0.15 for the three months ended June 30, 2018 and $0.20 for the three months ended March 31, 2019.

 

Total customer connections increased by 10.3% from June 30, 2018 to 84,054 as of June 30, 2019 and increased by 1.9% from March 31, 2019. On-net customer connections increased by 10.7% from June 30, 2018 to 72,415 as of June 30, 2019 and increased by 1.9% from March 31, 2019. Off-net customer connections increased by 8.0% from June 30, 2018 to 11,321 as of June 30, 2019 and increased by 1.6% from March 31, 2019.

 

The number of on-net buildings increased by 138 on-net buildings from June 30, 2018 to 2,737 on-net buildings as of June 30, 2019 and increased by 31 on-net buildings from March 31, 2019.

 

Quarterly Dividend Increase Approved

 

On August 7, 2019, Cogent’s board approved a regular quarterly dividend of $0.62 per common share payable on September 9, 2019 to shareholders of record on August 23, 2019. This third quarter 2019 regular dividend represents a 3.3% increase of $0.02 per share from the second quarter 2019 regular dividend of $0.60 per share and an annual increase of 14.8% from the Q3 2018 dividend of $0.54 per share.

 

 

 

 

The payment of any future dividends and any other returns of capital will be at the discretion of Cogent’s board of directors 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 Cogent’s board of directors.

 

Conference Call and Website Information

 

Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 8, 2019 to discuss Cogent’s operating results for the second quarter of 2019 and to discuss Cogent’s expectations for full year 2019. 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.

 

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 over 200 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

 

Metric ($ in 000’s, except
share and per share data) –
unaudited		  Q1 2018   Q2 2018   Q3 2018   Q4 2018   Q1 2019   Q2 2019 
On-Net revenue  $92,387   $93,026   $93,790   $95,351   $97,183   $97,472 
  % Change from previous Qtr.   3.4%   0.7%   0.8%   1.7%   1.9%   0.3%
Off-Net revenue  $36,144   $36,107   $36,202   $36,551   $36,843   $37,191 
  % Change from previous Qtr.   1.4%   -0.1%   0.3%   1.0%   0.8%   0.9%
Non-Core revenue (1)  $175   $163   $147   $147   $111   $126 
  % Change from previous Qtr.   -7.9%   -6.9%   -9.8%   -%    -24.5%   13.5%
Service revenue – total  $128,706   $129,296   $130,139   $132,049   $134,137   $134,789 
  % Change from previous Qtr.   2.8%   0.5%   0.7%   1.5%   1.6%   0.5%
Constant currency total revenue quarterly growth rate – sequential quarters (6)   2.0%   1.1%   1.1%   1.8%   1.7%   0.7%
Constant currency total revenue quarterly growth rate – year over year quarters (6)   7.0%   6.3%   6.2%   6.2%   5.8%   5.4%
Network operations expenses (2)  $54,686   $54,147   $54,365   $55,436   $53,970   $54,181 
  % Change from previous Qtr.   1.8%   -1.0%   0.4%   2.0%   -2.6%   0.4%
GAAP gross profit (3)  $54,043   $54,701   $55,248   $55,437   $59,724   $60,403 
  % Change from previous Qtr.   4.0%   1.2%   1.0%   0.3%   7.7%   1.1%
GAAP gross margin (3)   42.0%   42.3%   42.5%   42.0%   44.5%   44.8%
Non-GAAP gross profit (4) (6)  $74,020   $75,149   $75,774   $76,613   $80,167   $80,608 
  % Change from previous Qtr.   3.6%   1.5%   0.8%   1.1%   4.6%   0.6%
Non-GAAP gross margin (4) (6)   57.5%   58.1%   58.2%   58.0%   59.8%   59.8%
Selling, general and administrative expenses (5)  $29,928   $29,241   $28,838   $29,034   $32,568   $33,503 
  % Change from previous Qtr.   6.0%   -2.3%   -1.4%   0.7%   12.2%   2.9%
Depreciation and amortization expense  $19,788   $20,216   $20,276   $20,952   $20,263   $19,979 
  % Change from previous Qtr.   2.3%   2.2%   0.3%   3.3%   -3.3%   -1.4%
Equity-based compensation expense  $3,784   $4,695   $4,821   $4,408   $3,434   $5,289 
  % Change from previous Qtr.   2.7%   24.1%   2.7%   -8.6%   -22.1%   54.0%
Operating income  $20,637   $21,354   $22,255   $22,311   $24,400   $22,022 
  % Change from previous Qtr.   0.5%   3.5%   4.2%   0.3%   9.4%   -9.7%
Interest expense  $12,408   $12,373   $12,767   $13,508   $13,456   $13,595 
  % Change from previous Qtr.   1.5%   -0.3%   3.2%   5.8%   -0.4%   1.0%
Net income  $6,784   $6,552   $8,231   $7,100   $9,217   $7,136 
Basic net income per common share  $0.15   $0.15   $0.18   $0.16   $0.20   $0.16 
Diluted net income per common share  $0.15   $0.14   $0.18   $0.16   $0.20   $0.16 
Weighted average common shares – basic   44,923,973    45,016,767    45,105,830    45,284,481    45,223,157    45,354,327 
  % Change from previous Qtr.   0.2%   0.2%   0.2%   0.4%   -0.1%   0.3%
Weighted average common shares – diluted   45,294,697    45,536,473    45,699,635    45,803,418    45,644,236    45,912,291 
  % Change from previous Qtr.   1.0%   0.5%   0.4%   0.2%   -0.3%   0.6%
EBITDA (6)  $44,092   $45,908   $46,936   $47,579   $47,561   $47,105 
  % Change from previous Qtr.   2.0%   4.1%   2.2%   1.4%   -%    -1.0%
EBITDA margin   34.3%   35.5%   36.1%   36.0%   35.5%   34.9%
Gains on asset related transactions  $117   $357   $416   $92   $536   $185 
EBITDA, as adjusted (6)  $44,209   $46,265   $47,352   $47,671   $48,097   $47,290 
  % Change from previous Qtr.   1.5%   4.7%   2.3%   0.7%   0.9%   -1.7%
EBITDA, as adjusted, margin   34.3%   35.8%   36.4%   36.1%   35.9%   35.1%
Fees – net neutrality  $14   $39   $108   $16   $-   $- 
Net cash provided by operating activities  $30,179   $31,271   $31,745   $40,726   $28,637   $40,632 
  % Change from previous Qtr.   -3.8%   3.6%   1.5%   28.3%   -29.7%   41.9%
Capital expenditures  $14,905   $11,988   $12,107   $10,937   $13,288   $11,720 
  % Change from previous Qtr.   40.4%   -19.6%   1.0%   -9.7%   21.5%   -11.8%
Principal payments on capital (finance) leases  $2,304   $3,755   $2,099   $2,128   $3,030   $1,976 
  % Change from previous Qtr.   25.7%   63.0%   -44.1%   1.4%   42.4%   -34.8%
Dividends paid  $22,819   $23,788   $24,764   $26,516   $26,565   $27,741 
Purchases of common stock  $-   $-   $-   $6,564   $-   $- 
Gross Leverage Ratio   4.33    4.22    4.46    4.36    4.28    5.08 
Net Leverage Ratio   2.94    2.93    2.89    2.87    2.92    2.93 
Customer Connections – end of period                              
On-Net   63,366    65,407    67,370    68,770    71,066    72,415 
  % Change from previous Qtr.   3.3%   3.2%   3.0%   2.1%   3.3%   1.9%
Off-Net   10,241    10,480    10,698    10,974    11,138    11,321 
  % Change from previous Qtr.   2.9%   2.3%   2.1%   2.6%   1.5%   1.6%
Non-Core (1)   307    306    307    362    318    318 
  % Change from previous Qtr.   -5.8%   -0.3%   0.3%   17.9%   -12.2%   -% 
Total customer connections   73,194    76,193    78,375    80,106    82,522    84,054 
  % Change from previous Qtr.   3.2%   3.1%   2.9%   2.2%   3.0%   1.9%
On-Net Buildings – end of period                              
Multi-Tenant office buildings   1,672    1,710    1,720    1,735    1,746    1,751 
Carrier neutral data center buildings   816    837    863    889    908    933 
Cogent data centers   53    52    52    52    52    53 
Total on-net buildings   2,541    2,599    2,635    2,676    2,706    2,737 
Square feet – multi-tenant office buildings – on-net   911,283,287    927,410,239    934,535,144    944,232,756    949,486,923    951,031,709 
Network  – end of period                              
Intercity route miles   57,403    57,403    57,403    57,426    57,426    57,426 
Metro fiber miles   31,850    31,953    32,579    32,946    33,664    34,163 
Connected networks – AS’s   6,247    6,363    6,510    6,588    6,668    6,762 
Headcount – end of period                              
Sales force – quota bearing   432    438    453    487    501    519 
Sales force - total   555    566    583    619    639    656 
Total employees   908    917    938    974    997    1,026 
Sales rep productivity – units per full time equivalent sales rep (“FTE”) per month   5.7    5.7    5.8    5.7    5.1    4.9 
FTE – sales reps   427    413    418    436    464    478 

 

(1)Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only provided in Toronto, Canada).

(2)Network operations expense excludes equity-based compensation expense of $189, $232, $250, $224, $180 and $226 in the three month periods ended March 31, 2018 through June 30, 2019, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $3,157, $3,108, $3,010 and $3,234, $3,391 in the three and $3,191 ended March 31, 2018 through June 30, 2019, 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 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 $3,595, $4,463, $4,571, $4,184, $3,254 and $5,063 in the three month periods ended March 31, 2018 through June 30, 2019, respectively.

(6)See schedule of non-GAAP metrics below for definitions and reconciliations to GAAP measures below.

 

 

 

 

Schedules of Non-GAAP Measures

 

EBITDA and EBITDA, as adjusted

 

EBITDA represents net cash flows from 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 cash flows 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 cash flows provided by operating activities in the table below.

 

($ in 000’s) – unaudited  Q1
2018		   Q2
2018		   Q3
2018		   Q4
2018		   Q1
2019		   Q2
2019		 
                         
Net cash flows provided by operating activities  $30,179   $31,271   $31,745   $40,726   $28,637   $40,632 
Changes in operating assets and liabilities   2,919    2,408    4,254    (4,361)   6,727    (5,729)
Cash interest expense and income tax expense   10,994    12,229    10,937    11,214    12,197    12,202 
EBITDA  $44,092   $45,908   $46,936   $47,579   $47,561   $47,105 
PLUS: Gains on asset related transactions   117    357    416    92    536    185 
EBITDA, as adjusted  $44,209   $46,265   $47,352   $47,671   $48,097   $47,290 
EBITDA margin   34.3%   35.5%   36.1%   36.0%   35.5%   34.9%
EBITDA, as adjusted, margin   34.3%   35.8%   36.4%   36.1%   35.9%   35.1%

 

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

2018

  

Q2
2018

  

Q3

2018

  

Q4
2018

   Q1
2019		   Q2
2019		 
Service revenue, as reported – current period  $128,706   $129,296   $130,139   $132,049   $134,137   $134,789 
Impact of foreign currencies on service revenue   (981)   802    613    465    135    260 
Service revenue - as adjusted  for currency impact (1)  $127,725   $130,098   $130,752   $132,514   $134,272   $135,049 
Service revenue, as reported – prior sequential period  $125,226   $128,706   $129,296   $130,139   $132,049   $134,137 
Constant currency increase  $2,499   $1,392   $1,456   $2,375   $2,223   $912 
Constant currency percent increase   2.0%   1.1%   1.1%   1.8%   1.7%   0.7%

 

(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
2018

  

Q2
2018

  

Q3
2018

  

Q4
2018

   Q1
2019		   Q2
2019		 
Service revenue, as reported – current period  $128,706   $129,296   $130,139   $132,049   $134,137   $134,789 
Impact of foreign currencies on service revenue   (3,280)   (1,937)   445    896    2,078    1,505 
Service revenue - as adjusted for currency impact  (2)  $125,426   $127,359   $130,584   $132,945   $136,215   $136,294 
Service revenue, as reported – prior year period  $117,203   $119,777   $122,969   $125,226   $128,706   $129,296 
Constant currency increase  $8,223   $7,582   $7,615   $7,719   $7,509   $6,998 
Percent increase   7.0%   6.3%   6.2%   6.2%   5.8%   5.4%

 

(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.

 

($ in 000’s) – unaudited  Q1 2018   Q2 2018   Q3 2018   Q4 2018   Q1 2019   Q2 2019 
Service revenue total  $128,706   $129,296   $130,139   $132,049   $134,137   $134,789 
Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense   74,663    74,595    74,891    76,612    74,413    74,386 
GAAP Gross Profit (1)  $54,043   $54,701   $55,248   $55,437   $59,724   $60,403 
Plus  - Equity-based compensation – network operations expense   189    232    250    224    180    226 
Plus – Depreciation and amortization expense   19,788    20,216    20,276    20,952    20,263    19,979 
Non-GAAP Gross Profit (2)  $74,020   $75,149   $75,774   $76,613   $80,167   $80,608 
GAAP Gross Margin (1)   42.0%   42.3%   42.5%   42.0%   44.5%   44.8%
Non-GAAP Gross Margin (2)   57.5%   58.1%   58.2%   58.0%   59.8%   59.8%

 

(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, 2019   As of June 30, 2019 
Cash and cash equivalents  $259,138   $409,279 
Debt          
Capital (finance) leases – current portion   7,293    7,700 
Capital (finance) leases – long term   157,541    160,487 
Senior unsecured notes   189,225    189,225 
Senior secured notes   445,000    445,000 
Senior unsecured Euro notes   -    153,508 
Note payable   12,286    11,948 
Total debt   811,345    967,868 
Total net debt   552,207    558,589 
Trailing 12 months EBITDA, as adjusted   189,385    190,410 
Gross leverage ratio   4.28    5.08 
Net leverage ratio   2.92    2.93 

 

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, 2019 AND DECEMBER 31, 2018

(IN THOUSANDS, EXCEPT SHARE DATA)

 

   June 30,
2019		   December 31,
2018		 
   (Unaudited)     
Assets          
Current assets:          
Cash and cash equivalents  $409,279   $276,093 
Accounts receivable, net of allowance for doubtful accounts of $1,782 and $1,263, respectively   40,684    41,709 
Prepaid expenses and other current assets   36,030    32,535 
Total current assets   485,993    350,337 
Property and equipment, net   375,936    375,325 
Right-of-use leased assets   72,255    — 
Deferred tax assets   —    2,733 
Deposits and other assets   14,881    11,455 
Total assets  $949,065   $739,850 
           
Liabilities and stockholders’ equity          
Current liabilities:          
Accounts payable  $11,570   $8,519 
Accrued and other current liabilities   51,615    51,431 
Installment payment agreement, current portion, net of discount of $396 and $395, respectively   8,693    8,283 
Current maturities, operating lease liabilities   10,639    — 
Current maturities, finance lease obligations   7,700    7,074 
Total current liabilities   90,217    75,307 
Senior secured 2022 notes, net of unamortized debt costs of $2,301 and $2,695, respectively and including premium of $1,197 and $1,405, respectively   443,896    443,710 
Senior unsecured 2024 Euro notes, net of unamortized debt costs of $1,550   151,957    — 
Senior unsecured 2021 notes, net of unamortized debt costs of $1,171 and $1,476, respectively   188,054    187,749 
Operating lease liabilities, net of current maturities   83,456    — 
Finance lease obligations, net of current maturities   160,487    156,706 
Other long term liabilities   7,588    25,380 
Total liabilities   1,125,655    888,852 
Commitments and contingencies:          
Stockholders’ equity:          
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,806,370 and 46,336,499 shares issued and outstanding, respectively   47    46 
Additional paid-in capital   481,734    471,331 
Accumulated other comprehensive income — foreign currency translation   (10,967)   (10,928)
Accumulated deficit   (647,404)   (609,451)
Total stockholders’ deficit   (176,590)   (149,002)
Total liabilities and stockholders’ deficit  $949,065   $739,850 

 

 

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

   Three Months
Ended
June 30, 2019		   Three Months
Ended
June 30, 2018		 
   (Unaudited)   (Unaudited) 
Service revenue  $134,789   $129,296 
Operating expenses:          
Network operations (including $226 and $232 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)   54,407    54,379 
Selling, general, and administrative (including $5,063 and $4,463 of equity-based compensation expense, respectively)   38,566    33,704 
Depreciation and amortization   19,979    20,216 
Total operating expenses   112,952    108,299 
Gains on equipment transactions   185    357 
Operating income   22,022    21,354 
Interest income and other, net   1,753    189 
Interest expense   (13,595)   (12,373)
Income before income taxes   10,180    9,170 
Income tax provision   (3,044)   (2,618)
Net income  $7,136   $6,552 
           
Comprehensive income:          
Net income  $7,136   $6,552 
Foreign currency translation adjustment   1,786    (6,198)
Comprehensive income  $8,922   $354 
           
Net income per common share:          
Basic net income per common share  $0.16   $0.15 
Diluted net income per common share  $0.16   $0.14 
           
Dividends declared per common share  $0.60   $0.52 
           
Weighted-average common shares - basic   45,354,327    45,016,767 
           
Weighted-average common shares - diluted   45,912,291    45,536,473 

 

 

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

   Six Months
Ended
June 30, 2019		   Six Months
Ended
June 30, 2018		 
   (Unaudited)   (Unaudited) 
Service revenue  $268,930   $258,002 
Operating expenses:          
Network operations (including $406 and $421 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)   108,557    109,252 
Selling, general, and administrative (including $8,318 and $8,058 of equity-based compensation expense, respectively)   74,427    67,227 
Depreciation and amortization   40,240    40,004 
Total operating expenses   223,224    216,483 
Gains on equipment transactions   721    475 
Operating income   46,427    41,994 
Interest income and other, net   3,572    1,879 
Interest expense   (27,051)   (24,780)
Income before income taxes   22,948    19,093 
Income tax provision   (6,595)   (5,757)
Net income  $16,353   $13,336 
           
Comprehensive income:          
Net income  $16,353   $13,336 
Foreign currency translation adjustment   (39)   (3,587)
Comprehensive income  $16,314   $9,749 
           
Net income per common share:          
Basic net income per common share  $0.36   $0.30 
Diluted net income per common share  $0.36   $0.29 
           
Dividends declared per common share  $1.18   $1.02 
           
Weighted-average common shares - basic   45,349,397    45,011,616 
           
Weighted-average common shares - diluted   45,838,918    45,456,831 

 

 

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(IN THOUSANDS)

 

   Three months
Ended
June 30, 2019		   Three months
Ended
June 30, 2018		 
   (Unaudited)   (Unaudited) 
Cash flows from operating activities:          
Net income  $7,136   $6,552 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   19,977    20,216 
Amortization of debt costs and premium   428    381 
Equity-based compensation expense (net of amounts capitalized)   5,290    4,695 
Gains — equipment transactions and other, net   (253)   46 
Deferred income taxes   2,259    2,192 
Changes in operating assets and liabilities:          
Accounts receivable   (1,259)   (2,096)
Prepaid expenses and other current assets   (360)   582 
Accounts payable, accrued liabilities and other long-term liabilities   7,866    (414)
Deposits and other assets   (452)   (883)
Net cash provided by operating activities   40,632    31,271 
Cash flows from investing activities:          
Purchases of property and equipment   (11,720)   (11,988)
Net cash used in investing activities   (11,720)   (11,988)
Cash flows from financing activities:          
Dividends paid   (27,741)   (23,788)
Net proceeds from issuance of senior unsecured 2024 Euro Notes   152,128    — 
Proceeds from exercises of stock options   746    705 
Principal payments on installment payment agreement   (2,387)   (2,289)
Principal payments of capital lease obligations   (1,976)   (3,755)
Net cash provided by (used in) financing activities   120,770    (29,127)
Effect of exchange rates changes on cash   459    (1,900)
Net increase (decrease) in cash and cash equivalents   150,141    (11,744)
Cash and cash equivalents, beginning of period   259,138    236,026 
Cash and cash equivalents, end of period  $409,279   $224,282 

 

 

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(IN THOUSANDS)

 

   Six months
Ended
June 30, 2019		   Six months
Ended
June 30, 2018		 
   (Unaudited)   (Unaudited) 
Cash flows from operating activities:          
Net income  $16,353   $13,336 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   40,240    40,004 
Amortization of debt costs and premium   842    751 
Equity-based compensation expense (net of amounts capitalized)   8,724    8,479 
Gains — equipment transactions and other, net   (484)   (439)
Deferred income taxes   4,831    4,815 
Changes in operating assets and liabilities:          
Accounts receivable   1,005    (741)
Prepaid expenses and other current assets   (3,547)   (631)
Accounts payable, accrued liabilities and other long-term liabilities   5,088    (2,418)
Deposits and other assets   (3,783)   (1,706)
Net cash provided by operating activities   69,269    61,450 
Cash flows from investing activities:          
Purchases of property and equipment   (25,008)   (26,893)
Net cash used in investing activities   (25,008)   (26,893)
Cash flows from financing activities:          
Dividends paid   (54,306)   (46,607)
Net proceeds from issuance of senior unsecured 2024 Euro Notes   152,128    — 
Proceeds from exercises of stock options   919    1,002 
Principal payments on installment payment agreement   (4,774)   (4,254)
Principal payments of capital lease obligations   (5,006)   (6,059)
Net cash provided by (used in) financing activities   88,961    (55,918)
Effect of exchange rates changes on cash   (36)   (1,368)
Net increase (decrease) in cash and cash equivalents   133,186    (22,729)
Cash and cash equivalents, beginning of period   276,093    247,011 
Cash and cash equivalents, end of period  $409,279   $224,282 

 

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 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; 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 report on Form 10-Q for the quarter ended June 30, 2019 to be filed with the Securities and Exchange Commission. 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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