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 2022 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025
Financial and Business Highlights
| • | Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.905 per share for Q3 2022 as compared to $0.880 per share for Q2 2022 – Cogent’s fortieth consecutive quarterly dividend increase. |
| o | The Q3 2022 $0.905 dividend per share represents an annual increase of 12.4% from the dividend per share of $0.805 for Q3 2021. |
| • | Service revenue decreased from Q1 2022 to Q2 2022 by 0.5% and increased from Q2 2021 to Q2 2022 by 0.4%. |
| o | Service revenue, on a constant currency basis, increased from Q1 2022 to Q2 2022 by 0.4% and increased from Q2 2021 to Q2 2022 by 2.7%. |
| o | Service revenue, on a constant currency basis and adjusted for the impact of excise tax revenues, increased from Q1 2022 to Q2 2022 by 0.6% and increased from Q2 2021 to Q2 2022 by 3.6%. |
| • | EBITDA margin increased by 110 basis points from Q1 2022 to 39.4% for Q2 2022 and increased by 70 basis points from Q2 2021 to Q2 2022. |
| • | EBITDA increased by 2.3% from Q1 2022 to $58.5 million for Q2 2022 and increased by 2.2% from Q2 2021 to Q2 2022. |
| o | Net cash provided by operating activities was $34.4 million for Q2 2022, $49.4 million for Q1 2022 and $39.7 million for Q2 2021. Included in net cash from operating activities for Q2 2022 are interest payments on Cogent note obligations totaling $16.8 million. |
| • | In June 2022 Cogent extinguished its 2024 €350.0 million Euro Notes at a Euro to USD rate of $1.06 (originally issued at a Euro to USD rate of $1.13) with the proceeds from the issuance of its $450.0 million 2027 Notes |
| • | Sales rep productivity – units per full time equivalent sales rep per month - increased from 4.7 for Q1 2022 to 4.9 for Q2 2022. |
[WASHINGTON, D.C. August 4, 2022] Cogent Communications Holdings, Inc. (NASDAQ: CCOI) (“Cogent”) today announced service revenue of $148.5 million for the three months ended June 30, 2022, a decrease of 0.5% from the three months ended March 31, 2022 and an increase of 0.4% from the three months ended June 30, 2021. Foreign exchange rates negatively impacted service revenue growth from the three months ended March 31, 2022 to the three months ended June 30, 2022 by $1.4 million and negatively impacted service revenue growth from the three months ended June 30, 2021 to the three months ended June 30, 2022 by $3.4 million. On a constant currency basis, service revenue increased by 0.4% from the three months ended March 31, 2022 to the three months ended June 30, 2022 and increased by 2.7% from the three months ended June 30, 2021 to the three months ended June 30, 2022. The impact of excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense, negatively impacted service revenue growth from the three months ended March 31, 2022 to the three months ended June 30, 2022 by $0.4 million and negatively impacted service revenue growth from the three months ended June 30, 2021 to the three months ended June 30, 2022 by $1.4 million. On a constant currency basis, and adjusting for the impact of changes in excise tax revenue, service revenue increased by 0.6% from the three months ended March 31, 2022 to the three months ended June 30, 2022 and increased by 3.6% from the three months ended June 30, 2021 to the three months ended June 30, 2022.
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 $112.0 million for the three months ended June 30, 2022, a decrease of 0.6% from the three months ended March 31, 2022 and an increase of 0.8% from the three months ended June 30, 2021.
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 $36.3 million for the three months ended June 30, 2022; a decrease of 0.3% from the three months ended March 31, 2022 and a decrease of 1.1% from the three months ended June 30, 2021.
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 decreased by 1.1% from the three months ended June 30, 2021 to $68.9 million for the three months ended June 30, 2022 and decreased by 0.3% from the three months ended March 31, 2022. GAAP gross margin was 46.4% for the three months ended June 30, 2022, 47.1% for the three months ended June 30, 2021 and 46.3% for the three months ended March 31, 2022.
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 0.3% from the three months ended June 30, 2021 to $92.1 million for the three months ended June 30, 2022 and increased by 0.2% from the three months ended March 31, 2022. Non-GAAP gross margin was 62.0% for the three months ended June 30, 2022, 62.1% for the three months ended June 30, 2021 and 61.6% for the three months ended March 31, 2022.
Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.4 million for the three months ended June 30, 2022, $4.8 million for the three months ended June 30, 2021 and $3.7 million for the three months ended March 31, 2022.
Net cash provided by operating activities decreased by 13.4% from the three months ended June 30, 2021 to $34.4 million for the three months ended June 30, 2022 and decreased by 30.4% from the three months ended March 31, 2022.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 2.2% from the three months ended June 30, 2021 to $58.5 million for the three months ended June 30, 2022 and increased by 2.3% from the three months ended March 31, 2022. EBITDA margin was 39.4% for the three months ended June 30, 2022, 38.7% for the three months ended June 30, 2021 and 38.3% for the three months ended March 31, 2022.
Basic net and diluted income (loss) per share was $0.24 for the three months ended June 30, 2022, $(0.05) for the three months ended June 30, 2021 and $0.02 for the three months ended March 31, 2022.
Foreign exchange gains (losses) on Cogent’s 2024 Senior Euro Unsecured Notes were $23.5 million for the three months ended June 30, 2022, $(5.3) million for the three months ended June 30, 2021 and $8.0 million for the three months ended March 31, 2022.
Total customer connections increased by 4.3% from June 30, 2021 to 95,777 as of June 30, 2022 and increased by 0.9% from March 31, 2022. On-net customer connections increased by 4.0% from June 30, 2021 to 82,277 as of June 30, 2022 and increased by 0.8% from March 31, 2022. Off-net customer connections increased by 6.2% from June 30, 2021 to 13,160 as of June 30, 2022 and increased by 1.8% from March 31, 2022.
The number of on-net buildings increased by 120 from June 30, 2021 to 3,095 as of June 30, 2022 and increased by 30 from March 31, 2022.
Quarterly Dividend Increase Approved
On August 4, 2022, Cogent’s Board approved a regular quarterly dividend of $0.905 per share payable on August 31, 2022 to shareholders of record on August 18, 2022. This third quarter 2022 regular dividend represents an increase of $0.025 per share, or 2.8%, from the second quarter 2022 regular dividend of $0.880 per share and an annual increase of 12.4% from the third quarter 2021 dividend of $0.805 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 indentures 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 variants 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. Cogent has experienced a slight slowdown in the availability and delivery of networking equipment but Cogent believes it can adequately manage the operation, maintenance, upgrading and growth of its network. A worsening or prolonged slowdown may impact our ability to expand and augment our network. Most Cogent employees worldwide returned to its offices on a full-time basis in the first quarter of 2022. Cogent is implementing measures to protect its workforce, but it can provide no assurance that these measures will be sufficient. Cogent’s decisions to require its employees to return to its offices on a full-time basis and to implement a COVID-19 vaccine mandate, where legally permitted, may impede its ability to retain existing employees or attract new employees. 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 find that the impact of the pandemic on its vendors and their respective workforces may slow the delivery of services from these vendors to Cogent. 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, 2021 and in its Quarterly Report on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 4:30 p.m. (ET) on August 4, 2022 to discuss Cogent’s operating results for the second quarter of 2022 and to discuss Cogent’s expectations for full year 2022. 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 217 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 2021 | | | Q2 2021 | | | Q3 2021 | | | Q4 2021 | | | Q1 2022 | | | Q2 2022 | |
| Metric ($ in 000’s, except share and per share data) – unaudited | | | | | | | | | | | | | | | | | | |
| On-Net revenue | | $ | 109,947 | | | $ | 111,041 | | | $ | 111,099 | | | $ | 110,749 | | | $ | 112,634 | | | $ | 111,975 | |
| % Change from previous Qtr. | | | 2.6 | % | | | 1.0 | % | | | 0.1 | % | | | -0.3 | % | | | 1.7 | % | | | -0.6 | % |
| Off-Net revenue | | $ | 36,723 | | | $ | 36,699 | | | $ | 36,656 | | | $ | 36,304 | | | $ | 36,387 | | | $ | 36,282 | |
| % Change from previous Qtr. | | | 0.1 | % | | | -0.1 | % | | | -0.1 | % | | | -1.0 | % | | | 0.2 | % | | | -0.3 | % |
| Non-Core revenue (1) | | $ | 107 | | | $ | 139 | | | $ | 172 | | | $ | 155 | | | $ | 154 | | | $ | 193 | |
| % Change from previous Qtr. | | | -10.8 | % | | | 29.9 | % | | | 23.7 | % | | | -9.9 | % | | | -0.6 | % | | | 25.3 | % |
| Service revenue – total | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| % Change from previous Qtr. | | | 2.0 | % | | | 0.8 | % | | | 0.0 | % | | | -0.5 | % | | | 1.3 | % | | | -0.5 | % |
| Constant currency total revenue quarterly growth rate – sequential quarters (6) | | | 1.7 | % | | | 0.6 | % | | | 0.5 | % | | | 0.1 | % | | | 1.7 | % | | | 0.4 | % |
| Constant currency total revenue quarterly growth rate – year over year quarters (6) | | | 2.3 | % | | | 2.8 | % | | | 3.6 | % | | | 2.9 | % | | | 2.9 | % | | | 2.7 | % |
| Constant currency and excise tax impact on total revenue quarterly growth rate – sequential quarters (6) | | | 1.4 | % | | | 0.5 | % | | | 0.5 | % | | | 0.4 | % | | | 2.1 | % | | | 0.6 | % |
| Constant currency and excise tax impact on total revenue quarterly growth rate – year over year quarters (6) | | | 1.8 | % | | | 1.7 | % | | | 2.9 | % | | | 2.8 | % | | | 3.5 | % | | | 3.6 | % |
| Excise Taxes included in service revenue | | $ | 4,528 | | | $ | 4,811 | | | $ | 4,813 | | | $ | 4,336 | | | $ | 3,742 | | | $ | 3,448 | |
| % Change from previous Qtr. | | | 9.3 | % | | | 6.3 | % | | | 0.0 | % | | | -9.9 | % | | | -13.7 | % | | | -7.9 | % |
| Network operations expenses (2) | | $ | 55,016 | | | $ | 56,044 | | | $ | 56,482 | | | $ | 56,272 | | | $ | 57,305 | | | $ | 56,369 | |
| % Change from previous Qtr. | | | 0.9 | % | | | 1.9 | % | | | 0.8 | % | | | -0.4 | % | | | 1.8 | % | | | -1.6 | % |
| GAAP gross profit (3) | | $ | 67,715 | | | $ | 69,603 | | | $ | 68,673 | | | $ | 68,223 | | | $ | 69,038 | | | $ | 68,865 | |
| % Change from previous Qtr. | | | 1.6 | % | | | 2.8 | % | | | -1.3 | % | | | -0.7 | % | | | 1.2 | % | | | -0.3 | % |
| GAAP gross margin (3) | | | 46.1 | % | | | 47.1 | % | | | 46.4 | % | | | 46.3 | % | | | 46.3 | % | | | 46.4 | % |
| Non-GAAP gross profit (4) (6) | | $ | 91,761 | | | $ | 91,835 | | | $ | 91,445 | | | $ | 90,936 | | | $ | 91,870 | | | $ | 92,081 | |
| % Change from previous Qtr. | | | 2.7 | % | | | 0.1 | % | | | -0.4 | % | | | -0.6 | % | | | 1.0 | % | | | 0.2 | % |
| Non-GAAP gross margin (4) (6) | | | 62.5 | % | | | 62.1 | % | | | 61.8 | % | | | 61.8 | % | | | 61.6 | % | | | 62.0 | % |
| Selling, general and administrative expenses (5) | | $ | 36,211 | | | $ | 34,654 | | | $ | 33,692 | | | $ | 33,526 | | | $ | 34,715 | | | $ | 33,624 | |
| % Change from previous Qtr. | | | 7.4 | % | | | -4.3 | % | | | -2.8 | % | | | -0.5 | % | | | 3.5 | % | | | -3.1 | % |
| Depreciation and amortization expense | | $ | 21,970 | | | $ | 22,096 | | | $ | 22,609 | | | $ | 22,567 | | | $ | 22,688 | | | $ | 23,071 | |
| % Change from previous Qtr. | | | -2.2 | % | | | 0.6 | % | | | 2.3 | % | | | -0.2 | % | | | 0.5 | % | | | 1.7 | % |
| Equity-based compensation expense | | $ | 7,307 | | | $ | 6,874 | | | $ | 6,588 | | | $ | 6,053 | | | $ | 6,056 | | | $ | 5,907 | |
| % Change from previous Qtr. | | | 25.0 | % | | | -5.9 | % | | | -4.2 | % | | | -8.1 | % | | | 0.0 | % | | | -2.5 | % |
| Operating income | | $ | 26,291 | | | $ | 28,211 | | | $ | 28,556 | | | $ | 36,165 | | | $ | 28,784 | | | $ | 29,566 | |
| % Change from previous Qtr. | | | -4.0 | % | | | 7.3 | % | | | 1.2 | % | | | 26.6 | % | | | -20.4 | % | | | 2.7 | % |
| Interest expense | | $ | 15,836 | | | $ | 14,236 | | | $ | 14,273 | | | $ | 13,714 | | | $ | 14,168 | | | $ | 13,478 | |
| % Change from previous Qtr. | | | -1.1 | % | | | -10.1 | % | | | 0.3 | % | | | -3.9 | % | | | 3.3 | % | | | -4.9 | % |
| Non-cash change in valuation – Swap agreement | | | | | | | | | | $ | 3,076 | | | $ | 5,939 | | | $ | 21,271 | | | $ | 7,510 | |
| % Change from previous Qtr. | | | | | | | | | | | | | | | 93.1 | % | | | 258.2 | % | | | -64.7 | % |
| Net income (loss) | | $ | 18,851 | | | $ | (2,493 | ) | | $ | 13,320 | | | $ | 18,507 | | | $ | 1,137 | | | $ | 11,164 | |
| Foreign exchange gains (losses) on 2024 Euro Notes | | $ | 18,870 | | | $ | (5,280 | ) | | $ | 10,169 | | | $ | 8,763 | | | $ | 8,014 | | | $ | 23,547 | |
| Basic net income (loss) per common share | | $ | 0.41 | | | $ | (0.05 | ) | | $ | 0.29 | | | $ | 0.40 | | | $ | 0.02 | | | $ | 0.24 | |
| Diluted net income (loss) per common share | | $ | 0.41 | | | $ | (0.05 | ) | | $ | 0.28 | | | $ | 0.39 | | | $ | 0.02 | | | $ | 0.24 | |
| Weighted average common shares – basic | | | 46,067,096 | | | | 46,229,603 | | | | 46,293,524 | | | | 46,420,168 | | | | 46,575,848 | | | | 46,691,142 | |
| % Change from previous Qtr. | | | 0.4 | % | | | 0.4 | % | | | 0.1 | % | | | 0.3 | % | | | 0.3 | % | | | 0.2 | % |
| Weighted average common shares – diluted | | | 46,507,258 | | | | 46,229,603 | | | | 46,866,929 | | | | 46,992,639 | | | | 46,929,191 | | | | 47,029,446 | |
| % Change from previous Qtr. | | | 1.3 | % | | | -0.6 | % | | | 1.4 | % | | | 0.3 | % | | | -0.1 | % | | | 0.2 | % |
| EBITDA (6) | | $ | 55,550 | | | $ | 57,181 | | | $ | 57,753 | | | $ | 57,410 | | | $ | 57,155 | | | $ | 58,457 | |
| % Change from previous Qtr. | | | -0.2 | % | | | 2.9 | % | | | 1.0 | % | | | -0.6 | % | | | -0.4 | % | | | 2.3 | % |
| EBITDA margin | | | 37.8 | % | | | 38.7 | % | | | 39.0 | % | | | 39.0 | % | | | 38.3 | % | | | 39.4 | % |
| Gains on asset related transactions | | $ | 18 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| EBITDA, as adjusted (6) | | $ | 55,568 | | | $ | 57,181 | | | $ | 57,753 | | | $ | 57,410 | | | $ | 57,155 | | | $ | 58,457 | |
| % Change from previous Qtr. | | | -0.2 | % | | | 2.9 | % | | | 1.0 | % | | | -0.6 | % | | | -0.4 | % | | | 2.3 | % |
| EBITDA, as adjusted, margin | | | 37.9 | % | | | 38.7 | % | | | 39.0 | % | | | 39.0 | % | | | 38.3 | % | | | 39.4 | % |
| Net cash provided by operating activities | | $ | 47,106 | | | $ | 39,749 | | | $ | 47,418 | | | $ | 35,984 | | | $ | 49,411 | | | $ | 34,403 | |
| % Change from previous Qtr. | | | 25.4 | % | | | -15.6 | % | | | 19.3 | % | | | -24.1 | % | | | 37.3 | % | | | -30.4 | % |
| Capital expenditures | | $ | 15,444 | | | $ | 17,217 | | | $ | 21,959 | | | $ | 15,296 | | | $ | 18,121 | | | $ | 17,288 | |
| % Change from previous Qtr. | | | -2.6 | % | | | 11.5 | % | | | 27.5 | % | | | -30.3 | % | | | 18.5 | % | | | -4.6 | % |
| Principal payments of capital (finance) lease obligations | | $ | 5,744 | | | $ | 6,192 | | | $ | 4,890 | | | $ | 6,228 | | | $ | 5,863 | | | $ | 5,236 | |
| % Change from previous Qtr. | | | 24.9 | % | | | 7.8 | % | | | -21.0 | % | | | 27.4 | % | | | -5.9 | % | | | -10.7 | % |
| Dividends paid | | $ | 36,081 | | | $ | 37,001 | | | $ | 37,654 | | | $ | 39,552 | | | $ | 41,298 | | | $ | 41,855 | |
| Purchases of common stock | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Gross Leverage Ratio | | | 4.39 | | | | 5.13 | | | | 5.07 | | | | 5.02 | | | | 4.94 | | | | 5.22 | |
| Net Leverage Ratio | | | 3.31 | | | | 3.45 | | | | 3.50 | | | | 3.58 | | | | 3.58 | | | | 3.70 | |
| Customer Connections – end of period | | | | | | | | | | | | | | | | | | | | | | | | |
| On-Net | | | 78,389 | | | | 79,146 | | | | 80,162 | | | | 80,723 | | | | 81,627 | | | | 82,277 | |
| % Change from previous Qtr. | | | 1.4 | % | | | 1.0 | % | | | 1.3 | % | | | 0.7 | % | | | 1.1 | % | | | 0.8 | % |
| Off-Net | | | 12,216 | | | | 12,386 | | | | 12,495 | | | | 12,669 | | | | 12,922 | | | | 13,160 | |
| % Change from previous Qtr. | | | 2.1 | % | | | 1.4 | % | | | 0.9 | % | | | 1.4 | % | | | 2.0 | % | | | 1.8 | % |
| Non-Core (1) | | | 320 | | | | 336 | | | | 334 | | | | 334 | | | | 335 | | | | 340 | |
| % Change from previous Qtr. | | | -1.5 | % | | | 5.0 | % | | | -0.6 | % | | | -% | | | | 0.3 | % | | | 1.5 | % |
| Total customer connections | | | 90,925 | | | | 91,868 | | | | 92,991 | | | | 93,726 | | | | 94,884 | | | | 95,777 | |
| % Change from previous Qtr. | | | 1.5 | % | | | 1.0 | % | | | 1.2 | % | | | 0.8 | % | | | 1.2 | % | | | 0.9 | % |
| On-Net Buildings – end of period | | | | | | | | | | | | | | | | | | | | | | | | |
| Multi-Tenant office buildings | | | 1,796 | | | | 1,802 | | | | 1,816 | | | | 1,817 | | | | 1,824 | | | | 1,826 | |
| Carrier neutral data center buildings | | | 1,089 | | | | 1,119 | | | | 1,138 | | | | 1,164 | | | | 1,187 | | | | 1,216 | |
| Cogent data centers | | | 54 | | | | 54 | | | | 54 | | | | 54 | | | | 54 | | | | 53 | |
| Total on-net buildings | | | 2,939 | | | | 2,975 | | | | 3,008 | | | | 3,035 | | | | 3,065 | | | | 3,095 | |
| Total carrier neutral data center nodes | | | 1,274 | | | | 1,309 | | | | 1,332 | | | | 1,359 | | | | 1,383 | | | | 1,409 | |
| Square feet – multi-tenant office buildings – on-net | | | 978,095,164 | | | | 979,876,141 | | | | 984,753,702 | | | | 986,941,224 | | | | 992,336,259 | | | | 993,590,499 | |
| Network – end of period | | | | | | | | | | | | | | | | | | | | | | | | |
| Intercity route miles | | | 58,761 | | | | 59,741 | | | | 59,741 | | | | 60,676 | | | | 60,869 | | | | 61,024 | |
| Metro route miles | | | 15,596 | | | | 15,742 | | | | 15,979 | | | | 16,338 | | | | 16,614 | | | | 16,822 | |
| Metro fiber miles | | | 38,058 | | | | 38,351 | | | | 38,825 | | | | 39,559 | | | | 40,113 | | | | 40,529 | |
| Connected networks – AS’s | | | 7,471 | | | | 7,530 | | | | 7,597 | | | | 7,569 | | | | 7,625 | | | | 7,685 | |
| Headcount – end of period | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales force – quota bearing | | | 547 | | | | 565 | | | | 516 | | | | 490 | | | | 479 | | | | 477 | |
| Sales force - total | | | 693 | | | | 710 | | | | 662 | | | | 633 | | | | 620 | | | | 619 | |
| Total employees | | | 1,066 | | | | 1,087 | | | | 1,031 | | | | 1,001 | | | | 987 | | | | 988 | |
| Sales rep productivity – units per full time equivalent sales rep (“FTE”) per month | | | 4.3 | | | | 4.5 | | | | 4.3 | | | | 4.2 | | | | 4.7 | | | | 4.9 | |
| FTE – sales reps | | | 522 | | | | 511 | | | | 521 | | | | 467 | | | | 453 | | | | 449 | |
| (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 $2,076, $136, $163, $146, $144 and $145 in the three month periods ended March 31, 2021 through June 30, 2022, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $4,528, $4,811, $4,813, $4,336, $3,742 and $3,448 in the three month periods ended March 31, 2021 through June 30, 2022, 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 margin are relevant measures to provide investors. Management uses them 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 $5,231, $6,738, $6,425, $5,907, $5,912 and $5,762 in the three month periods ended March 31, 2021 through June 30, 2022, respectively. |
| (6) | See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures. |
Schedules of Non-GAAP Measures
EBITDA, EBITDA, as adjusted, EBITDA margin and EBITDA, as adjusted, margin
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. EBITDA margin is defined as EBITDA divided by total service revenue. EBITDA, as adjusted, margin is defined as EBITDA, as adjusted, divided by total service revenue.
The Company believes that EBITDA, EBITDA, as adjusted, EBITDA margin and EBITDA as adjusted margin are useful measures of its ability to service debt, fund capital expenditures and expand its business. The measurements are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, EBITDA, as adjusted, EBITDA margin and EBITDA, as adjusted, margin 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 measures 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 measures 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.
| ($ in 000’s) – unaudited | | Q1
2021 | | | Q2
2021 | | | Q3
2021 | | | Q4
2021 | | | Q1
2022 | | | Q2
2022 | |
| Net cash provided by operating activities | | $ | 47,106 | | | $ | 39,749 | | | $ | 47,418 | | | $ | 35,984 | | | $ | 49,411 | | | $ | 34,403 | |
| Changes in operating assets and liabilities | | $ | (9,060 | ) | | $ | 2,352 | | | $ | (3,191 | ) | | $ | 7,607 | | | $ | (6,294 | ) | | $ | 5,108 | |
| Cash interest expense and income tax expense | | | 17,504 | | | | 15,080 | | | | 13,526 | | | | 13,819 | | | | 14,038 | | | | 18,946 | |
| EBITDA | | $ | 55,550 | | | $ | 57,181 | | | $ | 57,753 | | | $ | 57,410 | | | $ | 57,155 | | | $ | 58,457 | |
| PLUS: Gains on asset related transactions | | | 18 | | | | - | | | | - | | | | - | | | | - | | | | - | |
| EBITDA, as adjusted | | $ | 55,568 | | | $ | 57,181 | | | $ | 57,753 | | | $ | 57,410 | | | $ | 57,155 | | | $ | 58,457 | |
| EBITDA margin | | | 37.8 | % | | | 38.7 | % | | | 39.0 | % | | | 39.0 | % | | | 38.3 | % | | | 39.4 | % |
| EBITDA, as adjusted, margin | | | 37.9 | % | | | 38.7 | % | | | 39.0 | % | | | 39.0 | % | | | 38.3 | % | | | 39.4 | % |
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
2021 | | | Q2
2021 | | | Q3
2021 | | | Q4
2021 | | | Q1
2022 | | | Q2
2022 | |
| Service revenue, as reported – current period | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| Impact of foreign currencies on service revenue | | | (447 | ) | | | (150 | ) | | | 709 | | | | 808 | | | | 516 | | | | 1,350 | |
| Service revenue - as adjusted for currency impact (1) | | $ | 146,330 | | | $ | 147,729 | | | $ | 148,636 | | | $ | 148,016 | | | $ | 149,691 | | | $ | 149,800 | |
| Service revenue, as reported – prior sequential period | | $ | 143,901 | | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | |
| Constant currency increase | | $ | 2,429 | | | $ | 952 | | | $ | 757 | | | $ | 89 | | | $ | 2,483 | | | $ | 625 | |
| Constant currency percent increase | | | 1.7 | % | | | 0.6 | % | | | 0.5 | % | | | 0.1 | % | | | 1.7 | % | | | 0.4 | % |
| (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
2021 | | | Q2
2021 | | | Q3
2021 | | | Q4
2021 | | | Q1
2022 | | | Q2
2022 | |
| Service revenue, as reported – current period | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| Impact of foreign currencies on service revenue | | | (2,608 | ) | | | (2,965 | ) | | | (555 | ) | | | 916 | | | | 1,914 | | | | 3,417 | |
| Service revenue - as adjusted for currency impact (2) | | $ | 144,169 | | | $ | 144,914 | | | $ | 147,372 | | | $ | 148,124 | | | $ | 151,089 | | | $ | 151,867 | |
| Service revenue, as reported – prior year period | | $ | 140,915 | | | $ | 140,990 | | | $ | 142,302 | | | $ | 143,901 | | | $ | 146,777 | | | $ | 147,879 | |
| Constant currency increase | | $ | 3,254 | | | $ | 3,924 | | | $ | 5,070 | | | $ | 4,223 | | | $ | 4,312 | | | $ | 3,988 | |
| Constant currency percent increase | | | 2.3 | % | | | 2.8 | % | | | 3.6 | % | | | 2.9 | % | | | 2.9 | % | | | 2.7 | % |
| (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. |
Revenue on a constant currency basis and adjusted for the impact of excise taxes is reconciled to service revenue as reported in the tables below.
Constant currency and excise tax impact on revenue changes – sequential periods
| ($ in 000’s) – unaudited | | Q1
2021 | | | Q2
2021 | | | Q3
2021 | | | Q4
2021 | | | Q1
2022 | | | Q2
2022 | |
| Service revenue, as reported – current period | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| Impact of foreign currencies on service revenue | | | (447 | ) | | | (150 | ) | | | 709 | | | | 808 | | | | 516 | | | | 1,350 | |
| Impact of excise taxes on service revenue | | | (384 | ) | | | (283 | ) | | | (2 | ) | | | 477 | | | | 594 | | | | 294 | |
| Service revenue - as adjusted for currency and excise taxes impact (3) | | $ | 145,946 | | | $ | 147,446 | | | $ | 148,634 | | | $ | 148,493 | | | $ | 150,285 | | | $ | 150,094 | |
| Service revenue, as reported – prior sequential period | | $ | 143,901 | | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | |
| Constant currency and excise taxes increase | | $ | 2,045 | | | $ | 669 | | | $ | 755 | | | $ | 566 | | | $ | 3,077 | | | $ | 919 | |
| Constant currency and excise tax percent increase | | | 1.4 | % | | | 0.5 | % | | | 0.5 | % | | | 0.4 | % | | | 2.1 | % | | | 0.6 | % |
| (3) | Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. |
Constant currency and excise tax impact on revenue changes – prior year periods
| ($ in 000’s) – unaudited | | Q1
2021 | | | Q2
2021 | | | Q3
2021 | | | Q4
2021 | | | Q1
2022 | | | Q2
2022 | |
| Service revenue, as reported – current period | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| Impact of foreign currencies on service revenue | | | (2,608 | ) | | | (2,965 | ) | | | (555 | ) | | | 916 | | | | 1,914 | | | | 3,417 | |
| Impact of excise taxes on service revenue | | | (785 | ) | | | (1,513 | ) | | | (911 | ) | | | (192 | ) | | | 786 | | | | 1,363 | |
| Service revenue - as adjusted for currency and excise taxes impact (4) | | $ | 143,384 | | | $ | 143,401 | | | $ | 146,461 | | | $ | 147,932 | | | $ | 151,875 | | | $ | 153,230 | |
| Service revenue, as reported – prior year period | | $ | 140,915 | | | $ | 140,990 | | | $ | 142,302 | | | $ | 143,901 | | | $ | 146,777 | | | $ | 147,879 | |
| Constant currency and excise taxes increase | | $ | 2,469 | | | $ | 2,411 | | | $ | 4,159 | | | $ | 4,031 | | | $ | 5,098 | | | $ | 5,351 | |
| Constant currency and excise tax percent increase | | | 1.8 | % | | | 1.7 | % | | | 2.9 | % | | | 2.8 | % | | | 3.5 | % | | | 3.6 | % |
| (4) | Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior year period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, 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 2021 | | | Q2 2021 | | | Q3 2021 | | | Q4 2021 | | | Q1 2022 | | | Q2 2022 | |
| Service revenue total | | $ | 146,777 | | | $ | 147,879 | | | $ | 147,927 | | | $ | 147,208 | | | $ | 149,175 | | | $ | 148,450 | |
| Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense | | | 79,062 | | | | 78,276 | | | | 79,254 | | | | 78,985 | | | | 80,137 | | | | 79,585 | |
| GAAP Gross Profit (1) | | $ | 67,715 | | | $ | 69,603 | | | $ | 68,673 | | | $ | 68,223 | | | $ | 69,038 | | | $ | 68,865 | |
| Plus - Equity-based compensation – network operations expense | | | 2,076 | | | | 136 | | | | 163 | | | | 146 | | | | 144 | | | | 145 | |
| Plus – Depreciation and amortization expense | | | 21,970 | | | | 22,096 | | | | 22,609 | | | | 22,567 | | | | 22,688 | | | | 23,071 | |
| Non-GAAP Gross Profit (2) | | $ | 91,761 | | | $ | 91,835 | | | $ | 91,445 | | | $ | 90,936 | | | $ | 91,870 | | | $ | 92,081 | |
| GAAP Gross Margin (1) | | | 46.1 | % | | | 47.1 | % | | | 46.4 | % | | | 46.3 | % | | | 46.3 | % | | | 46.4 | % |
| Non-GAAP Gross Margin (2) | | | 62.5 | % | | | 62.1 | % | | | 61.8 | % | | | 61.8 | % | | | 61.6 | % | | | 62.0 | % |
| (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 measures to provide to investors, as they are measures 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, 2022 | | | As of June 30, 2022 | |
| Cash and cash equivalents & restricted cash | | $ | 311,771 | | | $ | 349,847 | |
| Debt | | | | | | | | |
| Capital (finance) leases – current portion | | | 17,147 | | | | 17,562 | |
| Capital (finance) leases – long term | | | 228,102 | | | | 236,652 | |
| Senior Secured 2022 Notes | | | - | | | | - | |
| Senior Secured 2026 Notes | | | 500,000 | | | | 500,000 | |
| Senior Unsecured Euro 2024 Notes | | | 389,019 | | | | - | |
| Senior Unsecured 2027 Notes | | | - | | | | 450,000 | |
| Note payable | | | 219 | | | | - | |
| Total debt | | | 1,134,487 | | | | 1,204,214 | |
| Total net debt | | | 822,716 | | | | 854,367 | |
| Trailing 12 months EBITDA, as adjusted | | | 229,499 | | | | 230,775 | |
| Gross leverage ratio | | | 4.94 | | | | 5.22 | |
| Net leverage ratio | | | 3.58 | | | | 3.70 | |
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, 2022 AND DECEMBER 31, 2021
(IN THOUSANDS, EXCEPT SHARE DATA)
| | | June 30,
2022 | | | December 31,
2021 | |
| | (Unaudited) | | | | |
| Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 312,051 | | | $ | 319,609 | |
| Restricted cash | | | 37,796 | | | | 9,015 | |
| Accounts receivable, net of allowance for credit losses of $1,717 and $1,510, respectively | | | 44,568 | | | | 41,938 | |
| Prepaid expenses and other current assets | | | 43,054 | | | | 39,015 | |
| Total current assets | | | 437,469 | | | | 409,577 | |
| Property and equipment, net | | | 461,381 | | | | 457,880 | |
| Right-of-use leased assets | | | 98,576 | | | | 101,687 | |
| Deposits and other assets | | | 17,158 | | | | 15,413 | |
| Total assets | | $ | 1,014,584 | | | $ | 984,557 | |
| Liabilities and stockholders' deficit | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 14,823 | | | $ | 11,923 | |
| Accrued and other current liabilities | | | 52,322 | | | | 39,057 | |
| Installment payment agreement, current portion, net of discount of $6 | | | — | | | | 785 | |
| Current maturities, operating lease liabilities | | | 12,172 | | | | 12,197 | |
| Current maturities, finance lease obligations | | | 17,562 | | | | 17,048 | |
| Total current liabilities | | | 96,879 | | | | 81,010 | |
| Senior unsecured 2027 notes, net of unamortized debt costs of $1,283 and net of discount of $2,686 | | | 446,031 | | | | — | |
| Senior secured 2026 notes, net of unamortized debt costs of $1,032 and $1,156, respectively, and net of discounts of $1,371 and $1,536, respectively | | | 497,597 | | | | 497,308 | |
| Senior unsecured 2024 Euro notes, net of unamortized debt costs of $2,121 and net of discount of $772 | | | — | | | | 394,112 | |
| Operating lease liabilities, net of current maturities | | | 110,735 | | | | 111,794 | |
| Finance lease obligations, net of current maturities | | | 236,652 | | | | 228,822 | |
| Other long-term liabilities | | | 66,871 | | | | 44,609 | |
| Total liabilities | | | 1,454,765 | | | | 1,357,655 | |
| Commitments and contingencies: | | | | | | | | |
| Stockholders’ deficit: | | | | | | | | |
| Common stock, $0.001 par value; 75,000,000 shares authorized; 48,003,724 and 47,674,189 shares issued and outstanding, respectively | | | 48 | | | | 48 | |
| Additional paid-in capital | | | 561,161 | | | | 547,734 | |
| Accumulated other comprehensive loss — foreign currency translation | | | (20,661 | ) | | | (11,003 | ) |
| Accumulated deficit | | | (980,729 | ) | | | (909,877 | ) |
| Total stockholders’ deficit | | | (440,181 | ) | | | (373,098 | ) |
| Total liabilities and stockholders’ deficit | | $ | 1,014,584 | | | $ | 984,557 | |
COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| | | Three Months Ended June 30, 2022 | | | Three Months Ended June 30, 2021 | |
| | | (Unaudited) | | | (Unaudited) | |
| Service revenue | | $ | 148,450 | | | $ | 147,879 | |
| Operating expenses: | | | | | | | | |
| Network operations (including $145 and $136 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | | | 56,514 | | | | 56,180 | |
| Selling, general, and administrative (including $5,762 and $6,738 of equity-based compensation expense, respectively) | | | 39,386 | | | | 41,392 | |
| Depreciation and amortization | | | 23,071 | | | | 22,096 | |
| Total operating expenses | | | 118,971 | | | | 119,668 | |
| Gains on lease transactions | | | 87 | | | | — | |
| Operating income | | | 29,566 | | | | 28,211 | |
| Interest expense | | | (13,478 | ) | | | (14,236 | ) |
| Change in valuation – interest rate swap | | | (7,510 | ) | | | — | |
| Foreign exchange gain (loss) - 2024 Euro Notes | | | 23,547 | | | | (5,280 | ) |
| Loss on debt extinguishment and redemption – 2024 Euro Notes | | | (11,885 | ) | | | — | |
| Loss on debt extinguishment and redemption – 2022 Notes | | | — | | | | (10,830 | ) |
| Interest income and other, net | | | (522 | ) | | | 64 | |
| Income (loss) before income taxes | | | 19,718 | | | | (2,071 | ) |
| Income tax expense | | | (8,554 | ) | | | (422 | ) |
| Net income (loss) | | $ | 11,164 | | | $ | (2,493 | ) |
| | | | | | | | | |
| Comprehensive income (loss): | | | | | | | | |
| Net income (loss) | | $ | 11,164 | | | $ | (2,493 | ) |
| Foreign currency translation adjustment | | | (7,493 | ) | | | 1,776 | |
| Comprehensive income (loss) | | $ | 3,671 | | | $ | (717 | ) |
| | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | |
| Basic net income (loss) per common share | | $ | 0.24 | | | $ | (0.05 | ) |
| Diluted net income (loss) per common share | | $ | 0.24 | | | $ | (0.05 | ) |
| Dividends declared per common share | | $ | 0.88 | | | $ | 0.78 | |
| | | | | | | | | |
| Weighted-average common shares - basic | | | 46,691,142 | | | | 46,229,603 | |
| | | | | | | | | |
| Weighted-average common shares - diluted | | | 47,029,446 | | | | 46,229,603 | |
COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| | | Six Months Ended June 30, 2022 | | | Six Months Ended June 30, 2021 | |
| | | (Unaudited) | | | (Unaudited) | |
| Service revenue | | $ | 297,622 | | | $ | 294,656 | |
| Operating expenses: | | | | | | | | |
| Network operations (including $289 and $2,212 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | | | 113,963 | | | | 113,272 | |
| Selling, general, and administrative (including $11,674 and $11,969 of equity-based compensation expense, respectively) | | | 80,013 | | | | 82,834 | |
| Depreciation and amortization | | | 45,762 | | | | 44,065 | |
| Total operating expenses | | | 239,738 | | | | 240,171 | |
| Gains on equipment transactions | | | 460 | | | | 18 | |
| Operating income | | | 58,344 | | | | 54,503 | |
| Interest expense | | | (27,648 | ) | | | (30,071 | ) |
| Change in valuation – interest rate swap | | | (28,781 | ) | | | — | |
| Foreign exchange gain - 2024 Euro Notes | | | 31,561 | | | | 13,590 | |
| Loss on debt extinguishment and redemption- 2024 Euro Notes | | | (11,885 | ) | | | — | |
| Loss on debt extinguishment and redemption- 2022 Notes | | | — | | | | (14,698 | ) |
| Interest income and other, net | | | (195 | ) | | | 807 | |
| Income before income taxes | | | 21,396 | | | | 24,131 | |
| Income tax expense | | | (9,095 | ) | | | (7,773 | ) |
| Net income | | $ | 12,301 | | | $ | 16,358 | |
| | | | | | | | | |
| Comprehensive income: | | | | | | | | |
| Net income | | $ | 12,301 | | | $ | 16,358 | |
| Foreign currency translation adjustment | | | (9,658 | ) | | | (3,434 | ) |
| Comprehensive income | | $ | 2,643 | | | $ | 12,924 | |
| | | | | | | | | |
| Net income per common share: | | | | | | | | |
| Basic net income per common share | | $ | 0.26 | | | $ | 0.35 | |
| Diluted net income per common share | | $ | 0.26 | | | $ | 0.35 | |
| | | | | | | | | |
| Dividends declared per common share | | $ | 1.735 | | | $ | 1.535 | |
| | | | | | | | | |
| Weighted-average common shares - basic | | | 46,705,088 | | | | 46,227,528 | |
| | | | | | | | | |
| Weighted-average common shares - diluted | | | 47,050,911 | | | | 46,744,070 | |
COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(IN THOUSANDS)
| | | Three Months Ended June 30, 2022 | | | Three Months Ended June 30, 2021 | |
| | | (Unaudited) | | | (Unaudited) | |
| Cash flows from operating activities: | | | | | | | | |
| Net income (loss) | | $ | 11,164 | | | $ | (2,493 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 23,071 | | | | 22,096 | |
| Amortization of debt costs, discounts and premiums | | | 412 | | | | 453 | |
| Equity-based compensation expense (net of amounts capitalized) | | | 5,907 | | | | 6,874 | |
| Loss on debt extinguishment and redemption – 2024 Euro Notes | | | 11,885 | | | | — | |
| Loss on debt extinguishment and redemption – 2022 Notes | | | — | | | | 10,830 | |
| Foreign exchange (gain) loss – 2024 Euro Notes | | | (23,547 | ) | | | 5,280 | |
| Gains - equipment transactions and other, net | | | 1,155 | | | | (129 | ) |
| Deferred income taxes | | | 3,196 | | | | (939 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (3,605 | ) | | | (2,330 | ) |
| Prepaid expenses and other current assets | | | (2,197 | ) | | | (130 | ) |
| Accounts payable, accrued liabilities and other long-term liabilities | | | 5,701 | | | | 852 | |
| Deposits and other assets | | | 1,261 | | | | (615 | ) |
| Net cash provided by operating activities | | | 34,403 | | | | 39,749 | |
| Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (17,288 | ) | | | (17,217 | ) |
| Net cash used in investing activities | | | (17,288 | ) | | | (17,217 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Dividends paid | | | (41,855 | ) | | | (37,001 | ) |
| Redemption and extinguishment - 2024 Euro Notes | | | (375,354 | ) | | | — | |
| Redemption and extinguishment - 2022 Notes | | | — | | | | (339,638 | ) |
| Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $1,290 | | | 446,010 | | | | — | |
| Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317 | | | — | | | | 496,933 | |
| Principal payments on installment payment agreement | | | (219 | ) | | | (1,969 | ) |
| Principal payments of finance lease obligations | | | (5,236 | ) | | | (6,192 | ) |
| Proceeds from exercises of stock options | | | 130 | | | | 660 | |
| Net cash provided by financing activities | | | 23,476 | | | | 112,793 | |
| Effect of exchange rates changes on cash | | | (2,515 | ) | | | 658 | |
| Net increase in cash, cash equivalents and restricted cash | | | 38,076 | | | | 135,983 | |
| Cash, cash equivalents and restricted cash, beginning of period | | | 311,771 | | | | 237,980 | |
| Cash, cash equivalents and restricted cash, end of period | | $ | 349,847 | | | $ | 373,963 | |
COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(IN THOUSANDS)
| | | Six Months Ended June 30, 2022 | | | Six Months Ended June 30, 2021 | |
| | | (Unaudited) | | | (Unaudited) | |
| Cash flows from operating activities: | | | | | | | | |
| Net income | | $ | 12,301 | | | $ | 16,358 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 45,762 | | | | 44,065 | |
| Amortization of debt costs, discounts and premiums | | | 829 | | | | 894 | |
| Equity-based compensation expense (net of amounts capitalized) | | | 11,963 | | | | 14,181 | |
| Loss on debt extinguishment and redemption – 2024 Euro Notes | | | 11,885 | | | | — | |
| Loss on debt extinguishment and redemption – 2022 Notes | | | — | | | | 14,698 | |
| Foreign exchange gains – 2024 Euro Notes | | | (31,561 | ) | | | (13,590 | ) |
| Gains - equipment transactions and other, net | | | 1,308 | | | | 242 | |
| Deferred income taxes | | | 3,138 | | | | 3,558 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (3,529 | ) | | | 90 | |
| Prepaid expenses and other current assets | | | (5,150 | ) | | | 2,696 | |
| Accounts payable, accrued liabilities and other long-term liabilities | | | 37,014 | | | | 3,804 | |
| Deposits and other assets | | | (146 | ) | | | (141 | ) |
| Net cash provided by operating activities | | | 83,814 | | | | 86,855 | |
| Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (35,409 | ) | | | (32,661 | ) |
| Net cash used in investing activities | | | (35,409 | ) | | | (32,661 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Dividends paid | | | (83,153 | ) | | | (73,082 | ) |
| Redemption and extinguishment - 2024 Euro Notes | | | (375,354 | ) | | | — | |
| Redemption and extinguishment - 2022 Notes | | | — | | | | (459,317 | ) |
| Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $1,290 | | | 446,010 | | | | — | |
| Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317 | | | — | | | | 496,933 | |
| Principal payments on installment payment agreement | | | (790 | ) | | | (4,347 | ) |
| Principal payments of finance lease obligations | | | (11,099 | ) | | | (11,936 | ) |
| Proceeds from exercises of stock options | | | 334 | | | | 875 | |
| Net cash used in financing activities | | | (24,052 | ) | | | (50,874 | ) |
| Effect of exchange rates changes on cash | | | (3,130 | ) | | | (658 | ) |
| Net increase in cash, cash equivalents and restricted cash | | | 21,223 | | | | 2,662 | |
| Cash, cash equivalents and restricted cash, beginning of period | | | 328,624 | | | | 371,301 | |
| Cash, cash equivalents and restricted cash, end of period | | $ | 349,847 | | | $ | 373,963 | |
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, 2021 and our Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022. 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.
###
