8-K
Cogent Communications Holdings, Inc. (CCOI)
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORTPursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 4, 2021
Cogent Communications Holdings, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-51829 | 46-5706863 |
|---|---|---|
| (State or other jurisdiction of<br><br>incorporation) | (Commission File Number) | (I.R.S. Employer<br> Identification No.) |
| 2450 N St NW,<br>Washington, D.C. | 20037 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
202-295-4200
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered |
|---|---|---|
| Common Stock, par value $0.001 per share | CCOI | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On November 4, 2021, Cogent Communications Holdings, Inc. issued a press release summarizing its financial results for the third quarter of 2021. The Company will hold a conference call regarding its financial results at 8:30 a.m. ET on November 4, 2021, which will be simultaneously broadcast on a link available through the Company’s website at www.cogentco.com. The press release is furnished as Exhibit 99.1 to this current report on Form 8-K.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release of Cogent Communications Holdings, Inc. dated November 4, 2021. (filed herewith). |
| 104 | Cover Page Data File (the cover page XBRL tags are embedded within the iXBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Cogent Communications Holdings, Inc. | |||
|---|---|---|---|
| November 4, 2021 | By: | /s/ David Schaeffer | |
| Name: | David Schaeffer | ||
| Title: | President and Chief Executive Officer |
Exhibit 99.1
| FOR IMMEDIATE RELEASE | |
|---|---|
| Cogent Contacts: | |
| --- | --- |
| For Public Relations: | For Investor Relations: |
| Jocelyn Johnson | Sean Wallace |
| + 1 (202) 295-4299 | + 1 (202) 295-4202 |
| jajohnson@cogentco.com | investor.relations@cogentco.com |
Cogent Communications Reports Third QuarterResults 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<br>dividend for a total of $0.830 per share for Q4 2021 as compared to $0.805 per share for Q3 2021 – Cogent’s thirty-seventh<br>consecutive quarterly dividend increase. |
|---|---|
| o | The Q4 2021 $0.830 dividend per share represents an annual increase of 13.7% from the dividend per share of $0.730 for Q4 2020. |
| --- | --- |
| · | Service revenue increased from Q2 2021 to Q3 2021 by 0.03% and increased<br>from Q3 2020 to Q3 2021 by 4.0%. |
| --- | --- |
| o | Service revenue, on a constant currency basis, increased from Q2 2021 to Q3 2021 by 0.5% and increased from Q3 2020 to Q3 2021 by<br>3.6%. |
| --- | --- |
| · | GAAP gross profit increased by 3.8% from Q3 2020 to $68.7 million for Q3<br>2021. |
| --- | --- |
| o | Non-GAAP gross profit increased by 3.8% from Q3 2020 to $91.4 million for Q3 2021. |
| --- | --- |
| · | Net cash provided by operating activities increased by 19.3% from Q2 2021<br>to $47.4 million for Q3 2021 and increased from Q3 2020 to Q3 2021 by 43.8%. |
| --- | --- |
| · | Sales rep productivity – units per full time equivalent sales rep per<br>month - increased from 3.7 for Q3 2020 to 4.3 for Q3 2021. |
| --- | --- |
| · | Earnings before interest, taxes, depreciation and amortization (EBITDA) increased<br>by 1.0% from Q2 2021 to $57.8 million for Q3 2021 and increased by 5.8% from Q3 2020. |
| --- | --- |
| · | EBITDA margin increased by 30 basis points from Q2 2021 to 39.0% for Q3 2021<br>and increased by 60 basis points from Q3 2020. |
| --- | --- |
| · | Cogent lit its 3,000^th^ on-net building in Q3 2021 and now delivers<br>its services in 50 countries. |
| --- | --- |
[WASHINGTON, D.C. November 4, 2021] Cogent Communications Holdings, Inc. (NASDAQ: CCOI) (“Cogent”) today announced service revenue of $147.9 million for the three months ended September 30, 2021, an increase of 0.03% from the three months ended June 30, 2021 and an increase of 4.0% from the three months ended September 30, 2020. Foreign exchange negatively impacted service revenue growth from the three months ended June 30, 2021 to the three months ended September 30, 2021 by $0.7 million and positively impacted service revenue growth from the three months ended September 30, 2020 to the three months ended September 30, 2021 by $0.6 million. On a constant currency basis, service revenue increased by 0.5% from the three months ended June 30, 2021 to the three months ended September 30, 2021 and grew by 3.6% from the three months ended September 30, 2020 to the three months ended September 30, 2021.
On-net service is provided to customers located in buildings that are physically connected to Cogent’s network by Cogent facilities. On-net revenue was $111.1 million for the three months ended September 30, 2021; an increase of 0.1% from the three months ended June 30, 2021 and an increase of 5.7% over the three months ended September 30, 2020.
Off-net customers are located in buildings directly connected to Cogent’s network using other carriers’ lit fiber optic facilities and services to provide the last mile portion of the link from the customers’ premises to Cogent’s network. Off-net revenue was $36.7 million for the three months ended September 30, 2021; a decrease of 0.1% from the three months ended June 30, 2021 and a decrease of 1.2% from the three months ended September 30, 2020.
Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.
GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 3.8% from the three months ended September 30, 2020 to $68.7 million for the three months ended September 30, 2021 and decreased by 1.3% from the three months ended June 30, 2021. GAAP gross margin was 46.4% for the three months ended September 30, 2021, 46.5% for the three months ended September 30, 2020 and 47.1% for the three months ended June 30, 2021.
Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $4.8 million for the three months ended September 30, 2021, $3.9 million for the three months ended September 30, 2020 and $4.8 million for the three months ended June 30, 2021.
Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 3.8% from the three months ended September 30, 2020 to $91.4 million for the three months ended September 30, 2021 and decreased by 0.4% from the three months ended June 30, 2021. Non-GAAP gross profit margin was 61.8% for the three months ended September 30, 2021, 61.9% for the three months ended September 30, 2020 and 62.1% for the three months ended June 30, 2021.
Net cash provided by operating activities increased by 43.8% from the three months ended September 30, 2020 to $47.4 million for the three months ended September 30, 2021 and increased by 19.3% from the three months ended June 30, 2021.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 5.8% from the three months ended September 30, 2020 to $57.8 million for the three months ended September 30, 2021 and increased by 1.0% from the three months ended June 30, 2021. EBITDA margin was 39.0% for the three months ended September 30, 2021, 38.4% for the three months ended September 30, 2020 and 38.7% for the three months ended June 30, 2021.
Basic and diluted net income (loss) per share was $0.29 and $0.28 for the three months ended September 30, 2021, $(0.11) for the three months ended September 30, 2020 and $(0.05) for the three months ended June 30, 2021.
Unrealized and realized foreign exchange gains (losses) on Cogent’s 2024 Senior Euro Unsecured Notes were $10.2 million for the three months ended September 30, 2021, $(17.3) million for the three months ended September 30, 2020 and $(5.3) million for the three months ended June 30, 2021.
Total customer connections increased by 5.1% from September 30, 2020 to 92,991 as of September 30, 2021 and increased by 1.2% from June 30, 2021. On-net customer connections increased by 5.0% from September 30, 2020 to 80,162 as of September 30, 2021 and increased by 1.3% from June 30, 2021. Off-net customer connections increased by 5.5% from September 30, 2020 to 12,495 as of September 30, 2021 and increased by 0.9% from June 30, 2021.
The number of on-net buildings increased by 124 from September 30, 2020 to 3,008 as of September 30, 2021 and increased by 33 from June 30, 2021.
Quarterly Dividend Increase Approved
On November 2, 2021, Cogent’s Board approved a regular quarterly dividend of $0.830 per common share payable on December 3, 2021 to shareholders of record on November 19, 2021. This fourth quarter 2021 regular dividend represents a 3.1% increase of $0.025 per share from the third quarter 2021 regular dividend of $0.805 per share and an annual increase of 13.7% from the Q4 2020 dividend of $0.730 per share.
The payment of any future dividends and any other returns of capital will be at the discretion of the Board and may be reduced, eliminated or increased and will be dependent upon Cogent’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent’s debt indenture agreements and other factors deemed relevant by the Board.
Impact of COVID-19
Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. The recent spread of the Delta variant of COVID-19 has introduced new uncertainty.
The ongoing impact of the COVID-19 pandemic, including the spread of variant strains, and related government restrictions on Cogent’s business is unknown as a significant amount of uncertainty and volatility remains. Cogent does not know the ultimate scope and duration of the pandemic, the availability, efficacy and uptake of vaccines and therapeutic treatments, government actions that have been taken, or may be taken in the future in response to the pandemic and global economic conditions during and after the pandemic. 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. Cogent recently returned its employees in the United States back to its offices on a full-time basis and is planning on returning the rest of its employees outside of the United States to its offices on a full-time basis in the fourth quarter of 2021. 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 also find that its largest customer base, which is served primarily in its multi-tenant office buildings, may be adversely affected by falling demand for commercial office space in central business districts as companies located in these buildings elect not to return to their office space either on a temporary or even permanent basis or slow the pace of opening new offices. In addition, Cogent’s corporate customer base may reduce their overall number of locations due to adverse economic conditions or new working configurations which may adversely affect Cogent’s number of corporate connections and service revenues. As a result, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact Cogent’s business well into the future. These and other risks are described in more detail in Cogent’s Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on November 4, 2021 to discuss Cogent’s operating results for the third quarter of 2021 and to discuss Cogent’s expectations for full year 2021. Investors and other interested parties may access a live audio webcast of the earnings call in the “Events” section of Cogent’s website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call. A downloadable file of Cogent’s “Summary of Financial and Operational Results” and a transcript of its conference call will also be available on Cogent’s website following the conference call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent’s facilities-based, all-optical IP network backbone provides services in 215 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.
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COGENT COMMUNICATIONS HOLDINGS, INC.,AND SUBSIDIARIES
Summary of Financial and Operational Results
| Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | Q3 2021 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Metric ( in 000’s, except share and per share data) – unaudited | ||||||||||||||||||||
| On-Net revenue | 103,457 | $ | 103,800 | $ | 105,091 | $ | 107,109 | $ | 109,947 | $ | 111,041 | $ | 111,099 | |||||||
| % Change from previous Qtr. | 0.8 | % | 0.3 | % | 1.2 | % | 1.9 | % | 2.6 | % | 1.0 | % | 0.1 | % | ||||||
| Off-Net revenue | 37,321 | $ | 37,044 | $ | 37,092 | $ | 36,672 | $ | 36,723 | $ | 36,699 | $ | 36,656 | |||||||
| % Change from previous Qtr. | -0.4 | % | -0.7 | % | 0.1 | % | -1.1 | % | 0.1 | % | -0.1 | % | -0.1 | % | ||||||
| Non-Core revenue (1) | 137 | $ | 146 | $ | 119 | $ | 120 | $ | 107 | $ | 139 | $ | 172 | |||||||
| % Change from previous Qtr. | 5.4 | % | 6.6 | % | -18.5 | % | 0.8 | % | -10.8 | % | 29.9 | % | 23.7 | % | ||||||
| Service revenue – total | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | $ | 147,927 | |||||||
| % Change from previous Qtr. | 0.4 | % | 0.1 | % | 0.9 | % | 1.1 | % | 2.0 | % | 0.8 | % | 0.0 | % | ||||||
| Constant currency total revenue quarterly growth rate – sequential quarters (6) | 0.6 | % | 0.2 | % | -0.2 | % | 0.7 | % | 1.7 | % | 0.6 | % | 0.5 | % | ||||||
| Constant currency total revenue quarterly growth rate – year over year quarters (6) | 5.6 | % | 5.1 | % | 3.1 | % | 1.2 | % | 2.3 | % | 2.8 | % | 3.6 | % | ||||||
| Excise Taxes included in service revenue | 3,743 | $ | 3,298 | $ | 3,902 | $ | 4,144 | $ | 4,528 | $ | 4,811 | $ | 4,813 | |||||||
| % Change from previous Qtr. | -13.6 | % | -11.9 | % | 18.3 | % | 6.2 | % | 9.3 | % | 6.3 | % | 0.0 | % | ||||||
| Network operations expenses (2) | 55,669 | $ | 53,581 | $ | 54,173 | $ | 54,513 | $ | 55,016 | $ | 56,044 | $ | 56,482 | |||||||
| % Change from previous Qtr. | - | % | -3.8 | % | 1.1 | % | 0.6 | % | 0.9 | % | 1.9 | % | 0.8 | % | ||||||
| GAAP gross profit (3) | 65,486 | $ | 67,208 | $ | 66,164 | $ | 66,617 | $ | 67,715 | $ | 69,603 | $ | 68,673 | |||||||
| % Change from previous Qtr. | 1.8 | % | 2.6 | % | -1.6 | % | 0.7 | % | 1.6 | % | 2.8 | % | -1.3 | % | ||||||
| GAAP gross margin (3) | 46.5 | % | 47.7 | % | 46.5 | % | 46.3 | % | 46.1 | % | 47.1 | % | 46.4 | % | ||||||
| Non-GAAP gross profit (4) (6) | 85,246 | $ | 87,409 | $ | 88,129 | $ | 89,388 | $ | 91,761 | $ | 91,835 | $ | 91,445 | |||||||
| % Change from previous Qtr. | 0.8 | % | 2.5 | % | 0.8 | % | 1.4 | % | 2.7 | % | 0.1 | % | -0.4 | % | ||||||
| Non-GAAP gross margin (4) (6) | 60.5 | % | 62.0 | % | 61.9 | % | 62.1 | % | 62.5 | % | 62.1 | % | 61.8 | % | ||||||
| Selling, general and administrative expenses (5) | 34,852 | $ | 34,061 | $ | 33,546 | $ | 33,713 | $ | 36,211 | $ | 34,654 | $ | 33,692 | |||||||
| % Change from previous Qtr. | 9.3 | % | -2.3 | % | -1.5 | % | 0.5 | % | 7.4 | % | -4.3 | % | -2.8 | % |
All values are in US Dollars.
| Depreciation and amortization expense | $ | 19,508 | $ | 19,896 | $ | 21,619 | $ | 22,455 | $ | 21,970 | $ | 22,096 | $ | 22,609 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % Change from previous Qtr. | -2.5 | % | 2.0 | % | 8.7 | % | 3.9 | % | -2.2 | % | 0.6 | % | 2.3 | % | |||||||
| Equity-based compensation expense | $ | 5,075 | $ | 6,083 | $ | 6,522 | $ | 5,846 | $ | 7,307 | $ | 6,874 | $ | 6,588 | |||||||
| % Change from previous Qtr. | 2.7 | % | 19.9 | % | 7.2 | % | -10.4 | % | 25.0 | % | -5.9 | % | -4.2 | % | |||||||
| Operating income | $ | 25,850 | $ | 27,574 | $ | 26,036 | $ | 27,384 | $ | 26,291 | $ | 28,211 | $ | 28,556 | |||||||
| % Change from previous Qtr. | -7.8 | % | 6.7 | % | -5.6 | % | 5.2 | % | -4.0 | % | 7.3 | % | 1.2 | % | |||||||
| Interest expense | $ | 15,220 | $ | 15,499 | $ | 15,760 | $ | 16,007 | $ | 15,836 | $ | 14,236 | $ | 17,349 | |||||||
| % Change from previous Qtr. | 0.1 | % | 1.8 | % | 1.7 | % | 1.6 | % | -1.1 | % | -10.1 | % | 21.9 | % | |||||||
| Net income (loss) | $ | 9,227 | $ | 8,564 | $ | (4,955 | ) | $ | (6,620 | ) | $ | 18,851 | $ | (2,493 | ) | $ | 13,320 | ||||
| Realized and unrealized gains (losses) on 2024 Euro Notes | $ | 2,908 | $ | (873 | ) | $ | (17,315 | ) | $ | (19,170 | ) | $ | 18,870 | $ | (5,280 | ) | $ | 10,169 | |||
| Basic net income (loss) per common share | $ | 0.20 | $ | 0.19 | $ | (0.11 | ) | $ | (0.14 | ) | $ | 0.41 | $ | (0.05 | ) | $ | 0.29 | ||||
| Diluted net income (loss) per common share | $ | 0.20 | $ | 0.18 | $ | (0.11 | ) | $ | (0.14 | ) | $ | 0.41 | $ | (0.05 | ) | $ | 0.28 | ||||
| Weighted average common shares – basic | 45,658,565 | 45,754,880 | 45,815,718 | 45,904,943 | 46,067,096 | 46,229,603 | 46,293,524 | ||||||||||||||
| % Change from previous Qtr. | 0.2 | % | 0.2 | % | 0.1 | % | 0.2 | % | 0.4 | % | 0.4 | % | 0.1 | % | |||||||
| Weighted average common shares – diluted | 46,391,066 | 46,686,665 | 45,815,718 | 45,904,943 | 46,507,258 | 46,229,603 | 46,866,929 | ||||||||||||||
| % Change from previous Qtr. | 0.5 | % | 0.6 | % | -1.9 | % | 0.2 | % | 1.3 | % | -0.6 | % | 1.4 | % | |||||||
| EBITDA (6) | $ | 50,394 | $ | 53,348 | $ | 54,583 | $ | 55,675 | $ | 55,550 | $ | 57,181 | $ | 57,753 | |||||||
| % Change from previous Qtr. | -4.4 | % | 5.9 | % | 2.3 | % | 2.0 | % | -0.2 | % | 2.9 | % | 1.0 | % | |||||||
| EBITDA margin | 35.8 | % | 37.8 | % | 38.4 | % | 38.7 | % | 37.8 | % | 38.7 | % | 39.0 | % | |||||||
| Gains on asset related transactions | $ | 39 | $ | 205 | $ | 99 | $ | 10 | $ | 18 | $ | - | $ | - | |||||||
| EBITDA, as adjusted (6) | $ | 50,433 | $ | 53,553 | $ | 54,682 | $ | 55,685 | $ | 55,568 | $ | 57,181 | $ | 57,753 | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| % Change from previous Qtr. | -4.8 | % | 6.2 | % | 2.1 | % | 1.8 | % | -0.2 | % | 2.9 | % | 1.0 | % | |||||||
| EBITDA, as adjusted, margin | 35.8 | % | 38.0 | % | 38.4 | % | 38.7 | % | 37.9 | % | 38.7 | % | 39.0 | % | |||||||
| Net cash provided by operating activities | $ | 28,458 | $ | 41,311 | $ | 32,980 | $ | 37,571 | $ | 47,106 | $ | 39,749 | $ | 47,418 | |||||||
| % Change from previous Qtr. | -38.3 | % | 45.2 | % | -20.2 | % | 13.9 | % | 25.4 | % | -15.6 | % | 19.3 | % | |||||||
| Capital expenditures | $ | 12,866 | $ | 13,930 | $ | 13,296 | $ | 15,860 | $ | 15,444 | $ | 17,217 | $ | 21,959 | |||||||
| % Change from previous Qtr. | 30.0 | % | 8.3 | % | -4.6 | % | 19.3 | % | -2.6 | % | 11.5 | % | 27.5 | % | |||||||
| Principal payments of capital (finance) lease obligations | $ | 6,167 | $ | 3,716 | $ | 9,509 | $ | 4,598 | $ | 5,744 | $ | 6,192 | $ | 4,890 | |||||||
| % Change from previous Qtr. | 200.0 | % | -39.7 | % | 155.9 | % | -51.6 | % | 24.9 | % | 7.8 | % | -21.0 | % | |||||||
| Dividends paid | $ | 30,557 | $ | 31,738 | $ | 32,657 | $ | 34,460 | $ | 36,081 | $ | 37,001 | $ | 37,654 | |||||||
| Purchases of common stock | $ | - | $ | - | $ | 270 | $ | 4,225 | $ | - | $ | - | $ | - | |||||||
| Gross Leverage Ratio | 4.78 | 5.08 | 5.10 | 5.14 | 4.39 | 5.13 | 5.07 | ||||||||||||||
| Net Leverage Ratio | 2.92 | 3.07 | 3.24 | 3.40 | 3.31 | 3.45 | 3.50 | ||||||||||||||
| Customer Connections – end of period | |||||||||||||||||||||
| On-Net | 75,163 | 75,927 | 76,338 | 77,305 | 78,389 | 79,146 | 80,162 | ||||||||||||||
| % Change from previous Qtr. | 0.8 | % | 1.0 | % | 0.5 | % | 1.3 | % | 1.4 | % | 1.0 | % | 1.3 | % | |||||||
| Off-Net | 11,721 | 11,846 | 11,849 | 11,970 | 12,216 | 12,386 | 12,495 | ||||||||||||||
| % Change from previous Qtr. | 0.5 | % | 1.1 | % | 0.0 | % | 1.0 | % | 2.1 | % | 1.4 | % | 0.9 | % | |||||||
| Non-Core (1) | 329 | 339 | 322 | 325 | 320 | 336 | 334 | ||||||||||||||
| % Change from previous Qtr. | 1.2 | % | 3.0 | % | -5.0 | % | 0.9 | % | -1.5 | % | 5.0 | % | -0.6 | % | |||||||
| Total customer connections | 87,213 | 88,112 | 88,509 | 89,600 | 90,925 | 91,868 | 92,991 | ||||||||||||||
| % Change from previous Qtr. | 0.8 | % | 1.0 | % | 0.5 | % | 1.2 | % | 1.5 | % | 1.0 | % | 1.2 | % | |||||||
| On-Net Buildings – end of period | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Multi-Tenant office buildings | 1,769 | 1,771 | 1,783 | 1,792 | 1,796 | 1,802 | 1,816 | ||||||||||||||
| Carrier neutral data center buildings | 1,000 | 1,029 | 1,047 | 1,068 | 1,089 | 1,119 | 1,138 | ||||||||||||||
| Cogent data centers | 54 | 54 | 54 | 54 | 54 | 54 | 54 | ||||||||||||||
| Total on-net buildings | 2,823 | 2,854 | 2,884 | 2,914 | 2,939 | 2,975 | 3,008 | ||||||||||||||
| Total carrier neutral data center nodes | 1,175 | 1,203 | 1,225 | 1,252 | 1,274 | 1,309 | 1,332 | ||||||||||||||
| Square feet – multi-tenant office buildings – on-net | 961,154,384 | 962,049,183 | 968,355,695 | 976,813,678 | 978,095,164 | 979,876,141 | 984,753,702 | ||||||||||||||
| Network – end of period | |||||||||||||||||||||
| Intercity route miles | 58,009 | 58,009 | 58,142 | 58,285 | 58,761 | 59,741 | 59,741 | ||||||||||||||
| Metro fiber miles | 36,079 | 36,438 | 36,725 | 37,567 | 38,058 | 38,351 | 38,825 | ||||||||||||||
| Connected networks – AS’s | 7,042 | 7,133 | 7,222 | 7,338 | 7,471 | 7,530 | 7,597 | ||||||||||||||
| Headcount – end of period | |||||||||||||||||||||
| Sales force – quota bearing | 542 | 572 | 597 | 569 | 547 | 565 | 516 | ||||||||||||||
| Sales force - total | 684 | 716 | 740 | 712 | 693 | 710 | 662 | ||||||||||||||
| Total employees | 1,052 | 1,083 | 1,110 | 1,083 | 1,066 | 1,087 | 1,031 | ||||||||||||||
| Sales rep productivity – units per full time equivalent sales rep (“FTE”) per month | 4.5 | 4.0 | 3.7 | 4.2 | 4.3 | 4.5 | 4.3 | ||||||||||||||
| FTE – sales reps | 522 | 533 | 563 | 542 | 522 | 511 | 521 | ||||||||||||||
| (1) | Consists of legacy services of companies whose assets or businesses were acquired by Cogent. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | Network operations expense excludes equity-based compensation expense of $252, $305, $346, $316, $2,076, $136 and $163 in the three<br>month periods ended March 31, 2020 through September 30, 2021, respectively. Network operations expense includes excise taxes,<br>including Universal Service Fund fees of $3,743, $3,298, $3,902, $4,144, $4,528, $4,811 and $4,813 in the three month periods ended March 31,<br>2020 through September 30, 2021, respectively. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based<br>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<br>shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service<br>revenue. Management believes that non-GAAP gross profit and non-GAAP gross profit margin are relevant metrics to provide investors, as<br>they are metrics that management uses to measure the margin available to the company after network service costs, in essence a measure<br>of the efficiency of the Company’s network. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (5) | Excludes equity-based compensation expense of $4,823, $5,778, $6,176, $5,530, $5,231, $6,738 and $6,425 in the three month periods<br>ended March 31, 2020 through September 30, 2021, respectively. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (6) | See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures. | ||||||||||||||||||||
| --- | --- |
Schedules of Non-GAAP Measures
EBITDA and EBITDA, as adjusted
EBITDA represents net cash flows provided by operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense. Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is net cash provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers. EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.
The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business. EBITDA, and EBITDA, as adjusted are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company’s free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company’s calculations of these metrics may also differ from the calculations performed by its competitors and other companies and as such, its utility as a comparative measure is limited.
EBITDA, and EBITDA, as adjusted, are reconciled to net cash providedby operating activities in the table below.
| ($ in 000’s) – unaudited | Q1 <br> 2020 | Q2 <br> 2020 | Q3 <br> 2020 | Q4 <br> 2020 | Q1 <br> 2021 | Q2 <br> 2021 | Q3<br> 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net cash provided by operating activities | $ | 28,458 | $ | 41,311 | $ | 32,980 | $ | 37,571 | $ | 47,106 | $ | 39,749 | $ | 47,418 | |||||||
| Changes in operating assets and liabilities | 5,325 | $ | (3,232 | ) | $ | 6,255 | $ | 1,920 | $ | (9,060 | ) | $ | 2,352 | $ | (6,267 | ) | |||||
| Cash interest expense and income tax expense | 16,611 | 15,269 | 15,348 | 16,184 | 17,504 | 15,080 | 16,602 | ||||||||||||||
| EBITDA | $ | 50,394 | $ | 53,348 | $ | 54,583 | $ | 55,675 | $ | 55,550 | $ | 57,181 | $ | 57,753 | |||||||
| PLUS: Gains on asset related transactions | 39 | 205 | 99 | 10 | 18 | - | - | ||||||||||||||
| EBITDA, as adjusted | $ | 50,433 | $ | 53,553 | $ | 54,682 | $ | 55,685 | $ | 55,568 | $ | 57,181 | $ | 57,753 | |||||||
| EBITDA margin | 35.8 | % | 37.8 | % | 38.4 | % | 38.7 | % | 37.8 | % | 38.7 | % | 39.0 | % | |||||||
| EBITDA, as adjusted, margin | 35.8 | % | 38.0 | % | 38.4 | % | 38.7 | % | 37.9 | % | 38.7 | % | 39.0 | % |
Constant currency revenue is reconciled to service revenue as reportedin the tables below.
Constant currency impact on revenue changes – sequentialperiods
| ($ in 000’s) – unaudited | Q1 <br> 2020 | Q2 <br> 2020 | Q3 <br> 2020 | Q4 <br> 2020 | Q1 <br> 2021 | Q2 <br> 2021 | Q3 <br> 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service revenue, as reported – current period | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | $ | 147,927 | |||||||
| Impact of foreign currencies on service revenue | 184 | 202 | (1,616 | ) | (621 | ) | (447 | ) | (150 | ) | 709 | ||||||||||
| Service revenue - as adjusted for currency impact (1) | $ | 141,099 | $ | 141,192 | $ | 140,686 | $ | 143,280 | $ | 146,330 | $ | 147,729 | $ | 148,636 | |||||||
| Service revenue, as reported – prior sequential period | $ | 140,292 | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | |||||||
| Constant currency (decrease) increase | $ | 807 | $ | 277 | $ | (304 | ) | $ | 978 | $ | 2,429 | $ | 952 | $ | 757 | ||||||
| Constant currency percent (decrease) increase | 0.6 | % | 0.2 | % | (0.2 | )% | 0.7 | % | 1.7 | % | 0.6 | % | 0.5 | % | |||||||
| (1) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average<br>foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth<br>without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted<br>for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial<br>information. | ||||||||||||||||||||
| --- | --- |
Constant currency impact on revenue changes – prior yearperiods
| ($ in 000’s) – unaudited | Q1 <br> 2020 | Q2 <br> 2020 | Q3 <br> 2020 | Q4 <br> 2020 | Q1 <br> 2021 | Q2 <br> 2021 | Q3 <br> 2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service revenue, as reported – current period | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | $ | 147,927 | |||||||
| Impact of foreign currencies on service revenue | 746 | 674 | (1,141 | ) | (1,891 | ) | (2,608 | ) | (2,965 | ) | (555 | ) | |||||||||
| Service revenue - as adjusted for<br> currency impact (2) | $ | 141,661 | $ | 141,664 | $ | 141,161 | $ | 142,010 | $ | 144,169 | $ | 144,914 | $ | 147,372 | |||||||
| Service revenue, as reported – prior year period | $ | 134,137 | $ | 134,789 | $ | 136,942 | $ | 140,292 | $ | 140,915 | $ | 140,990 | $ | 142,302 | |||||||
| Constant currency increase | $ | 7,524 | $ | 6,875 | $ | 4,219 | $ | 1,718 | $ | 3,254 | $ | 3,924 | $ | 5,070 | |||||||
| Percent increase | 5.6 | % | 5.1 | % | 3.1 | % | 1.2 | % | 2.3 | % | 2.8 | % | 3.6 | % | |||||||
| (2) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average<br>foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth<br>without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency<br>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 toGAAP gross profit and GAAP gross margin in the table below.
| ($ in 000’s) – unaudited | Q1<br><br>2020 | Q2<br><br>2020 | Q3<br><br>2020 | Q4<br><br>2020 | Q1<br><br>2021 | Q2<br><br>2021 | Q3<br><br>2021 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service revenue total | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | $ | 147,927 | |||||||
| Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense | 75,429 | 73,782 | 76,138 | 77,284 | 79,062 | 78,276 | 79,254 | ||||||||||||||
| GAAP Gross Profit (1) | $ | 65,486 | $ | 67,208 | $ | 66,164 | $ | 66,617 | $ | 67,715 | $ | 69,603 | $ | 68,673 | |||||||
| Plus - Equity-based compensation – network operations expense | 252 | 305 | 346 | 316 | 2,076 | 136 | 163 | ||||||||||||||
| Plus – Depreciation and amortization expense | 19,508 | 19,896 | 21,619 | 22,455 | 21,970 | 22,096 | 22,609 | ||||||||||||||
| Non-GAAP Gross Profit (2) | $ | 85,246 | $ | 87,409 | $ | 88,129 | $ | 89,388 | $ | 91,761 | $ | 91,835 | $ | 91,445 | |||||||
| GAAP Gross Margin (1) | 46.5 | % | 47.7 | % | 46.5 | % | 46.3 | % | 46.1 | % | 47.1 | % | 46.4 | % | |||||||
| Non-GAAP Gross Margin (2) | 60.5 | % | 62.0 | % | 61.9 | % | 62.1 | % | 62.5 | % | 62.1 | % | 61.8 | % | |||||||
| (1) | GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based<br>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<br>shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service<br>revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics to provide to investors, as they<br>are metrics that management uses to measure the margin and amount available to the Company after network service costs, in essence these<br>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 June 30, 2021 | As of September 30, 2021 | ||
|---|---|---|---|---|
| Cash and cash equivalents & restricted cash | $ | 373,963 | $ | 354,955 |
| Debt | ||||
| Capital (finance) leases – current portion | 16,004 | 16,685 | ||
| Capital (finance) leases – long term | 208,588 | 222,854 | ||
| Senior Secured 2022 Notes | - | - | ||
| Senior Secured 2026 Notes | 500,000 | 500,000 | ||
| Senior Unsecured Euro 2024 Notes | 415,751 | 405,637 | ||
| Note payable | 3,365 | 1,868 | ||
| Total debt | 1,143,708 | 1,147,044 | ||
| Total net debt | 769,745 | 792,089 | ||
| Trailing 12 months EBITDA, as adjusted | 223,116 | 226,187 | ||
| Gross leverage ratio | 5.13 | 5.07 | ||
| Net leverage ratio | 3.45 | 3.50 |
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. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(IN THOUSANDS, EXCEPT SHARE DATA)
| December 31, | |||||
|---|---|---|---|---|---|
| 2020 | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 351,879 | $ | 371,301 | ||
| Restricted cash | 3,076 | — | |||
| Accounts receivable, net of allowance for credit losses of 1,413 and 1,921, respectively | 43,672 | 44,185 | |||
| Prepaid expenses and other current assets | 37,491 | 40,851 | |||
| Total current assets | 436,118 | 456,337 | |||
| Property and equipment, net | 454,710 | 430,335 | |||
| Right-of-use leased assets | 103,666 | 99,666 | |||
| Deposits and other assets | 14,255 | 14,139 | |||
| Total assets | 1,008,749 | $ | 1,000,477 | ||
| Liabilities and stockholders' equity | |||||
| Current liabilities: | |||||
| Accounts payable | 11,639 | $ | 9,775 | ||
| Accrued and other current liabilities | 57,510 | 51,029 | |||
| Installment payment agreement, current portion, net of discounts of 18 and 136, respectively | 1,850 | 6,786 | |||
| Current maturities, operating lease liabilities | 11,312 | 11,151 | |||
| Current maturities, finance lease obligations | 16,685 | 15,702 | |||
| Total current liabilities | 98,996 | 94,443 | |||
| Senior secured 2022 notes, net of unamortized debt costs of 1,052 and including premium of 544 | — | 444,492 | |||
| Senior unsecured 2024 Euro notes, net of unamortized debt costs of 2,327 and 2,961, respectively, and net of discounts of 863 and 1,142, respectively | 402,447 | 425,160 | |||
| Senior secured 2026 notes, net of unamortized debt costs of 1,217 and discount of 1,618 | 497,165 | — | |||
| Operating lease liabilities, net of current maturities | 115,065 | 111,318 | |||
| Finance lease obligations, net of current maturities | 222,854 | 203,438 | |||
| Other long-term liabilities | 28,989 | 14,792 | |||
| Total liabilities | 1,365,516 | 1,293,643 | |||
| Commitments and contingencies: | |||||
| Stockholders’ equity: | |||||
| Common stock, 0.001 par value; 75,000,000 shares authorized; 47,663,276 and 47,214,077 shares issued and outstanding, respectively | 48 | 47 | |||
| Additional paid-in capital | 540,575 | 515,867 | |||
| Accumulated other comprehensive income — foreign currency translation | (8,558 | ) | (1,306 | ) | |
| Accumulated deficit | (888,832 | ) | (807,774 | ) | |
| Total stockholders’ deficit | (356,767 | ) | (293,166 | ) | |
| Total liabilities and stockholders’ deficit | 1,008,749 | $ | 1,000,477 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021AND SEPTEMBER 30, 2020
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| Three Months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| September 30, 2020 | |||||
| (Unaudited) | |||||
| Service revenue | 147,927 | $ | 142,302 | ||
| Operating expenses: | |||||
| Network operations (including 163 and 346 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | 56,645 | 54,519 | |||
| Selling, general, and administrative (including 6,425 and 6,176 of equity-based compensation expense, respectively) | 40,117 | 39,722 | |||
| Depreciation and amortization | 22,609 | 21,619 | |||
| Total operating expenses | 119,371 | 115,860 | |||
| Loss on finance lease amendment | — | (505 | ) | ||
| Gains on equipment transactions | — | 99 | |||
| Operating income | 28,556 | 26,036 | |||
| Interest expense | (17,349 | ) | (15,760 | ) | |
| Unrealized foreign exchange gain (loss) on 2024 Euro Notes | 10,169 | (17,315 | ) | ||
| Interest income and other, net | 648 | 484 | |||
| Income (loss) before income taxes | 22,024 | (6,555 | ) | ||
| Income tax (provision) benefit | (8,704 | ) | 1,600 | ||
| Net income (loss) | 13,320 | $ | (4,955 | ) | |
| Comprehensive income: | |||||
| Net income (loss) | 13,320 | $ | (4,955 | ) | |
| Foreign currency translation adjustment | (3,818 | ) | 5,408 | ||
| Comprehensive income | 9,502 | $ | 453 | ||
| Net income (loss) per common share: | |||||
| Basic net income (loss) per common share | 0.29 | $ | (0.11 | ) | |
| Diluted net income (loss) per common share | 0.28 | $ | (0.11 | ) | |
| Dividends declared per common share | 0.805 | $ | 0.705 | ||
| Weighted-average common shares - basic | 46,293,524 | 45,815,718 | |||
| Weighted-average common shares - diluted | 46,866,929 | 45,815,718 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021AND SEPTEMBER 30, 2020
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
| Nine Months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| September 30, 2020 | |||||
| (Unaudited) | |||||
| Service revenue | 442,584 | $ | 424,205 | ||
| Operating expenses: | |||||
| Network operations (including 2,375 and 903 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | 169,920 | 164,326 | |||
| Selling, general, and administrative (including 18,394 and 16,776 of equity-based compensation expense, respectively) | 122,952 | 119,232 | |||
| Depreciation and amortization | 66,675 | 61,022 | |||
| Total operating expenses | 359,547 | 344,580 | |||
| Losses on finance lease amendments | — | (423 | ) | ||
| Gains on equipment transactions | 18 | 343 | |||
| Operating income | 83,055 | 79,545 | |||
| Interest expense | (47,421 | ) | (46,481 | ) | |
| Realized foreign exchange gain on issuance of 2024 Euro Notes | — | 2,547 | |||
| Unrealized gain (loss) on foreign exchange on 2024 Euro Notes | 23,759 | (17,827 | ) | ||
| Loss on debt extinguishment and redemption - 2021 Notes | — | (638 | ) | ||
| Loss on debt extinguishment and redemption - 2022 Notes | (14,698 | ) | — | ||
| Interest income and other, net | 1,460 | 430 | |||
| Income before income taxes | 46,155 | 17,576 | |||
| Income tax provision | (16,477 | ) | (4,740 | ) | |
| Net income | 29,678 | $ | 12,836 | ||
| Comprehensive income: | |||||
| Net income | 29,678 | $ | 12,836 | ||
| Foreign currency translation adjustment | (7,252 | ) | 4,828 | ||
| Comprehensive income | 22,426 | $ | 17,664 | ||
| Net income per common share: | |||||
| Basic net income per common share | 0.64 | $ | 0.28 | ||
| Diluted net income per common share | 0.63 | $ | 0.28 | ||
| Dividends declared per common share | 2.340 | $ | 2.045 | ||
| Weighted-average common shares - basic | 46,290,452 | 45,818,677 | |||
| Weighted-average common shares - diluted | 46,825,948 | 46,598,870 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC., ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021AND SEPTEMBER 30, 2020
(IN THOUSANDS)
| Three months<br> Ended<br> September 30, 2021 | Three months<br> Ended<br> September 30, 2020 | |||||
|---|---|---|---|---|---|---|
| (Unaudited) | (Unaudited) | |||||
| Cash flows from operating activities: | ||||||
| Net income (loss) | $ | 13,320 | $ | (4,955 | ) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 22,609 | 21,619 | ||||
| Amortization of debt costs, discounts and premiums | 439 | 496 | ||||
| Equity-based compensation expense (net of amounts capitalized) | 6,588 | 6,522 | ||||
| Unrealized (gain) loss on foreign exchange - 2024 Notes | (10,169 | ) | 17,378 | |||
| Gains - equipment transactions and other, net | (589 | ) | 406 | |||
| Deferred income taxes | 8,364 | (2,153 | ) | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (249 | ) | (1,009 | ) | ||
| Prepaid expenses and other current assets | (962 | ) | (788 | ) | ||
| Accounts payable, accrued liabilities and other long-term liabilities | 7,949 | (4,305 | ) | |||
| Deposits and other assets | 118 | (231 | ) | |||
| Net cash provided by operating activities | 47,418 | 32,980 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property and equipment | (21,959 | ) | (13,296 | ) | ||
| Net cash used in investing activities | (21,959 | ) | (13,296 | ) | ||
| Cash flows from financing activities: | ||||||
| Dividends paid | (37,654 | ) | (32,657 | ) | ||
| Purchases of common stock | — | (270 | ) | |||
| Principal payments on installment payment agreement | (1,498 | ) | (2,727 | ) | ||
| Principal payments of finance lease obligations | (4,890 | ) | (9,509 | ) | ||
| Proceeds from exercises of stock options | 362 | 186 | ||||
| Net cash used in financing activities | (43,680 | ) | (44,977 | ) | ||
| Effect of exchange rates changes on cash | (787 | ) | 1,560 | |||
| Net decrease in cash and cash equivalents & restricted cash | (19,008 | ) | (23,733 | ) | ||
| Cash and cash equivalents & restricted cash, beginning of period | 373,963 | 417,026 | ||||
| Cash and cash equivalents & restricted cash, end of period | $ | 354,955 | $ | 393,293 |
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021AND SEPTEMBER 30, 2020
(IN THOUSANDS)
| Nine months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| September 30, 2020 | |||||
| (Unaudited) | |||||
| Cash flows from operating activities: | |||||
| Net income | 29,678 | $ | 12,836 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||
| Depreciation and amortization | 66,675 | 61,022 | |||
| Amortization of debt costs, discounts and premium | 1,333 | 1,426 | |||
| Equity-based compensation expense (net of amounts capitalized) | 20,769 | 17,679 | |||
| Loss on debt extinguishment and redemption – 2021 Notes | — | 638 | |||
| Loss on debt extinguishment and redemption – 2022 Notes | 14,698 | — | |||
| Unrealized (gain) loss on foreign exchange – 2024 Notes | (23,759 | ) | 17,281 | ||
| Realized foreign exchange gain on issuance of 2024 Notes | — | (2,547 | ) | ||
| Gains - equipment transactions and other, net | (347 | ) | 80 | ||
| Deferred income taxes | 11,922 | 2,100 | |||
| Changes in operating assets and liabilities: | |||||
| Accounts receivable | (159 | ) | (1,102 | ) | |
| Prepaid expenses and other current assets | 1,734 | (3,253 | ) | ||
| Accounts payable, accrued liabilities and other long-term liabilities | 11,752 | (2,783 | ) | ||
| Deposits and other assets | (23 | ) | (628 | ) | |
| Net cash provided by operating activities | 134,273 | 102,749 | |||
| Cash flows from investing activities: | |||||
| Purchases of property and equipment | (54,620 | ) | (40,092 | ) | |
| Net cash used in investing activities | (54,620 | ) | (40,092 | ) | |
| Cash flows from financing activities: | |||||
| Dividends paid | (110,736 | ) | (94,952 | ) | |
| Purchases of common stock | — | (270 | ) | ||
| Extinguishment and redemption of 2021 Notes | — | (189,225 | ) | ||
| Extinguishment and redemption of 2022 Notes | (459,317 | ) | — | ||
| Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of 2,137 | — | 240,285 | |||
| Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of 1,317 | 496,933 | — | |||
| Principal payments on installment payment agreement | (5,845 | ) | (7,855 | ) | |
| Principal payments of finance lease obligations | (16,826 | ) | (19,392 | ) | |
| Proceeds from exercises of stock options | 1,237 | 1,175 | |||
| Net cash used in financing activities | (94,554 | ) | (70,234 | ) | |
| Effect of exchange rates changes on cash | (1,445 | ) | 1,448 | ||
| Net decrease in cash and cash equivalents & restricted cash | (16,346 | ) | (6,129 | ) | |
| Cash and cash equivalents & restricted cash, beginning of period | 371,301 | 399,422 | |||
| Cash and cash equivalents & restricted cash, end of period | 354,955 | $ | 393,293 |
All values are in US Dollars.
Except for historical information and discussioncontained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private SecuritiesLitigation 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 ofCogent’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in theforward-looking statements. Numerous factors could cause or contribute to such differences, including the impact of the COVID-19 pandemicand the related government policies; future economic instability in the global economy or a contraction of the capital markets which couldaffect 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 USUniversal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutralityrules by the United States Federal Communications Commission and in the area of data protection; cyber-attacks or security breachesof our network; increasing competition leading to lower prices for our services; our ability to attract new customers and to increaseand maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our relianceon an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependenceof our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprisea significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well asother risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, ourAnnual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31,2021, June 30, 2021 and September 30, 2021. Cogent undertakes no duty to update any forward-looking statement or any informationcontained in this press release or in other public disclosures at any time.