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): August 5, 2021
Cogent Communications Holdings, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-51829 | 46-5706863 |
|---|---|---|
| (State or other jurisdiction of 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 August 5, 2021, Cogent Communications Holdings, Inc. issued a press release summarizing its financial results for the second quarter of 2021. The Company will hold a conference call regarding its financial results at 8:30 a.m. ET on August 5, 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.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release of Cogent Communications Holdings, Inc. dated August 5, 2021. (filed herewith). |
| 104 | Cover Page Data File (the cover page XBRL tags are embedded within the iXBRL document). |
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
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. | ||
|---|---|---|
| August 5, 2021 | By: | /s/ David Schaeffer |
| Name: David Schaeffer | ||
| Title: President and Chief Executive Officer |
Exhibit 99.1
| FOR IMMEDIATE RELEASE | |
|---|---|
| Cogent<br> Contacts: | |
| --- | --- |
| For<br> Public Relations: | For<br> Investor Relations: |
| Jocelyn<br> Johnson | Sean Wallace |
| + 1 (202) 295-4299 | + 1 (202) 295-4202 |
| jajohnson@cogentco.com | investor.relations@cogentco.com |
Cogent CommunicationsReports Second Quarter 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 $0.805 per share for Q3 2021 as compared<br>to $0.780 per share for Q2 2021 – Cogent’s thirty-sixth consecutive quarterly dividend increase. |
|---|---|
| o | The Q3 2021 $0.805 dividend per share represents an annual increase of 14.2% from the dividend per share of $0.705 for Q3 2020. |
| --- | --- |
| · | Service revenue increased by 0.8% from Q1 2021 to Q2 2021 and increased from Q2 2020 to Q2 2021 by 4.9%. |
| --- | --- |
| · | GAAP gross profit increased by 3.6% from Q2 2020 to $69.6 million for Q2 2021. Non-GAAP gross profit increased by 5.1% from Q2 2020<br>to $91.8 million for Q2 2021. |
| --- | --- |
| o | GAAP gross margin decreased by 60 basis points from Q2 2020 to Q2 2021 to 47.1%. Non-GAAP gross margin increased by 10 basis points<br>from Q2 2020 to Q2 2021 to 62.1%. |
| --- | --- |
| · | Net cash provided by operating activities was $39.7 million for Q2 2021, $47.1 million for Q1 2021 and $41.3 million for Q2 2020. |
| --- | --- |
| · | Sales rep productivity – units per full time equivalent sales rep per month - increased from 4.3 for Q1 2021 to 4.5 for Q2 2021. |
| --- | --- |
| · | EBITDA margin increased by 90 basis points from Q1 2021 to 38.7% for Q2 2021 and increased by 90 basis points from Q2 2020 to Q2 2021. |
| --- | --- |
| · | EBITDA increased by 2.9% from Q1 2021 to $57.2 million for Q2 2021 and increased by 7.2% from Q2 2020. |
| --- | --- |
| · | Cogent issued $500.0 million of Senior Secured Notes due in 2026 in May for<br>net proceeds of $496.9 million. The net proceeds were used to redeem and extinguish its remaining $329.1 million of its Senior Secured<br>Notes due in 2022 and to provide cash for general corporate purposes including to dividend cash from its operating companies to Cogent<br>Holdings, Inc. |
| --- | --- |
[WASHINGTON, D.C. August 5, 2021] Cogent Communications Holdings, Inc. (NASDAQ: CCOI) (“Cogent”) today announced service revenue of $147.9 million for the three months ended June 30, 2021, an increase of 0.8% from the three months ended March 31, 2021 and an increase of 4.9% from the three months ended June 30, 2020. Foreign exchange positively impacted service revenue growth from the three months ended March 31, 2021 to the three months ended June 30, 2021 by $0.2 million and positively impacted service revenue growth from the three months ended June 30, 2020 to the three months ended June 30, 2021 by $3.0 million. On a constant currency basis, service revenue increased by 0.8% from the three months ended March 31, 2021 to the three months ended June 30, 2021 and grew by 2.8% from the three months ended June 30, 2020 to the three months ended June 30, 2021.
On-net service is provided to customers located in buildings that are physically connected to Cogent’s network by Cogent facilities. On-net revenue was $111.0 million for the three months ended June 30, 2021; an increase of 1.0% from the three months ended March 31, 2021 and an increase of 7.0% over the three months ended June 30, 2020.
Off-net customers are located in buildings directly connected to Cogent’s network using other carriers’ facilities and services to provide the last mile portion of the link from the customers’ premises to Cogent’s network. Off-net revenue was $36.7 million for the three months ended June 30, 2021; a decrease of 0.1% from the three months ended March 31, 2021 and a decrease of 0.9% from the three months ended June 30, 2020.
Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.
GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 3.6% from the three months ended June 30, 2020 to $69.6 million for the three months ended June 30, 2021 and increased by 2.8% from the three months ended March 31, 2021. GAAP gross margin was 47.1% for the three months ended June 30, 2021, 47.7% for the three months ended June 30, 2020 and 46.1% for the three months ended March 31, 2021.
Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $4.8 million for the three months ended June 30, 2021, $3.3 million for the three months ended June 30, 2020 and $4.5 million for the three months ended March 31, 2021.
Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 5.1% from the three months ended June 30, 2020 to $91.8 million for the three months ended June 30, 2021 and increased by 0.1% from the three months ended March 31, 2021. Non-GAAP gross profit margin was 62.1% for the three months ended June 30, 2021, 62.0% for the three months ended June 30, 2020 and 62.5% for the three months ended March 31, 2021.
Net cash provided by operating activities decreased by 3.8% from the three months ended June 30, 2020 to $39.7 million for the three months ended June 30, 2021 and decreased by 15.6% from the three months ended March 31, 2021.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 7.2% from the three months ended June 30, 2020 to $57.2 million for the three months ended June 30, 2021 and increased by 2.9% from the three months ended March 31, 2021. EBITDA margin was 38.7% for the three months ended June 30, 2021, 37.8% for the three months ended June 30, 2020 and 37.8% for the three months ended March 31, 2021.
Basic and diluted net income (loss) per share was $(0.05) for the three months ended June 30, 2021, $0.19 and $0.18 for the three months ended June 30, 2020 and $0.41 for the three months ended March 31, 2021.
Unrealized and realized foreign exchange (losses) gains on Cogent’s 2024 Senior Euro Unsecured Notes were $(5.3) million for the three months ended June 30, 2021, $(0.9) million for the three months ended June 30, 2020 and $18.9 million for the three months ended March 31, 2021.
Total customer connections increased by 4.3% from June 30, 2020 to 91,868 as of June 30, 2021 and increased by 1.0% from March 31, 2021. On-net customer connections increased by 4.2% from June 30, 2020 to 79,146 as of June 30, 2021 and increased by 1.0% from March 31, 2021. Off-net customer connections increased by 4.6% from June 30, 2020 to 12,386 as of June 30, 2021 and increased by 1.4% from March 31, 2021.
The number of on-net buildings increased by 121 from June 30, 2020 to 2,975 as of June 30, 2021 and increased by 36 from March 31, 2021.
Quarterly Dividend Increase Approved
On August 4, 2021, Cogent’s Board approved a regular quarterly dividend of $0.805 per common share payable on September 3, 2021 to shareholders of record on August 20, 2021. This third quarter 2021 regular dividend represents a 3.2% increase of $0.025 per share from the second quarter 2021 regular dividend of $0.780 per share and an annual increase of 14.2% from the Q3 2020 dividend of $0.705 per share.
The payment of any future dividends and any other returns of capital will be at the discretion of the Board and may be reduced, eliminated or increased and will be dependent upon Cogent’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent’s debt indenture agreements and other factors deemed relevant by the Board.
Impact of COVID-19
Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. The majority of Cogent’s workforce continues to work remotely with dedication.
The ongoing impact of the COVID-19 pandemic 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 and efficacy of vaccines and therapeutic treatments, government actions that have been taken, or may be taken in the future in response to the pandemic and global economic conditions during and after the pandemic. While Cogent’s workforce is working remotely, Cogent provides no assurance that this will be sufficient to protect its workforce or its key employees. Moreover, Cogent’s results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue. Cogent may also experience slowdowns in new customer orders, find it difficult to collect from customers who are experiencing financial distress, undergo an increase in customer churn, encounter difficulties accessing the buildings and locations where Cogent installs new services and serves existing customers, or have difficulties procuring, shipping or installing necessary equipment on its network. Cogent may also find that its largest customer base, which is served primarily in its multi-tenant office buildings, may be adversely affected by falling demand for commercial office space in central business districts as companies located in these buildings elect not to return to their office space either on a temporary or even permanent basis or slow the pace of opening new offices. In addition, Cogent’s corporate customer base may reduce their overall number of locations due to adverse economic conditions or new working configurations which may adversely affect Cogent’s number of corporate connections and service revenues. As a result, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact Cogent’s business well into the future. These and other risks are described in more detail in Cogent’s Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 5, 2021 to discuss Cogent’s operating results for the second quarter of 2021 and to discuss Cogent’s expectations for full year 2021. Investors and other interested parties may access a live audio webcast of the earnings call in the “Events” section of Cogent’s website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call. A downloadable file of Cogent’s “Summary of Financial and Operational Results” and a transcript of its conference call will also be available on Cogent’s website following the conference call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent’s facilities-based, all-optical IP network backbone provides services in 210 markets globally.
Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.
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COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results
| Q2<br> 2020 | Q3<br> 2020 | Q4<br> 2020 | Q1<br> 2021 | Q2<br> 2021 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Metric<br> ( in 000’s, except share and per share data) – unaudited | |||||||||||||||||
| On-Net<br> revenue | 103,457 | $ | 103,800 | $ | 105,091 | $ | 107,109 | $ | 109,947 | $ | 111,041 | ||||||
| %<br> Change from previous Qtr. | 0.8 | % | 0.3 | % | 1.2 | % | 1.9 | % | 2.6 | % | 1.0 | % | |||||
| Off-Net<br> revenue | 37,321 | $ | 37,044 | $ | 37,092 | $ | 36,672 | $ | 36,723 | $ | 36,699 | ||||||
| %<br> Change from previous Qtr. | -0.4 | % | -0.7 | % | 0.1 | % | -1.1 | % | 0.1 | % | -0.1 | % | |||||
| Non-Core<br> revenue (1) | 137 | $ | 146 | $ | 119 | $ | 120 | $ | 107 | $ | 139 | ||||||
| %<br> Change from previous Qtr. | 5.4 | % | 6.6 | % | -18.5 | % | 0.8 | % | -10.8 | % | 29.9 | % | |||||
| Service<br> revenue – total | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | ||||||
| %<br> Change from previous Qtr. | 0.4 | % | 0.1 | % | 0.9 | % | 1.1 | % | 2.0 | % | 0.8 | % | |||||
| Constant<br> currency total revenue quarterly growth rate – sequential quarters (6) | 0.6 | % | 0.2 | % | -0.2 | % | 0.7 | % | 1.7 | % | 0.6 | % | |||||
| Constant<br> currency total revenue quarterly growth rate – year over year quarters (6) | 5.6 | % | 5.1 | % | 3.1 | % | 1.2 | % | 2.3 | % | 2.8 | % | |||||
| Excise<br> Taxes included in service revenue | 3,743 | $ | 3,298 | $ | 3,902 | $ | 4,144 | $ | 4,528 | $ | 4,811 | ||||||
| %<br> Change from previous Qtr. | -13.6 | % | -11.9 | % | 18.3 | % | 6.2 | % | 9.3 | % | 6.3 | % | |||||
| Network<br> operations expenses (2) | 55,669 | $ | 53,581 | $ | 54,173 | $ | 54,513 | $ | 55,016 | $ | 56,044 | ||||||
| %<br> Change from previous Qtr. | -% | -3.8 | % | 1.1 | % | 0.6 | % | 0.9 | % | 1.9 | % | ||||||
| GAAP<br> gross profit (3) | 65,486 | $ | 67,208 | $ | 66,164 | $ | 66,617 | $ | 67,715 | $ | 69,603 | ||||||
| %<br> Change from previous Qtr. | 1.8 | % | 2.6 | % | -1.6 | % | 0.7 | % | 1.6 | % | 2.8 | % | |||||
| GAAP<br> gross margin (3) | 46.5 | % | 47.7 | % | 46.5 | % | 46.3 | % | 46.1 | % | 47.1 | % | |||||
| Non-GAAP<br> gross profit (4) (6) | 85,246 | $ | 87,409 | $ | 88,129 | $ | 89,388 | $ | 91,761 | $ | 91,835 | ||||||
| %<br> Change from previous Qtr. | 0.8 | % | 2.5 | % | 0.8 | % | 1.4 | % | 2.7 | % | 0.1 | % | |||||
| Non-GAAP<br> gross margin (4) (6) | 60.5 | % | 62.0 | % | 61.9 | % | 62.1 | % | 62.5 | % | 62.1 | % | |||||
| Selling,<br> general and administrative expenses (5) | 34,852 | $ | 34,061 | $ | 33,546 | $ | 33,713 | $ | 36,211 | $ | 34,654 | ||||||
| %<br> Change from previous Qtr. | 9.3 | % | -2.3 | % | -1.5 | % | 0.5 | % | 7.4 | % | -4.3 | % | |||||
| Depreciation<br> and amortization expense | 19,508 | $ | 19,896 | $ | 21,619 | $ | 22,455 | $ | 21,970 | $ | 22,096 | ||||||
| %<br> Change from previous Qtr. | -2.5 | % | 2.0 | % | 8.7 | % | 3.9 | % | -2.2 | % | 0.6 | % | |||||
| Equity-based<br> compensation expense | 5,075 | $ | 6,083 | $ | 6,522 | $ | 5,846 | $ | 7,307 | $ | 6,874 | ||||||
| %<br> Change from previous Qtr. | 2.7 | % | 19.9 | % | 7.2 | % | -10.4 | % | 25.0 | % | -5.9 | % | |||||
| Operating<br> income | 25,850 | $ | 27,574 | $ | 26,036 | $ | 27,384 | $ | 26,291 | $ | 28,211 | ||||||
| %<br> Change from previous Qtr. | -7.8 | % | 6.7 | % | -5.6 | % | 5.2 | % | -4.0 | % | 7.3 | % | |||||
| Interest<br> expense | 15,220 | $ | 15,499 | $ | 15,760 | $ | 16,007 | $ | 15,836 | $ | 14,236 | ||||||
| %<br> Change from previous Qtr. | 0.1 | % | 1.8 | % | 1.7 | % | 1.6 | % | -1.1 | % | -10.1 | % | |||||
| Net<br> income (loss) | 9,227 | $ | 8,564 | $ | (4,955 | ) | $ | (6,620 | ) | $ | 18,851 | $ | (2,493 | ) | |||
| Realized<br> and unrealized gains (losses) on 2024 Euro Notes | 2,908 | $ | (873 | ) | $ | (17,315 | ) | $ | (19,170 | ) | $ | 18,870 | $ | (5,280 | ) | ||
| Basic<br> net income (loss) per common share | 0.20 | $ | 0.19 | $ | (0.11 | ) | $ | (0.14 | ) | $ | 0.41 | $ | (0.05 | ) | |||
| Diluted<br> net income (loss) per common share | 0.20 | $ | 0.18 | $ | (0.11 | ) | $ | (0.14 | ) | $ | 0.41 | $ | (0.05 | ) | |||
| Weighted<br> average common shares – basic | 45,658,565 | 45,754,880 | 45,815,718 | 45,904,943 | 46,067,096 | 46,229,603 | |||||||||||
| %<br> Change from previous Qtr. | 0.2 | % | 0.2 | % | 0.1 | % | 0.2 | % | 0.4 | % | 0.4 | % | |||||
| Weighted<br> average common shares – diluted | 46,391,066 | 46,686,665 | 45,815,718 | 45,904,943 | 46,507,258 | 46,229,603 | |||||||||||
| %<br> Change from previous Qtr. | 0.5 | % | 0.6 | % | -1.9 | % | 0.2 | % | 1.3 | % | -0.6 | % | |||||
| EBITDA<br> (6) | 50,394 | $ | 53,348 | $ | 54,583 | $ | 55,675 | $ | 55,550 | $ | 57,181 | ||||||
| %<br> Change from previous Qtr. | -4.4 | % | 5.9 | % | 2.3 | % | 2.0 | % | -0.2 | % | 2.9 | % | |||||
| EBITDA<br> margin | 35.8 | % | 37.8 | % | 38.4 | % | 38.7 | % | 37.8 | % | 38.7 | % | |||||
| Gains<br> on asset related transactions | 39 | $ | 205 | $ | 99 | $ | 10 | $ | 18 | $ | - | ||||||
| EBITDA,<br> as adjusted (6) | 50,433 | $ | 53,553 | $ | 54,682 | $ | 55,685 | $ | 55,568 | $ | 57,181 | ||||||
| %<br> Change from previous Qtr. | -4.8 | % | 6.2 | % | 2.1 | % | 1.8 | % | -0.2 | % | 2.9 | % | |||||
| EBITDA,<br> as adjusted, margin | 35.8 | % | 38.0 | % | 38.4 | % | 38.7 | % | 37.9 | % | 38.7 | % | |||||
| Net<br> cash provided by operating activities | 28,458 | $ | 41,311 | $ | 32,980 | $ | 37,571 | $ | 47,106 | $ | 39,749 | ||||||
| %<br> Change from previous Qtr. | -38.3 | % | 45.2 | % | -20.2 | % | 13.9 | % | 25.4 | % | -15.6 | % | |||||
| Capital<br> expenditures | 12,866 | $ | 13,930 | $ | 13,296 | $ | 15,860 | $ | 15,444 | $ | 17,217 | ||||||
| %<br> Change from previous Qtr. | 30.0 | % | 8.3 | % | -4.6 | % | 19.3 | % | -2.6 | % | 11.5 | % | |||||
| Principal<br> payments of capital (finance) lease obligations | 6,167 | $ | 3,716 | $ | 9,509 | $ | 4,598 | $ | 5,744 | $ | 6,192 | ||||||
| %<br> Change from previous Qtr. | 200.0 | % | -39.7 | % | 155.9 | % | -51.6 | % | 24.9 | % | 7.8 | % | |||||
| Dividends<br> paid | 30,557 | $ | 31,738 | $ | 32,657 | $ | 34,460 | $ | 36,081 | $ | 37,001 | ||||||
| Purchases<br> of common stock | - | $ | - | $ | 270 | $ | 4,225 | $ | - | $ | - | ||||||
| Gross<br> Leverage Ratio | 4.78 | 5.08 | 5.10 | 5.14 | 4.39 | 5.13 | |||||||||||
| Net<br> Leverage Ratio | 2.92 | 3.07 | 3.24 | 3.40 | 3.31 | 3.45 | |||||||||||
| Customer<br> Connections – end of period | |||||||||||||||||
| On-Net | 75,163 | 75,927 | 76,338 | 77,305 | 78,389 | 79,146 | |||||||||||
| %<br> Change from previous Qtr. | 0.8 | % | 1.0 | % | 0.5 | % | 1.3 | % | 1.4 | % | 1.0 | % | |||||
| Off-Net | 11,721 | 11,846 | 11,849 | 11,970 | 12,216 | 12,386 | |||||||||||
| %<br> Change from previous Qtr. | 0.5 | % | 1.1 | % | 0.0 | % | 1.0 | % | 2.1 | % | 1.4 | % | |||||
| Non-Core<br> (1) | 329 | 339 | 322 | 325 | 320 | 336 | |||||||||||
| %<br> Change from previous Qtr. | 1.2 | % | 3.0 | % | -5.0 | % | 0.9 | % | -1.5 | % | 5.0 | % | |||||
| Total<br> customer connections | 87,213 | 88,112 | 88,509 | 89,600 | 90,925 | 91,868 | |||||||||||
| %<br> Change from previous Qtr. | 0.8 | % | 1.0 | % | 0.5 | % | 1.2 | % | 1.5 | % | 1.0 | % | |||||
| On-Net<br> Buildings – end of period | |||||||||||||||||
| Multi-Tenant<br> office buildings | 1,769 | 1,771 | 1,783 | 1,792 | 1,796 | 1,802 | |||||||||||
| Carrier<br> neutral data center buildings | 1,000 | 1,029 | 1,047 | 1,068 | 1,089 | 1,119 | |||||||||||
| Cogent<br> data centers | 54 | 54 | 54 | 54 | 54 | 54 | |||||||||||
| Total<br> on-net buildings | 2,823 | 2,854 | 2,884 | 2,914 | 2,939 | 2,975 | |||||||||||
| Total<br> carrier neutral data center nodes | 1,175 | 1,203 | 1,225 | 1,252 | 1,274 | 1,309 | |||||||||||
| Square<br> feet – multi-tenant office buildings – on-net | 961,154,384 | 962,049,183 | 968,355,695 | 976,813,678 | 978,095,164 | 979,876,141 | |||||||||||
| Network –<br> end of period | |||||||||||||||||
| Intercity<br> route miles | 58,009 | 58,009 | 58,142 | 58,285 | 58,761 | 59,741 | |||||||||||
| Metro<br> fiber miles | 36,079 | 36,438 | 36,725 | 37,567 | 38,058 | 38,351 | |||||||||||
| Connected<br> networks – AS’s | 7,042 | 7,133 | 7,222 | 7,338 | 7,471 | 7,530 | |||||||||||
| Headcount<br> – end of period | |||||||||||||||||
| Sales<br> force – quota bearing | 542 | 572 | 597 | 569 | 547 | 565 | |||||||||||
| Sales<br> force - total | 684 | 716 | 740 | 712 | 693 | 710 | |||||||||||
| Total<br> employees | 1,052 | 1,083 | 1,110 | 1,083 | 1,066 | 1,087 | |||||||||||
| Sales<br> rep productivity – units per full time equivalent sales rep (“FTE”) per month | 4.5 | 4.0 | 3.7 | 4.2 | 4.3 | 4.5 | |||||||||||
| FTE<br> – sales reps | 522 | 533 | 563 | 542 | 522 | 511 |
All values are in US Dollars.
| (1) | Consists of legacy services of companies whose assets or businesses were acquired by Cogent. |
|---|---|
| (2) | Network operations expense excludes equity-based compensation expense of $252, $305, $346, $316, $2,076 and $136 in the three month<br>periods ended March 31, 2020 through June 30, 2021, respectively. Network operations expense includes excise taxes, including Universal<br>Service Fund fees of $3,743, $3,298, $3,902, $4,144, $4,528 and $4,811 in the three month periods ended March 31, 2020 through June 30,<br>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 and $6,738 in the three month periods ended March<br>31, 2020 through June 30, 2021, respectively. |
| --- | --- |
| (6) | See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures. |
| --- | --- |
Schedules of Non-GAAP Measures
EBITDA and EBITDA, as adjusted
EBITDA represents net cash flows provided by operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense. Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is net cash provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers. EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.
The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business. EBITDA, and EBITDA, as adjusted are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company’s free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company’s calculations of these metrics may also differ from the calculations performed by its competitors and other companies and as such, its utility as a comparative measure is limited.
EBITDA, and EBITDA, as adjusted, are reconciled to net cash providedby operating activities in the table below.
| Q2 <br> 2020 | Q3 <br> 2020 | Q4 <br> 2020 | Q1 <br> 2021 | Q2 <br> 2021 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in 000’s) – unaudited | |||||||||||||||||
| Net cash provided by operating activities | 28,458 | $ | 41,311 | $ | 32,980 | $ | 37,571 | $ | 47,106 | $ | 39,749 | ||||||
| Changes in operating assets and liabilities | 5,325 | $ | (3,232 | ) | $ | 6,255 | $ | 1,920 | $ | (9,060 | ) | $ | 2,352 | ||||
| Cash interest expense and income tax expense | 16,611 | 15,269 | 15,348 | 16,184 | 17,504 | 15,080 | |||||||||||
| EBITDA | 50,394 | $ | 53,348 | $ | 54,583 | $ | 55,675 | $ | 55,550 | $ | 57,181 | ||||||
| PLUS: Gains on asset related transactions | 39 | 205 | 99 | 10 | 18 | - | |||||||||||
| EBITDA, as adjusted | 50,433 | $ | 53,553 | $ | 54,682 | $ | 55,685 | $ | 55,568 | $ | 57,181 | ||||||
| EBITDA margin | 35.8 | % | 37.8 | % | 38.4 | % | 38.7 | % | 37.8 | % | 38.7 | % | |||||
| EBITDA, as adjusted, margin | 35.8 | % | 38.0 | % | 38.4 | % | 38.7 | % | 37.9 | % | 38.7 | % |
All values are in US Dollars.
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 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service revenue, as reported – current period | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | ||||||
| Impact of foreign currencies on service revenue | 184 | 202 | (1,616 | ) | (621 | ) | (447 | ) | (150 | ) | ||||||||
| Service revenue - as adjusted for currency impact (1) | $ | 141,099 | $ | 141,192 | $ | 140,686 | $ | 143,280 | $ | 146,330 | $ | 147,729 | ||||||
| Service revenue, as reported – prior sequential period | $ | 140,292 | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | ||||||
| Constant currency (decrease) increase | $ | 807 | $ | 277 | $ | (304 | ) | $ | 978 | $ | 2,429 | $ | 952 | |||||
| Constant currency percent (decrease) increase | 0.6 | % | 0.2 | % | (0.2 | )% | 0.7 | % | 1.7 | % | 0.6 | % | ||||||
| (1) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average<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 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Service revenue, as reported – current period | $ | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | ||||||
| Impact of foreign currencies on service revenue | 746 | 674 | (1,141 | ) | (1,891 | ) | (2,608 | ) | (2,965 | ) | ||||||||
| Service revenue - as adjusted for currency impact (2) | $ | 141,661 | $ | 141,664 | $ | 141,161 | $ | 142,010 | $ | 144,169 | $ | 144,914 | ||||||
| Service revenue, as reported – prior year period | $ | 134,137 | $ | 134,789 | $ | 136,942 | $ | 140,292 | $ | 140,915 | $ | 140,990 | ||||||
| Constant currency increase | $ | 7,524 | $ | 6,875 | $ | 4,219 | $ | 1,718 | $ | 3,254 | $ | 3,924 | ||||||
| Percent increase | 5.6 | % | 5.1 | % | 3.1 | % | 1.2 | % | 2.3 | % | 2.8 | % | ||||||
| (2) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average<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.
| Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | Q2 2021 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in 000’s) – unaudited | |||||||||||||||||
| Service revenue total | 140,915 | $ | 140,990 | $ | 142,302 | $ | 143,901 | $ | 146,777 | $ | 147,879 | ||||||
| Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense | 75,429 | 73,782 | 76,138 | 77,284 | 79,062 | 78,276 | |||||||||||
| GAAP Gross Profit (1) | 65,486 | $ | 67,208 | $ | 66,164 | $ | 66,617 | $ | 67,715 | $ | 69,603 | ||||||
| Plus - Equity-based compensation – network operations expense | 252 | 305 | 346 | 316 | 2,076 | 136 | |||||||||||
| Plus – Depreciation and amortization expense | 19,508 | 19,896 | 21,619 | 22,455 | 21,970 | 22,096 | |||||||||||
| Non-GAAP Gross Profit (2) | 85,246 | $ | 87,409 | $ | 88,129 | $ | 89,388 | $ | 91,761 | $ | 91,835 | ||||||
| GAAP Gross Margin (1) | 46.5 | % | 47.7 | % | 46.5 | % | 46.3 | % | 46.1 | % | 47.1 | % | |||||
| Non-GAAP Gross Margin (2) | 60.5 | % | 62.0 | % | 61.9 | % | 62.1 | % | 62.5 | % | 62.1 | % |
All values are in US Dollars.
| (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 March 31, 2021 | As of June 30, 2021 | ||
|---|---|---|---|---|
| Cash and cash equivalents | $ | 237,980 | $ | 373,963 |
| Debt | ||||
| Capital (finance) leases – current portion | 15,996 | 16,004 | ||
| Capital (finance) leases – long term | 202,514 | 208,588 | ||
| Senior Secured 2022 Notes | 329,080 | - | ||
| Senior Secured 2026 Notes | - | 500,000 | ||
| Senior Unsecured Euro 2024 Notes | 410,471 | 415,751 | ||
| Note payable | 5,334 | 3,365 | ||
| Total debt | 963,395 | 1,143,708 | ||
| Total net debt | 725,415 | 769,745 | ||
| Trailing 12 months EBITDA, as adjusted | 219,488 | 223,116 | ||
| Gross leverage ratio | 4.39 | 5.13 | ||
| Net leverage ratio | 3.31 | 3.45 |
Cogent’s SEC filings are available online via the Investor Relations section of www.cogentco.com or on the Securities and Exchange Commission’s website at www.sec.gov.
COGENT COMMUNICATIONS HOLDINGS, INC.AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2021 AND DECEMBER 31, 2020
(IN THOUSANDS, EXCEPT SHARE DATA)
| December 31, | |||||
|---|---|---|---|---|---|
| 2020 | |||||
| (Unaudited) | |||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 373,963 | $ | 371,301 | ||
| Accounts receivable, net of allowance for credit losses of 1,673 and 1,921, respectively | 43,751 | 44,185 | |||
| Prepaid expenses and other current assets | 36,841 | 40,851 | |||
| Total current assets | 454,555 | 456,337 | |||
| Property and equipment, net | 435,996 | 430,335 | |||
| Right-of-use leased assets | 105,072 | 99,666 | |||
| Deposits and other assets | 15,124 | 14,139 | |||
| Total assets | 1,010,747 | $ | 1,000,477 | ||
| Liabilities and stockholders’ equity | |||||
| Current liabilities: | |||||
| Accounts payable | 14,601 | $ | 9,775 | ||
| Accrued and other current liabilities | 48,014 | 51,029 | |||
| Installment payment agreement, current portion, net of discounts of 41 and 136, respectively | 3,324 | 6,786 | |||
| Current maturities, operating lease liabilities | 11,783 | 11,151 | |||
| Current maturities, finance lease obligations | 16,004 | 15,702 | |||
| Total current liabilities | 93,726 | 94,443 | |||
| Senior secured 2022 notes, net of unamortized debt costs of 1,052 and including premiums of 544 | — | 444,492 | |||
| Senior unsecured 2024 Euro notes, net of unamortized debt costs of 2,538 and<br> 2,961, respectively and net of discounts of 959 and 1,142, respectively | 412,254 | 425,160 | |||
| Senior secured 2026 notes, net of unamortized debt costs of 1,277 and discount of 1,698 | 497,025 | — | |||
| Operating lease liabilities, net of current maturities | 115,949 | 111,318 | |||
| Finance lease obligations, net of current maturities | 208,588 | 203,438 | |||
| Other long-term liabilities | 19,346 | 14,792 | |||
| Total liabilities | 1,346,888 | 1,293,643 | |||
| Commitments and contingencies: | |||||
| Stockholders’ equity: | |||||
| Common stock, 0.001 par value; 75,000,000 shares authorized; 47,655,131 and 47,214,077 shares issued and outstanding, respectively | 48 | 47 | |||
| Additional paid-in capital | 533,049 | 515,867 | |||
| Accumulated other comprehensive income — foreign currency translation | (4,740 | ) | (1,306 | ) | |
| Accumulated deficit | (864,498 | ) | (807,774 | ) | |
| Total stockholders’ deficit | (336,141 | ) | (293,166 | ) | |
| Total liabilities and stockholders’ deficit | 1,010,747 | $ | 1,000,477 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSOF COMPREHENSIVE (LOSS) INCOME
FOR THE THREE MONTHS ENDED JUNE30, 2021 AND JUNE 30, 2020
(IN THOUSANDS, EXCEPT SHAREAND PER SHARE AMOUNTS)
| Three Months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| June 30, 2020 | |||||
| (Unaudited) | (Unaudited) | ||||
| Service revenue | 147,879 | $ | 140,990 | ||
| Operating expenses: | |||||
| Network operations (including 136 and 305 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | 56,180 | 53,886 | |||
| Selling, general, and administrative (including 6,738 and 5,778 of equity-based compensation expense, respectively) | 41,392 | 39,839 | |||
| Depreciation and amortization | 22,096 | 19,896 | |||
| Total operating expenses | 119,668 | 113,621 | |||
| Gains on equipment transactions | — | 205 | |||
| Operating income | 28,211 | 27,574 | |||
| Interest expense | (14,236 | ) | (15,499 | ) | |
| Realized foreign exchange gain on issuance on 2024 Euro Notes | — | 2,547 | |||
| Unrealized foreign exchange losses on 2024 Euro Notes | (5,280 | ) | (3,420 | ) | |
| Loss on debt extinguishment and redemption – 2021 Notes | — | (638 | ) | ||
| Loss on debt extinguishment and redemption – 2022 Notes | (10,830 | ) | — | ||
| Interest income and other, net | 64 | 735 | |||
| (Loss) income before income taxes | (2,071 | ) | 11,299 | ||
| Income tax provision | (422 | ) | (2,735 | ) | |
| Net (loss) income | (2,493 | ) | $ | 8,564 | |
| Comprehensive (loss) income: | |||||
| Net (loss) income | (2,493 | ) | $ | 8,564 | |
| Foreign currency translation adjustment | 1,776 | 2,913 | |||
| Comprehensive (loss) income | (717 | ) | $ | 11,477 | |
| Net (loss) income per common share: | |||||
| Basic net (loss) income per common share | (0.05 | ) | $ | 0.19 | |
| Diluted net (loss) income per common share | (0.05 | ) | $ | 0.18 | |
| Dividends declared per common share | 0.78 | $ | 0.68 | ||
| Weighted-average common shares - basic | 46,229,603 | 45,754,880 | |||
| Weighted-average common shares - diluted | 46,229,603 | 46,686,665 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2021AND JUNE 30, 2020
(IN THOUSANDS, EXCEPT SHARE AND PER SHAREAMOUNTS)
| Six Months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| June 30, 2020 | |||||
| (Unaudited) | |||||
| Service revenue | 294,656 | $ | 281,904 | ||
| Operating expenses: | |||||
| Network operations (including 2,212 and 557 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) | 113,272 | 109,806 | |||
| Selling, general, and administrative (including 11,969 and 10,600 of equity-based compensation expense, respectively) | 82,834 | 79,513 | |||
| Depreciation and amortization | 44,065 | 39,402 | |||
| Total operating expenses | 240,171 | 228,721 | |||
| Gains on equipment transactions | 18 | 244 | |||
| Operating income | 54,503 | 53,427 | |||
| Interest expense | (30,071 | ) | (30,720 | ) | |
| Realized foreign exchange gain on issuance of 2024 Euro Notes | — | 2,547 | |||
| Unrealized gain (loss) on foreign exchange on 2024 Euro Notes | 13,590 | (512 | ) | ||
| Interest income and other, net | 807 | 28 | |||
| Loss on debt extinguishment and redemption- 2021 Notes | — | (638 | ) | ||
| Loss on debt extinguishment and redemption- 2022 Notes | (14,698 | ) | — | ||
| Income before income taxes | 24,131 | 24,132 | |||
| Income tax provision | (7,773 | ) | (6,341 | ) | |
| Net income | 16,358 | $ | 17,791 | ||
| Comprehensive income: | |||||
| Net income | 16,358 | $ | 17,791 | ||
| Foreign currency translation adjustment | (3,434 | ) | (580 | ) | |
| Comprehensive income | 12,924 | $ | 17,211 | ||
| Net income per common share: | |||||
| Basic net income per common share | 0.35 | $ | 0.39 | ||
| Diluted net income per common share | 0.35 | $ | 0.38 | ||
| Dividends declared per common share | 1.535 | $ | 1.340 | ||
| Weighted-average common shares - basic | 46,227,528 | 45,760,302 | |||
| Weighted-average common shares - diluted | 46,744,070 | 46,592,445 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2021AND JUNE 30, 2020
(IN THOUSANDS)
| Three months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| June 30, 2020 | |||||
| (Unaudited) | |||||
| Cash flows from operating activities: | |||||
| Net (loss) income | (2,493 | ) | $ | 8,564 | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||
| Depreciation and amortization | 22,096 | 19,896 | |||
| Amortization of debt costs, discounts and premiums | 453 | 453 | |||
| Equity-based compensation expense (net of amounts capitalized) | 6,874 | 6,083 | |||
| Loss on debt extinguishment and redemption – 2021 Notes | — | 638 | |||
| Loss on debt extinguishment and redemption – 2022 Notes | 10,830 | — | |||
| Unrealized losses on foreign exchange – 2024 Notes | 5,280 | 3,383 | |||
| Realized foreign exchange gain on issuance of 2024 Notes | — | (2,547 | ) | ||
| Gains - equipment transactions and other, net | (129 | ) | (448 | ) | |
| Deferred income taxes | (939 | ) | 1,814 | ||
| Changes in operating assets and liabilities: | |||||
| Accounts receivable | (2,330 | ) | 2,697 | ||
| Prepaid expenses and other current assets | (130 | ) | 628 | ||
| Accounts payable, accrued liabilities and other long-term liabilities | 852 | 453 | |||
| Deposits and other assets | (615 | ) | (303 | ) | |
| Net cash provided by operating activities | 39,749 | 41,311 | |||
| Cash flows from investing activities: | |||||
| Purchases of property and equipment | (17,217 | ) | (13,930 | ) | |
| Net cash used in investing activities | (17,217 | ) | (13,930 | ) | |
| Cash flows from financing activities: | |||||
| Dividends paid | (37,001 | ) | (31,738 | ) | |
| Redemption and extinguishment of 2021 Notes | — | (189,225 | ) | ||
| Redemption and extinguishment of 2022 Notes | (339,638 | ) | — | ||
| Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of 2,137 | — | 240,285 | |||
| Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of 1,317 | 496,933 | — | |||
| Principal payments on installment payment agreement | (1,969 | ) | (2,562 | ) | |
| Principal payments of finance lease obligations | (6,192 | ) | (3,716 | ) | |
| Proceeds from exercises of stock options | 660 | 271 | |||
| Net cash provided by financing activities | 112,793 | 13,315 | |||
| Effect of exchange rates changes on cash | 658 | 1,214 | |||
| Net increase in cash and cash equivalents | 135,983 | 41,910 | |||
| Cash and cash equivalents, beginning of period | 237,980 | 375,116 | |||
| Cash and cash equivalents, end of period | 373,963 | $ | 417,026 |
All values are in US Dollars.
COGENT COMMUNICATIONS HOLDINGS, INC. ANDSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021AND JUNE 30, 2020
(IN THOUSANDS)
| Six months | |||||
|---|---|---|---|---|---|
| Ended | |||||
| June 30, 2020 | |||||
| (Unaudited) | |||||
| Cash flows from operating activities: | |||||
| Net income | 16,358 | $ | 17,791 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||
| Depreciation and amortization | 44,065 | 39,402 | |||
| Amortization of debt costs, discounts and premiums | 894 | 930 | |||
| Equity-based compensation expense (net of amounts capitalized) | 14,181 | 11,157 | |||
| Loss on debt extinguishment and redemption – 2021 Notes | — | 638 | |||
| Loss on debt extinguishment and redemption – 2022 Notes | 14,698 | — | |||
| Unrealized (gains) losses on foreign exchange – 2024 Notes | (13,590 | ) | 512 | ||
| Realized foreign exchange gain on issuance of 2024 Notes | — | (2,547 | ) | ||
| Gains - equipment transactions and other, net | 242 | (935 | ) | ||
| Deferred income taxes | 3,558 | 4,253 | |||
| Changes in operating assets and liabilities: | |||||
| Accounts receivable | 90 | (93 | ) | ||
| Prepaid expenses and other current assets | 2,696 | (2,465 | ) | ||
| Accounts payable, accrued liabilities and other long-term liabilities | 3,804 | 1,523 | |||
| Deposits and other assets | (141 | ) | (397 | ) | |
| Net cash provided by operating activities | 86,855 | 69,769 | |||
| Cash flows from investing activities: | |||||
| Purchases of property and equipment | (32,661 | ) | (26,796 | ) | |
| Net cash used in investing activities | (32,661 | ) | (26,796 | ) | |
| Cash flows from financing activities: | |||||
| Dividends paid | (73,082 | ) | (62,295 | ) | |
| Redemption and extinguishment of 2021 Notes | — | (189,225 | ) | ||
| Redemption and extinguishment of 2022 Notes | (459,317 | ) | — | ||
| Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of 2,137 | — | 240,285 | |||
| Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of 1,317 | 496,933 | — | |||
| Principal payments on installment payment agreement | (4,347 | ) | (5,128 | ) | |
| Principal payments of finance lease obligations | (11,936 | ) | (9,883 | ) | |
| Proceeds from exercises of stock options | 875 | 989 | |||
| Net cash used in financing activities | (50,874 | ) | (25,257 | ) | |
| Effect of exchange rates changes on cash | (658 | ) | (112 | ) | |
| Net increase in cash and cash equivalents | 2,662 | 17,604 | |||
| Cash and cash equivalents, beginning of period | 371,301 | 399,422 | |||
| Cash and cash equivalents, end of period | 373,963 | $ | 417,026 |
All values are in US Dollars.
Except forhistorical information and discussion contained herein, statements contained in this release constitute forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identifiedby words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “projects” and similar expressions. The statements in this release are based uponthe current beliefs and expectations of Cogent’s management and are subject to significant risks and uncertainties. Actual resultsmay differ from those set forth in the forward-looking statements. Numerous factors could cause or contribute to such differences, includingthe impact of the COVID-19 pandemic and the related government policies; future economic instability in the global economy or a contractionof the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impactof changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of ournon-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of arequirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/orregulation, 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 attractnew customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangementson favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associatedwith such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retaincertain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; andoutcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission,including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quartersended March 31, 2021 and June 30, 2021. Cogent undertakes no duty to update any forward-looking statement or any information containedin this press release or in other public disclosures at any time.