Cogent Communications Reports First Quarter 2018 Results and Increases Regular Quarterly Dividend on Common Stock
Cogent Communications Reports First Quarter 2018 Results and Increases Regular Quarterly Dividend on Common Stock
WASHINGTON, May 3, 2018 /PRNewswire/ --
Financial and Business Highlights
-- Cogent approves a 4.0% increase of $0.02 per share to its regular
quarterly dividend to $0.52
-- Service revenue increased by 2.8% from Q4 2017 to Q1 2018 to $128.7
million and increased from Q1 2017 to Q1 2018 by 9.8%
-- On-net revenue increased by 3.4% from Q4 2017 to Q1 2018 to $92.4
million and increased from Q1 2017 to Q1 2018 by 10.5%
-- Off-net revenue increased by 1.4% from Q4 2017 to Q1 2018 to $36.1
million and increased from Q1 2017 to Q1 2018 by 8.3%
-- Cash flow from operations for Q1 2018 increased by 28.3% from Q1 2017 to
$30.2 million
-- EBITDA for Q1 2018 increased by 16.9% from Q1 2017 to $44.1 million
-- EBITDA margin for Q1 2018 increased by 210 basis points to 34.3% from Q1
2017
Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $128.7 million for the three months ended March 31, 2018, an increase of 9.8% from the three months ended March 31, 2017 and an increase of 2.8% from the three months ended December 31, 2017. Foreign exchange positively impacted service revenue growth from the three months ended December 31, 2017 to the three months ended March 31, 2018 by $1.0 million and positively impacted service revenue growth from the three months ended March 31, 2017 to the three months ended March 31, 2018 by $3.3 million. On a constant currency basis, service revenue grew by 2.0% from the three months ended December 31, 2017 to the three months ended March 31, 2018 and grew by 7.0% from the three months ended March 31, 2017 to the three months ended March 31, 2018.
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 $92.4 million for the three months ended March 31, 2018; an increase of 3.4% from the three months ended December 31, 2017 and an increase of 10.5% over the three months ended March 31, 2017.
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 $36.1 million for the three months ended March 31, 2018; an increase of 1.4% over the three months ended December 31, 2017 and an increase of 8.3% over the three months ended March 31, 2017.
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 12.6% from the three months ended March 31, 2017 to $54.0 million for the three months ended March 31, 2018 and increased by 4.0% from the three months ended December 31, 2017. GAAP gross margin was 42.0% for the three months ended March 31, 2018, 41.0% for the three months ended March 31, 2017 and 41.5% for the three months ended December 31, 2017. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.2 million for the three months ended March 31, 2018, $2.9 million for the three months ended December 31, 2017 and $2.6 million for the three months ended March 31, 2017.
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 11.1% from the three months ended March 31, 2017 to $74.0 million for the three months ended March 31, 2018 and increased by 3.6% from the three months ended December 31, 2017. Non-GAAP gross profit margin was 57.5% for the three months ended March 31, 2018, 56.9% for the three months ended March 31, 2017 and 57.1% for the three months ended December 31, 2017.
Cash flow from operating activities increased by 28.3% from the three months ended March 31, 2017 to $30.2 million for the three months ended March 31, 2018 and decreased by 3.8% from the three months ended December 31, 2017.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 16.9% from the three months ended March 31, 2017 to $44.1 million for the three months ended March 31, 2018 and increased by 2.0% from the three months ended December 31, 2017. EBITDA margin was 34.3% for the three months ended March 31, 2018, 32.2% for the three months ended March 31, 2017 and 34.5% for the three months ended December 31, 2017.
EBITDA, as adjusted, increased by 10.9% from the three months ended March 31, 2017 to $44.2 million for the three months ended March 31, 2018 and increased by 1.5% from the three months ended December 31, 2017. EBITDA, as adjusted, margin was 34.3% for the three months ended March 31, 2018, 34.0% for the three months ended March 31, 2017 and 34.8% for the three months ended December 31, 2017.
Basic and diluted net income (loss) per share was $0.15 for the three months ended March 31, 2018, $0.09 for the three months ended March 31, 2017 and $(0.14) for the three months ended December 31, 2017.
Total customer connections increased by 15.1% from March 31, 2017 to 73,914 as of March 31, 2018 and increased by 3.2% from December 31, 2017. On-net customer connections increased by 15.6% from March 31, 2017 to 63,366 as of March 31, 2018 and increased by 3.3% from December 31, 2017. Off-net customer connections increased by 13.1% from March 31, 2017 to 10,241 as of March 31, 2018 and increased by 2.9% from December 31, 2017.
The number of on-net buildings increased by 135 on-net buildings from March 31, 2017 to 2,541 on-net buildings as of March 31, 2018 and increased by 35 on-net buildings from December 31, 2017.
Quarterly Dividend Increase Approved
On May 2, 2018, Cogent's board approved a regular quarterly dividend of $0.52 per common share payable on June 1, 2018 to shareholders of record on May 17, 2018. This second quarter 2018 regular dividend represents a 4.0% increase of $0.02 per share from the first quarter 2018 regular dividend of $0.50 per share.
The payment of any future dividends and any other returns of capital will be at the discretion of Cogent's board of directors and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent's debt indenture agreements and other factors deemed relevant by Cogent's board of directors.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on May 3, 2018 to discuss Cogent's operating results for the first quarter of 2018 and to discuss Cogent's expectations for full year 2018. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 195 markets globally.
Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
---
Summary of Financial and Operational Results
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
------- ------- ------- ------- -------
Metric ($ in 000's, except
share and per share data) -
unaudited
---------
On-Net revenue $83,586 $85,586 $87,898 $89,374 $92,387
-------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 0.1% 2.4% 2.7% 1.7% 3.4%
--------------------------- --- --- --- --- ---
Off-Net revenue $33,386 $33,980 $34,865 $35,662 $36,144
--------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 4.8% 1.8% 2.6% 2.3% 1.4%
--------------------------- --- --- --- --- ---
Non-Core revenue (1) $231 $211 $206 $190 $175
------------------- ---- ---- ---- ---- ----
% Change from previous Qtr. 3.1% -8.7% -2.4% -7.8% -7.9%
--------------------------- --- ---- ---- ---- ----
Service revenue - total $117,203 $119,777 $122,969 $125,226 $128,706
----------------------- -------- -------- -------- -------- --------
% Change from previous Qtr. 1.4% 2.2% 2.7% 1.8% 2.8%
--------------------------- --- --- --- --- ---
Constant currency total 1.6% 1.7% 1.2% 1.8% 2.0%
revenue quarterly growth
rate - sequential quarters (4)
-----------------------------
Constant currency total 8.7% 9.6% 7.7% 6.6% 7.0%
revenue quarterly growth
rate - year over year quarters
(4)
---
Network operations $50,551 $50,974 $53,405 $53,745 $54,686
expenses (2)
-----------
% Change from previous Qtr. 1.2% 0.8% 4.8% 0.6% 1.8%
--------------------------- --- --- --- --- ---
GAAP gross profit (3) $48,003 $49,765 $50,238 $51,964 $54,043
-------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 5.7% 3.7% 1.0% 3.4% 4.0%
--------------------------- --- --- --- --- ---
GAAP gross margin (3) 41.0% 41.5% 40.9% 41.5% 42.0%
-------------------- ---- ---- ---- ---- ----
Non-GAAP gross profit (4) (6) $66,652 $68,803 $69,564 $71,481 $74,020
---------------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 1.5% 3.2% 1.1% 2.8% 3.6%
--------------------------- --- --- --- --- ---
Non-GAAP gross margin (4) (6) 56.9% 57.4% 56.6% 57.1% 57.5%
---------------------------- ---- ---- ---- ---- ----
Selling, general and administrative expenses (5) $28,925 $28,704 $29,360 $28,238 $29,928
----------------------------------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 1.2% -0.8% 2.3% -3.8% 6.0%
--------------------------- --- ---- --- ---- ---
Depreciation and $18,538 $18,897 $19,147 $19,344 $19,788
amortization expense
--------------------
% Change from previous Qtr. -7.6% 1.9% 1.3% 1.0% 2.3%
--------------------------- ---- --- --- --- ---
Equity-based compensation expense $2,647 $3,225 $3,734 $3,684 $3,784
--------------------------------- ------ ------ ------ ------ ------
% Change from previous Qtr. -8.0% 21.8% 15.8% -1.3% 2.7%
--------------------------- ---- ---- ---- ---- ---
Operating income $18,666 $19,000 $17,891 $20,534 $20,637
---------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 26.2% 1.8% -5.8% 14.8% 0.5%
--------------------------- ---- --- ---- ---- ---
Interest expense $11,891 $12,090 $12,266 $12,222 $12,408
---------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 12.2% 1.7% 1.5% -0.4% 1.5%
--------------------------- ---- --- --- ---- ---
Net income (loss) $4,136 $4,317 $3,650 $(6,227) $6,784
---------------- ------ ------ ------ ------- ------
Basic net income (loss) per common share $0.09 $0.10 $0.08 $(0.14) $0.15
---------------------------------------- ----- ----- ----- ------ -----
Diluted net income (loss) per common share $0.09 $0.10 $0.08 $(0.14) $0.15
------------------------------------------ ----- ----- ----- ------ -----
Weighted average common shares - basic 44,649,645 44,717,372 44,767,163 44,844,469 44,923,973
-------------------------------------- ---------- ---------- ---------- ---------- ----------
% Change from previous Qtr. 0.2% 0.2% 0.1% 0.2% 0.2%
--------------------------- --- --- --- --- ---
Weighted average common shares - diluted 44,917,014 44,988,655 45,118,607 44,844,469 45,294,697
---------------------------------------- ---------- ---------- ---------- ---------- ----------
% Change from previous Qtr. 0.3% 0.2% 0.3% -0.6% 1.0%
--------------------------- --- --- --- ---- ---
EBITDA (6) $37,727 $40,099 $40,204 $43,243 $44,092
--------- ------- ------- ------- ------- -------
% Change from previous Qtr. 1.8% 6.3% 0.3% 7.6% 2.0%
--------------------------- --- --- --- --- ---
EBITDA margin 32.2% 33.5% 32.7% 34.5% 34.3%
------------- ---- ---- ---- ---- ----
Gains on asset related transactions $2,124 $1,023 $397 $319 $117
----------------------------------- ------ ------ ---- ---- ----
EBITDA, as adjusted (6) $39,851 $41,122 $40,601 $43,562 $44,209
---------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 5.6% 3.2% -1.3% 7.3% 1.5%
--------------------------- --- --- ---- --- ---
EBITDA, as adjusted, margin 34.0% 34.3% 33.0% 34.8% 34.3%
--------------------------- ---- ---- ---- ---- ----
Fees - net neutrality $2 $188 $824 $260 $14
--------------------- --- ---- ---- ---- ---
Net cash provided by operating activities $23,514 $28,045 $28,783 $31,360 $30,179
----------------------------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. -30.6% 19.3% 2.6% 9.0% -3.8%
--------------------------- ----- ---- --- --- ----
Capital expenditures $12,249 $12,007 $10,927 $10,618 $14,905
-------------------- ------- ------- ------- ------- -------
% Change from previous Qtr. 70.2% -2.0% -9.0% -2.8% 40.4%
--------------------------- ---- ---- ---- ---- ----
Principal payments on capital leases $3,854 $2,194 $3,320 $1,833 $2,304
------------------------------------ ------ ------ ------ ------ ------
% Change from previous Qtr. 37.3% -43.1% 51.3% -44.8% 25.7%
--------------------------- ---- ----- ---- ----- ----
Dividends paid $18,999 $19,946 $20,879 $21,833 $22,819
-------------- ------- ------- ------- ------- -------
Purchases of common stock $ - $1,829 $ - $ - $ -
------------------------- --- ------ --- --- ---
Gross Leverage Ratio 4.64 4.62 4.57 4.44 4.33
-------------------- ---- ---- ---- ---- ----
Net Leverage Ratio 2.94 2.98 3.00 2.94 2.94
------------------ ---- ---- ---- ---- ----
Customer Connections - end of period
------------------------------------
On-Net 54,805 57,307 59,357 61,334 63,366
------ ------ ------ ------ ------ ------
% Change from previous Qtr. 3.7% 4.6% 3.6% 3.3% 3.3%
--------------------------- --- --- --- --- ---
Off-Net 9,055 9,355 9,724 9,953 10,241
------- ----- ----- ----- ----- ------
% Change from previous Qtr. 5.3% 3.1% 4.2% 2.4% 2.9%
--------------------------- --- --- --- --- ---
Non-Core (1) 383 340 336 326 307
----------- --- --- --- --- ---
% Change from previous Qtr. 9.4% -11.2% -1.2% -3.0% -5.8%
--------------------------- --- ----- ---- ---- ----
Total customer connections 64,243 66,982 69,417 71,613 73,194
-------------------------- ------ ------ ------ ------ ------
% Change from previous Qtr. 3.9% 4.3% 3.6% 3.2% 3.2%
--------------------------- --- --- --- --- ---
On-Net Buildings - end of period
--------------------------------
Multi-Tenant office buildings 1,601 1,618 1,635 1,653 1,672
----------------------------- ----- ----- ----- ----- -----
Carrier neutral data center buildings 752 767 784 800 816
------------------------------------- --- --- --- --- ---
Cogent data centers 53 53 53 53 53
------------------- --- --- --- --- ---
Total on-net buildings 2,406 2,438 2,472 2,506 2,541
---------------------- ----- ----- ----- ----- -----
Square feet - multi-tenant office buildings - on-net 864,432,176 872,293,092 881,184,145 893,580,297 911,283,287
---------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Network - end of period
------------------------
Intercity route miles 57,213 57,403 57,403 57,403 57,403
--------------------- ------ ------ ------ ------ ------
Metro fiber miles 30,190 30,516 31,071 31,254 31,850
----------------- ------ ------ ------ ------ ------
Connected networks - AS's 5,949 5,983 6,076 6,152 6,247
------------------------- ----- ----- ----- ----- -----
Headcount - end of period
-------------------------
Sales force - quota bearing 432 434 444 455 432
--------------------------- --- --- --- --- ---
Sales force - total 554 559 565 574 555
------------------- --- --- --- --- ---
Total employees 900 909 919 929 908
--------------- --- --- --- --- ---
Sales rep productivity - units per full time equivalent
sales rep ("FTE") per month 6.1 6.5 5.7 5.8 5.7
------------------------------------------------------- --- --- --- --- ---
FTE - sales reps 416 410 420 429 427
---------------- --- --- --- --- ---
(1) Consists of legacy services of
companies whose assets or
businesses were acquired by
Cogent, primarily including voice
services (only provided in
Toronto, Canada).
(2) Network operations expense excludes
equity-based compensation expense
of $111, $141, $179, $173 and $189
in the three month periods ended
March 31, 2017 through March 31,
2018, respectively. Network
operations expense includes excise
taxes, including Universal Service
Fund fees of $2,604, $2,672,
$2,691, $2,943 and $3,157 in the
three month periods ended March
31, 2017 through March 31, 2018,
respectively.
(3) GAAP gross profit is defined as
total service revenue less network
operations expense, depreciation
and amortization and equity based
compensation included in network
operations expense. GAAP gross
margin is defined as GAAP gross
profit divided by total service
revenue.
(4) Non-GAAP gross profit represents
service revenue less network
operations expense, excluding
equity-based compensation and
amounts shown separately
(depreciation expense). Non-GAAP
gross margin is defined as non-
GAAP gross profit divided by total
service revenue. Management
believes that Non-GAAP gross
profit and Non-GAAP gross profit
margin are relevant metrics to
provide investors, as they are
metrics that management uses to
measure the margin available to
the company after network service
costs, in essence a measure of the
efficiency of the Company's
network.
(5) Excludes equity-based compensation
expense of $2,536, $3,084, $3,555,
$3,511 and $3,595 in the three
month periods ended March 31, 2017
through March 31, 2018,
respectively.
(6) See schedule of non-GAAP metrics
below for definitions and
reconciliations to GAAP measures
below.
Schedules of Non-GAAP Measures
EBITDA and EBITDA, as adjusted
EBITDA represents net cash flows from operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense. Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is cash flows provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers. EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.
The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business. EBITDA, and EBITDA, as adjusted are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of these metrics may also differ from the calculations performed by its competitors and other companies and as such, its utility as a comparative measure is limited.
EBITDA, and EBITDA, as adjusted, are reconciled to cash flows provided by operating activities in the table below.
Q1 Q2 Q3 Q4 Q1
2018
2017 2017 2017 2017
---- ---- ---- ----
($ in 000's) - unaudited
------------------------
Net cash flows provided by operating $23,514 $28,045 $28,783 $31,360 $30,179
activities
----------
Changes in operating assets and 3,192 950 721 300 2,919
liabilities
-----------
Cash interest expense and income tax 11,021 11,104 10,700 11,583 10,994
expense
-------
EBITDA $37,727 $40,099 $40,204 $43,243 $44,092
------ ------- ------- ------- ------- -------
PLUS: Gains on asset related transactions 2,124 1,023 397 319 117
----------------------------------------- ----- ----- --- --- ---
EBITDA, as adjusted $39,851 $41,122 $40,601 $43,562 $44,209
------------------- ------- ------- ------- ------- -------
EBITDA margin 32.2% 33.5% 32.7% 34.5% 34.3%
------------- ---- ---- ---- ---- ----
EBITDA, as adjusted, margin 34.0% 34.3% 33.0% 34.8% 34.3%
--------------------------- ---- ---- ---- ---- ----
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes - sequential periods
($ in 000's) - unaudited Q1 Q2 Q3 Q4 Q1
2017 2017 2017 2017 2018
--- ---- ---- ---- ---- ----
Service revenue, as reported - $117,203 $119,777 $122,969 $125,226 $128,706
current period
--------------
Impact of foreign currencies on 195 (531) (1,701) 16 (981)
service revenue
---------------
Service revenue - as adjusted $117,398 $119,246 $121,268 $125,242 $127,725
for currency impact (1)
----------------------
Service revenue, as reported - $115,596 $117,203 $119,777 $122,969 $125,226
prior sequential period
-----------------------
Constant currency increase $1,802 $2,043 $1,491 $2,273 $2,499
-------------------------- ------ ------ ------ ------ ------
Constant currency percent 1.6% 1.7% 1.2% 1.8% 2.0%
increase
--------
(1) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the
average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential
revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service
revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a
supplement to GAAP financial information.
Constant currency impact on revenue changes - prior year periods
($ in 000's) - unaudited Q1 Q2 Q3 Q4 Q1
2017 2017 2017 2017 2018
--- ---- ---- ---- ---- ----
Service revenue, as reported $117,203 $119,777 $122,969 $125,226 $128,706
- current period
----------------
Impact of foreign currencies 503 743 (1,257) (2,055) (3,280)
on service revenue
------------------
Service revenue - as adjusted $117,706 $120,520 $121,712 $123,171 $125,426
for currency impact (2)
-----------------------
Service revenue, as reported $108,291 $109,955 $113,057 $115,596 $117,203
- prior year period
-------------------
Constant currency increase $9,415 $10,565 $8,655 $7,575 $8,223
-------------------------- ------ ------- ------ ------ ------
Percent increase 8.7% 9.6% 7.7% 6.6% 7.0%
---------------- --- --- --- --- ---
(2) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the
average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year
revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue,
as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as
a supplement to GAAP financial information.
Non-GAAP gross profit and Non-GAAP gross margin
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
------- ------- ------- ------- -------
($ in 000's) -
unaudited
--------------
Service revenue
total $117,203 $119,777 $122,969 $125,226 $128,706
--------------- -------- -------- -------- -------- --------
Minus - Network
operations expense
including equity-
based compensation
and including
depreciation and
amortization
expense 69,200 70,012 72,731 73,262 74,663
------------------- ------ ------ ------ ------ ------
GAAP Gross Profit
(1) $48,003 $49,765 $50,238 $51,964 $54,043
----------------- ------- ------- ------- ------- -------
Plus - Equity-
based compensation
- network
operations expense 111 141 179 173 189
------------------- --- --- --- --- ---
Plus - Depreciation
and amortization
expense 18,538 18,897 19,147 19,344 19,788
------------------- ------ ------ ------ ------ ------
Non-GAAP Gross
Profit (2) $66,652 $68,803 $69,564 $71,481 $74,020
-------------- ------- ------- ------- ------- -------
GAAP Gross Margin
(1) 41.0% 41.5% 40.9% 41.5% 42.0%
----------------- ---- ---- ---- ---- ----
Non-GAAP Gross
Margin (2) 56.9% 57.4% 56.6% 57.1% 57.5%
-------------- ---- ---- ---- ---- ----
(1) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity
based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total
service revenue.
(2) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and
amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit
divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics
to provide to investors, as they are metrics that management uses to measure the margin and amount available to the Company after
network service costs, in essence these are measures of the efficiency of the Company's network.
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio was 4.44 at December 31, 2017 and 4.33 at March 31, 2018 and Cogent's net leverage ratio was 2.94 at December 31, 2017 and 2.94 at March 31, 2018 and as shown below.
($ in
000's)
-
unaudited As of December 31, 2017 As of March 31, 2018
---------- ----------------------- --------------------
Cash
and
cash
equivalents $247,011 $236,026
------------ -------- --------
Debt
----
Capital
leases
-
current
portion 7,171 7,003
-------- ----- -----
Capital
leases
- long
term 150,333 150,939
------- ------- -------
Senior
unsecured
notes 189,225 189,225
---------- ------- -------
Senior
secured
notes 375,000 375,000
-------- ------- -------
Note
payable 10,748 11,349
-------- ------ ------
Total
debt 732,477 733,516
----- ------- -------
Total
net
debt 485,466 497,490
----- ------- -------
Trailing
12
months
EBITDA,
as
adjusted 165,136 169,494
-------- ------- -------
Gross
leverage
ratio 4.44 4.33
--------- ---- ----
Net
leverage
ratio 2.94 2.94
--------- ---- ----
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 MARCH 31, 2018 AND DECEMBER 31, 2017
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
2018 2017
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $236,026 $247,011
Accounts receivable, net of allowance for doubtful accounts of $1,110 and $1,499, 38,015 39,096
respectively
Prepaid expenses and other current assets 33,508 20,011
------ ------
Total current assets 307,549 306,118
Property and equipment, net 385,770 381,282
Deferred tax assets 11,241 17,616
Deposits and other assets - $756 and $736 restricted, respectively 11,893 5,572
------ -----
Total assets $716,453 $710,588
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $12,964 $11,592
Accrued and other current liabilities 46,198 47,947
Installment payment agreement, current portion, net of discount of $355 and $337, 8,309 7,816
respectively
Current maturities, capital lease obligations 7,003 7,171
----- -----
Total current liabilities 74,474 74,526
Senior secured 2022 notes, net of unamortized debt costs of $1,769 and $1,870, 373,591 373,512
respectively and including premium of $360 and $382, respectively
Senior unsecured 2021 notes, net of unamortized debt costs of $1,917 and $2,060, 187,308 187,165
respectively
Capital lease obligations, net of current maturities 150,939 150,333
Other long term liabilities 27,196 27,596
------ ------
Total liabilities 813,508 813,132
------- -------
Commitments and contingencies:
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,283,140 and 46 46
45,960,799 shares issued and outstanding, respectively
Additional paid-in capital 461,154 456,696
Accumulated other comprehensive income - foreign currency translation (1,989) (4,600)
Accumulated deficit (556,266) (554,686)
-------- --------
Total stockholders' deficit (97,055) (102,544)
------- --------
Total liabilities and stockholders' deficit $716,453 $710,588
======== ========
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND MARCH 31, 2017
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Three Months
Ended Ended
March 31, 2018 March 31, 2017
-------------- --------------
(Unaudited) (Unaudited)
Service revenue $128,706 $117,203
Operating expenses:
Network operations (including $189 and $111 of equity-based compensation 54,875 50,662
expense, respectively, exclusive of depreciation and amortization shown
separately below)
Selling, general, and administrative (including $3,595 and $2,536 of equity-based 33,523 31,461
compensation expense, respectively)
Depreciation and amortization 19,788 18,538
------ ------
Total operating expenses 108,186 100,661
Gains on equipment transactions 117 2,124
--- -----
Operating income 20,637 18,666
Interest income and other, net 1,694 854
Interest expense (12,408) (11,891)
------- -------
Income before income taxes 9,923 7,629
Income tax provision (3,139) (3,493)
------ ------
Net income $6,784 $4,136
====== ======
Comprehensive income:
Net income $6,784 $4,136
Foreign currency translation adjustment 2,611 1,328
----- -----
Comprehensive income $9,395 $5,464
====== ======
Net income per common share:
Basic and diluted net income per common share $0.15 $0.09
Dividends declared per common share $0.50 $0.42
Weighted-average common shares - basic 44,923,973 44,649,645
Weighted-average common shares - diluted 45,294,697 44,917,014
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND MARCH 31, 2017
(IN THOUSANDS)
Three months Three months
Ended Ended
March 31, 2018 March 31, 2017
-------------- --------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $6,784 $4,136
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 19,788 18,538
Amortization of debt discount and premium 370 280
Equity-based compensation expense (net of amounts capitalized) 3,784 2,647
Gains - equipment transactions and other, net (484) (2,172)
Deferred income taxes 2,623 3,229
Changes in operating assets and liabilities:
Accounts receivable 1,355 43
Prepaid expenses and other current assets (1,213) (1,067)
Accounts payable, accrued liabilities and other long-term liabilities (2,005) (1,660)
Deposits and other assets (823) (460)
---- ----
Net cash provided by operating activities 30,179 23,514
------ ------
Cash flows from investing activities:
Purchases of property and equipment (14,905) (12,249)
------- -------
Net cash used in investing activities (14,905) (12,249)
------- -------
Cash flows from financing activities:
Dividends paid (22,819) (18,999)
Proceeds from exercises of stock options 297 300
Principal payments on installment payment agreement (1,965) (218)
Principal payments of capital lease obligations (2,304) (3,854)
------ ------
Net cash used in financing activities (26,791) (22,771)
------- -------
Effect of exchange rates changes on cash 532 383
--- ---
Net decrease in cash and cash equivalents (10,985) (11,123)
Cash and cash equivalents, beginning of period 247,011 274,319
------- -------
Cash and cash equivalents, end of period $236,026 $263,196
======== ========
Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions. The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Numerous factors could cause or contribute to such differences, including future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our report on Form 10-Q for the quarter ended March 31, 2018 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time.
CONTACT: Cogent Contacts: For Public Relations: Jocelyn Johnson, + 1 (202) 295-4299, jajohnson@cogentco.com; For Investor Relations: John Chang, + 1 (202) 295-4212, investor.relations@cogentco.com
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SOURCE Cogent Communications Holdings, Inc.
