Cogent Communications Reports Second Quarter 2019 Results and Increases Regular Quarterly Dividend on Common Stock
WASHINGTON, Aug. 8, 2019 /PRNewswire/ --
Financial and Business Highlights
-- Cogent approves a $0.02 increase per share to its regular quarterly
dividend to $0.62 per share for Q3 2019 from $0.60 per share for Q2 2019
- the twenty-eighth consecutive quarterly dividend increase.
-- The Q3 2019 $0.62 dividend per share represents an annual increase
of 14.8% from the dividend per share of $0.54 for Q3 2018.
-- Cogent Group issued 135.0 million Euros ($153.7 million) of senior
unsecured notes in June 2019. The notes accrue interest at 4.375% and
mature on June 30, 2024.
-- Service revenue, on a constant currency basis, increased by 0.7% from Q1
2019 to Q2 2019 and increased from Q2 2018 to Q2 2019 by 5.4%.
-- Service revenue increased by 0.5% from Q1 2019 to Q2 2019 and
increased from Q2 2018 to Q2 2019 by 4.2%.
-- GAAP gross profit increased by 10.4% from Q2 2018 to $60.4 million for
Q2 2019 and non-GAAP gross profit increased by 7.3% from Q2 2018 to
$80.6 million for Q2 2019
-- GAAP gross margin increased by 250 basis points from Q2 2018 to Q2
2019 to 44.8% and non-GAAP gross margin increased by 170 basis
points from Q2 2018 to Q2 2019 to 59.8%.
-- Cash flow from operations increased by 29.9% from Q2 2018 to $40.6
million for Q2 2019 and increased by 41.9% from Q1 2019.
Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $134.8 million for the three months ended June 30, 2019, an increase of 4.2% from the three months ended June 30, 2018 and an increase of 0.5% from the three months ended March 31, 2019. Foreign exchange negatively impacted service revenue growth from the three months ended March 31, 2019 to the three months ended June 30, 2019 by $0.3 million and negatively impacted service revenue growth from the three months ended June 30, 2018 to the three months ended June 30, 2019 by $1.5 million. On a constant currency basis, service revenue grew by 0.7% from the three months ended March 31, 2019 to the three months ended June 30, 2019 and grew by 5.4% from the three months ended June 30, 2018 to the three months ended June 30, 2019.
On-net service is provided to customers located in buildings that are physically connected to Cogent's network by Cogent facilities. On-net revenue was $97.5 million for the three months ended June 30, 2019; an increase of 0.3% from the three months ended March 31, 2019 and an increase of 4.8% over the three months ended June 30, 2018.
Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $37.2 million for the three months ended June 30, 2019; an increase of 0.9% over the three months ended March 31, 2019 and an increase of 3.0% over the three months ended June 30, 2018.
GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 10.4% from the three months ended June 30, 2018 to $60.4 million for the three months ended June 30, 2019 and increased by 1.1% from the three months ended March 31, 2019. GAAP gross margin was 44.8% for the three months ended June 30, 2019, 42.3% for the three months ended June 30, 2018 and 44.5% for the three months ended March 31, 2019. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.2 million for the three months ended June 30, 2019, $3.4 million for the three months ended March 31, 2019 and $3.1 million for the three months ended June 30, 2018.
Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 7.3% from the three months ended June 30, 2018 to $80.6 million for the three months ended June 30, 2019 and increased by 0.6% from the three months ended March 31, 2019. Non-GAAP gross profit margin was 59.8% for the three months ended June 30, 2019, 58.1% for the three months ended June 30, 2018 and 59.8% for the three months ended March 31, 2019.
Cash flow from operating activities increased by 29.9% from the three months ended June 30, 2018 to $40.6 million for the three months ended June 30, 2019 and increased by 41.9% from the three months ended March 31, 2019.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 2.6% from the three months ended June 30, 2018 to $47.1 million for the three months ended June 30, 2019 and decreased by 1.0% from the three months ended March 31, 2019. EBITDA margin was 34.9% for the three months ended June 30, 2019, 35.5% for the three months ended June 30, 2018 and 35.5% for the three months ended March 31, 2019.
EBITDA, as adjusted, increased by 2.2% from the three months ended June 30, 2018 to $47.3 million for the three months ended June 30, 2019 and decreased by 1.7% from the three months ended March 31, 2019. EBITDA, as adjusted, margin was 35.1% for the three months ended June 30, 2019, 35.8% for the three months ended June 30, 2018 and 35.9% for the three months ended March 31, 2019.
Basic net income per share was $0.16 for the three months ended June 30, 2019, $0.15 for the three months ended June 30, 2018 and $0.20 for the three months ended March 31, 2019.
Total customer connections increased by 10.3% from June 30, 2018 to 84,054 as of June 30, 2019 and increased by 1.9% from March 31, 2019. On-net customer connections increased by 10.7% from June 30, 2018 to 72,415 as of June 30, 2019 and increased by 1.9% from March 31, 2019. Off-net customer connections increased by 8.0% from June 30, 2018 to 11,321 as of June 30, 2019 and increased by 1.6% from March 31, 2019.
The number of on-net buildings increased by 138 on-net buildings from June 30, 2018 to 2,737 on-net buildings as of June 30, 2019 and increased by 31 on-net buildings from March 31, 2019.
Quarterly Dividend Increase Approved
On August 7, 2019, Cogent's board approved a regular quarterly dividend of $0.62 per common share payable on September 9, 2019 to shareholders of record on August 23, 2019. This third quarter 2019 regular dividend represents a 3.3% increase of $0.02 per share from the second quarter 2019 regular dividend of $0.60 per share and an annual increase of 14.8% from the Q3 2018 dividend of $0.54 per share.
The payment of any future dividends and any other returns of capital will be at the discretion of Cogent's board of directors and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent's debt indenture agreements and other factors deemed relevant by Cogent's board of directors.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 8, 2019 to discuss Cogent's operating results for the second quarter of 2019 and to discuss Cogent's expectations for full year 2019. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 200 markets globally.
Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
---
Metric ($ in 000's, except share and per share data) - unaudited
---
On-Net revenue $92,387 $93,026 $93,790 $95,351 $97,183 $97,472
---
% Change from previous Qtr. 3.4% 0.7% 0.8% 1.7% 1.9% 0.3%
---
Off-Net revenue $36,144 $36,107 $36,202 $36,551 $36,843 $37,191
---
% Change from previous Qtr. 1.4% -0.1% 0.3% 1.0% 0.8% 0.9%
---
Non-Core revenue (1) $175 $163 $147 $147 $111 $126
---
% Change from previous Qtr. -7.9% -6.9% -9.8% -% -24.5% 13.5%
---
Service revenue - total $128,706 $129,296 $130,139 $132,049 $134,137 $134,789
---
% Change from previous Qtr. 2.8% 0.5% 0.7% 1.5% 1.6% 0.5%
---
Constant currency total revenue quarterly growth rate - sequential 2.0% 1.1% 1.1% 1.8% 1.7% 0.7%
quarters (6)
---
Constant currency total revenue quarterly growth rate - year over 7.0% 6.3% 6.2% 6.2% 5.8% 5.4%
year quarters (6)
---
Network operations expenses (2) $54,686 $54,147 $54,365 $55,436 $53,970 $54,181
---
% Change from previous Qtr. 1.8% -1.0% 0.4% 2.0% -2.6% 0.4%
---
GAAP gross profit (3) $54,043 $54,701 $55,248 $55,437 $59,724 $60,403
---
% Change from previous Qtr. 4.0% 1.2% 1.0% 0.3% 7.7% 1.1%
---
GAAP gross margin (3) 42.0% 42.3% 42.5% 42.0% 44.5% 44.8%
---
Non-GAAP gross profit (4) (6) $74,020 $75,149 $75,774 $76,613 $80,167 $80,608
---
% Change from previous Qtr. 3.6% 1.5% 0.8% 1.1% 4.6% 0.6%
---
Non-GAAP gross margin (4) (6) 57.5% 58.1% 58.2% 58.0% 59.8% 59.8%
---
Selling, general and administrative expenses (5) $29,928 $29,241 $28,838 $29,034 $32,568 $33,503
---
% Change from previous Qtr. 6.0% -2.3% -1.4% 0.7% 12.2% 2.9%
---
Depreciation and amortization expense $19,788 $20,216 $20,276 $20,952 $20,263 $19,979
---
% Change from previous Qtr. 2.3% 2.2% 0.3% 3.3% -3.3% -1.4%
---
Equity-based compensation expense $3,784 $4,695 $4,821 $4,408 $3,434 $5,289
---
% Change from previous Qtr. 2.7% 24.1% 2.7% -8.6% -22.1% 54.0%
---
Operating income $20,637 $21,354 $22,255 $22,311 $24,400 $22,022
---
% Change from previous Qtr. 0.5% 3.5% 4.2% 0.3% 9.4% -9.7%
---
Interest expense $12,408 $12,373 $12,767 $13,508 $13,456 $13,595
---
% Change from previous Qtr. 1.5% -0.3% 3.2% 5.8% -0.4% 1.0%
---
Net income $6,784 $6,552 $8,231 $7,100 $9,217 $7,136
---
Basic net income per common share $0.15 $0.15 $0.18 $0.16 $0.20 $0.16
---
Diluted net income per common share $0.15 $0.14 $0.18 $0.16 $0.20 $0.16
---
Weighted average common shares - basic 44,923,973 45,016,767 45,105,830 45,284,481 45,223,157 45,354,327
---
% Change from previous Qtr. 0.2% 0.2% 0.2% 0.4% -0.1% 0.3%
---
Weighted average common shares - diluted 45,294,697 45,536,473 45,699,635 45,803,418 45,644,236 45,912,291
---
% Change from previous Qtr. 1.0% 0.5% 0.4% 0.2% -0.3% 0.6%
---
EBITDA (6) $44,092 $45,908 $46,936 $47,579 $47,561 $47,105
---
% Change from previous Qtr. 2.0% 4.1% 2.2% 1.4% -% -1.0%
---
EBITDA margin 34.3% 35.5% 36.1% 36.0% 35.5% 34.9%
---
Gains on asset related transactions $117 $357 $416 $92 $536 $185
---
EBITDA, as adjusted (6) $44,209 $46,265 $47,352 $47,671 $48,097 $47,290
---
% Change from previous Qtr. 1.5% 4.7% 2.3% 0.7% 0.9% -1.7%
---
EBITDA, as adjusted, margin 34.3% 35.8% 36.4% 36.1% 35.9% 35.1%
---
Fees - net neutrality $14 $39 $108 $16
$-
$-
---
Net cash provided by operating activities $30,179 $31,271 $31,745 $40,726 $28,637 $40,632
---
% Change from previous Qtr. -3.8% 3.6% 1.5% 28.3% -29.7% 41.9%
---
Capital expenditures $14,905 $11,988 $12,107 $10,937 $13,288 $11,720
---
% Change from previous Qtr. 40.4% -19.6% 1.0% -9.7% 21.5% -11.8%
---
Principal payments on capital (finance) leases $2,304 $3,755 $2,099 $2,128 $3,030 $1,976
---
% Change from previous Qtr. 25.7% 63.0% -44.1% 1.4% 42.4% -34.8%
---
Dividends paid $22,819 $23,788 $24,764 $26,516 $26,565 $27,741
---
Purchases of common stock
$ -
$ -
$ - $6,564
$ -
$ -
--- ---
Gross Leverage Ratio 4.33 4.22 4.46 4.36 4.28 5.08
---
Net Leverage Ratio 2.94 2.93 2.89 2.87 2.92 2.93
---
Customer Connections - end of period
---
On-Net 63,366 65,407 67,370 68,770 71,066 72,415
---
% Change from previous Qtr. 3.3% 3.2% 3.0% 2.1% 3.3% 1.9%
---
Off-Net 10,241 10,480 10,698 10,974 11,138 11,321
---
% Change from previous Qtr. 2.9% 2.3% 2.1% 2.6% 1.5% 1.6%
---
Non-Core (1) 307 306 307 362 318 318
---
% Change from previous Qtr. -5.8% -0.3% 0.3% 17.9% -12.2% -%
---
Total customer connections 73,194 76,193 78,375 80,106 82,522 84,054
---
% Change from previous Qtr. 3.2% 3.1% 2.9% 2.2% 3.0% 1.9%
---
On-Net Buildings - end of period
---
Multi-Tenant office buildings 1,672 1,710 1,720 1,735 1,746 1,751
---
Carrier neutral data center buildings 816 837 863 889 908 933
---
Cogent data centers 53 52 52 52 52 53
---
Total on-net buildings 2,541 2,599 2,635 2,676 2,706 2,737
---
Square feet - multi-tenant office buildings - on-net 911,283,287 927,410,239 934,535,144 944,232,756 949,486,923 951,031,709
---
Network - end of period
---
Intercity route miles 57,403 57,403 57,403 57,426 57,426 57,426
---
Metro fiber miles 31,850 31,953 32,579 32,946 33,664 34,163
---
Connected networks - AS's 6,247 6,363 6,510 6,588 6,668 6,762
---
Headcount - end of period
---
Sales force - quota bearing 432 438 453 487 501 519
---
Sales force - total 555 566 583 619 639 656
---
Total employees 908 917 938 974 997 1,026
---
Sales rep productivity - units per full time equivalent sales rep 5.7 5.7 5.8 5.7 5.1 4.9
("FTE") per month
---
FTE - sales reps 427 413 418 436 464 478
---
(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only provided in Toronto, Canada).
(2) Network operations expense excludes equity-based compensation expense of $189, $232, $250, $224, $180 and $226 in the three month periods ended March 31, 2018 through June 30, 2019, respectively. Network operations expense includes
excise taxes, including Universal Service Fund fees of $3,157, $3,108, $3,010 and $3,234, $3,391 in the three and $3,191 ended March 31, 2018 through June 30, 2019, respectively.
(3) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross
profit divided by total service revenue.
(4) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation expense). Non-GAAP gross margin is defined as non-GAAP gross profit
divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross profit margin are relevant metrics to provide investors, as they are metrics that management uses to measure the margin available to the
company after network service costs, in essence a measure of the efficiency of the Company's network.
(5) Excludes equity-based compensation expense of $3,595, $4,463, $4,571, $4,184, $3,254 and $5,063 in the three month periods ended March 31, 2018 through June 30, 2019, respectively.
(6) See schedule of non-GAAP metrics below for definitions and reconciliations to GAAP measures below.
Schedules of Non-GAAP Measures
EBITDA and EBITDA, as adjusted
EBITDA represents net cash flows from operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense. Management believes the most directly comparable measure to EBITDA calculated
in accordance with generally accepted accounting principles in the United States, or GAAP, is cash flows provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts,
investors, and other interested parties in their evaluation of issuers. EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.
---
The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business. EBITDA, and EBITDA, as adjusted are an integral part of the internal
reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for
the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash
requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of these metrics may also differ from the calculations
performed by its competitors and other companies and as such, its utility as a comparative measure is limited.
EBITDA, and EBITDA, as adjusted, are reconciled to cash flows provided by operating activities in the table below.
Q1 Q2 Q3 Q4 Q1 Q2
2018 2018 2018 2018 2019 2019
($ in 000's) - unaudited
---
Net cash flows provided by operating activities $30,179 $31,271 $31,745 $40,726 $28,637 $40,632
---
Changes in operating assets and liabilities 2,919 2,408 4,254 (4,361) 6,727 (5,729)
---
Cash interest expense and income tax expense 10,994 12,229 10,937 11,214 12,197 12,202
---
EBITDA $44,092 $45,908 $46,936 $47,579 $47,561 $47,105
---
PLUS: Gains on asset related transactions 117 357 416 92 536 185
---
EBITDA, as adjusted $44,209 $46,265 $47,352 $47,671 $48,097 $47,290
---
EBITDA margin 34.3% 35.5% 36.1% 36.0% 35.5% 34.9%
---
EBITDA, as adjusted, margin 34.3% 35.8% 36.4% 36.1% 35.9% 35.1%
---
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes - sequential periods
---
($ in 000's) - unaudited Q1 Q2 Q3 Q4 Q1 Q2
2019 2019
2018 2018 2018 2018
--- ---
Service revenue, as reported - current $128,706 $129,296 $130,139 $132,049 $134,137 $134,789
period
---
Impact of foreign currencies on service (981) 802 613 465 135 260
revenue
---
Service revenue - as adjusted for $127,725 $130,098 $130,752 $132,514 $134,272 $135,049
currency impact (1)
---
Service revenue, as reported - prior $125,226 $128,706 $129,296 $130,139 $132,049 $134,137
sequential period
---
Constant currency increase $2,499 $1,392 $1,456 $2,375 $2,223 $912
---
Constant currency percent increase 2.0% 1.1% 1.1% 1.8% 1.7% 0.7%
---
(1) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing
quarterly sequential revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting
and planning system used by management as a supplement to GAAP financial information.
Constant currency impact
on revenue changes -
prior year periods
---
($ in 000's) - unaudited Q1 Q2 Q3 Q4 Q1 Q2
2018 2018 2018 2018 2019 2019
--- ---
Service revenue, as reported - current $128,706 $129,296 $130,139 $132,049 $134,137 $134,789
period
---
Impact of foreign currencies on service (3,280) (1,937) 445 896 2,078 1,505
revenue
---
Service revenue - as adjusted for $125,426 $127,359 $130,584 $132,945 $136,215 $136,294
currency impact (2)
---
Service revenue, as reported - prior $117,203 $119,777 $122,969 $125,226 $128,706 $129,296
year period
---
Constant currency increase $8,223 $7,582 $7,615 $7,719 $7,509 $6,998
---
Percent increase 7.0% 6.3% 6.2% 6.2% 5.8% 5.4%
---
(2) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the comparable prior year period. The Company believes that
disclosing year over year revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and
planning system used by management as a supplement to GAAP financial information.
Non-GAAP gross profit and Non-GAAP gross margin
---
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
---
($ in 000's) - unaudited
---
Service revenue total $128,706 $129,296 $130,139 $132,049 $134,137 $134,789
---
Minus - Network operations expense 74,663 74,595 74,891 76,612 74,413 74,386
including equity-based compensation
and including depreciation and
amortization expense
---
GAAP Gross Profit (1) $54,043 $54,701 $55,248 $55,437 $59,724 $60,403
---
Plus - Equity-based compensation - 189 232 250 224 180 226
network operations expense
---
Plus - Depreciation and amortization 19,788 20,216 20,276 20,952 20,263 19,979
expense
---
Non-GAAP Gross Profit (2) $74,020 $75,149 $75,774 $76,613 $80,167 $80,608
---
GAAP Gross Margin (1) 42.0% 42.3% 42.5% 42.0% 44.5% 44.8%
---
Non-GAAP Gross Margin (2) 57.5% 58.1% 58.2% 58.0% 59.8% 59.8%
---
(1) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit
divided by total service revenue.
(2) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP
gross profit divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics to provide to investors, as they are metrics that management uses to measure the margin and
amount available to the Company after network service costs, in essence these are measures of the efficiency of the Company's network.
Gross and Net Leverage Ratios
---
Gross leverage ratio is defined
as total debt divided by the
trailing last 12 months
EBITDA, as adjusted. Net
leverage ratio is defined as
total net debt (total debt
minus cash and cash
equivalents) divided by the
trailing last 12 months
EBITDA, as adjusted. Cogent's
gross leverage ratio and net
leverage ratio are shown
below.
($ in 000's) - unaudited As of March 31, 2019 As of June 30, 2019
--- ---
Cash and cash equivalents $259,138 $409,279
---
Debt
---
Capital (finance) leases - current portion 7,293 7,700
---
Capital (finance) leases - long term 157,541 160,487
---
Senior unsecured notes 189,225 189,225
---
Senior secured notes 445,000 445,000
---
Senior unsecured Euro notes - 153,508
--- ---
Note payable 12,286 11,948
---
Total debt 811,345 967,868
---
Total net debt 552,207 558,589
---
Trailing 12 months EBITDA, as adjusted 189,385 190,410
---
Gross leverage ratio 4.28 5.08
---
Net leverage ratio 2.92 2.93
---
Cogent's SEC filings are available online via the Investor Relations section of www.cogentco.com or on the Securities and
Exchange Commission's website at www.sec.gov.
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2019 AND DECEMBER 31, 2018
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
2019 2018
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $
409,279 $
276,093
Accounts receivable, net of allowance for doubtful accounts of $1,782 and $1,263, 40,684 41,709
respectively
Prepaid expenses and other current assets 36,030 32,535
Total current assets 485,993 350,337
Property and equipment, net 375,936 375,325
Right-of-use leased assets 72,255
Deferred tax assets 2,733
Deposits and other assets 14,881 11,455
Total assets $
949,065 $
739,850
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
11,570 $
8,519
Accrued and other current liabilities 51,615 51,431
Installment payment agreement, current portion, net of discount of $396 and $395, 8,693 8,283
respectively
Current maturities, operating lease liabilities 10,639
Current maturities, finance lease obligations 7,700 7,074
Total current liabilities 90,217 75,307
Senior secured 2022 notes, net of unamortized debt costs of $2,301 and $2,695, 443,896 443,710
respectively and including premium of $1,197 and $1,405, respectively
Senior unsecured 2024 Euro notes, net of unamortized debt costs of $1,550 151,957
Senior unsecured 2021 notes, net of unamortized debt costs of $1,171 and $1,476, 188,054 187,749
respectively
Operating lease liabilities, net of current maturities 83,456
Finance lease obligations, net of current maturities 160,487 156,706
Other long term liabilities 7,588 25,380
Total liabilities 1,125,655 888,852
Commitments and contingencies:
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 46,806,370 and 47 46
46,336,499 shares issued and outstanding, respectively
Additional paid-in capital 481,734 471,331
Accumulated other comprehensive income - foreign currency translation (10,967) (10,928)
Accumulated deficit (647,404) (609,451)
Total stockholders' deficit (176,590) (149,002)
Total liabilities and stockholders' deficit $
949,065 $
739,850
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Three Months
Ended Ended
June 30, 2019 June 30, 2018
(Unaudited) (Unaudited)
Service revenue $
134,789 $
129,296
Operating expenses:
Network operations (including $226 and $232 of equity-based compensation 54,407 54,379
expense, respectively, exclusive of depreciation and amortization shown
separately below)
Selling, general, and administrative (including $5,063 and $4,463 of equity- 38,566 33,704
based compensation expense, respectively)
Depreciation and amortization 19,979 20,216
Total operating expenses 112,952 108,299
Gains on equipment transactions 185 357
Operating income 22,022 21,354
Interest income and other, net 1,753 189
Interest expense (13,595) (12,373)
Income before income taxes 10,180 9,170
Income tax provision (3,044) (2,618)
Net income $
7,136 $
6,552
Comprehensive income:
Net income $
7,136 $
6,552
Foreign currency translation adjustment 1,786 (6,198)
Comprehensive income $
8,922 $
354
Net income per common share:
Basic net income per common share $
0.16 $
0.15
Diluted net income per common share $
0.16 $
0.14
Dividends declared per common share $
0.60 $
0.52
Weighted-average common shares - basic 45,354,327 45,016,767
Weighted-average common shares - diluted 45,912,291 45,536,473
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Six Months Six Months
Ended Ended
June 30, 2019 June 30, 2018
(Unaudited) (Unaudited)
Service revenue $
268,930 $
258,002
Operating expenses:
Network operations (including $406 and $421 of equity-based compensation 108,557 109,252
expense, respectively, exclusive of depreciation and amortization shown
separately below)
Selling, general, and administrative (including $8,318 and $8,058 of equity- 74,427 67,227
based compensation expense, respectively)
Depreciation and amortization 40,240 40,004
Total operating expenses 223,224 216,483
Gains on equipment transactions 721 475
Operating income 46,427 41,994
Interest income and other, net 3,572 1,879
Interest expense (27,051) (24,780)
Income before income taxes 22,948 19,093
Income tax provision (6,595) (5,757)
Net income $
16,353 $
13,336
Comprehensive income:
Net income $
16,353 $
13,336
Foreign currency translation adjustment (39) (3,587)
Comprehensive income $
16,314 $
9,749
Net income per common share:
Basic net income per common share $
0.36 $
0.30
Diluted net income per common share $
0.36 $
0.29
Dividends declared per common share $
1.18 $
1.02
Weighted-average common shares - basic 45,349,397 45,011,616
Weighted-average common shares - diluted 45,838,918 45,456,831
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(IN THOUSANDS)
Three months Three months
Ended Ended
June 30, 2019 June 30, 2018
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
7,136 $
6,552
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 19,977 20,216
Amortization of debt costs and premium 428 381
Equity-based compensation expense (net of amounts capitalized) 5,290 4,695
Gains - equipment transactions and other, net (253) 46
Deferred income taxes 2,259 2,192
Changes in operating assets and liabilities:
Accounts receivable (1,259) (2,096)
Prepaid expenses and other current assets (360) 582
Accounts payable, accrued liabilities and other long-term liabilities 7,866 (414)
Deposits and other assets (452) (883)
Net cash provided by operating activities 40,632 31,271
Cash flows from investing activities:
Purchases of property and equipment (11,720) (11,988)
Net cash used in investing activities (11,720) (11,988)
Cash flows from financing activities:
Dividends paid (27,741) (23,788)
Net proceeds from issuance of senior unsecured 2024 Euro Notes 152,128
Proceeds from exercises of stock options 746 705
Principal payments on installment payment agreement (2,387) (2,289)
Principal payments of capital lease obligations (1,976) (3,755)
Net cash provided by (used in) financing activities 120,770 (29,127)
Effect of exchange rates changes on cash 459 (1,900)
Net increase (decrease) in cash and cash equivalents 150,141 (11,744)
Cash and cash equivalents, beginning of period 259,138 236,026
Cash and cash equivalents, end of period $
409,279 $
224,282
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(IN THOUSANDS)
Six months Six months
Ended Ended
June 30, 2019 June 30, 2018
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
16,353 $
13,336
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 40,240 40,004
Amortization of debt costs and premium 842 751
Equity-based compensation expense (net of amounts capitalized) 8,724 8,479
Gains - equipment transactions and other, net (484) (439)
Deferred income taxes 4,831 4,815
Changes in operating assets and liabilities:
Accounts receivable 1,005 (741)
Prepaid expenses and other current assets (3,547) (631)
Accounts payable, accrued liabilities and other long-term liabilities 5,088 (2,418)
Deposits and other assets (3,783) (1,706)
Net cash provided by operating activities 69,269 61,450
Cash flows from investing activities:
Purchases of property and equipment (25,008) (26,893)
Net cash used in investing activities (25,008) (26,893)
Cash flows from financing activities:
Dividends paid (54,306) (46,607)
Net proceeds from issuance of senior unsecured 2024 Euro Notes 152,128
Proceeds from exercises of stock options 919 1,002
Principal payments on installment payment agreement (4,774) (4,254)
Principal payments of capital lease obligations (5,006) (6,059)
Net cash provided by (used in) financing activities 88,961 (55,918)
Effect of exchange rates changes on cash (36) (1,368)
Net increase (decrease) in cash and cash equivalents 133,186 (22,729)
Cash and cash equivalents, beginning of period 276,093 247,011
Cash and cash equivalents, end of period $
409,279 $
224,282
Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions. The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Numerous factors could cause or contribute to such differences, including future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our report on Form 10-Q for the quarter ended June 30, 2019 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time.
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SOURCE Cogent Communications Holdings, Inc.
