Cogent Communications Reports Third Quarter 2020 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025
WASHINGTON, Nov. 5, 2020 /PRNewswire/ --
Financial and Business Highlights
-- Cogent approved an increase of $0.025 per share to its regular quarterly
dividend for a total of $0.730 per share for Q4 2020 as compared to
$0.705 per share for Q3 2020 - Cogent's thirty-third consecutive
quarterly dividend increase
-- The Q4 2020 $0.730 dividend per share represents an annual increase
of 14.1% from the dividend per share of $0.640 for Q4 2019.
-- Service revenue increased by 0.9% from Q2 2020 to Q3 2020 and increased
from Q3 2019 to Q3 2020 by 3.9%.
-- GAAP gross profit increased by 7.3% from Q3 2019 to $66.2 million for Q3
2020. Non-GAAP gross profit increased by 7.5% from Q3 2019 to $88.1
million for Q3 2020.
-- GAAP gross margin increased by 150 basis points from Q3 2019 to Q3
2020 to 46.5%. Non-GAAP gross margin increased by 200 basis points
from Q3 2019 to Q3 2020 to 61.9%.
-- Net cash provided by operating activities was $33.0 million for Q3 2020,
$41.3 million for Q2 2020 and $33.4 million for Q3 2019.
-- EBITDA margin increased by 60 basis points from Q2 2020 to 38.4% for Q3
2020 and increased by 150 basis points from Q3 2019.
-- EBITDA increased by 2.3% from Q2 2020 to $54.6 million for Q3 2020 and
increased by 8.1% from Q3 2019.
Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $142.3 million for the three months ended September 30, 2020, an increase of 0.9% from the three months ended June 30, 2020 and an increase of 3.9% from the three months ended September 30, 2019. Foreign exchange positively impacted service revenue growth from the three months ended June 30, 2020 to the three months ended September 30, 2020 by $1.6 million and positively impacted service revenue growth from the three months ended September 30, 2019 to the three months ended September 30, 2020 by $1.1 million. On a constant currency basis, service revenue declined by 0.2% from the three months ended June 30, 2020 to the three months ended September 30, 2020 and grew by 3.1% from the three months ended September 30, 2019 to the three months ended September 30, 2020.
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 $105.1 million for the three months ended September 30, 2020; an increase of 1.2% from the three months ended June 30, 2020 and an increase of 5.7% over the three months ended September 30, 2019.
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 $37.1 million for the three months ended September 30, 2020; an increase of 0.1% over the three months ended June 30, 2020 and a decrease of 0.9% over the three months ended September 30, 2019.
Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell. Non-core revenue was $119,000 for the three months ended September 30, 2020; a decrease of 18.5% from the three months ended June 30, 2020. Non-core revenue was $108,000 for the three months ended September 30, 2019.
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 7.3% from the three months ended September 30, 2019 to $66.2 million for the three months ended September 30, 2020 and decreased by 1.6% from the three months ended June 30, 2020. GAAP gross margin was 46.5% for the three months ended September 30, 2020, 45.0% for the three months ended September 30, 2019 and 47.7% for the three months ended June 30, 2020. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.9 million for the three months ended September 30, 2020, $4.0 million for the three months ended September 30, 2019 and $3.3 million for the three months ended June 30, 2020.
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 7.5% from the three months ended September 30, 2019 to $88.1 million for the three months ended September 30, 2020 and increased by 0.8% from the three months ended June 30, 2020. Non-GAAP gross profit margin was 61.9% for the three months ended September 30, 2020, 59.9% for the three months ended September 30, 2019 and 62.0% for the three months ended June 30, 2020.
Net cash provided by operating activities decreased by 1.4% from the three months ended September 30, 2019 to $33.0 million for the three months ended September 30, 2020 and decreased by 20.2% from the three months ended June 30, 2020.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 8.1% from the three months ended September 30, 2019 to $54.6 million for the three months ended September 30, 2020 and increased by 2.3% from the three months ended June 30, 2020. EBITDA margin was 38.4% for the three months ended September 30, 2020, 36.9% for the three months ended September 30, 2019 and 37.8% for the three months ended June 30, 2020.
Basic net (loss) income per share was $(0.11) for the three months ended September 30, 2020, $0.30 for the three months ended September 30, 2019 and $0.19 for the three months ended June 30, 2020. Diluted net (loss) income per share was $(0.11) for the three months ended September 30, 2020, $0.30 for the three months ended September 30, 2019 and $0.18 for the three months ended June 30, 2020.
Unrealized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Notes were $(17.3) million for the three months ended September 30, 2020, $6.2 million for the three months ended September 30, 2019 and $(3.4) million for the three months ended June 30, 2020.
Total customer connections increased by 3.3% from 85,692 as of September 30, 2019 to 88,509 as of September 30, 2020 and increased by 0.5% from 88,112 as of June 30, 2020. On-net customer connections increased by 3.3% from 73,870 as of September 30, 2019 to 76,338 as of September 30, 2020 and increased by 0.5% from 75,927 as of June 30, 2020. Off-net customer connections increased by 3.0% from 11,503 as of September 30, 2019 to 11,849 as of September 30, 2020 and off-net customer connections were 11,846 as of June 30, 2020.
The number of on-net buildings increased by 113 buildings from September 30, 2019 to 2,884 on-net buildings as of September 30, 2020 and increased by 30 on-net buildings from June 30, 2020.
Quarterly Dividend Increase Approved
On November 4, 2020, Cogent's Board approved a regular quarterly dividend of $0.730 per common share payable on December 4, 2020 to shareholders of record on November 20, 2020. This fourth quarter 2020 regular dividend represents a 3.5% increase of $0.025 per share from the third quarter 2020 regular dividend of $0.705 per share and an annual increase of 14.1% from the Q4 2019 dividend of $0.640 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.
Share Buy-back Program Extension and Stock Purchases
On November 4, 2020, the Board extended Cogent's share buy-back program to December 31, 2021.
During the three months ended September 30, 2020 Cogent purchased 4,567 shares of its common stock for $0.3 million. Subsequent to September 30, 2020, Cogent purchased 53,516 shares of its common stock for $3.1 million.
Impact of COVID-19
Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. Cogent's workforce continues to work remotely with dedication. During the third quarter of 2020, Cogent experienced a decrease in sales productivity as certain new potential customers decided to delay the purchase of services and certain existing and new corporate customers decided to reduce their number of secondary service locations.
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 scope and duration of the pandemic, what actions governments may take in the future in response to the pandemic and what the impact will be on the economies of the world. 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, 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. 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 will be described in more detail in Cogent's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and are set forth in its annual report on Form 10-K for the year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarters ended June 30, 2020 and March 31, 2020.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on November 5, 2020 to discuss Cogent's operating results for the third quarter of 2020 and to discuss Cogent's expectations for full year 2020. 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 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 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
---
Metric ($ in 000's, except share and per share data) -
unaudited
---
On-Net revenue $97,183 $97,472 $99,416 $102,683 $103,457 $103,800 $105,091
---
% Change from previous
Qtr. 1.9% 0.3% 2.0% 3.3% 0.8% 0.3% 1.2%
---
Off-Net revenue $36,843 $37,191 $37,418 $37,479 $37,321 $37,044 $37,092
---
% Change from previous
Qtr. 0.8% 0.9% 0.6% 0.2% -0.4% -0.7% 0.1%
---
Non-Core revenue (1) $111 $126 $108 $130 $137 $146 $119
---
% Change from previous
Qtr. -24.5% 13.5% -14.3% 20.4% 5.4% 6.6% -18.5%
---
Service revenue -
total $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302
---
% Change from previous
Qtr. 1.6% 0.5% 1.6% 2.4% 0.4% 0.1% 0.9%
---
Constant currency
total revenue
quarterly growth rate
- sequential quarters
(6) 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% -0.2%
---
Constant currency
total revenue
quarterly growth rate
- year over year
quarters (6) 5.8% 5.4% 6.0% 6.8% 5.6% 5.1% 3.1%
---
Excise Taxes included
in service revenue $3,391 $3,191 $3,998 $4,334 $3,743 $3,298 $3,902
---
% Change from previous
Qtr. 4.9% -5.9% 25.3% 8.4% -13.6% -11.9% 18.3%
---
Network operations
expenses (2) $53,970 $54,181 $54,971 $55,684 $55,669 $53,581 $54,173
---
% Change from previous
Qtr. -2.6% 0.4% 1.5% 1.3% -% -3.8% 1.1%
---
GAAP gross profit (3) $59,724 $60,403 $61,683 $64,300 $65,486 $67,208 $66,164
---
% Change from previous
Qtr. 7.7% 1.1% 2.1% 4.2% 1.8% 2.6% -1.6%
---
GAAP gross margin (3) 44.5% 44.8% 45.0% 45.8% 46.5% 47.7% 46.5%
---
Non-GAAP gross profit
(4) (6) $80,167 $80,608 $81,971 $84,608 $85,246 $87,409 $88,129
---
% Change from previous
Qtr. 4.6% 0.6% 1.7% 3.2% 0.8% 2.5% 0.8%
---
Non-GAAP gross margin
(4) (6) 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9%
---
Selling, general and
administrative
expenses (5) $32,568 $33,503 $31,456 $31,884 $34,852 $34,061 $33,546
---
% Change from previous
Qtr. 12.2% 2.9% -6.1% 1.4% 9.3% -2.3% -1.5%
---
Depreciation and
amortization expense $20,263 $19,979 $20,006 $20,002 $19,508 $19,896 $21,619
---
% Change from previous
Qtr. -3.3% -1.4% 0.1% -% -2.5% 2.0% 8.7%
---
Equity-based
compensation expense $3,434 $5,289 $4,797 $4,940 $5,075 $6,083 $6,522
---
% Change from previous
Qtr. -22.1% 54.0% -9.3% 3.0% 2.7% 19.9% 7.2%
---
Operating income $24,400 $22,022 $25,799 $28,033 $25,850 $27,574 $26,036
---
% Change from previous
Qtr. 9.4% -9.7% 17.2% 8.7% -7.8% 6.7% -5.6%
---
Interest expense $13,456 $13,595 $15,191 $15,211 $15,220 $15,499 $15,760
---
% Change from previous
Qtr. -0.4% 1.0% 11.7% 0.1% 0.1% 1.8% 1.7%
---
Net income $9,217 $7,136 $13,701 $7,465 $9,227 $8,564 $(4,955)
---
Realized and
unrealized gains
(losses) on 2024 euro
notes
$- $177 $6,128 $(4,032) $2,908 $(873) $(17,315)
--- ---
Basic net income per
common share $0.20 $0.16 $0.30 $0.16 $0.20 $0.19 $(0.11)
---
Diluted net income per
common share $0.20 $0.16 $0.30 $0.16 $0.20 $0.18 $(0.11)
---
Weighted average
common shares - basic 45,223,157 45,354,327 45,438,656 45,553,727 45,658,565 45,754,880 45,815,718
---
% Change from previous
Qtr. -0.1% 0.3% 0.2% 0.3% 0.2% 0.2% 0.1%
---
Weighted average
common shares -
diluted 45,644,236 45,912,291 46,019,691 46,145,970 46,391,066 46,686,665 45,815,718
---
% Change from previous
Qtr. -0.3% 0.6% 0.2% 0.3% 0.5% 0.6% -1.9%
---
EBITDA (6) $47,561 $47,105 $50,515 $52,724 $50,394 $53,348 $54,583
---
% Change from previous
Qtr. -% -1.0% 7.2% 4.4% -4.4% 5.9% 2.3%
--- ---
EBITDA margin 35.5% 34.9% 36.9% 37.6% 35.8% 37.8% 38.4%
---
Gains on asset related
transactions $536 $185 $87 $251 $39 $205 $99
---
EBITDA, as adjusted
(6) $48,097 $47,290 $50,602 $52,975 $50,433 $53,553 $54,682
---
% Change from previous
Qtr. 0.9% -1.7% 7.0% 4.7% -4.8% 6.2% 2.1%
---
EBITDA, as adjusted,
margin 35.9% 35.1% 37.0% 37.8% 35.8% 38.0% 38.4%
---
Net cash provided by
operating activities $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 $32,980
---
% Change from previous
Qtr. -29.7% 41.9% -17.7% 37.8% -38.3% 45.2% -20.2%
---
Capital expenditures $13,288 $11,720 $12,051 $9,899 $12,866 $13,930 $13,296
---
% Change from previous
Qtr. 21.5% -11.8% 2.8% -17.9% 30.0% 8.3% -4.6%
---
Principal payments of
capital (finance)
lease obligations $3,030 $1,976 $2,029 $2,056 $6,167 $3,716 $9,509
---
% Change from previous
Qtr. 42.4% -34.8% 2.7% 1.3% 200.0% -39.7% 155.9%
---
Dividends paid $26,565 $27,741 $28,565 $29,776 $30,557 $31,738 $32,657
---
Purchases of common
stock
$ -
$ -
$ -
$ -
$ -
$- $270
--- ---
Gross Leverage Ratio 4.28 5.08 4.97 4.86 4.78 5.08 5.10
---
Net Leverage Ratio 2.92 2.93 2.92 2.86 2.92 3.07 3.24
---
Customer Connections - end of period
---
On-Net 71,066 72,415 73,870 74,554 75,163 75,927 76,338
---
% Change from previous
Qtr. 3.3% 1.9% 2.0% 0.9% 0.8% 1.0% 0.5%
---
Off-Net 11,138 11,321 11,503 11,660 11,721 11,846 11,849
---
% Change from previous
Qtr. 1.5% 1.6% 1.6% 1.4% 0.5% 1.1% 0.0%
---
Non-Core (1) 318 318 319 325 329 339 322
---
% Change from previous
Qtr. -12.2% -% -0.3% 1.9% 1.2% 3.0% -5.0%
---
Total customer
connections 82,522 84,054 85,692 86,539 87,213 88,112 88,509
---
% Change from previous
Qtr. 3.0% 1.9% 1.9% 1.0% 0.8% 1.0% 0.5%
---
On-Net Buildings - end of period
---
Multi-Tenant office
buildings 1,746 1,751 1,757 1,767 1,769 1,771 1,783
---
Carrier neutral data
center buildings 908 933 960 980 1,000 1,029 1,047
---
Cogent data centers 52 53 54 54 54 54 54
---
Total on-net
buildings 2,706 2,737 2,771 2,801 2,823 2,854 2,884
---
Square feet - multi-
tenant office
buildings - on-net 949,486,923 951,031,709 954,013,024 957,173,183 961,154,384 962,049,183 968,355,695
---
Network - end of period
---
Intercity route miles 57,426 57,426 57,426 57,600 58,009 58,009 58,142
---
Metro fiber miles 33,664 34,163 34,985 35,526 36,079 36,438 36,725
---
Connected networks -
AS's 6,668 6,762 6,844 6,954 7,042 7,133 7,222
---
Headcount - end of period
---
Sales force - quota
bearing 501 519 530 548 542 572 597
---
Sales force -total 639 656 667 686 684 716 740
---
Total employees 997 1,026 1,036 1,055 1,052 1,083 1,110
---
Sales rep productivity
- units per full time
equivalent sales rep
("FTE") per month 5.1 4.9 4.4 4.1 4.5 4.0 3.7
---
FTE - sales reps 464 478 488 502 522 533 563
---
(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 $180, $226, $282, $306, $252,
$305 and $346 in the three month
periods ended March 31, 2019
through September 30, 2020,
respectively. Network operations
expense includes excise taxes,
including Universal Service Fund
fees of $3,391, $3,191, $3,998,
$4,334, $3,743, $3,298 and $3,902
in the three month periods ended
March 31, 2019 through September
30, 2020, respectively.
(3) GAAP gross profit is defined as
total service revenue less network
operations expense, depreciation
and amortization and equity based
compensation included in network
operations expense. GAAP gross
margin is defined as GAAP gross
profit divided by total service
revenue.
(4) Non-GAAP gross profit represents
service revenue less network
operations expense, excluding
equity-based compensation and
amounts shown separately
(depreciation and amortization
expense). Non-GAAP gross margin
is defined as non-GAAP gross
profit divided by total service
revenue. Management believes that
non-GAAP gross profit and non-
GAAP gross 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 $3,254, $5,063, $4,515,
$4,634, $4,823, $5,778 and $6,176
in the three month periods ended
March 31, 2019 through September
30, 2020, 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 provided by operating activities in the table below.
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2020 2020 2020
2019 2019 2019 2019
---
($ in 000's) - unaudited
---
Net cash provided by operating activities $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 $32,980
---
Changes in operating assets and liabilities 6,727 (5,729) 3,785 (6,557) 5,325 $(3,232) $6,255
---
Cash interest expense and income tax expense 12,197 12,202 13,287 13,184 16,611 15,269 15,348
---
EBITDA $47,561 $47,105 $50,515 $52,724 $50,394 $53,348 $54,583
---
PLUS: Gains on asset related transactions 536 185 87 251 39 205 99
---
EBITDA, as adjusted $48,097 $47,290 $50,602 $52,975 $50,433 $53,553 $54,682
---
EBITDA margin 35.5% 34.9% 36.9% 37.6% 35.8% 37.8% 38.4%
---
EBITDA, as adjusted, margin 35.9% 35.1% 37.0% 37.8% 35.8% 38.0% 38.4%
---
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes - sequential periods
---
($ in 000's)
- unaudited Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2019 2019 2019 2020 2020 2020
--- ---
Service
revenue, as
reported -
current
period $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302
---
Impact of
foreign
currencies
on service
revenue 135 260 176 88 184 202 (1,616)
---
Service
revenue -as
adjusted
for currency
impact (1) $134,272 $135,049 $137,118 $140,380 $141,099 $141,192 $140,686
---
Service
revenue, as
reported -
prior
sequential
period $132,049 $134,137 $134,789 $136,942 $140,292 $140,915 $140,990
---
Constant
currency
(decrease)
increase $2,223 $912 $2,329 $3,438 $807 $277 $(304)
---
Constant
currency
percent
(decrease)
increase 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% (0.2)%
---
(1) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the prior
sequential period. The Company
believes that disclosing
quarterly sequential revenue
growth without the impact of
foreign currencies on service
revenue is a useful measure of
sequential revenue growth.
Service revenue, as adjusted for
currency impact, is an integral
part of the internal reporting
and planning system used by
management as a supplement to
GAAP financial information.
Constant currency impact on revenue changes - prior year periods
---
($ in 000's)
- unaudited Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2019 2019 2019 2020 2020 2020
--- ---
Service
revenue, as
reported -
current
period $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302
---
Impact of
foreign
currencies
on service
revenue 2,078 1,505 1,058 683 746 674 (1,141)
---
Service
revenue -as
adjusted for
currency
impact (2) $136,215 $136,294 $138,000 $140,975 $141,661 $141,664 $141,161
---
Service
revenue, as
reported -
prior year
period $128,706 $129,296 $130,139 $132,049 $134,137 $134,789 $136,942
---
Constant
currency
increase $7,509 $6,998 $7,861 $8,926 $7,524 $6,875 $4,219
---
Percent
increase 5.8% 5.4% 6.0% 6.8% 5.6% 5.1% 3.1%
---
(2) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the
comparable prior year period.
The Company believes that
disclosing year over year
revenue growth without the
impact of foreign currencies on
service revenue is a useful
measure of revenue growth.
Service revenue, as adjusted for
currency impact, is an integral
part of the internal reporting
and planning system used by
management as a supplement to
GAAP financial information.
Non-GAAP gross profit and Non-GAAP gross margin
---
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
---
($ in 000's) - unaudited
---
Service revenue total $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302
---
Minus - Network operations expense including equity-based compensation and
including depreciation and amortization expense 74,413 74,386 75,259 75,992 75,429 73,782 76,138
---
GAAP Gross Profit (1) $59,724 $60,403 $61,683 $64,300 $65,486 $67,208 $66,164
---
Plus - Equity-based compensation - network operations expense 180 226 282 306 252 305 346
---
Plus - Depreciation and amortization expense 20,263 19,979 20,006 20,002 19,508 19,896 21,619
---
Non-GAAP Gross Profit (2) $80,167 $80,608 $81,971 $84,608 $85,246 $87,409 $88,129
---
GAAP Gross Margin (1) 44.5% 44.8% 45.0% 45.8% 46.5% 47.7% 46.5%
---
Non-GAAP Gross Margin (2) 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9%
---
(1) GAAP gross profit is defined as
total service revenue less network
operations expense, depreciation
and amortization and equity based
compensation included in network
operations expense. GAAP gross
margin is defined as GAAP gross
profit divided by total service
revenue.
(2) Non-GAAP gross profit represents
service revenue less network
operations expense, excluding
equity based compensation and
amounts shown separately
(depreciation and amortization
expense). Non-GAAP gross margin
is defined as non-GAAP gross
profit divided by total service
revenue. Management believes that
non-GAAP gross profit and non-
GAAP gross margin are relevant
metrics to provide to investors,
as they are metrics that
management uses to measure the
margin and amount available to the
Company after network service
costs, in essence these are
measures of the efficiency of the
Company's network.
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio and net leverage ratio are shown below.
($ in 000's) - unaudited As of June 30, 2020 As of September 30, 2020
---
Cash and cash equivalents $417,026 $393,293
---
Debt
---
Capital (finance) leases - current portion 14,734 15,252
---
Capital (finance) leases - long term 189,044 197,688
---
Senior secured notes 445,000 445,000
---
Senior unsecured euro 2024 notes 393,011 410,365
---
Note payable 12,831 10,404
---
Total debt 1,054,620 1,078,709
---
Total net debt 637,594 685,416
---
Trailing 12 months EBITDA, as adjusted 207,563 211,643
---
Gross leverage ratio 5.08 5.10
---
Net leverage ratio 3.07 3.24
---
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 SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
2020 2019
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $
393,293 $
399,422
Accounts receivable, net of allowance for credit losses of $2,204 and $1,771, respectively 42,053 40,484
Prepaid expenses and other current assets 40,007 35,822
Total current assets 475,353 475,728
Property and equipment, net 421,251 368,929
Right-of-use leased assets 90,400 73,460
Deposits and other assets 13,910 14,007
Total assets $
1,000,914 $
932,124
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
11,983 $
11,075
Accrued and other current liabilities 47,714 51,301
Installment payment agreement, current portion, net of discounts of $245 and $350, respectively 8,292 9,063
Current maturities, operating lease liabilities 12,006 10,101
Current maturities, finance lease obligations 15,252 8,154
Total current liabilities 95,247 89,694
Senior secured 2022 notes, net of unamortized debt costs of $1,267 and $1,897, 444,389 444,088
respectively and including premiums of $656 and $985, respectively
Senior unsecured 2024 Euro notes, net of unamortized debt costs of $3,166 and 406,034 150,001
$1,410, respectively and net of discounts of $1,164 and $0, respectively
Senior unsecured 2021 notes, net of unamortized debt costs of $857 188,368
Operating lease liabilities, net of current maturities 101,447 86,690
Finance lease obligations, net of current maturities 197,688 161,635
Other long term liabilities 16,800 15,327
Total liabilities 1,261,605 1,135,803
Commitments and contingencies:
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,284,336 and 47 47
46,840,434 shares issued and outstanding, respectively
Additional paid-in capital 513,454 493,178
Accumulated other comprehensive income - foreign currency translation (7,498) (12,326)
Accumulated deficit (766,694) (684,578)
Total stockholders' deficit (260,691) (203,679)
Total liabilities and stockholders' deficit $
1,000,914 $
932,124
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEMPTEMBER 30, 2019
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Three Months
Ended Ended
September 30, 2020 September 30, 2019
(Unaudited) (Unaudited)
Service revenue $
142,302 $
136,942
Operating expenses:
Network operations (including $346 and $282 of equity-based compensation 54,519 55,253
expense, respectively, exclusive of depreciation and amortization shown
separately below)
Selling, general, and administrative (including $6,176 and $4,515 of equity-based 39,722 35,971
compensation expense, respectively)
Depreciation and amortization 21,619 20,006
Total operating expenses 115,860 111,230
Loss on finance leases amendment (505)
Gains on equipment transactions 99 87
Operating income 26,036 25,799
Interest expense (15,760) (15,191)
Unrealized foreign exchange (loss) gain on 2024 Euro Notes (17,315) 6,162
Interest income and other, net 484 2,185
(Loss) income before income taxes (6,555) 18,955
Income tax benefit (provision) 1,600 (5,254)
Net (loss) income $
(4,955) $
13,701
Comprehensive (loss) income:
Net (loss) income $
(4,955) $
13,701
Foreign currency translation adjustment 5,408 (4,709)
Comprehensive income $
453 $
8,992
Net (loss) income per common share:
Basic net (loss) income per common share $
(0.11) $
0.30
Diluted net (loss) income per common share $
(0.11) $
0.30
Dividends declared per common share $
0.705 $
0.620
Weighted-average common shares - basic 45,815,718 45,438,656
Weighted-average common shares - diluted 45,815,718 46,019,691
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Nine Months Nine Months
Ended Ended
September 30, 2020 September 30, 2019
(Unaudited) (Unaudited)
Service revenue $
424,205 $
405,866
Operating expenses:
Network operations (including $903 and $688 of equity-based compensation 164,326 163,811
expense, respectively, exclusive of depreciation and amortization shown
separately below)
Selling, general, and administrative (including $16,776 and $12,832 of equity- 119,232 110,396
based compensation expense, respectively)
Depreciation and amortization 61,022 60,246
Total operating expenses 344,580 334,453
Loss on finance lease amendments (423)
Gains on equipment transactions 343 808
Operating income 79,545 72,221
Interest expense (46,481) (42,243)
Realized foreign exchange gain on issuance of 2024 Euro Notes 2,547
Unrealized (loss) gain on foreign exchange on 2024 Euro Notes (17,827) 6,339
Interest income and other, net 430 5,588
Loss on debt extinguishment and redemption- 2021 Notes (638)
Income before income taxes 17,576 41,905
Income tax provision (4,740) (11,851)
Net income $
12,836 $
30,054
Comprehensive income:
Net income $
12,836 $
30,054
Foreign currency translation adjustment 4,828 (4,748)
Comprehensive income $
17,664 $
25,306
Net income per common share:
Basic net income per common share $
0.28 $
0.66
Diluted net income per common share $
0.28 $
0.65
Dividends declared per common share $
2.045 $
1.800
Weighted-average common shares - basic 45,818,677 45,428,305
Weighted-average common shares - diluted 46,598,870 45,948,331
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
(IN THOUSANDS)
Three months Three months
Ended Ended
September 30, 2020 September 30, 2019
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net (loss) income $
(4,955) $
13,701
Adjustments to reconcile net
(loss) income to net cash
provided by operating
activities:
Depreciation and
amortization 21,619 20,006
Amortization of debt costs,
discounts and premiums 496 486
Equity-based compensation
expense (net of amounts
capitalized) 6,522 4,796
Unrealized losses (gains) on
foreign exchange 17,378 (6,128)
Gains -equipment
transactions and other, net 406 176
Deferred income taxes (2,153) 4,454
Changes in operating assets
and liabilities:
Accounts receivable (1,009) (1,048)
Prepaid expenses and other
current assets (788) (1,315)
Accounts payable, accrued
liabilities and other long-
term liabilities (4,305) (3,738)
Deposits and other assets (231) 2,053
Net cash provided by
operating activities 32,980 33,443
Cash flows from investing
activities:
Purchases of property and
equipment (13,296) (12,051)
Net cash used in investing
activities (13,296) (12,051)
Cash flows from financing
activities:
Dividends paid (32,657) (28,565)
Purchases of common stock (270)
Principal payments on
installment payment
agreement (2,727) (2,574)
Principal payments of
finance lease obligations (9,509) (2,029)
Proceeds from exercises of
stock options 186 351
Net cash (used in) financing
activities (44,977) (32,817)
Effect of exchange rates
changes on cash 1,560 (1,583)
Net decrease in cash and
cash equivalents (23,733) (13,008)
Cash and cash equivalents,
beginning of period 417,026 409,279
Cash and cash equivalents,
end of period $
393,293 $
396,271
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
(IN THOUSANDS)
Nine months Nine months
Ended Ended
September 30, 2020 September 30, 2019
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $
12,836 $
30,054
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 61,022 60,246
Amortization of debt costs, discounts and premiums 1,426 1,328
Equity-based compensation expense (net of amounts capitalized) 17,679 13,520
Loss on debt extinguishment and redemption - 2021 Notes 638
Unrealized losses (gains) on foreign exchange 17,281 (6,305)
Realized foreign exchange gain on issuance of 2024 Notes (2,547)
Gains - equipment transactions and other, net 80 (131)
Deferred income taxes 2,100 9,285
Changes in operating assets and liabilities:
Accounts receivable (1,102) (43)
Prepaid expenses and other current assets (3,253) (4,862)
Accounts payable, accrued liabilities and other long-term liabilities (2,783) 1,350
Deposits and other assets (628) (1,730)
Net cash provided by operating activities 102,749 102,712
Cash flows from investing activities:
Purchases of property and equipment (40,092) (37,059)
Net cash used in investing activities (40,092) (37,059)
Cash flows from financing activities:
Dividends paid (94,952) (82,871)
Purchases of common stock (270)
Redemption and extinguishment of 2021 Notes (189,225)
240,285 152,128
Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs
of $2,137 and $1,556, respectively
Principal payments on installment payment agreement (7,855) (7,348)
Principal payments of finance lease obligations (19,392) (7,035)
Proceeds from exercises of stock options 1,175 1,270
Net cash (used in) provided by financing activities (70,234) 56,144
Effect of exchange rates changes on cash 1,448 (1,619)
Net (decrease) increase in cash and cash equivalents (6,129) 120,178
Cash and cash equivalents, beginning of period 399,422 276,093
Cash and cash equivalents, end of period $
393,293 $
396,271
Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions. The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Numerous factors could cause or contribute to such differences, including the impact of the COVID-19 pandemic and the related government policies; future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules by the United States Federal Communications Commission and in the area of data protection; 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 Quarterly Report on Form 10-Q for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020 and our Annual Report on Form 10-K for the year ended December 31, 2019. 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.
View original content to download multimedia:http://www.prnewswire.com/news-releases/cogent-communications-reports-third-quarter-2020-results-and-increases-its-regular-quarterly-dividend-on-its-common-stock-by-0-025--301166728.html
SOURCE Cogent Communications Holdings, Inc.
