Cogent Communications Reports Fourth Quarter and Full Year 2020 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025
WASHINGTON, Feb. 25, 2021 /PRNewswire/ --
Financial and Business Highlights
-- Cogent approved an increase of $0.025 per share to its regular quarterly
dividend for a total of $0.755 per share for Q1 2021 as compared to
$0.730 per share for Q4 2020 - Cogent's thirty-fourth consecutive
quarterly dividend increase.
-- The Q1 2021 $0.755 dividend per share represents an annual increase
of 14.4% from the dividend per share of $0.660 for Q1 2020.
-- Dividends for 2020 totaled $129.4 million, or $$2.780 per share, with
63.1% treated as a return of capital and 36.9% treated as dividends for
US federal income tax purposes.
-- Service revenue increased by 1.1% from Q3 2020 to Q4 2020, increased
from Q4 2019 to Q4 2020 by 2.6% and increased from full year 2019 to
full year 2020 by 4.0%.
-- GAAP gross profit increased by 3.6% from Q4 2019 to $66.6 million for Q4
2020 and increased from full year 2019 to full year 2020 by 2.3% to
$251.9 million. Non-GAAP gross profit increased by 5.6% from Q4 2019 to
$89.4 million for Q4 2020 and increased from full year 2019 to full year
2020 by 7.0% to $350.2 million.
-- GAAP gross margin increased by 50 basis points from Q4 2019 to Q4
2020 to 46.3% and increased from full year 2019 to full year 2020 by
160 basis points to 46.7%. Non-GAAP gross margin increased by 180
basis points from Q4 2019 to Q4 2020 to 62.1% and increased from
full year 2019 to full year 2020 by 170 basis points to 61.6%.
-- Net cash provided by operating activities was $37.6 million for Q4 2020,
$33.0 million for Q3 2020 and $46.1 million for Q4 2019. Net cash
provided by operating activities was $148.8 million for full year 2019
and $140.3 million for full year 2020.
-- Sales rep productivity - units per full time equivalent sales rep per
month - increased from 3.7 for Q3 2020 to 4.2 for Q4 2020.
-- EBITDA margin increased by 30 basis points from Q3 2020 to 38.7% for Q4
2020, increased by 110 basis points from Q4 2019 to Q4 2020 and
increased from full year 2019 to full year 2020 by 150 basis points to
37.7%.
-- EBITDA increased by 2.0% from Q3 2020 to $55.7 million for Q4 2020,
increased by 5.6% from Q4 2019 to Q4 2020 and increased from full year
2019 to full year 2020 by 8.1% to $214.0 million.
Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $143.9 million for the three months ended December 31, 2020, an increase of 1.1% from the three months ended September 30, 2020 and an increase of 2.6% from the three months ended December 31, 2019. Service revenue was $568.1 million for the year ended December 31, 2020, an increase of 4.0% from the year ended December 31, 2019. Foreign exchange positively impacted service revenue growth from the three months ended September 30, 2020 to the three months ended December 31, 2020 by $0.6 million, positively impacted service revenue growth from the three months ended December 31, 2019 to the three months ended December 31, 2020 by $1.9 million and positively impacted service revenue growth from the year ended December 31, 2019 to the year ended December 31, 2020 by $1.5 million. On a constant currency basis, service revenue increased by 0.7% from the three months ended September 30, 2020 to the three months ended December 31, 2020, grew by 1.2% from the three months ended December 31, 2019 to the three months ended December 31, 2020 and grew by 3.7% from the year ended December 31, 2019 to the year ended December 31, 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 $107.1 million for the three months ended December 31, 2020; an increase of 1.9% from the three months ended September 30, 2020 and an increase of 4.3% over the three months ended December 31, 2019. On-net revenue was $419.5 million for the year ended December 31, 2020; an increase of 5.7% over the year ended December 31, 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 $36.7 million for the three months ended December 31, 2020; a decrease of 1.1% from the three months ended September 30, 2020 and a decrease of 2.2% from the three months ended December 31, 2019. Off-net revenue was $148.1 million for the year ended December 31, 2020; a decrease of 0.5% from the year ended December 31, 2019.
Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.
GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 3.6% from the three months ended December 31, 2019 to $66.6 million for the three months ended December 31, 2020 and increased by 0.7% from the three months ended September 30, 2020. GAAP gross profit increased by 7.9% from the year ended December 31, 2019 to $265.5 million for the year ended December 31, 2020. GAAP gross margin was 46.3% for the three months ended December 31, 2020, 45.8% for the three months ended December 31, 2019 and 46.5% for the three months ended September 30, 2020. GAAP gross margin was 46.7% for the year ended December 31, 2020 and 45.1% for the year ended December 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 $4.1 million for the three months ended December 31, 2020, $4.3 million for the three months ended December 31, 2019, $3.9 million for the three months ended September 30, 2020, $15.1 million for the year ended December 31, 2020 and $14.9 million for the year ended December 31, 2019.
Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 5.6% from the three months ended December 31, 2019 to $89.4 million for the three months ended December 31, 2020 and increased by 1.4% from the three months ended September 30, 2020. Non-GAAP gross profit increased by 7.0% from the year ended December 31, 2019 to $350.2 million for the year ended December 31, 2020. Non-GAAP gross profit margin was 62.1% for the three months ended December 31, 2020, 60.3% for the three months ended December 31, 2019 and 61.9% for the three months ended September 30, 2020. Non-GAAP gross margin was 61.6% for the year ended December 31, 2020 and 59.9% for the year ended December 31, 2019.
Net cash provided by operating activities decreased by 18.5% from the three months ended December 31, 2019 to $37.6 million for the three months ended December 31, 2020 and increased by 13.9% from the three months ended September 30, 2020. Net cash provided by operating activities decreased by 5.7% from the year ended December 31, 2019 to $140.3 million for the year ended December 31, 2020.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 5.6% from the three months ended December 31, 2019 to $55.7 million for the three months ended December 31, 2020 and increased by 2.0% from the three months ended September 30, 2020. EBITDA increased by 8.1% from the year ended December 31, 2019 to $214.0 million for the year ended December 31, 2020. EBITDA margin was 38.7% for the three months ended December 31, 2020, 37.6% for the three months ended December 31, 2019 and 38.4% for the three months ended September 30, 2020. EBITDA margin was 37.7% for the year ended December 31, 2020 and 36.2% for the year ended December 31, 2019.
Basic and diluted net (loss) income per share was $(0.14) for the three months ended December 31, 2020, $0.16 for the three months ended December 31, 2019 and $(0.11) for the three months ended September 30, 2020. Basic net income per share was $0.14 for the year ended December 31, 2020 and $0.82 for the year ended December 31, 2019. Diluted net income per share was $0.13 for the year ended December 31, 2020 and $0.81 for the year ended December 31, 2019.
Unrealized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Unsecured Notes were $(19.2) million for the three months ended December 31, 2020, $(4.1) million for the three months ended December 31, 2019, $(17.3) million for the three months ended September 30, 2020, $(37.0) million for the year ended December 31, 2020 and $2.3 million for the year ended December 31, 2019.
Total customer connections increased by 3.5% from December 31, 2019 to 89,600 as of December 31, 2020 and increased by 1.2% from September 30, 2020. On-net customer connections increased by 3.7% from December 31, 2019 to 77,305 as of December 31, 2020 and increased by 1.3% from September 30, 2020. Off-net customer connections increased by 2.7% from December 31, 2019 to 11,970 as of December 31, 2020 and increased by 1.0% from September 30, 2020.
The number of on-net buildings increased by 113 from December 31, 2019 to 2,914 as of December 31, 2020 and increased by 30 from September 30, 2020.
Quarterly Dividend Increase Approved
On February 24, 2021, Cogent's Board approved a regular quarterly dividend of $0.755 per common share payable on March 26, 2021 to shareholders of record on March 12, 2021. This first quarter 2021 regular dividend represents a 3.4% increase of $0.025 per share from the fourth quarter 2020 regular dividend of $0.730 per share and an annual increase of 14.4% from the Q1 2020 dividend of $0.660 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.
Tax Treatment of 2020 Dividends
Cogent paid four quarterly dividends in 2020 totaling $129.4 million, or $2.78 per share. The expected tax treatment of these dividends are generally that 63.1% are treated as a return of capital and 36.9% are generally treated as dividends for United States federal income tax purposes. While the above information includes general statements about the tax classification of dividends paid on Cogent common stock, these statements do not constitute tax advice. The taxation of corporate distributions can be complex, and stockholders are encouraged to consult their tax advisers to determine what impact the above information may have on their specific tax situation.
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.
The ongoing impact of the COVID-19 pandemic and related government restrictions on Cogent's business is unknown as a significant amount of uncertainty and volatility remains. Cogent does not know the ultimate scope and duration of the pandemic, the availability and efficacy of vaccines and therapeutic treatments, government actions that have been taken, or may be taken in the future in response to the pandemic and global economic conditions during and after the pandemic. While Cogent's workforce is working remotely, Cogent provides no assurance that this will be sufficient to protect its workforce or its key employees. Moreover, Cogent's results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue. Cogent may also experience slowdowns in new customer orders, find it difficult to collect from customers who are experiencing financial distress, undergo an increase in customer churn, encounter difficulties accessing the buildings and locations where Cogent installs new services and serves existing customers, or have difficulties procuring, shipping or installing necessary equipment on its network. Cogent may also find that its largest customer base, which is served primarily in its multi-tenant office buildings, may be adversely affected by falling demand for commercial office space in central business districts as companies located in these buildings elect not to return to their office space either on a temporary or even permanent basis or slow the pace of opening new offices. In addition, Cogent's corporate customer base may reduce their overall number of locations due to adverse economic conditions or new working configurations which may adversely affect Cogent's number of corporate connections and service revenues. As a result, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact Cogent's business well into the future. These and other risks will be described in more detail in Cogent's Annual Report on Form 10-K for the year ended December 31, 2020 and are set forth in its Quarterly Reports on Form 10-Q for the quarters ended September 30, 2020, 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 February 25, 2021 to discuss Cogent's operating results for the fourth quarter of 2020 and full year 2020 and to discuss Cogent's expectations for full year 2021. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call. A downloadable file of Cogent's "Summary of Financial and Operational Results" and a transcript of its conference call will also be available on Cogent's website following the conference call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in 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 Q4 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 $107,109
---
% Change from previous
Qtr. 1.9% 0.3% 2.0% 3.3% 0.8% 0.3% 1.2% 1.9%
---
Off-Net revenue $36,843 $37,191 $37,418 $37,479 $37,321 $37,044 $37,092 $36,672
---
% Change from previous
Qtr. 0.8% 0.9% 0.6% 0.2% -0.4% -0.7% 0.1% -1.1%
---
Non-Core revenue (1) $111 $126 $108 $130 $137 $146 $119 $120
---
% Change from previous
Qtr. -24.5% 13.5% -14.3% 20.4% 5.4% 6.6% -18.5% 0.8%
---
Service revenue -
total $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302 $143,901
---
% Change from previous
Qtr. 1.6% 0.5% 1.6% 2.4% 0.4% 0.1% 0.9% 1.1%
---
Constant currency
total revenue
quarterly growth rate
- sequential quarters
(6) 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% -0.2% 0.7%
---
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% 1.2%
---
Excise Taxes included
in service revenue $3,391 $3,191 $3,998 $4,334 $3,743 $3,298 $3,902 $4,144
---
% Change from previous
Qtr. 4.9% -5.9% 25.3% 8.4% -13.6% -11.9% 18.3% 6.2%
---
Network operations
expenses (2) $53,970 $54,181 $54,971 $55,684 $55,669 $53,581 $54,173 $54,513
---
% Change from previous
Qtr. -2.6% 0.4% 1.5% 1.3% -% -3.8% 1.1% 0.6%
---
GAAP gross profit (3) $59,724 $60,403 $61,683 $64,300 $65,486 $67,208 $66,164 $66,617
---
% Change from previous
Qtr. 7.7% 1.1% 2.1% 4.2% 1.8% 2.6% -1.6% 0.7%
---
GAAP gross margin (3) 44.5% 44.8% 45.0% 45.8% 46.5% 47.7% 46.5% 46.3%
---
Non-GAAP gross profit
(4) (6) $80,167 $80,608 $81,971 $84,608 $85,246 $87,409 $88,129 $89,388
---
% Change from previous
Qtr. 4.6% 0.6% 1.7% 3.2% 0.8% 2.5% 0.8% 1.4%
---
Non-GAAP gross margin
(4) (6) 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9% 62.1%
---
Selling, general and
administrative
expenses (5) $32,568 $33,503 $31,456 $31,884 $34,852 $34,061 $33,546 $33,713
---
% Change from previous
Qtr. 12.2% 2.9% -6.1% 1.4% 9.3% -2.3% -1.5% 0.5%
---
Depreciation and
amortization expense $20,263 $19,979 $20,006 $20,002 $19,508 $19,896 $21,619 $22,455
---
% Change from previous
Qtr. -3.3% -1.4% 0.1% -% -2.5% 2.0% 8.7% 3.9%
---
Equity-based
compensation expense $3,434 $5,289 $4,797 $4,940 $5,075 $6,083 $6,522 $5,846
---
% Change from previous
Qtr. -22.1% 54.0% -9.3% 3.0% 2.7% 19.9% 7.2% -10.4%
---
Operating income $24,400 $22,022 $25,799 $28,033 $25,850 $27,574 $26,036 $27,384
---
% Change from previous
Qtr. 9.4% -9.7% 17.2% 8.7% -7.8% 6.7% -5.6% 5.2%
---
Interest expense $13,456 $13,595 $15,191 $15,211 $15,220 $15,499 $15,760 $16,007
---
% Change from previous
Qtr. -0.4% 1.0% 11.7% 0.1% 0.1% 1.8% 1.7% 1.6%
---
Net income (loss) $9,217 $7,136 $13,701 $7,465 $9,227 $8,564 $(4,955) $(6,620)
---
Realized and
unrealized gains
(losses) on 2024 Euro
Notes
$- $177 $6,128 $(4,068) $2,908 $(873) $(17,315) $(19,170)
--- ---
Basic net income
(loss) per common
share $0.20 $0.16 $0.30 $0.16 $0.20 $0.19 $(0.11) $(0.14)
---
Diluted net income
(loss) per common
share $0.20 $0.16 $0.30 $0.16 $0.20 $0.18 $(0.11) $(0.14)
---
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 45,904,943
---
% Change from previous
Qtr. -0.1% 0.3% 0.2% 0.3% 0.2% 0.2% 0.1% 0.2%
---
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 45,904,943
---
% Change from previous
Qtr. -0.3% 0.6% 0.2% 0.3% 0.5% 0.6% -1.9% 0.2%
---
EBITDA (6) $47,561 $47,105 $50,515 $52,724 $50,394 $53,348 $54,583 $55,675
---
% Change from previous
Qtr. -% -1.0% 7.2% 4.4% -4.4% 5.9% 2.3% 2.0%
--- ---
EBITDA margin 35.5% 34.9% 36.9% 37.6% 35.8% 37.8% 38.4% 38.7%
---
Gains on asset related
transactions $536 $185 $87 $251 $39 $205 $99 $10
---
EBITDA, as adjusted
(6) $48,097 $47,290 $50,602 $52,975 $50,433 $53,553 $54,682 $55,685
---
% Change from previous
Qtr. 0.9% -1.7% 7.0% 4.7% -4.8% 6.2% 2.1% 1.8%
---
EBITDA, as adjusted,
margin 35.9% 35.1% 37.0% 37.8% 35.8% 38.0% 38.4% 38.7%
---
Net cash provided by
operating activities $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 $32,980 $37,571
---
% Change from previous
Qtr. -29.7% 41.9% -17.7% 37.8% -38.3% 45.2% -20.2% 13.9%
---
Capital expenditures $13,288 $11,720 $12,051 $9,899 $12,866 $13,930 $13,296 $15,860
---
% Change from previous
Qtr. 21.5% -11.8% 2.8% -17.9% 30.0% 8.3% -4.6% 19.3%
---
Principal payments of
capital (finance)
lease obligations $3,030 $1,976 $2,029 $2,056 $6,167 $3,716 $9,509 $4,598
---
% Change from previous
Qtr. 42.4% -34.8% 2.7% 1.3% 200.0% -39.7% 155.9% -51.6%
---
Dividends paid $26,565 $27,741 $28,565 $29,776 $30,557 $31,738 $32,657 $34,460
---
Purchases of common
stock
$ -
$ -
$ -
$ -
$ -
$- $270 $4,225
--- ---
Gross Leverage Ratio 4.28 5.08 4.97 4.86 4.78 5.08 5.10 5.14
---
Net Leverage Ratio 2.92 2.93 2.92 2.86 2.92 3.07 3.24 3.40
---
Customer Connections - end of period
---
On-Net 71,066 72,415 73,870 74,554 75,163 75,927 76,338 77,305
---
% Change from previous
Qtr. 3.3% 1.9% 2.0% 0.9% 0.8% 1.0% 0.5% 1.3%
---
Off-Net 11,138 11,321 11,503 11,660 11,721 11,846 11,849 11,970
---
% Change from previous
Qtr. 1.5% 1.6% 1.6% 1.4% 0.5% 1.1% 0.0% 1.0%
---
Non-Core (1) 318 318 319 325 329 339 322 325
---
% Change from previous
Qtr. -12.2% -% -0.3% 1.9% 1.2% 3.0% -5.0% 0.9%
---
Total customer
connections 82,522 84,054 85,692 86,539 87,213 88,112 88,509 89,600
---
% Change from previous
Qtr. 3.0% 1.9% 1.9% 1.0% 0.8% 1.0% 0.5% 1.2%
---
On-Net Buildings - end of period
---
Multi-Tenant office
buildings 1,746 1,751 1,757 1,767 1,769 1,771 1,783 1,792
---
Carrier neutral data
center buildings 908 933 960 980 1,000 1,029 1,047 1,068
---
Cogent data centers 52 53 54 54 54 54 54 54
---
Total on-net
buildings 2,706 2,737 2,771 2,801 2,823 2,854 2,884 2,914
---
Total carrier neutral
data center nodes 1,071 1,101 1,128 1,153 1,175 1,203 1,225 1,252
---
Square feet - multi-
tenant office
buildings - on-net 949,486,923 951,031,709 954,013,024 957,173,183 961,154,384 962,049,183 968,355,695 976,813,678
---
Network - end of period
---
Intercity route miles 57,426 57,426 57,426 57,600 58,009 58,009 58,142 58,285
---
Metro fiber miles 33,664 34,163 34,985 35,526 36,079 36,438 36,725 37,567
---
Connected networks -
AS's 6,668 6,762 6,844 6,954 7,042 7,133 7,222 7,338
---
Headcount - end of period
---
Sales force - quota
bearing 501 519 530 548 542 572 597 569
---
Sales force -total 639 656 667 686 684 716 740 712
---
Total employees 997 1,026 1,036 1,055 1,052 1,083 1,110 1,083
---
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 4.2
---
FTE - sales reps 464 478 488 502 522 533 563 542
---
(1) Consists of legacy services of
companies whose assets or
businesses were acquired by
Cogent.
(2) Network operations expense excludes
equity-based compensation expense
of $180, $226, $282, $306, $252,
$305, $346 and $316 in the three
month periods ended March 31, 2019
through December 31, 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, $3,902 and
$4,144 in the three month periods
ended March 31, 2019 through
December 31, 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, $6,176 and
$5,530 in the three month periods
ended March 31, 2019 through
December 31, 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 Year Q1 Q2 Q3 Q4 Year
2019 2019 2019 2019 2019 2020 2020 2020 2020 2020
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($ in 000's) - unaudited
---
Net cash
provided by
operating
activities $28,637 $40,632 $33,443 $46,097 $148,809 $28,458 $41,311 $32,980 $37,571 $140,320
---
Changes in
operating
assets and
liabilities 6,727 (5,729) 3,785 (6,557) (1,949) 5,325 $(3,232) $6,255 $1,920 $12,780
---
Cash interest
expense and
income tax
expense 12,197 12,202 13,287 13,184 51,045 16,611 15,269 15,348 16,184 60,895
---
EBITDA $47,561 $47,105 $50,515 $52,724 $197,905 $50,394 $53,348 $54,583 $55,675 $213,995
---
PLUS: Gains on
asset related
transactions 536 185 87 251 1,059 39 205 99 10 352
---
EBITDA, as
adjusted $48,097 $47,290 $50,602 $52,975 $198,964 $50,433 $53,553 $54,682 $55,685 $214,347
---
EBITDA margin 35.5% 34.9% 36.9% 37.6% 36.2% 35.8% 37.8% 38.4% 38.7% 37.7%
---
EBITDA, as
adjusted,
margin 35.9% 35.1% 37.0% 37.8% 36.4% 35.8% 38.0% 38.4% 38.7% 37.7%
---
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes - sequential periods
---
($ in 000's)
- unaudited Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
2019 2019 2019 2019 2019 2020 2020 2020 2020 2020
--- ---
Service
revenue, as
reported -
current
period $134,137 $134,789 $136,942 $140,292 $546,159 $140,915 $140,990 $142,302 $143,901 $568,103
---
Impact of
foreign
currencies
on service
revenue 135 260 176 88 5,286 184 202 (1,616) (621) (1,492)
---
Service
revenue -as
adjusted
for currency
impact (1) $134,272 $135,049 $137,118 $140,380 $551,445 $141,099 $141,192 $140,686 $143,280 $566,611
---
Service
revenue, as
reported -
prior
sequential
period $132,049 $134,137 $134,789 $136,942 $520,193 $140,292 $140,915 $140,990 $142,302 $546,159
---
Constant
currency
(decrease)
increase $2,223 $912 $2,329 $3,438 $31,252 $807 $277 $(304) $978 $20,452
---
Constant
currency
percent
(decrease)
increase 1.7% 0.7% 1.7% 2.5% 6.0% 0.6% 0.2% (0.2)% 0.7% 3.7%
---
(1) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the prior
sequential period. The Company
believes that disclosing
quarterly sequential revenue
growth without the impact of
foreign currencies on service
revenue is a useful measure of
sequential revenue growth.
Service revenue, as adjusted for
currency impact, is an integral
part of the internal reporting
and planning system used by
management as a supplement to
GAAP financial information.
Constant currency impact on revenue changes - prior year periods
---
($ in 000's)
- unaudited Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
2019 2019 2019 2019 2019 2020 2020 2020 2020 2020
--- ---
Service
revenue, as
reported -
current
period $134,137 $134,789 $136,942 $140,292 $546,159 $140,915 $140,990 $142,302 $143,901 $568,103
---
Impact of
foreign
currencies
on service
revenue 2,078 1,505 1,058 683 5,286 746 674 (1,141) (1,891) (1,492)
---
Service
revenue -as
adjusted for
currency
impact (2) $136,215 $136,294 $138,000 $140,975 $551,445 $141,661 $141,664 $141,161 $142,010 $566,611
---
Service
revenue, as
reported -
prior year
period $128,706 $129,296 $130,139 $132,049 $520,193 $134,137 $134,789 $136,942 $140,292 $546,159
---
Constant
currency
increase $7,509 $6,998 $7,861 $8,926 $31,252 $7,524 $6,875 $4,219 $1,718 $20,452
---
Percent
increase 5.8% 5.4% 6.0% 6.8% 6.0% 5.6% 5.1% 3.1% 1.2% 3.7%
---
(2) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the
comparable prior year period.
The Company believes that
disclosing year over year
revenue growth without the
impact of foreign currencies on
service revenue is a useful
measure of revenue growth.
Service revenue, as adjusted for
currency impact, is an integral
part of the internal reporting
and planning system used by
management as a supplement to
GAAP financial information.
Non-GAAP gross profit and Non-GAAP gross margin
---
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Year Q1 2020 Q2 2020 Q3 2020 Q4 2020 Year
2019 2020
---
($ in 000's) - unaudited
---
Service revenue
total $134,137 $134,789 $136,942 $140,292 $546,159 $140,915 $140,990 $142,302 $143,901 $568,103
---
Minus - Network
operations expense
including equity-
based compensation
and including
depreciation and
amortization
expense 74,413 74,386 75,259 75,992 300,050 75,429 73,782 76,138 77,284 302,633
---
GAAP Gross Profit
(1) $59,724 $60,403 $61,683 $64,300 $246,109 $65,486 $67,208 $66,164 $66,617 $265,470
---
Plus - Equity-
based compensation
- network
operations expense 180 226 282 306 994 252 305 346 316 1,219
---
Plus - Depreciation
and amortization
expense 20,263 19,979 20,006 20,002 80,247 19,508 19,896 21,619 22,455 83,477
---
Non-GAAP Gross
Profit (2) $80,167 $80,608 $81,971 $84,608 $327,350 $85,246 $87,409 $88,129 $89,388 $350,166
---
GAAP Gross Margin
(1) 44.5% 44.8% 45.0% 45.8% 45.1% 46.5% 47.7% 46.5% 46.3% 46.7%
---
Non-GAAP Gross
Margin (2) 59.8% 59.8% 59.9% 60.3% 59.9% 60.5% 62.0% 61.9% 62.1% 61.6%
---
(1) GAAP gross profit is defined as
total service revenue less network
operations expense, depreciation
and amortization and equity-based
compensation included in network
operations expense. GAAP gross
margin is defined as GAAP gross
profit divided by total service
revenue.
(2) Non-GAAP gross profit represents
service revenue less network
operations expense, excluding
equity-based compensation and
amounts shown separately
(depreciation and amortization
expense). Non-GAAP gross margin
is defined as non-GAAP gross
profit divided by total service
revenue. Management believes that
non-GAAP gross profit and non-
GAAP gross margin are relevant
metrics to provide to investors,
as they are metrics that
management uses to measure the
margin and amount available to the
Company after network service
costs, in essence these are
measures of the efficiency of the
Company's network.
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio and net leverage ratio are shown below.
($ in
000's)
-
unaudited As of September 30, 2020 As of December 31, 2020
---
Cash and
cash
equivalents $393,293 $371,301
---
Debt
---
Capital
(finance)
leases
-
current
portion 15,252 15,702
---
Capital
(finance)
leases
- long
term 197,688 203,438
---
Senior
Secured
2022
Notes 445,000 445,000
---
Senior
Unsecured
Euro
2024
Notes 410,365 429,264
---
Note
payable 10,404 7,712
---
Total
debt 1,078,709 1,101,116
---
Total
net
debt 685,416 729,815
---
Trailing
12
months
EBITDA,
as
adjusted 211,643 214,353
---
Gross
leverage
ratio 5.10 5.14
---
Net
leverage
ratio 3.24 3.40
---
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
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2019
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2020 2019
---
Assets
Current assets:
Cash and cash equivalents $
371,301 $
399,422
Accounts receivable, net of allowance
for credit losses of $1,921 and $1,771,
respectively 44,185 40,484
Prepaid expenses and other current
assets 40,851 35,822
Total current assets 456,337 475,728
Property and equipment:
Property and equipment 1,515,867 1,366,782
Accumulated depreciation and
amortization (1,085,532) (997,853)
Total property and equipment, net 430,335 368,929
Right-of-use leased assets 99,666 73,460
Deposits and other assets 14,139 14,007
Total assets $
1,000,477 $
932,124
===
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
9,775 $
11,075
Accrued and other current liabilities 51,029 51,301
Current maturities, operating lease
liabilities 11,151 10,101
Installment payment agreement, current
portion, net of discount of $136 and
$350, respectively 6,786 9,063
Finance lease obligations, current
maturities 15,702 8,154
Total current liabilities 94,443 89,694
Senior unsecured 2024 Euro notes, net of
unamortized debt 425,160 150,001
costs of $2,961 and $1,410, respectively
and net of discount of
$1,142 and $0, respectively
Senior secured 2022 notes, net of
unamortized debt costs of 444,492 444,088
$1,052 and $1,897 respectively and including premium of $544
and $985, respectively
Senior unsecured 2021 notes, net of
unamortized debt costs of $857 188,368
Operating lease liabilities, net of
current maturities 111,318 86,690
Finance lease obligations, net of
current maturities 203,438 161,635
Other long-term liabilities 14,792 15,327
Total liabilities 1,293,643 1,135,803
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value;
75,000,000 shares authorized; 47 47
47,214,077 and 46,840,434 shares issued
and outstanding,
respectively
Additional paid-in capital 515,867 493,178
Accumulated other comprehensive income
(loss) (1,306) (12,326)
Accumulated deficit (807,774) (684,578)
Total stockholders' deficit (293,166) (203,679)
Total liabilities and
stockholders' equity $
1,000,477 $
932,124
===
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three Months Three Months
Ended Ended
December 31, 2020 December 31, 2019
Service revenue $
143,901 $
140,292
Operating expenses:
Network operations
(including $316 and $306
of equity- 54,829 55,990
based compensation expense, respectively),
exclusive
of amounts shown separately
Selling, general, and
administrative (including
$5,530 39,243 36,518
and $4,634 of equity-based compensation
expense,
respectively)
Depreciation and
amortization 22,455 20,002
Total operating expenses 116,527 112,510
Gains on equipment
transactions 10 251
Operating income 27,384 28,033
Interest expense (16,007) (15,211)
Unrealized foreign
exchange (loss) gain on
2024 Euro Notes (19,170) (4,068)
Interest income and other 529 2,012
(Loss) income before
income taxes (7,264) 10,766
Income tax benefit
(expense) 644 (3,301)
Net (loss) income $
(6,620) $
7,465
Comprehensive (loss) income:
Net (loss) income $
(6,620) $
7,465
Foreign currency
translation adjustment 6,192 3,350
Comprehensive (loss)
income $
(428) $
10,815
Basic net (loss) income
per common share $
(0.14) $
0.16
Diluted net (loss) income
per common share $
(0.14) $
0.16
Dividends declared per
common share $
0.73 $
0.64
Weighted-average common
shares-basic 45,904,943 45,553,727
Weighted-average common
shares-diluted 45,904,943 46,145,970
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2020
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2020 2019 2018
---
Service revenue $
568,103 $
546,159 $
520,193
Operating expenses:
Network operations (including $1,219, 219,157 219,801 219,526
$994 and $895 of equity-based
compensation expense, respectively),
exclusive of amounts shown separately
Selling, general, and administrative 158,476 146,913 133,858
(including $22,306, $17,466 and
$16,813 of equity-based compensation
expense, respectively)
Depreciation and amortization 83,477 80,247 81,233
Total operating expenses 461,110 446,961 434,617
Gains on equipment transactions 352 1,059 982
Losses on lease terminations (423)
Operating income 106,922 100,257 86,558
Interest expense (62,486) (57,453) (51,056)
Realized foreign exchange gain on 2024 Euro Notes 2,533
Unrealized foreign exchange (loss) gain on 2024 Euro Notes (36,997) 2,271
Loss on debt extinguishment and redemption - 2021 Notes (638)
Interest income and other 978 7,599 5,880
Income before income taxes 10,312 52,674 41,382
Income tax expense (4,096) (15,154) (12,715)
Net income $
6,216 $
37,520 $
28,667
===
Comprehensive income:
Net income $
6,216 $
37,520 $
28,667
Foreign currency translation adjustment 11,020 (1,398) (6,328)
Comprehensive income $
17,236 $
36,122 $
22,339
===
Basic net income per common share $
0.14 $
0.82 $
0.63
Diluted net income per common share $
0.13 $
0.81 $
0.63
Dividends declared per common share $
2.78 $
2.44 $
2.12
Weighted-average common shares-basic 45,947,772 45,542,315 45,280,161
Weighted-average common shares-diluted 46,668,198 46,080,395 45,780,954
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019
(IN THOUSANDS)
Three Months Three Months
Ended Ended
December 31, 2020 December 31, 2019
Cash flows from operating activities:
Net (loss) income $
(6,620) $
7,466
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and
amortization 22,455 20,001
Amortization of debt
discount and premium 468 479
Equity-based compensation
expense (net of amounts
capitalized) 5,846 4,940
Gains-equipment
transactions and other,
net (115) (263)
Unrealized foreign
currency exchange loss
on 2024 Euro notes 19,170 4,068
Deferred income taxes (1,818) 2,873
Changes in operating assets and liabilities:
Accounts receivable (1,600) 1,110
Prepaid expenses and
other current assets 482 1,132
Deposits and other assets (245) 599
Accounts payable, accrued
liabilities and other
long-term liabilities (452) 3,692
Net cash provided by
operating activities 37,571 46,097
Cash flows from investing activities:
Purchases of property and
equipment (15,860) (9,899)
Net cash used in
investing activities (15,860) (9,899)
Cash flows from financing activities:
Dividends paid (34,460) (34,460)
Principal payments of
capital lease
obligations (4,598) (2,056)
Principal payments of
installment payment
agreement (2,692) (2,659)
Purchases of common stock (4,225)
Proceeds from exercises
of common stock options 207 367
Net cash used in
financing activities (45,768) (34,124)
Effect of exchange rate
changes on cash 2,065 1,077
Net (decrease) increase
in cash and cash
equivalents (21,992) 3,151
Cash and cash
equivalents, beginning
of period 393,293 396,271
Cash and cash
equivalents, end of
period $
371,301 $
399,422
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2020
(IN THOUSANDS)
2020 2019 2018
---
Cash flows from operating activities:
Net income $
6,216 $
37,520 $
28,667
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 83,477 80,247 81,233
Amortization of debt discount and
premium 1,894 1,807 1,533
Equity-based compensation expense (net
of amounts capitalized) 23,525 18,460 17,708
Unrealized foreign currency exchange
loss (gain) on 2024 Euro Notes 36,997 (2,271)
Realized foreign currency exchange gain
on 2024 Euro Notes (2,533)
Loss on extinguishment of 2021 notes 638
Gains-equipment transactions and
other, net (546) (358) (1,109)
Deferred income taxes 282 12,158 11,117
Changes in operating assets and
liabilities:
Accounts receivable (2,702) 1,067 (3,204)
Prepaid expenses and other current
assets (2,771) (3,730) (438)
Deposits and other assets (873) (1,131) (1,490)
Accounts payable, accrued liabilities
and other long-term liabilities (3,284) 5,040 (96)
Net cash provided by operating
activities 140,320 148,809 133,921
Cash flows from investing activities:
Purchases of property and equipment (55,952) (46,958) (49,937)
Net cash used in investing activities (55,952) (46,958) (49,937)
Cash flows from financing activities:
Net proceeds from issuance of senior
2024 Euro 240,285 152,134
Notes, net of debt costs of $2,137 and
$1,556,
respectively
Net proceeds from issuance of 2022
Notes, net of debt costs of $1,364 69,861
Redemption and extinguishment of 2021
Notes (189,225)
Dividends paid (129,412) (112,647) (97,887)
Principal payments of finance lease
obligations (23,990) (9,097) (10,286)
Principal payments of installment
payment agreement (10,547) (10,007) (9,437)
Purchases of common stock (4,495) (6,564)
Proceeds from exercises of common stock
options 1,382 1,637 1,768
Net cash (used in) provided by
financing activities (116,002) 22,020 (52,545)
Effect of exchange rate changes on cash 3,513 (542) (2,357)
Net (decrease) increase in cash and
cash equivalents (28,121) 123,329 29,082
Cash and cash equivalents, beginning of
year 399,422 276,093 247,011
Cash and cash equivalents,
end of year $
371,301 $
399,422 $
276,093
===
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 Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q for the quarters ended March 31,2020, June 30, 2020 and September 30, 2020. 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.
