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Cogent Communications Reports Second Quarter 2019 Results and Increases Regular Quarterly Dividend on Common Stock

WASHINGTON, Aug. 8, 2019 /PRNewswire/ --

Cogent Communications Logo. (PRNewsFoto/Cogent Communications) (PRNewsfoto/Cogent Communications Holdings,)

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.
  • 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%.
  • 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
  • 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. (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 (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
quarters (6)

2.0%

1.1%

1.1%

1.8%

1.7%

0.7%

Constant currency total revenue quarterly growth rate – year over
year quarters (6)

7.0%

6.3%

6.2%

6.2%

5.8%

5.4%

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
("FTE") per month

5.7

5.7

5.8

5.7

5.1

4.9

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
2018

Q2
2018

Q3
2018

Q4
2018

Q1
2019

Q2 
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

2018

Q2

2018

Q3

2018

Q4

2018

Q1
2019

Q2
2019

Service revenue, as reported – current
period

$128,706

$129,296

$130,139

$132,049

$134,137

$134,789

Impact of foreign currencies on service
revenue

(981)

802

613

465

135

260

Service revenue - as adjusted  for
currency impact (1)

$127,725

$130,098

$130,752

$132,514

$134,272

$135,049

Service revenue, as reported – prior
sequential period

$125,226

$128,706

$129,296

$130,139

$132,049

$134,137

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
2018

Q2
2018

Q3
2018

Q4
2018

Q1
2019

Q2
2019

Service revenue, as reported – current
period

$128,706

$129,296

$130,139

$132,049

$134,137

$134,789

Impact of foreign currencies on service
revenue

(3,280)

(1,937)

445

896

2,078

1,505

Service revenue - as adjusted for
currency impact  (2)

$125,426

$127,359

$130,584

$132,945

$136,215

$136,294

Service revenue, as reported – prior
year period

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

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
including equity-based compensation
and including depreciation and
amortization expense

74,663

74,595

74,891

76,612

74,413

74,386

GAAP Gross Profit (1)

$54,043

$54,701

$55,248

$55,437

$59,724

$60,403

Plus  - Equity-based compensation –
network operations expense

189

232

250

224

180

226

Plus – Depreciation and amortization
expense

19,788

20,216

20,276

20,952

20,263

19,979

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,
2019


December 31,
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,
respectively


40,684


41,709


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,
respectively


8,693


8,283


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,
respectively and including premium of $1,197 and $1,405, respectively


443,896


443,710


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,
respectively


188,054


187,749


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
46,336,499 shares issued and outstanding, respectively


47


46


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
Ended
June 30, 2019


Three Months
Ended
June 30, 2018




(Unaudited)


(Unaudited)


Service revenue


$

134,789


$

129,296


Operating expenses:






Network operations (including $226 and $232 of equity-based compensation
expense, respectively, exclusive of depreciation and amortization shown
separately below)


54,407


54,379


Selling, general, and administrative (including $5,063 and $4,463 of equity-
based compensation expense, respectively)


38,566


33,704


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
Ended
June 30, 2019


Six Months
Ended
June 30, 2018




(Unaudited)


(Unaudited)


Service revenue


$

268,930


$

258,002


Operating expenses:






Network operations (including $406 and $421 of equity-based compensation
expense, respectively, exclusive of depreciation and amortization shown
separately below)


108,557


109,252


Selling, general, and administrative (including $8,318 and $8,058 of equity-
based compensation expense, respectively)


74,427


67,227


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
Ended
June 30, 2019


Three months
Ended
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
Ended
June 30, 2019


Six months
Ended
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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