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Cogent Communications Reports Third Quarter 2018 Results and Increases Regular Quarterly Dividend on Common Stock

WASHINGTON, Nov. 1, 2018 /PRNewswire/ --

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

Financial and Business Highlights

  • Cogent approves a 3.7% increase of $0.02 per share to its regular quarterly dividend to $0.56 per share - the twenty-fifth consecutive quarterly dividend increase
  • Service revenue, on a constant currency basis, increased by 1.1% from Q2 2018 to Q3 2018 and increased from Q3 2017 to Q3 2018 by 6.2%
  • EBITDA margin increased by 60 basis points from Q2 2018 to 36.1% and increased by 340 basis points from Q3 2017
  • GAAP gross profit increased by 10.0% from Q3 2017 to $55.2 million for Q3 2018 and GAAP gross margin increased by 160 basis points from Q3 2017 to Q3 2018
  • Cash flow from operations increased by 1.5% from Q2 2018 to Q3 2018 to $31.7 million and increased from Q3 2017 to Q3 2018 by 10.3%

Cogent Communications Holdings, Inc. (CCOI) today announced service revenue of $130.1 million for the three months ended September 30, 2018, an increase of 5.8% from the three months ended September 30, 2017 and an increase of 0.7% from the three months ended June 30, 2018. Foreign exchange negatively impacted service revenue growth from the three months ended June 30, 2018 to the three months ended September 30, 2018 by $0.6 million and negatively impacted service revenue growth from the three months ended September 30, 2017 to the three months ended September 30, 2018 by $0.4 million.  On a constant currency basis, service revenue grew by 1.1% from the three months ended June 30, 2018 to the three months ended September 30, 2018 and grew by 6.2% from the three months ended September 30, 2017 to the three months ended September 30, 2018.

On-net service is provided to customers located in buildings that are physically connected to Cogent's network by Cogent facilities. On-net revenue was $93.8 million for the three months ended September 30, 2018; an increase of 0.8% from the three months ended June 30, 2018 and an increase of 6.7% over the three months ended September 30, 2017.

Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $36.2 million for the three months ended September 30, 2018; an increase of 0.3% from the three months ended June 30, 2018 and an increase of 3.8% over the three months ended September 30, 2017.

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 10.0% from the three months ended September 30, 2017 to $55.2 million for the three months ended September 30, 2018 and increased by 1.0% from the three months ended June 30, 2018. GAAP gross margin was 42.5% for the three months ended September 30, 2018, 40.9% for the three months ended September 30, 2017 and 42.3% for the three months ended June 30, 2018.  Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.0 million for the three months ended September 30, 2018, $3.1 million for the three months ended June 30, 2018 and $2.7 million for the three months ended September 30, 2017.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Non-GAAP gross profit increased by 8.9% from the three months ended September 30, 2017 to $75.8 million for the three months ended September 30, 2018 and increased by 0.8% from the three months ended June 30, 2018. Non-GAAP gross profit margin was 58.2% for the three months ended September 30, 2018, 56.6% for the three months ended September 30, 2017 and 58.1% for the three months ended June 30, 2018. 

Cash flow from operating activities increased by 10.3% from the three months ended September 30, 2017 to $31.7 million for the three months ended September 30, 2018 and increased by 1.5% from the three months ended June 30, 2018.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 16.7% from the three months ended September 30, 2017 to $46.9 million for the three months ended September 30, 2018 and increased by 2.2% from the three months ended June 30, 2018. EBITDA margin was 36.1% for the three months ended September 30, 2018, 32.7% for the three months ended September 30, 2017 and 35.5% for the three months ended June 30, 2018. 

EBITDA, as adjusted, increased by 16.6% from the three months ended September 30, 2017 to $47.4 million for the three months ended September 30, 2018 and increased by 2.3% from the three months ended June 30, 2018. EBITDA, as adjusted, margin was 36.4% for the three months ended September 30, 2018, 33.0% for the three months ended September 30, 2017 and 35.8% for the three months ended June 30, 2018.

Basic net income per share was $0.18 for the three months ended September 30, 2018, $0.08 for the three months ended September 30, 2017 and $0.15 for the three months ended June 30, 2018. Diluted net income per share was $0.18 for the three months ended September 30, 2018, $0.08 for the three months ended September 30, 2017 and $0.14 for the three months ended June 30, 2018.

Total customer connections increased by 12.9% from September 30, 2017 to 78,375 as of September 30, 2018 and increased by 2.9% from June 30, 2018. On-net customer connections increased by 13.5% from September 30, 2017 to 67,370 as of September 30, 2018 and increased by 3.0% from June 30, 2018. Off-net customer connections increased by 10.0% from September 30, 2017 to 10,698 as of September 30, 2018 and increased by 2.1% from June 30, 2018.

The number of on-net buildings increased by 163 on-net buildings from September 30, 2017 to 2,635 on-net buildings as of September 30, 2018 and increased by 36 on-net buildings from June 30, 2018.

Quarterly Dividend Increase Approved
On October 31, 2018, Cogent's board approved a regular quarterly dividend of $0.56 per common share payable on November 30, 2018 to shareholders of record on November 16, 2018. This fourth quarter 2018 regular dividend represents a 3.7% increase of $0.02 per share from the third quarter 2018 regular 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 November 1, 2018 to discuss Cogent's operating results for the third quarter of 2018 and to discuss Cogent's expectations for full year 2018. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call. 

About Cogent Communications
Cogent Communications (CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 195 markets globally.

Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results


Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Metric ($ in 000's, except 
share and per share data) –
unaudited








On-Net revenue

$83,586

$85,586

$87,898

$89,374

$92,387

$93,026

$93,790

  % Change from previous Qtr.

0.1%

2.4%

2.7%

1.7%

3.4%

0.7%

0.8%

Off-Net revenue

$33,386

$33,980

$34,865

$35,662

$36,144

$36,107

$36,202

  % Change from previous Qtr.

4.8%

1.8%

2.6%

2.3%

1.4%

-0.1%

0.3%

Non-Core revenue (1)

$231

$211

$206

$190

$175

$163

$147

  % Change from previous Qtr.

3.1%

-8.7%

-2.4%

-7.8%

-7.9%

-6.9%

-9.8%

Service revenue – total

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

$130,139

  % Change from previous Qtr.

1.4%

2.2%

2.7%

1.8%

2.8%

0.5%

0.7%

Constant currency total
revenue quarterly growth
rate – sequential quarters (4)

1.6%

1.7%

1.2%

1.8%

2.0%

1.1%

1.1%

Constant currency total
revenue quarterly growth
rate – year over year quarters (4)

8.7%

9.6%

7.7%

6.6%

7.0%

6.3%

6.2%

Network operations
expenses (2)

$50,551

$50,974

$53,405

$53,745

$54,686

$54,147

$54,365

  % Change from previous Qtr.

1.2%

0.8%

4.8%

0.6%

1.8%

-1.0%

0.4%

GAAP gross profit (3)

$48,003

$49,765

$50,238

$51,964

$54,043

$54,701

$55,248

  % Change from previous Qtr.

5.7%

3.7%

1.0%

3.4%

4.0%

1.2%

1.0%

GAAP gross margin (3)

41.0%

41.5%

40.9%

41.5%

42.0%

42.3%

42.5%

Non-GAAP gross profit (4) (6)

$66,652

$68,803

$69,564

$71,481

$74,020

$75,149

$75,774

  % Change from previous Qtr.

1.5%

3.2%

1.1%

2.8%

3.6%

1.5%

0.8%

Non-GAAP gross margin (4) (6)

56.9%

57.4%

56.6%

57.1%

57.5%

58.1%

58.2%

Selling, general and
administrative expenses (5)

$28,925

$28,704

$29,360

$28,238

$29,928

$29,241

$28,838

  % Change from previous Qtr.

1.2%

-0.8%

2.3%

-3.8%

6.0%

-2.3%

-1.4%

Depreciation and
amortization expense

$18,538

$18,897

$19,147

$19,344

$19,788

$20,216

$20,276

  % Change from previous Qtr.

-7.6%

1.9%

1.3%

1.0%

2.3%

2.2%

0.3%

Equity-based compensation
expense

$2,647

$3,225

$3,734

$3,684

$3,784

$4,695

$4,821

  % Change from previous Qtr.

-8.0%

21.8%

15.8%

-1.3%

2.7%

24.1%

2.7%

Operating income

$18,666

$19,000

$17,891

$20,534

$20,637

$21,354

$22,255

  % Change from previous Qtr.

26.2%

1.8%

-5.8%

14.8%

0.5%

3.5%

4.2%

Interest expense

$11,891

$12,090

$12,266

$12,222

$12,408

$12,373

$12,767

  % Change from previous Qtr.

12.2%

1.7%

1.5%

-0.4%

1.5%

-0.3%

3.2%

Net income (loss)

$4,136

$4,317

$3,650

$(6,227)

$6,784

$6,552

$8,231

Basic net income (loss) per
common share

$0.09

$0.10

$0.08

$(0.14)

$0.15

$0.15

$0.18

Diluted net income (loss) per
common share

$0.09

$0.10

$0.08

$(0.14)

$0.15

$0.14

$0.18

Weighted average common
shares – basic

44,649,645

44,717,372

44,767,163

44,844,469

44,923,973

45,016,767

45,105,830

  % Change from previous Qtr.

0.2%

0.2%

0.1%

0.2%

0.2%

0.2%

0.2%

Weighted average common
shares – diluted

44,917,014

44,988,655

45,118,607

44,844,469

45,294,697

45,536,473

45,699,635

  % Change from previous Qtr.

0.3%

0.2%

0.3%

-0.6%

1.0%

0.5%

0.4%

EBITDA (6)

$37,727

$40,099

$40,204

$43,243

$44,092

$45,908

$46,936

  % Change from previous Qtr.

1.8%

6.3%

0.3%

7.6%

2.0%

4.1%

2.2%

EBITDA margin

32.2%

33.5%

32.7%

34.5%

34.3%

35.5%

36.1%

Gains on asset related
transactions

$2,124

$1,023

$397

$319

$117

$357

$416

EBITDA, as adjusted (6)

$39,851

$41,122

$40,601

$43,562

$44,209

$46,265

$47,352

  % Change from previous Qtr.

5.6%

3.2%

-1.3%

7.3%

1.5%

4.7%

2.3%

EBITDA, as adjusted, margin

34.0%

34.3%

33.0%

34.8%

34.3%

35.8%

36.4%

 Fees – net neutrality

$2

$188

$824

$260

$14

$39

$108

Net cash provided by
operating activities

$23,514

$28,045

$28,783

$31,360

$30,179

$31,271

$31,745

  % Change from previous Qtr.

-30.6%

19.3%

2.6%

9.0%

-3.8%

3.6%

1.5%

Capital expenditures

$12,249

$12,007

$10,927

$10,618

$14,905

$11,988

$12,107

  % Change from previous Qtr.

70.2%

-2.0%

-9.0%

-2.8%

40.4%

-19.6%

1.0%

Principal payments on
capital leases

$3,854

$2,194

$3,320

$1,833

$2,304

$3,755

$2,099

  % Change from previous Qtr.

37.3%

-43.1%

51.3%

-44.8%

25.7%

63.0%

-44.1%

Dividends paid

$18,999

$19,946

$20,879

$21,833

$22,819

$23,788

$24,764

Purchases of common stock

$ -

$ 1,829

$ -

$ -

$ -

$ -

$ -

Gross Leverage Ratio

4.64

4.62

4.57

4.44

4.33

4.22

4.46

Net Leverage Ratio

2.94

2.98

3.00

2.94

2.94

2.93

2.89

Customer Connections – end
of period








On-Net

54,805

57,307

59,357

61,334

63,366

65,407

67,370

  % Change from previous Qtr.

3.7%

4.6%

3.6%

3.3%

3.3%

3.2%

3.0%

Off-Net

9,055

9,355

9,724

9,953

10,241

10,480

10,698

  % Change from previous Qtr.

5.3%

3.1%

4.2%

2.4%

2.9%

2.3%

2.1%

Non-Core (1)

383

340

336

326

307

306

307

  % Change from previous Qtr.

9.4%

-11.2%

-1.2%

-3.0%

-5.8%

-0.3%

0.3%

Total customer connections

64,243

66,982

69,417

71,613

73,194

76,193

78,375

  %1 Change from previous Qtr.

3.9%

4.3%

3.6%

3.2%

3.2%

3.1%

2.9%

On-Net Buildings – end of period








Multi-Tenant office buildings

1,601

1,618

1,635

1,653

1,672

1,710

1,720

Carrier neutral data center
buildings

752

767

784

800

816

837

863

Cogent data centers

53

53

53

53

53

52

52

Total on-net buildings

2,406

2,438

2,472

2,506

2,541

2,599

2,635

Square feet – multi-tenant
office buildings – on-net

864,432,176

872,293,092

881,184,145

893,580,297

911,283,287

927,410,239

934,535,144

Network  – end of period








Intercity route miles

57,213

57,403

57,403

57,403

57,403

57,403

57,403

Metro fiber miles

30,190

30,516

31,071

31,254

31,850

31,953

32,579

Connected networks – AS's

5,949

5,983

6,076

6,152

6,247

6,363

6,510

Headcount – end of period








Sales force – quota bearing

432

434

444

455

432

438

453

Sales force - total

554

559

565

574

555

566

583

Total employees

900

909

919

929

908

917

938

Sales rep productivity – units
per full time equivalent sales
rep ("FTE") per month

6.1

6.5

5.7

5.8

5.7

5.7

5.8

FTE – sales reps

416

410

420

429

427

413

418



(1)     Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only 
          provided in Toronto, Canada).

(2)     Network operations expense excludes equity-based compensation expense of $111, $141, $179, $173, $189, $232 and $250 in the three 
          month periods ended March 31, 2017 through September 30, 2018, respectively.  Network operations expense includes excise taxes, 
          including Universal Service Fund fees of $2,604, $2,672, $2,691, $2,943, $3,157, $3,108 and $3,010 in the three month periods ended 
          March 31, 2017 through September 30, 2018, respectively. 

(3)     GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based 
          compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service 
          revenue.

(4)     Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts 
          shown separately (depreciation expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  
          Management believes that Non-GAAP gross profit and Non-GAAP gross profit margin are relevant metrics to provide investors, as they are 
          metrics that management uses to measure the margin available to the company after network service costs, in essence a measure of the 
          efficiency of the Company's network.

(5)     Excludes equity-based compensation expense of $2,536, $3,084, $3,555, $3,511, $3,595, $4,463 and $4,571 in the three month periods 
          ended March 31, 2017 through September 30, 2018, respectively. 

(6)     See schedule of non-GAAP metrics below for definitions and reconciliations to GAAP measures below.

Schedules of Non-GAAP Measures 

EBITDA and EBITDA, as adjusted
EBITDA represents net cash flows from operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense.  Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is cash flows provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers.  EBITDA, as adjusted, represents EBITDA plus net gains (losses) on asset related transactions.

The Company believes that EBITDA, and EBITDA, as adjusted, are useful measures of its ability to service debt, fund capital expenditures and expand its business.  EBITDA, and EBITDA, as adjusted are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, and EBITDA, as adjusted are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these metrics are not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of these metrics may also differ from the calculations performed by its competitors and other companies and as such, its utility as a comparative measure is limited.

EBITDA, and EBITDA, as adjusted, are reconciled to cash flows provided by operating activities in the table below.


Q1
2017

Q2
2017

Q3
2017

Q4
2017

Q1
2018

Q2
2018

Q3
2018

($ in 000's) – unaudited








Net cash flows provided by operating
activities

$23,514

$28,045

$28,783

$31,360

$30,179

$31,271

$31,745

Changes in operating assets and liabilities

3,192

950

721

300

2,919

2,408

4,254

Cash interest expense and income tax
expense

11,021

11,104

10,700

11,583

10,994

12,229

10,937

EBITDA

$37,727

$40,099

$40,204

$43,243

$44,092

$45,908

$46,936

PLUS: Gains on asset related transactions

2,124

1,023

397

319

117

357

416

EBITDA, as adjusted

$39,851

$41,122

$40,601

$43,562

$44,209

$46,265

$47,352

EBITDA margin

32.2%

33.5%

32.7%

34.5%

34.3%

35.5%

36.1%

EBITDA, as adjusted, margin

34.0%

34.3%

33.0%

34.8%

34.3%

35.8%

36.4%

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
2017

Q2
2017

Q3
2017

Q4
2017

Q1
2018

Q2
2018

Q3
2018

Service revenue, as reported –
current period

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

$130,139

Impact of foreign currencies on
service revenue

195

(531)

(1,701)

16

(981)

802

613

Service revenue - as adjusted  for currency impact (1)

$117,398

$119,246

$121,268

$125,242

$127,725

$130,098

$130,752

Service revenue, as reported – prior sequential period

$115,596

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

Constant currency increase

$1,802

$2,043

$1,491

$2,273

$2,499

$1,392

$1,456

Constant currency percent increase

1.6%

1.7%

1.2%

1.8%

2.0%

1.1%

1.1%


(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
2017

Q2
2017

Q3
2017

Q4
2017

Q1
2018

Q2
2018

Q3
2018

Service revenue, as reported –
current period

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

$130,139

Impact of foreign currencies on
service revenue

503

743

(1,257)

(2,055)

(3,280)

(1,937)

445

Service revenue - as adjusted for currency impact  (2)

$117,706

$120,520

$121,712

$123,171

$125,426

$127,359

$130,584

Service revenue, as reported – prior year period

$108,291

$109,955

$113,057

$115,596

$117,203

$119,777

$122,969

Constant currency increase

$9,415

$10,565

$8,655

$7,575

$8,223

$7,582

$7,615

Percent increase

8.7%

9.6%

7.7%

6.6%

7.0%

6.3%

6.2%


(2)    Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the 
         average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year 
         revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service 
         revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a 
         supplement to GAAP financial information.

Non-GAAP gross profit and Non-GAAP gross margin

Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.


Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

($ in 000's) – unaudited








Service revenue total

$117,203

$119,777

$122,969

$125,226

$128,706

$129,296

$130,139

Minus - Network operations expense
including equity-based compensation and
including depreciation and amortization
expense

69,200

70,012

72,731

73,262

74,663

74,595

74,891

GAAP Gross Profit (1)

$48,003

$49,765

$50,238

$51,964

$54,043

$54,701

$55,248

Plus  - Equity-based compensation –
network operations expense

111

141

179

173

189

232

250

Plus – Depreciation and amortization
expense

18,538

18,897

19,147

19,344

19,788

20,216

20,276

Non-GAAP Gross Profit (2)

$66,652

$68,803

$69,564

$71,481

$74,020

$75,149

$75,774

GAAP Gross Margin (1)

41.0%

41.5%

40.9%

41.5%

42.0%

42.3%

42.5%

Non-GAAP Gross Margin (2)

56.9%

57.4%

56.6%

57.1%

57.5%

58.1%

58.2%


(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 at June 30, 2018 and September 30, 2018 are shown below.

($ in 000's) – unaudited

As of June 30, 2018

As of September 30, 2018

Cash and cash equivalents

$224,282

$284,558

Debt



Capital leases – current portion

8,428

8,665

Capital leases – long term

151,439

152,954

Senior unsecured notes

189,225

189,225

Senior secured notes

375,000

445,000

Note payable

12,437

12,468

Total debt

736,529

808,312

Total net debt

512,247

523,754

Trailing 12 months EBITDA, as adjusted

174,637

181,388

Gross leverage ratio

4.22

4.46

Net leverage ratio

2.93

2.89

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, 2018 AND DECEMBER 31, 2017

(IN THOUSANDS, EXCEPT SHARE DATA)




September 30,
2018


December 31,
2017




(Unaudited)




Assets






Current assets:






Cash and cash equivalents


$

284,558


$

247,011


Accounts receivable, net of allowance for doubtful accounts of $1,614 and 
     $1,499, respectively


40,993


39,096


Prepaid expenses and other current assets


32,956


20,011


Total current assets


358,507


306,118


Property and equipment, net


381,004


381,282


Deferred tax assets


6,326


17,616


Deposits and other assets


11,482


5,572


Total assets


$

757,319


$

710,588








Liabilities and stockholders' equity






Current liabilities:






Accounts payable


$

8,262


$

11,592


Accrued and other current liabilities


46,728


47,947


Installment payment agreement, current portion, net of discount of $450 and 
     $337, respectively


8,617


7,816


Current maturities, capital lease obligations


8,665


7,171


Total current liabilities


72,272


74,526


Senior secured 2022 notes, net of unamortized debt costs of $2,887 and 
     $1,870, respectively and including premium of $1,507 and $382, 
     respectively


443,620


373,512


Senior unsecured 2021 notes, net of unamortized debt costs of $1,625 and 
     $2,060, respectively


187,600


187,165


Capital lease obligations, net of current maturities


152,954


150,333


Other long term liabilities


26,717


27,596


Total liabilities


883,163


813,132


Commitments and contingencies:






Stockholders' equity:






Common stock, $0.001 par value; 75,000,000 shares authorized; 46,461,371 
     and 45,960,799 shares issued and outstanding, respectively


46


46


Additional paid-in capital


472,817


456,696


Accumulated other comprehensive income — foreign currency translation


(8,672)


(4,600)


Accumulated deficit


(590,035)


(554,686)


Total stockholders' deficit


(125,844)


(102,544)


Total liabilities and stockholders' deficit


$

757,319


$

710,588



COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Three Months
Ended
September 30, 2018


Three Months
Ended
September 30, 2017




(Unaudited)


(Unaudited)


Service revenue


$

130,139


$

122,969


Operating expenses:






Network operations (including $250 and $179 of equity-based compensation 
     expense, respectively, exclusive of depreciation and amortization shown 
     separately below)


54,615


53,584


Selling, general, and administrative (including $4,571 and $3,555 of equity-
     based compensation expense, respectively)


33,409


32,915


Depreciation and amortization


20,276


19,147


Total operating expenses


108,300


105,646


Gains on equipment transactions


416


397


Operating income


22,255


17,720


Interest income and other, net


1,937


1,632


Interest expense


(12,767)


(12,266)


Income before income taxes


11,425


7,086


Income tax provision


(3,194)


(3,436)


Net income


$

8,231


$

3,650








Comprehensive income:






Net income


$

8,231


$

3,650


Foreign currency translation adjustment


(485)


3,790


Comprehensive income


$

7,746


$

7,440








Net income per common share:






Basic and diluted net income per common share


$

0.18


$

0.08








Dividends declared per common share


$

0.54


$

0.46








Weighted-average common shares - basic


45,105,830


44,767,163








Weighted-average common shares - diluted


45,699,635


45,118,607



COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Nine Months
Ended
September 30, 2018


Nine Months
Ended
September 30, 2017




(Unaudited)


(Unaudited)


Service revenue


$

388,144


$

359,949


Operating expenses:






Network operations (including $671 and $431 of equity-based compensation 
     expense, respectively, exclusive of depreciation and amortization shown 
     separately below)


163,868


155,362


Selling, general, and administrative (including $12,629 and $9,175 of equity-
     based compensation expense, respectively)


100,637


96,165


Depreciation and amortization


60,280


56,583


Total operating expenses


324,785


308,110


Gains on equipment transactions


891


3,543


Operating income


64,250


55,382


Interest income and other, net


3,817


3,502


Interest expense


(37,547)


(36,245)


Income before income taxes


30,520


22,639


Income tax provision


(8,953)


(10,536)


Net income


$

21,567


$

12,103








Comprehensive income:






Net income


$

21,567


$

12,103


Foreign currency translation adjustment


(4,072)


11,281


Comprehensive income


$

17,495


$

23,384








Net income per common share:






Basic net income per common share


$

0.48


$

0.27


Diluted net income per common share


$

0.47


$

0.27








Dividends declared per common share


$

1.56


$

1.32








Weighted-average common shares - basic


45,096,472


44,787,067








Weighted-average common shares - diluted


45,591,217


45,083,765



COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(IN THOUSANDS)




Three months
Ended
September 30, 2018


Three months
Ended
September 30, 2017




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income


$

8,231


$

3,650


Adjustments to reconcile net income to net cash provided by operating 
     activities:






Depreciation and amortization


20,276


19,148


Amortization of debt discount and premium


375


332


Equity-based compensation expense (net of amounts capitalized)


4,821


3,734


Gains — equipment transactions and other, net


(288)


(766)


Deferred income taxes


2,712


3,209


Changes in operating assets and liabilities:






Accounts receivable


(1,539)


(3,976)


Prepaid expenses and other current assets


(32)


1,845


Accounts payable, accrued liabilities and other long-term liabilities


(3,055)


673


Deposits and other assets


244


934


Net cash provided by operating activities


31,745


28,783


Cash flows from investing activities:






Purchases of property and equipment


(12,107)


(10,927)


Net cash used in investing activities


(12,107)


(10,927)


Cash flows from financing activities:






Dividends paid


(24,764)


(20,879)


Net proceeds from issuance of 2022 secured notes – net of debt costs of 
     $1,363


69,862



Proceeds from exercises of stock options


518


433


Principal payments on installment payment agreement


(2,634)


(1,232)


Principal payments of capital lease obligations


(2,099)


(3,320)


Net cash provided by (used in) financing activities


40,883


(24,998)


Effect of exchange rates changes on cash


(245)


1,415


Net increase (decrease) in cash and cash equivalents


60,276


(5,727)


Cash and cash equivalents, beginning of period


224,282


256,492


Cash and cash equivalents, end of period


$

284,558


$

250,765



COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2017

(IN THOUSANDS)




Nine months
Ended
September 30, 2018


Nine months
Ended
September 30, 2017




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income


$

21,567


$

12,103


Adjustments to reconcile net income to net cash provided by operating 
     activities:






Depreciation and amortization


60,280


56,583


Amortization of debt discount and premium


1,126


899


Equity-based compensation expense (net of amounts capitalized)


13,300


9,606


Gains — equipment transactions and other, net


(727)


(4,394)


Deferred income taxes


7,527


9,835


Changes in operating assets and liabilities:






Accounts receivable


(2,280)


(4,317)


Prepaid expenses and other current assets


(663)


645


Accounts payable, accrued liabilities and other long-term liabilities


(5,473)


(1,411)


Deposits and other assets


(1,462)


793


Net cash provided by operating activities


93,195


80,342


Cash flows from investing activities:






Purchases of property and equipment


(39,000)


(35,183)


Net cash used in investing activities


(39,000)


(35,183)


Cash flows from financing activities:






Dividends paid


(71,371)


(59,824)


Net proceeds from issuance of 2022 secured notes – net of debt costs of 
     $1,363


69,862



Purchases of common stock



(1,829)


Proceeds from exercises of stock options


1,520


919


Principal payments on installment payment agreement


(6,888)


(2,183)


Principal payments of capital lease obligations


(8,158)


(9,368)


Net cash used in financing activities


(15,035)


(72,285)


Effect of exchange rates changes on cash


(1,613)


3,572


Net increase (decrease) in cash and cash equivalents


37,547


(23,554)


Cash and cash equivalents, beginning of period


247,011


274,319


Cash and cash equivalents, end of period


$

284,558


$

250,765


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 September 30, 2018 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time. 

 

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