WASHINGTON, May 7, 2020 /PRNewswire/ --
Financial and Business Highlights
- Cogent approved a $0.02 increase per share to its regular quarterly dividend to $0.68 per share for Q2 2020 from $0.66 per share for Q1 2020 – Cogent's thirty-first consecutive quarterly dividend increase.
- The Q2 2020 $0.68 dividend per share represents an annual increase of 13.3% from the dividend per share of $0.60 for Q2 2019.
- Service revenue, on a constant currency basis, increased by 0.6% from Q4 2019 to Q1 2020 and increased from Q1 2019 to Q1 2020 by 5.6%.
- Service revenue increased by 0.4% from Q4 2019 to Q1 2020 and increased from Q1 2019 to Q1 2020 by 5.1%.
- GAAP gross profit increased by 9.6% from Q1 2019 to $65.5 million for Q1 2020. Non-GAAP gross profit increased by 6.3% from Q1 2019 to $85.2 million for Q1 2020.
- GAAP gross margin increased by 200 basis points from Q1 2019 to Q1 2020 to 46.5%. Non-GAAP gross margin increased by 70 basis points from Q1 2019 to Q1 2020 to 60.5%.
- Net cash provided by operating activities decreased to $28.5 million for Q1 2020.
- EBITDA decreased by 4.4% from Q4 2019 to $50.4 million for Q1 2020 and increased by 6.0% from Q1 2019 to Q1 2020.
- EBITDA margin decreased by 180 basis points from Q4 2019 to 35.8% for Q1 2020 and increased by 30 basis points from Q1 2019 to Q1 2020.
Cogent Communications Holdings, Inc. CCOI ("Cogent") today announced service revenue of $140.9 million for the three months ended March 31, 2020, an increase of 5.1% from the three months ended March 31, 2019 and an increase of 0.4% from the three months ended December 31, 2019. Foreign exchange negatively impacted service revenue growth from the three months ended December 31, 2019 to the three months ended March 31, 2020 by $0.2 million and negatively impacted service revenue growth from the three months ended March 31, 2019 to the three months ended March 31, 2020 by $0.7 million. On a constant currency basis, service revenue grew by 0.6% from the three months ended December 31, 2019 to the three months ended March 31, 2020 and grew by 5.6% from the three months ended March 31, 2019 to the three months ended March 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 $103.5 million for the three months ended March 31, 2020; an increase of 0.8% from the three months ended December 31, 2019 and an increase of 6.5% over the three months ended March 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 $37.3 million for the three months ended March 31, 2020; a decrease of 0.4% over the three months ended December 31, 2019 and an increase of 1.3% over the three months ended March 31, 2019.
GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 9.6% from the three months ended March 31, 2019 to $65.5 million for the three months ended March 31, 2020 and increased by 1.8% from the three months ended December 31, 2019. GAAP gross margin was 46.5% for the three months ended March 31, 2020, 44.5% for the three months ended March 31, 2019 and 45.8% for the three months 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 $3.7 million for the three months ended March 31, 2020, $3.4 million for the three months ended March 31, 2019 and $4.3 million for the three months 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 6.3% from the three months ended March 31, 2019 to $85.2 million for the three months ended March 31, 2020 and increased by 0.8% from the three months ended December 31, 2019. Non-GAAP gross profit margin was 60.5% for the three months ended March 31, 2020, 59.8% for the three months ended March 31, 2019 and 60.3% for the three months ended December 31, 2019.
Net cash provided by operating activities decreased by 0.6% from the three months ended March 31, 2019 to $28.5 million for the three months ended March 31, 2020 and decreased by 38.3% from the three months ended December 31, 2019.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 6.0% from the three months ended March 31, 2019 to $50.4 million for the three months ended March 31, 2020 and decreased by 4.4% from the three months ended December 31, 2019. EBITDA margin was 35.8% for the three months ended March 31, 2020, 35.5% for the three months ended March 31, 2019 and 37.6% for the three months ended December 31, 2019.
EBITDA, as adjusted, increased by 4.9% from the three months ended March 31, 2019 to $50.4 million for the three months ended March 31, 2020 and decreased by 4.8% from the three months ended December 31, 2019. EBITDA, as adjusted, margin was 35.8% for the three months ended March 31, 2020, 35.9% for the three months ended March 31, 2019 and 37.8% for the three months ended December 31, 2019.
Basic and diluted net income per share was $0.20 for the three months ended March 31, 2020, $0.20 for the three months ended March 31, 2019 and $0.16 for the three months ended December 31, 2019. Unrealized foreign exchange gains (losses) on Cogent's €135.0 million Euro notes were $(4.0) million for the three months ended December 31, 2019, or $(0.09) per basic and diluted net income per share and $2.9 million for the three months ended March 31, 2020, or $0.06 per basic and diluted net income per share.
Total customer connections increased by 5.7% from March 31, 2019 to 87,213 as of March 31, 2020 and increased by 0.8% from December 31, 2019. On-net customer connections increased by 5.8% from March 31, 2019 to 75,163 as of March 31, 2020 and increased by 0.8% from December 31, 2019. Off-net customer connections increased by 5.2% from March 31, 2019 to 11,721 as of March 31, 2020 and increased by 0.5% from December 31, 2019.
The number of on-net buildings increased by 117 buildings from March 31, 2019 to 2,823 on-net buildings as of March 31, 2020 and increased by 22 on-net buildings from December 31, 2019.
Quarterly Dividend Increase Approved
On May 6, 2020, the Board approved a regular quarterly dividend of $0.68 per common share payable on June 5, 2020 to shareholders of record on May 22, 2020. This second quarter 2020 regular dividend represents a 3.0% increase of $0.02 per share from the first quarter 2020 regular dividend of $0.66 per share and an annual increase of 13.3% from the Q2 2019 dividend of $0.60 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.
Impact of COVID-19
Like many other companies, Cogent has been impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. During the first quarter of 2020, the impact of the COVID-19 pandemic on Cogent was limited. In the last two weeks of March, we saw a positive impact on net-centric revenue but a slight slowdown in corporate installs. We also saw, during these two weeks, a material increase in traffic on our network.
However, the ultimate impact of the pandemic on Cogent is unknown as a significant amount of uncertainty and volatility remains. Beginning in mid-March, Cogent transitioned its entire workforce to work remotely, which continues through today, but we have no assurance that this will be sufficient to protect our workforce or certain key employees. Moreover, our results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue. We may see slowdowns in new customer orders, find it difficult to collect from customers who are experiencing financial distress, encounter difficulties accessing the buildings and locations where we install new customers and serve existing customers, or have difficulties procuring or shipping necessary equipment. Lastly, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact our business well into the future.
These and other risks will be described in more detail in our quarterly report on Form 10-Q for the quarter ending March 31, 2020 and are set forth in our annual report on Form 10-K for the year ended December 31, 2019.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on May 7, 2020 to discuss Cogent's operating results for the first quarter of 2020 and to discuss Cogent's expectations for full year 2020. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.
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 | |||||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 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 |
% Change from previous Qtr. | 1.9% | 0.3% | 2.0% | 3.3% | 0.8% |
Off-Net revenue | $36,843 | $37,191 | $37,418 | $37,479 | $37,321 |
% Change from previous Qtr. | 0.8% | 0.9% | 0.6% | 0.2% | -0.4% |
Non-Core revenue (1) | $111 | $126 | $108 | $130 | $137 |
% Change from previous Qtr. | -24.5% | 13.5% | -14.3% | 20.4% | 5.4% |
Service revenue – total | $134,137 | $134,789 | $136,942 | $140,292 | $140,915 |
% Change from previous Qtr. | 1.6% | 0.5% | 1.6% | 2.4% | 0.4% |
Constant currency total revenue quarterly growth rate – sequential quarters (6) | 1.7% | 0.7% | 1.7% | 2.5% | 0.6% |
Constant currency total revenue quarterly growth rate – year over year quarters (6) | 5.8% | 5.4% | 6.0% | 6.8% | 5.6% |
Excise Taxes | $3,391 | $3,191 | $3,998 | $4,334 | $3,743 |
% Change from previous Qtr. | 4.9% | -5.9% | 25.3% | 8.4% | -13.6% |
Network operations expenses (2) | $53,970 | $54,181 | $54,971 | $55,684 | $55,669 |
% Change from previous Qtr. | -2.6% | 0.4% | 1.5% | 1.3% | -% |
GAAP gross profit (3) | $59,724 | $60,403 | $61,683 | $64,300 | $65,486 |
% Change from previous Qtr. | 7.7% | 1.1% | 2.1% | 4.2% | 1.8% |
GAAP gross margin (3) | 44.5% | 44.8% | 45.0% | 45.8% | 46.5% |
Non-GAAP gross profit (4) (6) | $80,167 | $80,608 | $81,971 | $84,608 | $85,246 |
% Change from previous Qtr. | 4.6% | 0.6% | 1.7% | 3.2% | 0.8% |
Non-GAAP gross margin (4) (6) | 59.8% | 59.8% | 59.9% | 60.3% | 60.5% |
Selling, general and administrative expenses (5) | $32,568 | $33,503 | $31,456 | $31,884 | $34,958 |
% Change from previous Qtr. | 12.2% | 2.9% | -6.1% | 1.4% | 9.6% |
Depreciation and amortization expense | $20,263 | $19,979 | $20,006 | $20,002 | $19,508 |
% Change from previous Qtr. | -3.3% | -1.4% | 0.1% | -% | -2.5% |
Equity-based compensation expense | $3,434 | $5,289 | $4,797 | $4,940 | $5,075 |
% Change from previous Qtr. | -22.1% | 54.0% | -9.3% | 3.0% | 2.7% |
Operating income | $24,400 | $22,022 | $25,799 | $28,033 | $25,850 |
% Change from previous Qtr. | 9.4% | -9.7% | 17.2% | 8.7% | -7.8% |
Interest expense | $13,456 | $13,595 | $15,191 | $15,211 | $15,220 |
% Change from previous Qtr. | -0.4% | 1.0% | 11.7% | 0.1% | 0.1% |
Net income | $9,217 | $7,136 | $13,701 | $7,465 | $9,227 |
Gain (loss) on Euro Notes | $- | $177 | $6,128 | $(4,032) | $2,904 |
Basic net income per common share | $0.20 | $0.16 | $0.30 | $0.16 | $0.20 |
Diluted net income per common share | $0.20 | $0.16 | $0.30 | $0.16 | $0.20 |
Weighted average common shares – basic | 45,223,157 | 45,354,327 | 45,438,656 | 45,553,727 | 45,658,565 |
% Change from previous Qtr. | -0.1% | 0.3% | 0.2% | 0.3% | 0.2% |
Weighted average common shares – diluted | 45,644,236 | 45,912,291 | 46,019,691 | 46,145,970 | 46,391,066 |
% Change from previous Qtr. | -0.3% | 0.6% | 0.2% | 0.3% | 0.5% |
EBITDA (6) | $47,561 | $47,105 | $50,515 | $52,724 | $50,394 |
% Change from previous Qtr. | -% | -1.0% | 7.2% | 4.4% | -4.4% |
EBITDA margin | 35.5% | 34.9% | 36.9% | 37.6% | 35.8% |
Gains on asset related transactions | $536 | $185 | $87 | $251 | $39 |
EBITDA, as adjusted (6) | $48,097 | $47,290 | $50,602 | $52,975 | $50,433 |
% Change from previous Qtr. | 0.9% | -1.7% | 7.0% | 4.7% | -4.8% |
EBITDA, as adjusted, margin | 35.9% | 35.1% | 37.0% | 37.8% | 35.8% |
Fees – net neutrality | $- | $- | $- | $- | $- |
Net cash provided by operating activities | $28,637 | $40,632 | $33,443 | $46,097 | $28,458 |
% Change from previous Qtr. | -29.7% | 41.9% | -17.7% | 37.8% | -38.3% |
Capital expenditures | $13,288 | $11,720 | $12,051 | $9,899 | $12,866 |
% Change from previous Qtr. | 21.5% | -11.8% | 2.8% | -17.9% | 30.0% |
Principal payments of capital (finance) lease obligations | $3,030 | $1,976 | $2,029 | $2,056 | $2,566 |
% Change from previous Qtr. | 42.4% | -34.8% | 2.7% | 1.3% | 24.8% |
Dividends paid | $26,565 | $27,741 | $28,565 | $29,776 | $30,557 |
Purchases of common stock | $ - | $ - | $ - | $ - | $ - |
Gross Leverage Ratio | 4.28 | 5.08 | 4.97 | 4.86 | 4.78 |
Net Leverage Ratio | 2.92 | 2.93 | 2.92 | 2.86 | 2.92 |
Customer Connections – end of period | |||||
On-Net | 71,066 | 72,415 | 73,870 | 74,554 | 75,163 |
% Change from previous Qtr. | 3.3% | 1.9% | 2.0% | 0.9% | 0.8% |
Off-Net | 11,138 | 11,321 | 11,503 | 11,660 | 11,721 |
% Change from previous Qtr. | 1.5% | 1.6% | 1.6% | 1.4% | 0.5% |
Non-Core (1) | 318 | 318 | 319 | 325 | 329 |
% Change from previous Qtr. | -12.2% | -% | -0.3% | 1.9% | 1.2% |
Total customer connections | 82,522 | 84,054 | 85,692 | 86,539 | 87,213 |
% Change from previous Qtr. | 3.0% | 1.9% | 1.9% | 1.0% | 0.8% |
On-Net Buildings – end of period | |||||
Multi-Tenant office buildings | 1,746 | 1,751 | 1,757 | 1,767 | 1,769 |
Carrier neutral data center buildings | 908 | 933 | 960 | 980 | 1,000 |
Cogent data centers | 52 | 53 | 54 | 54 | 54 |
Total on-net buildings | 2,706 | 2,737 | 2,771 | 2,801 | 2,823 |
Square feet – multi-tenant office buildings – on-net | 949,486,923 | 951,031,709 | 954,013,024 | 957,173,183 | 961,154,384 |
Network – end of period | |||||
Intercity route miles | 57,426 | 57,426 | 57,426 | 57,600 | 58,009 |
Metro fiber miles | 33,664 | 34,163 | 34,985 | 35,526 | 36,079 |
Connected networks – AS's | 6,668 | 6,762 | 6,844 | 6,954 | 7,042 |
Headcount – end of period | |||||
Sales force – quota bearing | 501 | 519 | 530 | 548 | 542 |
Sales force - total | 639 | 656 | 667 | 686 | 684 |
Total employees | 997 | 1,026 | 1,036 | 1,055 | 1,052 |
Sales rep productivity – units per full time equivalent sales rep ("FTE") per month | 5.1 | 4.9 | 4.4 | 4.1 | 4.5 |
FTE – sales reps | 464 | 478 | 488 | 502 | 522 |
(1) | Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only provided in Toronto, Canada). |
(2) | Network operations expense excludes equity-based compensation expense of $180, $226, $282, $306 and $252 in the three month periods ended March 31, 2019 through March 31, 2020, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $3,391, $3,191, $3,998, $4,334 and $3,743 in the three month periods ended March 31, 2019 through March 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 and $4,823 in the three month periods ended March 31, 2019 through March 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 | Q1 | |
($ in 000's) – unaudited | |||||
Net cash provided by operating activities | $28,637 | $40,632 | $33,443 | $46,097 | $28,458 |
Changes in operating assets and liabilities | 6,727 | (5,729) | 3,785 | (6,557) | 5,325 |
Cash interest expense and income tax expense | 12,197 | 12,202 | 13,287 | 13,184 | 16,611 |
EBITDA | $47,561 | $47,105 | $50,515 | $52,724 | $50,394 |
PLUS: Gains on asset related transactions | 536 | 185 | 87 | 251 | 39 |
EBITDA, as adjusted | $48,097 | $47,290 | $50,602 | $52,975 | $50,433 |
EBITDA margin | 35.5% | 34.9% | 36.9% | 37.6% | 35.8% |
EBITDA, as adjusted, margin | 35.9% | 35.1% | 37.0% | 37.8% | 35.8% |
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes – sequential periods
($ in 000's) – unaudited | Q1 | Q2 | Q3 | Q4 | Q1 |
Service revenue, as reported – current period | $134,137 | $134,789 | $136,942 | $140,292 | $140,915 |
Impact of foreign currencies on service revenue | 135 | 260 | 176 | 88 | 184 |
Service revenue - as adjusted for currency impact (1) | $134,272 | $135,049 | $137,118 | $140,380 | $141,099 |
Service revenue, as reported – prior sequential period | $132,049 | $134,137 | $134,789 | $136,942 | $140,292 |
Constant currency increase | $2,223 | $912 | $2,329 | $3,438 | $807 |
Constant currency percent increase | 1.7% | 0.7% | 1.7% | 2.5% | 0.6% |
(1) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. |
Constant currency impact on revenue changes – prior year periods
($ in 000's) – unaudited | Q1 | Q2 | Q3 | Q4 | Q1 |
Service revenue, as reported – current period | $134,137 | $134,789 | $136,942 | $140,292 | $140,915 |
Impact of foreign currencies on service revenue | 2,078 | 1,505 | 1,058 | 683 | 746 |
Service revenue - as adjusted for currency impact (2) | $136,215 | $136,294 | $138,000 | $140,975 | $141,661 |
Service revenue, as reported – prior year period | $128,706 | $129,296 | $130,139 | $132,049 | $134,137 |
Constant currency increase | $7,509 | $6,998 | $7,861 | $8,926 | $7,524 |
Percent increase | 5.8% | 5.4% | 6.0% | 6.8% | 5.6% |
(2) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. |
Non-GAAP gross profit and Non-GAAP gross margin
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 | Q2 | Q3 | Q4 | Q1 | |
($ in 000's) – unaudited | |||||
Service revenue total | $134,137 | $134,789 | $136,942 | $140,292 | $140,915 |
Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense | 74,413 | 74,386 | 75,259 | 75,992 | 75,429 |
GAAP Gross Profit (1) | $59,724 | $60,403 | $61,683 | $64,300 | $65,486 |
Plus - Equity-based compensation – network operations expense | 180 | 226 | 282 | 306 | 252 |
Plus – Depreciation and amortization expense | 20,263 | 19,979 | 20,006 | 20,002 | 19,508 |
Non-GAAP Gross Profit (2) | $80,167 | $80,608 | $81,971 | $84,608 | $85,246 |
GAAP Gross Margin (1) | 44.5% | 44.8% | 45.0% | 45.8% | 46.5% |
Non-GAAP Gross Margin (2) | 59.8% | 59.8% | 59.9% | 60.3% | 60.5% |
(1) | GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. |
(2) | Non-GAAP gross profit represents service revenue less network operations expense, excluding equity based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics to provide to investors, as they are metrics that management uses to measure the margin and amount available to the Company after network service costs, in essence these are measures of the efficiency of the Company's network. |
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio and net leverage ratio are shown below.
($ in 000's) – unaudited | As of December 31, 2019 | As of March 31, 2020 |
Cash and cash equivalents | $399,422 | $375,116 |
Debt | ||
Capital (finance) leases – current portion | 8,154 | 8,268 |
Capital (finance) leases – long term | 161,635 | 159,678 |
Senior unsecured notes | 189,225 | 189,225 |
Senior secured notes | 445,000 | 445,000 |
Senior unsecured Euro notes | 151,411 | 148,507 |
Note payable | 12,487 | 12,264 |
Total debt | 967,912 | 962,942 |
Total net debt | 568,490 | 587,826 |
Trailing 12 months EBITDA, as adjusted | 198,964 | 201,300 |
Gross leverage ratio | 4.86 | 4.78 |
Net leverage ratio | 2.86 | 2.92 |
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 MARCH 31, 2020 AND DECEMBER 31, 2019 (IN THOUSANDS, EXCEPT SHARE DATA) | |||||||
March 31, | December 31, | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 375,116 | $ | 399,422 | |||
Accounts receivable, net of allowance for credit losses of $1,976 and $1,771, respectively | 42,964 | 40,484 | |||||
Prepaid expenses and other current assets | 38,482 | 35,822 | |||||
Total current assets | 456,562 | 475,728 | |||||
Property and equipment, net | 367,682 | 368,929 | |||||
Right-of-use leased assets | 75,724 | 73,460 | |||||
Deferred tax assets | 275 | 335 | |||||
Deposits and other assets | 13,382 | 13,672 | |||||
Total assets | $ | 913,625 | $ | 932,124 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,102 | $ | 11,075 | |||
Accrued and other current liabilities | 49,239 | 51,301 | |||||
Installment payment agreement, current portion, net of discount of $313 and $350, respectively | 9,122 | 9,063 | |||||
Current maturities, operating lease liabilities | 10,409 | 10,101 | |||||
Current maturities, finance lease obligations | 8,268 | 8,154 | |||||
Total current liabilities | 90,140 | 89,694 | |||||
Senior unsecured 2024 Euro notes, net of unamortized debt costs of $1,341 and $1,410, respectively | 147,166 | 150,001 | |||||
Senior secured 2022 notes, net of unamortized debt costs of $1,690 and $1,897, respectively and including | 444,187 | 444,088 | |||||
Senior unsecured 2021 notes, net of unamortized debt costs of $696 and $857, respectively | 188,529 | 188,368 | |||||
Operating lease liabilities, net of current maturities | 88,335 | 86,690 | |||||
Finance lease obligations, net of current maturities | 159,678 | 161,635 | |||||
Other long term liabilities | 17,815 | 15,327 | |||||
Total liabilities | 1,135,850 | 1,135,803 | |||||
Commitments and contingencies: | |||||||
Stockholders' equity: | |||||||
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,139,369 and 46,840,434 shares issued and | 47 | 47 | |||||
Additional paid-in capital | 499,455 | 493,178 | |||||
Accumulated other comprehensive income — foreign currency translation | (15,819) | (12,326) | |||||
Accumulated deficit | (705,908) | (684,578) | |||||
Total stockholders' deficit | (222,225) | (203,679) | |||||
Total liabilities and stockholders' deficit | $ | 913,625 | $ | 932,124 | |||
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) | |||||||
Three Months | Three Months | ||||||
(Unaudited) | (Unaudited) | ||||||
Service revenue | $ | 140,915 | $ | 134,137 | |||
Operating expenses: | |||||||
Network operations (including $252 and $180 of equity-based compensation expense, respectively, exclusive of | 55,921 | 54,150 | |||||
Selling, general, and administrative (including $4,823 and $3,254 of equity-based compensation expense, | 39,675 | 35,860 | |||||
Depreciation and amortization | 19,508 | 20,263 | |||||
Total operating expenses | 115,104 | 110,273 | |||||
Gains on equipment transactions | 39 | 536 | |||||
Operating income | 25,850 | 24,400 | |||||
Interest income and other, net | 2,205 | 1,827 | |||||
Interest expense | (15,220) | (13,456) | |||||
Income before income taxes | 12,835 | 12,771 | |||||
Income tax provision | (3,608) | (3,554) | |||||
Net income | $ | 9,227 | $ | 9,217 | |||
Comprehensive income: | |||||||
Net income | $ | 9,227 | $ | 9,217 | |||
Foreign currency translation adjustment | (3,493) | (1,825) | |||||
Comprehensive income | $ | 5,734 | $ | 7,392 | |||
Net income per common share: | |||||||
Basic and diluted net income per common share | $ | 0.20 | $ | 0.20 | |||
Dividends declared per common share | $ | 0.66 | $ | 0.58 | |||
Weighted-average common shares - basic | 45,658,565 | 45,223,157 | |||||
Weighted-average common shares - diluted | 46,391,066 | 45,644,236 | |||||
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019 (IN THOUSANDS) | |||||||
Three months | Three months | ||||||
(Unaudited) | (Unaudited) | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 9,227 | $ | 9,217 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 19,508 | 20,263 | |||||
Amortization of debt discount and premium | 477 | 414 | |||||
Equity-based compensation expense (net of amounts capitalized) | 5,075 | 3,434 | |||||
Gains — equipment transactions and other, net | (454) | (231) | |||||
Unrealized foreign currency exchange gain on 2024 Euro notes | (2,904) | — | |||||
Deferred income taxes | 2,439 | 2,572 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (2,790) | 2.264 | |||||
Prepaid expenses and other current assets | (3,093) | (3,187) | |||||
Accounts payable, accrued liabilities and other long-term liabilities | 1,067 | (2,778) | |||||
Deposits and other assets | (94) | (3,331) | |||||
Net cash provided by operating activities | 28,458 | 28,637 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (12,866) | (13,288) | |||||
Net cash used in investing activities | (12,866) | (13,288) | |||||
Cash flows from financing activities: | |||||||
Dividends paid | (30,557) | (26,565) | |||||
Proceeds from exercises of stock options | 718 | 173 | |||||
Principal payments on installment payment agreement | (2,566) | (2,387) | |||||
Principal payments of finance lease obligations | (6,167) | (3,030) | |||||
Net cash used in financing activities | (38,572) | (31,809) | |||||
Effect of exchange rates changes on cash | (1,326) | (495) | |||||
Net decrease in cash and cash equivalents | (24,306) | (16,955) | |||||
Cash and cash equivalents, beginning of period | 399,422 | 276,093 | |||||
Cash and cash equivalents, end of period | $ | 375,116 | $ | 259,138 | |||
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, 2019. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time.
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SOURCE Cogent Communications Holdings, Inc.
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