Financial and Business Highlights
- Service revenue was $239.8
million for Q2 2023 and was $260.4
million for Q2 2024.
- EBITDA margin was 6.9% for Q1 2024 and 10.4% for Q2 2024.
- EBITDA, as adjusted for Sprint acquisition costs and cash
received under the IP Transit Agreement with T-Mobile was
$115.0 million for Q1 2024 and
$106.2 million for Q2 2024.
- Gross margin – Non-GAAP - was 36.7% for Q1 2024 and 40.2% for
Q2 2024.
- Gross margin was 9.9% for Q1 2024 and 11.6% for Q2 2024.
- Gross leverage ratio was 3.57 for Q1 2024 and was 4.06 for Q2
2024.
- Net leverage ratio was 3.17 for Q1 2024 and was 3.14 for Q2
2024.
- Cogent closed its issuance of $206.0
million of its 7.9% IPV4 Securitized Notes on May 2, 2024.
- Cogent closed its issuance of $300.0
million of its 7.0% Unsecured Notes on June 11, 2024.
- Cogent purchased 153,322 shares of its common stock for
$8.0 million in Q2 2024 under its
buyback program.
- Cogent approved an increase of $0.01 per share to its regular quarterly dividend
for a total of $0.985 per share for
Q3 2024 as compared to $0.975 per
share for Q2 2024 – Cogent's forty-eighth consecutive quarterly
dividend increase.
WASHINGTON, Aug. 8, 2024
/PRNewswire/ -- Cogent Communications Holdings, Inc. (NASDAQ: CCOI)
("Cogent") today announced service revenue of $260.4 million for the three months ended
June 30, 2024, a decrease of 2.2%
from the three months ended March 31,
2024 and an increase of 8.6% from the three months ended
June 30, 2023. Foreign exchange rates
negatively impacted service revenue growth from the three months
ended March 31, 2024 to the three
months ended June 30, 2024 by
$0.3 million and negatively impacted
service revenue growth from the three months ended June 30, 2023 to the three months ended
June 30, 2024 by $0.4 million. On a constant currency basis,
service revenue decreased by 2.0% from the three months ended
March 31, 2024 to the three months
ended June 30, 2024, and increased by
8.8% for the three months ended June 30,
2023 to the three months ended June
30, 2024.
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 $140.6
million for the three months ended June 30, 2024, an increase of 1.5% from the three
months ended March 31, 2024 and an
increase of 10.3% from the three months ended June 30, 2023.
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 $111.5 million for the three months ended
June 30, 2024, a decrease of 5.7%
from the three months ended March 31,
2024 and an increase of 9.3% from the three months ended
June 30, 2023.
Wavelength revenue was $3.6
million for the three months ended June 30, 2024, an increase of 9.0% from the three
months ended March 31, 2024 and an
increase of 128.7% from the three months ended March 31, 2023.
Non-core services are legacy services, which Cogent acquired and
continues to support but does not actively sell. Non-core
revenue was $4.6 million for the
three months ended June 30, 2024,
$6.0 million for the three months
ended March 31, 2024 and was
$8.6 million for the three months
ended June 30, 2023.
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 decreased by
39.3% from the three months ended June 30,
2023 to $30.2 million for the
three months ended June 30, 2024 and
increased by 14.8% from the three months ended March 31, 2024.
GAAP gross margin was 11.6% for the three months ended
June 30, 2024, 9.9% for the three
months ended March 31, 2024 and 20.8%
for the three months ended June 30,
2023.
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 2.0% from
the three months ended June 30, 2023
to $104.6 million for the three
months ended June 30, 2024 and
increased by 7.2% from the three months ended March 31, 2024.
Non-GAAP gross margin was 40.2% for the three months ended
June 30, 2024, 36.7% for the three
months ended March 31, 2024 and 42.8%
for the three months ended June 30,
2023.
Net cash used in operating activities was $22.2 million for the three months ended
June 30, 2024. Net cash provided by
operating activities was $19.2
million for the three months ended March 31, 2024 and $82.7
million for the three months ended June 30, 2023.
Total Sprint acquisition costs were $12.4
million for the three months ended June 30, 2024, $9.0
million for the three months ended March 31, 2024 and $0.7
million for the three months ended June 30, 2023. Severance costs, reimbursed
by T-Mobile, and included in Sprint acquisition costs, were
$8.0 million for the three months
ended June 30, 2024 and $4.3 million for the three months ended
March 31, 2024.
Earnings before interest, taxes, depreciation and amortization
(EBITDA), as adjusted, for Sprint acquisition costs and cash
paid under the IP Transit Services Agreement (discussed below) was
$106.2 million for the three months
ended June 30, 2024, $115.0 million for the three months ended
March 31, 2024 and $54.1 million for the three months ended
June 30, 2023.
EBITDA as adjusted, for Sprint acquisition costs and cash
paid under the IP Transit Services Agreement margin, was 40.8% for
the three months ended June 30, 2024,
43.2% for the three months ended March 31,
2024 and 22.5% for the three months ended June 30, 2023.
Basic net (loss) income per share was $(0.68) for the three months ended June 30, 2024, $(1.38) for the three months ended March 31, 2024 and $23.84 for the three months ended June 30, 2023. Diluted net income (loss) per
share was $(0.68) for the three
months ended June 30, 2024,
$(1.38) for the three months ended
March 31, 2024 and $23.65 for the three months ended June 30, 2023.
Total customer connections decreased by 15.0% from June 30, 2023 to128,782 as of June 30, 2024 and decreased by 3.1% from
March 31, 2024. On-net customer
connections decreased by 5.9% from June 30,
2023 to 87,387 as of June 30,
2024 and decreased by 0.2% from March
31, 2024. Off-net customer connections decreased by 15.5%
from June 30, 2023 to 32,758 as of
June 30, 2024 and decreased by 5.3%
from March 31, 2024. Wavelength
customer connections were 754 as of June 30,
2024, 693 as of March 31, 2024
and 414 as of June 30, 2023.
Non-core customer connections were 7,883 as of June 30, 2024, 10,037 as of March 31, 2024 and 19,408 as of June 30, 2023.
The number of on-net buildings increased by 159 from
June 30, 2023 to 3,386 as of
June 30, 2024 and increased by 65
from March 31, 2024.
IP Transit Services Agreement
On May 1, 2023, the closing date of the Sprint
acquisition, Cogent and T-Mobile USA, Inc. ("TMUSA"), a Delaware corporation and direct subsidiary of
T-Mobile US, Inc., a Delaware
corporation ("T-Mobile") , entered into an agreement for IP transit
services (the "IP Transit Services Agreement"), pursuant to which
TMUSA will pay Cogent an aggregate of $700.0
million, consisting of (i) $350.0
million paid in equal monthly installments during the first
year after the closing date of the Sprint acquisition and (ii)
$350.0 million paid in equal monthly
installments over the subsequent 42 months. Amounts paid under the
IP Transit Services Agreement were $66.7
million, $87.5 million and
$29.2 million in the three months
ended June 30, 2024, March 31, 2024 and June
30, 2023 respectively.
Commercial Services Agreement
Additionally, on the
closing date of the Sprint acquisition, Cogent and T-Mobile entered
into a commercial agreement (the "Commercial Agreement"), for
colocation and connectivity services. Revenue under the
Commercial Agreement was $5.9 million
for the three months ended June 30,
2024, an increase of 86.2% from $3.2
million for the three months ended March 31, 2024.
Quarterly Dividend Increase Approved
On August 7, 2024, Cogent's Board approved a regular
quarterly dividend of $0.985 per
share payable on September 6, 2024 to
shareholders of record on August 22,
2024. This third quarter 2024 regular dividend represents an
increase of $0.01 per share, or 1.0%,
from the second quarter 2024 regular dividend of $0.975 per share and an annual increase of 4.2%
from the third quarter 2023 dividend of $0.945 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
indentures and other factors deemed relevant by the Board.
Residual Impact of COVID-19 Pandemic on Corporate
Results
Beginning with and throughout the COVID-19 pandemic,
Cogent witnessed a deteriorating real estate market in and around
the buildings it serves in central business districts in
North America, largely
attributable to businesses continuing remote work policies
instituted during the COVID-19 pandemic. Because of the rising
vacancy levels and falling lease initiations or renewals, Cogent
experienced a slowdown in new sales to its corporate customers,
which negatively impacted its corporate revenue results. During the
three months ended June 30, 2024,
Cogent continued to see declining vacancy rates and rising office
occupancy rates, and to see positive trends in its corporate
business in a number of areas of the
United States. In other cities, the impact of the pandemic
on leasing activity and office occupancy lingers. Nevertheless, as
the option to fully or partially work from home becomes permanently
established at many companies, Cogent's corporate customers are
integrating some of the new applications that were part of the
remote work environment into their everyday use, which benefits
Cogent's corporate business as these customers upgrade their
Internet access infrastructure to higher capacity
connections. If and when companies eventually return to the
buildings in which Cogent operates, Cogent believes it will present
an opportunity for increased sales. However, the exact timing, path
and spread of these positive trends remains uncertain, and Cogent
may continue to see increased corporate customer turnover, fewer
upgrades of existing corporate customer configurations and fewer
new tenant opportunities, which would negatively impact Cogent's
corporate revenue growth.
These and other risks are described in more detail in Cogent's
Annual Report on Form 10-K for the year ended December 31, 2023 and in its Quarterly Reports on
Form 10-Q for the quarterly periods ended June 30, 2023, September
30, 2023, March 31, 2024 and
June 30, 2024.
Conference Call and Website Information
Cogent will
host a conference call with financial analysts at 8:30 a.m. (ET) on August
8, 2024 to discuss Cogent's operating results for the second
quarter of 2024. Investors and other interested parties may
access a live audio webcast of the earnings call in the "Events"
section of Cogent's website at www.cogentco.com/events. A replay of
the webcast, together with the press release, will be available on
the website following the earnings call. A downloadable file
of Cogent's "Summary of Financial and Operational Results" and a
transcript of its conference call will also be available on
Cogent's website following the conference call.
About Cogent Communications
Cogent Communications
(NASDAQ: CCOI) is a multinational, Tier 1 facilities-based
ISP. Cogent specializes in providing businesses with
high-speed Internet access, Ethernet transport, and colocation
services. Cogent's facilities-based, all-optical IP network
backbone provides services in 251 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
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
Metric ($ in 000's, except share, per
share, customer connections and
network related data) – unaudited
|
|
|
|
|
|
|
|
On-Net revenue
|
$116,143
|
$127,665
|
$129,031
|
$138,064
|
$138,624
|
$140,757
|
|
% Change from
previous Qtr.
|
1.0 %
|
9.9 %
|
1.1 %
|
7.0 %
|
0.4 %
|
1.5 %
|
|
Off-Net revenue
|
$37,283
|
$101,984
|
$130,560
|
$123,669
|
$118,178
|
$111,451
|
|
% Change from
previous Qtr.
|
1.1 %
|
173.5 %
|
28.0 %
|
-5.3 %
|
-4.4 %
|
-5.7 %
|
|
Wavelength revenue
(1)
|
$-
|
$1,585
|
$2,992
|
$3,108
|
$3,327
|
$3,625
|
|
% Change from
previous Qtr.
|
-
|
-
|
88.8 %
|
3.9 %
|
7.0 %
|
9.0 %
|
|
Non-Core revenue (2)
(16)
|
$162
|
$8,572
|
$12,846
|
$7,258
|
$6,039
|
$4,610
|
|
% Change from
previous Qtr.
|
3.2 %
|
NM
|
49.9 %
|
-43.5 %
|
-16.8 %
|
-23.7 %
|
|
Service revenue – total
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
% Change from
previous Qtr.
|
1.1 %
|
56.1 %
|
14.9 %
|
-1.2 %
|
-2.2 %
|
-2.2 %
|
|
Constant currency
total revenue
quarterly growth rate – sequential
quarters (3)
|
0.2 %
|
55.9 %
|
14.9 %
|
-1.1 %
|
-2.3 %
|
-2.0 %
|
|
Constant currency
total revenue
quarterly growth rate – year over year
quarters (3)
|
4.0 %
|
61.4 %
|
82.4 %
|
78.1 %
|
73.1 %
|
8.8 %
|
|
Constant currency
and excise tax
impact on total revenue quarterly
growth rate – sequential quarters (3)
|
0.1 %
|
51.4 %
|
13.4 %
|
-3.2 %
|
-2.3 %
|
-1.5 %
|
|
Constant currency
and excise tax
impact on total revenue quarterly
growth rate – year over year quarters
(3)
|
3.7 %
|
56.2 %
|
75.5 %
|
67.4 %
|
62.4 %
|
5.4 %
|
|
Excise Taxes
included in service
revenue (4)
|
$4,193
|
$11,040
|
$14,557
|
$20,428
|
$20,549
|
$19,182
|
|
% Change from
previous Qtr.
|
2.6 %
|
163.3 %
|
31.9 %
|
40.3 %
|
0.6 %
|
-6.7 %
|
|
Corporate revenue (5) (16)
|
$85,627
|
$110,998
|
$120,484
|
$126,634
|
$124,864
|
$119,557
|
|
% Change from
previous Qtr.
|
-0.2 %
|
29.6 %
|
8.5 %
|
5.1 %
|
-1.4 %
|
-4.3 %
|
|
Net-centric revenue
(5) (15)
|
$67,961
|
$87,582
|
$94,936
|
$93,148
|
$91,979
|
$91,107
|
|
% Change from
previous Qtr.
|
2.7 %
|
28.9 %
|
8.4 %
|
-1.9 %
|
-1.3 %
|
-0.9 %
|
|
Enterprise revenue
(5)
|
-
|
$41,227
|
$60,009
|
$52,318
|
$49,325
|
$49,781
|
|
% Change from
previous Qtr.
|
-
|
NM
|
45.6 %
|
-12.8 %
|
-5.7 %
|
0.9 %
|
|
Network operations
expenses (4)
|
$58,489
|
$137,271
|
$173,224
|
$174,180
|
$168,548
|
$155,817
|
|
% Change from
previous Qtr.
|
2.8 %
|
134.7 %
|
26.2 %
|
0.6 %
|
-3.2 %
|
-7.6 %
|
|
GAAP gross profit
(6)
|
$69,790
|
$49,793
|
$15,101
|
$29,744
|
$26,344
|
$30,240
|
|
% Change from
previous Qtr.
|
-2.3 %
|
-28.7 %
|
-69.7 %
|
97.0 %
|
-11.4 %
|
14.8 %
|
|
GAAP gross margin
(6)
|
45.4 %
|
20.8 %
|
5.5 %
|
10.9 %
|
9.9 %
|
11.6 %
|
|
Non-GAAP gross
profit (3) (7)
|
$95,099
|
$102,535
|
$102,205
|
$97,919
|
$97,620
|
$104,626
|
|
% Change from
previous Qtr.
|
0.0 %
|
7.8 %
|
-0.3 %
|
-4.2 %
|
-0.3 %
|
7.2 %
|
|
Non-GAAP gross
margin (3) (7)
|
61.9 %
|
42.8 %
|
37.1 %
|
36.0 %
|
36.7 %
|
40.2 %
|
|
Selling, general and
administrative
expenses (8)
|
$38,646
|
$77,640
|
$58,267
|
$74,907
|
$70,131
|
$65,130
|
|
% Change from
previous Qtr.
|
2.5 %
|
100.9 %
|
-25.0 %
|
28.6 %
|
-6.4 %
|
-7.1 %
|
|
Depreciation and
amortization expense
|
$25,160
|
$52,511
|
$86,734
|
$67,805
|
$70,891
|
$74,036
|
|
% Change from
previous Qtr.
|
6.8 %
|
108.7 %
|
65.2 %
|
-21.8 %
|
4.6 %
|
4.4 %
|
|
Equity-based
compensation expense
|
$6,581
|
$6,249
|
$7,411
|
$6,684
|
$6,950
|
$3,565
|
|
% Change from
previous Qtr.
|
5.1 %
|
-5.0 %
|
18.6 %
|
-9.8 %
|
4.0 %
|
-48.7 %
|
|
Operating income
(loss)
|
$24,312
|
$(34,604)
|
$(50,558)
|
$(68,478)
|
$(59,389)
|
$(47,143)
|
|
% Change from
previous Qtr.
|
-11.0 %
|
NM
|
46.1 %
|
35.4 %
|
13.3 %
|
20.6 %
|
|
Interest expense (9)
|
$19,005
|
$28,653
|
$24,198
|
$34,928
|
$23,010
|
$38,840
|
|
% Change from
previous Qtr.
|
-13.6 %
|
50.8 %
|
-15.5 %
|
44.3 %
|
-34.1 %
|
68.8 %
|
|
Non-cash change in valuation – Swap
Agreement (9)
|
$(1,847)
|
$1,305
|
$4,825
|
$(17,722)
|
$6,152
|
$(9,299)
|
|
Gain on bargain purchase (10)
|
-
|
$1,155,719
|
$(3,332)
|
$254,049
|
$(5,470)
|
$27,673
|
|
Net income (loss)
|
$6,148
|
$1,123,863
|
$(56,723)
|
$200,153
|
$(65,307)
|
$(32,338)
|
|
Basic net income
(loss) per common
share
|
$0.13
|
$23.84
|
$(1.20)
|
$4.23
|
$(1.38)
|
$(0.68)
|
|
Diluted net income
(loss) per common
share
|
$0.13
|
$23.65
|
$(1.20)
|
$4.17
|
$(1.38)
|
$(0.68)
|
|
Weighted average
common shares –
basic
|
47,037,091
|
47,137,822
|
47,227,338
|
47,353,291
|
47,416,268
|
47,511,613
|
|
% Change from
previous Qtr.
|
0.3 %
|
0.2 %
|
0.2 %
|
0.3 %
|
0.1 %
|
0.2 %
|
|
Weighted average
common shares –
diluted
|
47,381,226
|
47,526,207
|
47,227,338
|
48,037,841
|
47,416,268
|
47,511,613
|
|
% Change from
previous Qtr.
|
0.4 %
|
0.3 %
|
-0.6 %
|
1.7 %
|
-1.3 %
|
0.2 %
|
|
EBITDA
(3)
|
$56,053
|
$24,156
|
$43,587
|
$6,011
|
$18,452
|
$27,126
|
|
% Change from
previous Qtr.
|
-1.9 %
|
-56.9 %
|
80.4 %
|
-86.2 %
|
207.0 %
|
47.0 %
|
|
EBITDA margin
(3)
|
36.5 %
|
10.1 %
|
15.8 %
|
2.2 %
|
6.9 %
|
10.4 %
|
|
Sprint acquisition
costs (14)
|
$400
|
$739
|
$351
|
$17,001
|
$9,037
|
$12,370
|
|
Cash payments under
IP Transit
Services Agreement (11)
|
$-
|
$29,167
|
$87,500
|
$87,500
|
$87,500
|
$66,667
|
|
EBITDA, as adjusted for Sprint
acquisition costs and cash payments
under IP Transit Services Agreement (3)
(11) (14)
|
$56,453
|
$54,062
|
$131,438
|
$110,512
|
$114,989
|
$106,163
|
|
% Change from
previous Qtr.
|
-1.6 %
|
-4.2 %
|
143.1 %
|
-15.9 %
|
4.1 %
|
-7.7 %
|
|
EBITDA, as adjusted for Sprint
acquisition costs and cash payments
under IP Transit Services Agreement,
margin (3) (11) (14)
|
36.8 %
|
22.5 %
|
47.7 %
|
40.6 %
|
43.2 %
|
40.8 %
|
|
Net cash provided by
(used in)
operating activities
|
$35,821
|
$82,654
|
$(52,433)
|
$(48,701)
|
$19,219
|
$(22,171)
|
|
% Change from
previous Qtr.
|
-1.4 %
|
130.7 %
|
-163.4 %
|
-7.1 %
|
-139.5 %
|
-215.4 %
|
|
Capital
expenditures
|
$23,204
|
$37,449
|
$25,373
|
$43,609
|
$40,883
|
$48,767
|
|
% Change from
previous Qtr.
|
18.4 %
|
61.4 %
|
-32.2 %
|
71.9 %
|
-6.3 %
|
19.3 %
|
|
Principal payments
of capital (finance)
lease obligations
|
$9,450
|
$7,797
|
$41,302
|
$18,813
|
$23,235
|
$133,472
|
|
% Change from
previous Qtr.
|
-61.5 %
|
-17.5 %
|
429.7 %
|
-54.5 %
|
23.5 %
|
474.4 %
|
|
Dividends paid
(17)
|
$45,311
|
$44,907
|
$45,136
|
$46,362
|
$478
|
$93,304
|
|
Gross Leverage Ratio
(3) (11)
|
5.47
|
5.63
|
4.79
|
4.07
|
3.57
|
4.06
|
|
Net Leverage Ratio
(3) (11)
|
4.46
|
4.56
|
4.24
|
3.75
|
3.17
|
3.14
|
|
Customer Connections – end of period
(15) (16)
|
|
|
|
|
|
|
|
On-Net customer
connections
|
83,268
|
92,846
|
88,250
|
88,291
|
87,574
|
87,387
|
|
% Change from
previous Qtr.
|
0.8 %
|
11.5 %
|
-5.0 %
|
0.0 %
|
-0.8 %
|
-0.2 %
|
|
Off-Net customer
connections
|
13,785
|
38,762
|
36,923
|
36,676
|
34,579
|
32,758
|
|
% Change from
previous Qtr.
|
1.9 %
|
181.2 %
|
-4.7 %
|
-0.7 %
|
-5.7 %
|
-5.3 %
|
|
Wavelength customer
connections (1)
|
|
414
|
449
|
661
|
693
|
754
|
|
% Change from
previous Qtr.
|
|
-
|
8.5 %
|
47.2 %
|
4.8 %
|
8.8 %
|
|
Non-Core customer
connections (2) (16)
|
374
|
19,408
|
12,403
|
11,975
|
10,037
|
7,883
|
|
% Change from
previous Qtr.
|
3.0 %
|
NM
|
-36.1 %
|
-3.5 %
|
-16.2 %
|
-21.5 %
|
|
Total customer
connections (15) (16)
|
97,427
|
151,430
|
138,025
|
137,603
|
132,883
|
128,782
|
|
% Change from
previous Qtr.
|
0.9 %
|
55.4 %
|
-8.9 %
|
-0.3 %
|
-3.4 %
|
-3.1 %
|
|
Corporate customer
connections (5)
(16)
|
44,570
|
61,284
|
55,045
|
54,493
|
51,821
|
48,690
|
|
% Change from
previous Qtr.
|
-0.6 %
|
37.5 %
|
-10.2 %
|
-1.0 %
|
-4.9 %
|
-6.0 %
|
|
Net-centric customer
connections (5)
(15)
|
52,857
|
66,711
|
62,291
|
62,370
|
61,599
|
61,736
|
|
% Change from
previous Qtr.
|
2.3 %
|
26.2 %
|
-6.6 %
|
0.1 %
|
-1.2 %
|
0.2 %
|
|
Enterprise customer
connections (5)
|
-
|
23,435
|
20,689
|
20,740
|
19,463
|
18,356
|
|
% Change from
previous Qtr.
|
-
|
NM
|
-11.7 %
|
0.2 %
|
-6.2 %
|
-5.7 %
|
|
On-Net Buildings – end of
period
|
|
|
|
|
|
|
|
Multi-Tenant office buildings
|
1,841
|
1,844
|
1,860
|
1,862
|
1,861
|
1,864
|
|
Carrier neutral data center
buildings
|
1,294
|
1,327
|
1,337
|
1,347
|
1,382
|
1,436
|
|
Cogent data centers
|
55
|
56
|
60
|
68
|
78
|
86
|
|
Total on-net buildings
|
3,190
|
3,227
|
3,257
|
3,277
|
3,321
|
3,386
|
|
Total carrier neutral data center
nodes
|
1,490
|
1,526
|
1,528
|
1,558
|
1,586
|
1,602
|
|
Square feet –
multi-tenant office
buildings – on-net
|
1,001,382,577
|
1,001,491,002
|
1,006,523,795
|
1,008,006,655
|
1,009,702,653
|
1,011,171,523
|
|
Total Technical
Buildings Owned (12)
|
-
|
482
|
482
|
482
|
482
|
482
|
|
Square feet –
Technical Buildings
Owned (12)
|
-
|
1,603,569
|
1,603,569
|
1,603,569
|
1,603,569
|
1,603,569
|
|
Network – end of
period
|
|
|
|
|
|
|
|
Intercity route
miles – Leased
|
61,300
|
72,694
|
72,694
|
72,552
|
76,211
|
75,965
|
|
Metro route miles –
Leased
|
17,826
|
22,556
|
22,128
|
24,779
|
25,977
|
27,373
|
|
Metro fiber miles –
Leased
|
42,863
|
75,577
|
69,943
|
77,365
|
79,138
|
80,042
|
|
Intercity route
miles – Owned
|
2,748
|
21,883
|
21,883
|
21,883
|
21,883
|
21,883
|
|
Metro route miles –
Owned
|
445
|
1,704
|
1,704
|
1,704
|
1,704
|
1,704
|
|
Connected networks –
AS's
|
7,864
|
7,891
|
7,971
|
7,988
|
8,098
|
8,135
|
|
Headcount – end of
period (13)
|
|
|
|
|
|
|
|
Sales force – quota
bearing (13)
|
562
|
647
|
637
|
657
|
677
|
656
|
|
Sales force – total
(13)
|
714
|
841
|
833
|
847
|
871
|
851
|
|
Total employees
(13)
|
1,107
|
2,020
|
1,990
|
1,947
|
1,955
|
1,901
|
|
Sales rep
productivity – units per full
time equivalent sales rep ("FTE") per
month (15)
|
4.0
|
9.2
|
3.6
|
3.3
|
4.0
|
3.8
|
|
FTE – sales
reps
|
539
|
567
|
621
|
620
|
627
|
632
|
(1) In connection with the acquisition of the Wireline
Business, Cogent began to provide optical wavelength services and
optical transport services over its fiber network.
(2) Consists of legacy services of companies whose assets or
businesses were acquired by Cogent.
(3) See Schedules of Non-GAAP measures below for definitions and
reconciliations to GAAP measures.
(4) Network operations expense excludes equity-based compensation
expense of $149, $231, $370,
$370, $385 and $350 in
the three-month periods ended March 31,
2023 through June 30, 2024,
respectively. Network operations expense includes excise
taxes, including Universal Service Fund fees, of $4,193, $11,040,
$14,557, $20,428, $20,549
and $19,182 in the three-month
periods ended March 31, 2023 through
June 30, 2024, respectively.
(5) In connection with the acquisition of the Wireline
Business, Cogent classified revenue and customer connections as
follows:
- $12.9 million of the Wireline
Business monthly recurring revenue and 17,823 customer connections
as corporate revenue and corporate customer connections,
respectively,
- $6.5 million of monthly recurring
revenue and 5,711 customer connections as net-centric revenue and
net-centric customer connections, respectively, and
- $20.1 million of monthly
recurring revenue and 23,209 customer connections as enterprise
revenue and enterprise customer connections, respectively.
- Conversely, Cogent reclassified $0.3
million of monthly recurring revenue and 387 customer
connections of legacy Cogent monthly recurring revenue to
enterprise revenue and enterprise customer connections,
respectively
- $0.3 million of corporate monthly
recurring revenue and 363 corporate customer connections and
$0.02 million of net-centric monthly
recurring revenue and 24 net-centric customer connections.
(6) 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.
(7) 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 measures to provide
investors. Management uses them to measure the margin available to
the company after network service costs, in essence a measure of
the efficiency of the Company's network.
(8) Excludes equity-based compensation expense of $6,432, $6,018,
$7,041, $6,314, $6,565 and
$3,215 in the three-month periods
ended March 31, 2023 through
June 30, 2024, respectively and
excludes $400, $739, $351,
$17,001, $9,037 and $12,370
of Sprint acquisition costs for the three-month periods ended
March 31, 2023 through June 30, 2024, respectively.
(9) As of June 30, 2024, Cogent was
party to an interest rate swap agreement (the "Swap Agreement")
that has the economic effect of modifying the fixed interest rate
obligation associated with its Senior Secured 2026 Notes to a
variable interest rate obligation based on the Secured Overnight
Financing Rate ("SOFR") so that the interest payable on the 2026
Notes effectively became variable based on overnight SOFR. Interest
expense includes payments of $9.5
million, $12.0 million and
$12.1 million for the three-month
periods ended June 30, 2023,
December 31, 2023 and June 30, 2024, respectively related to the Swap
Agreement. Under GAAP, changes in the valuation of the Swap
Agreement are classified with interest expense in the condensed
consolidated statements of comprehensive (loss) income.
(10) The gain on bargain purchase from the Sprint acquisition was
$1.4 billion as shown below.
|
(In
thousands)
Gain on bargain
purchase
|
|
|
|
|
Fair value of net
assets acquired
|
|
|
$826,067
|
|
Total net consideration
to be received from Seller, net of discounts
|
|
|
602,581
|
|
Gain on bargain
purchase
|
|
|
$1,428,648
|
(11) Includes cash payments under the IP Transit Services
Agreement, as discussed above, of
- $29.2 million for the three
months ended June 30, 2023.
- $87.5 million for the three
months ended September 30, 2023.
- $87.5 million for the three
months ended December 31, 2023.
- $87.5 million for the three
months ended March 31, 2024.
- $66.7 million for the three
months ended June 30, 2024.
(12) In connection with the acquisition of the Wireline
Business, Cogent acquired 482 technical buildings.
Thirty-four of those buildings have been converted to a Cogent Data
Centers.
(13) In connection with the acquisition of the Wireline Business,
Cogent hired 942 total employees, including 75 quota bearing sales
employees and 114 sales employees.
- As of June 30, 2023, there were
888 employees remaining from the original Wireline Business
employees.
- As of September 30, 2023, there
were 839 employees remaining from the original Wireline Business
employees.
- As of December 31, 2023, there
were 758 employees remaining from the original Wireline Business
employees.
- As of March 31, 2024, there were
718 employees remaining from the original Wireline Business
employees.
- As of June 30, 2024, there were
655 employees remaining from the original Wireline Business
employees.
(14) In connection with the acquisition of the Wireline Business
the Company incurred the following Sprint Acquisition Costs
- $0.4 million of in the three
months ended June 30, 2023,
- $0.7 million in the three months
ended June 30, 2023,
- $0.4 million in the three months
ended September 30, 2023,
- $17.0 million in the three months
ended December 31, 2023,
- $9.0 million in the three months
ended March 31, 2024
- $12.4 million in the three months
ended June 30, 2024
Included in Sprint acquisition costs were the following
reimbursable severance
- $16.2 million of reimbursable
severance costs in the three months ended December 31, 2023,
- $4.3 million of reimbursable
severance costs in the three months ended March 31, 2024, and
- $8.0 million of reimbursable
severance costs in the three months ended June 30, 2024
(15) Sales rep productivity for Q2 2023 included 9,084
net-centric customer connections from a commercial services
agreement ("CSA") with TMUSA entered into in May 2023.
Net-centric revenue under the CSA was
- $7.3 million for the three months
ended June 30, 2023,
- $8.0 million for the three months
ended September 30, 2023,
- $8.6 million for the three months
ended December 31, 2023
- $3.2 million for the three months
ended March 31, 2024, and
- $5.9 million for the three months
ended June 30, 2024
Net-centric customer connections under the CSA were
- 8,028 as of June 30, 2023,
- 4,661 as of September 30,
2023,
- 3,576 as of December 31,
2023
- 2,658 as of March 31, 2024,
and
- 2,117 as of June 30, 2024
(16) As of June 30, 2023, total
non-core customer connections included 8,486 Session Initiation
Protocol ("SIP") customer connections. This non-core corporate
product was discontinued. There were no SIP, non-core customer
connections as of September 30, 2023,
December 31, 2023, March 31, 2024, or June
30, 2024.
(17) The first quarter 2024 dividend totaling $45.8 million was declared on February 28, 2024, and paid on April 9, 2024.
NM Not meaningful
Schedules of Non-GAAP Measures
EBITDA, EBITDA, as adjusted for Sprint acquisition costs and
cash payments made to the Company under the IP Transit
Services Agreement, EBITDA margin and EBITDA, as adjusted for
Sprint acquisition costs and cash payments made to the Company
under the IP Transit Services Agreement , margin
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 for Sprint acquisition costs and
cash payments under the IP Transit Services Agreement with
T-Mobile, represents EBITDA plus costs related to the Company's
acquisition of the Wireline Business and cash payments made to the
Company under the IP Transit Agreement. EBITDA margin is defined as
EBITDA divided by total service revenue. EBITDA, as adjusted for
Sprint acquisition costs and cash payments made to the Company
under the IP Transit Agreement margin is defined as EBITDA, as
adjusted for Sprint acquisition costs and cash payments made to the
Company under the IP Transit Agreement, divided by total service
revenue.
The Company believes that EBITDA, EBITDA, as adjusted for Sprint
acquisition costs and cash payments made to the Company under the
IP Transit Services Agreement, EBITDA margin and EBITDA as adjusted
for Sprint acquisition costs and cash payments made to the Company
under the IP Transit Services Agreement margin are useful measures
of its ability to service debt, fund capital expenditures, pay
dividends and expand its business. The company believes its
EBITDA, as adjusted for Sprint acquisition costs and cash payments
made to the Company under the IP Transit Services Agreement, is a
useful measure because it includes recurring cash flows stemming
from the IP Transit Services Agreement that are of the same type as
contracted payments under commercial contracts. The
measurements are an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information. EBITDA, EBITDA, as adjusted for Sprint
acquisition costs and cash payments made to the Company under the
IP Transit Agreement, EBITDA margin and EBITDA as adjusted for
Sprint acquisition costs and cash payments made to the Company
under the IP Transit Agreement margin 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
measures are not intended to reflect the Company's free cash flow,
as they do 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 measures may also differ from the calculations performed
by its competitors and other companies and as such, their utility
as a comparative measure is limited.
EBITDA, and EBITDA, as adjusted for Sprint acquisition costs
and cash payments made to the Company under the IP Transit Services
Agreement, are reconciled to net cash provided by operating
activities in the table below.
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
($ in 000's) –
unaudited
|
|
|
|
|
|
|
|
Net cash provided by
(used in) operating
activities
|
$35,821
|
$82,654
|
$(52,433)
|
$(48,701)
|
$19,219
|
$(22,171)
|
|
Changes in operating
assets and liabilities
|
$1,435
|
$(90,373)
|
$51,064
|
$36,288
|
$(34,640)
|
$11,077
|
|
Cash interest expense
and income tax expense
|
18,797
|
31,875
|
44,956
|
18,424
|
33,873
|
38,220
|
|
EBITDA
|
$56,053
|
$24,156
|
$43,587
|
$6,011
|
$18,452
|
$27,126
|
|
PLUS: Sprint
acquisition costs
|
$400
|
$739
|
$351
|
$17,001
|
$9,037
|
$12,370
|
|
PLUS: Cash payments
made to the
Company under IP Transit Services
Agreement
|
-
|
29,167
|
87,500
|
87,500
|
87,500
|
66,667
|
|
EBITDA, as adjusted
for Sprint
acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement
|
$56,453
|
$54,062
|
$131,438
|
$110,512
|
$114,989
|
$106,163
|
|
EBITDA
margin
|
36.5 %
|
10.1 %
|
15.8 %
|
2.2 %
|
6.9 %
|
10.4 %
|
|
EBITDA, as adjusted
for Sprint
acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement, margin
|
36.8 %
|
22.5 %
|
47.7 %
|
40.6 %
|
43.2 %
|
40.8 %
|
Constant currency revenue is reconciled to service revenue as
reported in the tables below.
Constant currency impact on revenue changes – sequential
periods
|
($ in 000's) –
unaudited
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
Service revenue, as
reported – current
period
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
Impact of foreign
currencies on service
revenue
|
(1,292)
|
(417)
|
10
|
375
|
(304)
|
323
|
|
Service revenue - as
adjusted for
currency impact (1)
|
$152,296
|
$239,389
|
$275,439
|
$272,474
|
$265,864
|
$260,766
|
|
Service revenue, as
reported – prior
sequential period
|
$151,979
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
|
Constant currency
revenue increase
(decrease)
|
$317
|
$85,801
|
$35,633
|
$(2,955)
|
$(6,235)
|
$(5,402)
|
|
Constant currency
revenue percent
increase (decrease)
|
0.2 %
|
55.9 %
|
14.9 %
|
-1.1 %
|
-2.3 %
|
-2.0 %
|
|
|
|
(1)
|
Service revenue, as
adjusted for currency impact, is determined by translating the
service revenue for the current period at the average foreign
currency exchange rates for the prior sequential period. The
Company believes that disclosing quarterly sequential revenue
growth without the impact of foreign currencies on service revenue
is a useful measure of sequential revenue growth. Service revenue,
as adjusted for currency impact, is an integral part of the
internal reporting and planning system used by management as a
supplement to GAAP financial information.
|
Constant currency impact on revenue changes – prior year
periods
|
($ in 000's) –
unaudited
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
Service revenue, as
reported – current
period
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
Impact of foreign
currencies on service
revenue
|
1,553
|
(277)
|
(1,768)
|
(1,412)
|
(362)
|
420
|
|
Service revenue - as
adjusted for
currency impact (2)
|
$155,141
|
$239,529
|
$273,661
|
$270,687
|
$265,806
|
$260,863
|
|
Service revenue, as
reported – prior
year period
|
149,175
|
148,450
|
$150,000
|
$151,979
|
$153,588
|
$239,806
|
|
Constant currency
revenue increase
|
5,966
|
91,079
|
$123,661
|
$118,708
|
$112,218
|
$21,057
|
|
Constant currency
percent revenue
increase
|
4.0 %
|
61.4 %
|
82.4 %
|
78.1 %
|
73.1 %
|
8.8 %
|
|
|
|
(2)
|
Service revenue, as
adjusted for currency impact, is determined by translating the
service revenue for the current period at the average foreign
currency exchange rates for the comparable prior year period. The
Company believes that disclosing year over year revenue growth
without the impact of foreign currencies on service revenue is a
useful measure of revenue growth. Service revenue, as adjusted for
currency impact, is an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information.
|
Revenue on a constant currency basis and adjusted for the
impact of excise taxes is reconciled to service revenue as reported
in the tables below.
Constant currency and excise tax impact on revenue changes –
sequential periods
|
($ in 000's) –
unaudited
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
Service revenue, as
reported – current
period
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
Impact of foreign
currencies on service
revenue
|
(1,292)
|
(417)
|
10
|
375
|
(304)
|
323
|
|
Impact of excise taxes
on service
revenue
|
(107)
|
(6,847)
|
(3,517)
|
(5,871)
|
(121)
|
1,367
|
|
Service revenue - as
adjusted for
currency and excise taxes impact (3)
|
$152,189
|
$232,542
|
$271,922
|
$266,603
|
$265,743
|
$262,133
|
|
Service revenue, as
reported – prior
sequential period
|
$151,979
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
|
Constant currency and
excise taxes
revenue increase (decrease)
|
$210
|
$78,954
|
$32,116
|
$(8,826)
|
$(6,356)
|
$(4,035)
|
|
Constant currency and
excise tax
revenue percent increase (decrease)
|
0.1 %
|
51.4 %
|
13.4 %
|
-3.2 %
|
-2.3 %
|
-1.5 %
|
|
|
|
(3)
|
Service revenue, as
adjusted for currency impact and the impact of excise taxes, is
determined by translating the service revenue for the current
period at the average foreign currency exchange rates for the prior
sequential period and adjusting for the changes in excise taxes
recorded as revenue between the periods presented. The Company
believes that disclosing quarterly sequential revenue growth
without the impact of foreign currencies and excise taxes on
service revenue is a useful measure of sequential revenue growth.
Service revenue, as adjusted for the impact of foreign currency and
excise taxes, is an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information.
|
Constant currency and excise tax impact on revenue changes –
prior year periods
|
($ in 000's) –
unaudited
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
Service revenue, as
reported –
current period
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
Impact of foreign
currencies on
service revenue
|
1,553
|
(277)
|
(1,768)
|
(1,412)
|
(362)
|
420
|
|
Impact of excise taxes
on service
revenue
|
(451)
|
(7,592)
|
(10,439)
|
(16,342)
|
(16,356)
|
(8,142)
|
|
Service revenue - as
adjusted for
currency and excise taxes impact
(4)
|
$154,690
|
$231,937
|
$263,222
|
$254,345
|
$249,450
|
$252,721
|
|
Service revenue, as
reported –
prior year period
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
$239,806
|
|
Constant currency and
excise
taxes revenue increase
|
$5,515
|
$83,487
|
$113,222
|
$102,366
|
$95,862
|
$12,915
|
|
Constant currency and
excise tax
percent revenue increase
|
3.7 %
|
56.2 %
|
75.5 %
|
67.4 %
|
62.4 %
|
5.4 %
|
|
|
|
(4)
|
Service revenue, as
adjusted for currency impact and the impact of excise taxes, is
determined by translating the service revenue for the current
period at the average foreign currency exchange rates for the prior
year period and adjusting for the changes in excise taxes recorded
as revenue between the periods presented. The Company believes that
disclosing quarterly sequential revenue growth without the impact
of foreign currencies and excise taxes on service revenue is a
useful measure of sequential revenue growth. Service revenue, as
adjusted for the impact of foreign currency and excise taxes, is an
integral part of the internal reporting and planning system used by
management as a supplement to GAAP financial
information.
|
Non-GAAP gross profit and non-GAAP gross margin
Non-GAAP gross profit and non-GAAP gross margin are
reconciled to GAAP gross profit and GAAP gross margin in the table
below.
|
Q1
2023
|
Q2
2023
|
Q3
2023
|
Q4
2023
|
Q1
2024
|
Q2
2024
|
|
($ in 000's) –
unaudited
|
|
|
|
|
|
|
|
Service revenue
total
|
$153,588
|
$239,806
|
$275,429
|
$272,099
|
$266,168
|
$260,443
|
|
Minus - Network
operations expense
including equity-based compensation
and depreciation and amortization
expense
|
83,798
|
190,013
|
260,328
|
242,355
|
239,824
|
230,203
|
|
GAAP Gross Profit
(5)
|
$69,790
|
$49,793
|
$15,101
|
$29,744
|
$26,344
|
$30,240
|
|
Plus - Equity-based
compensation –
network operations expense
|
149
|
231
|
370
|
370
|
385
|
350
|
|
Plus – Depreciation and
amortization
expense
|
$25,160
|
$52,511
|
$86,734
|
$67,805
|
$70,891
|
$74,036
|
|
Non-GAAP Gross
Profit (6)
|
$95,099
|
$102,535
|
$102,205
|
$97,919
|
$97,620
|
$104,626
|
|
GAAP Gross Margin
(5)
|
45.4 %
|
20.8 %
|
5.5 %
|
10.9 %
|
9.9 %
|
11.6 %
|
|
Non-GAAP Gross
Margin (6)
|
61.9 %
|
42.8 %
|
37.1 %
|
36.0 %
|
36.7 %
|
40.2 %
|
|
|
|
(5)
|
GAAP gross profit is
defined as total service revenue less network operations expense,
depreciation and amortization and equity-based compensation
included in network operations expense. GAAP gross margin is
defined as GAAP gross profit divided by total service
revenue.
|
|
|
|
(6)
|
Non-GAAP gross profit
represents service revenue less network operations expense,
excluding equity-based compensation and amounts shown separately
(depreciation and amortization expense). Non-GAAP gross margin is
defined as non-GAAP gross profit divided by total service
revenue. Management believes that non-GAAP gross profit and
non-GAAP gross margin are relevant measures for investors, as they
are measures that management uses to measure the margin and amount
available to the Company after network service costs, in essence,
these are measures of the efficiency of the Company's
network.
|
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the
trailing 12 months EBITDA, as adjusted for Sprint acquisition costs
and cash payments under the IP Transit Services Agreement.
Net leverage ratio is defined as total net debt (total debt minus
cash and cash equivalents) divided by the last 12 months EBITDA, as
adjusted for Sprint acquisition costs and cash payments under the
IP Transit Services Agreement. Cogent's gross leverage ratios
and net leverage ratios are shown below.
|
($ in 000's) –
unaudited
|
As of
March 31,
2023
|
As of
June 30,
2023
|
As of
September 30,
2023
|
As of
December 31,
2023
|
As of
March 31,
2024
|
As of
June 30,
2024
|
|
Cash and cash
equivalents & restricted
cash
|
$234,422
|
$243,953
|
$166,072
|
$113,781
|
$163,274
|
$426,241
|
|
Debt
|
|
|
|
|
|
|
|
Capital (finance)
leases – current portion
|
19,782
|
20,114
|
63,236
|
64,594
|
64,043
|
21,253
|
|
Capital (finance)
leases – long term
|
300,600
|
311,405
|
419,941
|
419,921
|
453,473
|
405,176
|
|
Senior Secured 2026
Notes
|
500,000
|
500,000
|
500,000
|
500,000
|
500,000
|
500,000
|
|
Secured IPV4
Notes
|
|
|
|
|
|
206,000
|
|
Senior Unsecured 2027
Notes
|
450,000
|
450,000
|
450,000
|
450,000
|
450,000
|
750,000
|
|
Total debt
|
1,270,382
|
1,281,519
|
1,433,177
|
1,434,515
|
1,467,516
|
1,882,429
|
|
Total net
debt
|
1,035,960
|
1,037,566
|
1,267,105
|
1,320,734
|
1,304,242
|
1,456,188
|
|
Trailing 12 months
EBITDA, as adjusted
for Sprint acquisition costs and cash
payments from the IP Transit Services
Agreement
|
232,169
|
227,774
|
298,984
|
352,465
|
411,001
|
463,102
|
|
Gross leverage
ratio
|
5.47
|
5.63
|
4.79
|
4.07
|
3.57
|
4.06
|
|
Net leverage
ratio
|
4.46
|
4.56
|
4.24
|
3.75
|
3.17
|
3.14
|
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, 2024
AND DECEMBER 31, 2023
|
|
(IN THOUSANDS,
EXCEPT SHARE DATA)
|
|
|
|
June
30,
2024
|
|
December 31,
2023
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
384,419
|
|
$
|
75,092
|
|
Restricted
cash
|
|
|
41,822
|
|
|
38,689
|
|
Accounts receivable,
net of allowance for credit losses of $6,382 and $3,677,
respectively
|
|
|
111,676
|
|
|
135,475
|
|
Due from T-Mobile, IP
Transit Services Agreement, current portion, net of discount of
$19,992 and $24,898, respectively
|
|
|
80,008
|
|
|
179,269
|
|
Due from T-Mobile,
Transition Services Agreement
|
|
|
3,862
|
|
|
4,514
|
|
Prepaid expenses and
other current assets
|
|
|
67,688
|
|
|
80,588
|
|
Total current
assets
|
|
|
689,475
|
|
|
513,627
|
|
Property and
equipment:
|
|
|
|
|
|
|
|
Property and
equipment
|
|
|
3,103,518
|
|
|
2,947,376
|
|
Accumulated
depreciation and amortization
|
|
|
(1,522,908)
|
|
|
(1,409,559)
|
|
Total property and
equipment, net
|
|
|
1,580,610
|
|
|
1,537,817
|
|
Right-of-use leased
assets
|
|
|
332,065
|
|
|
361,587
|
|
IPv4 intangible
assets
|
|
|
458,000
|
|
|
458,000
|
|
Other intangible
assets, net
|
|
|
13,926
|
|
|
14,815
|
|
Deposits and other
assets
|
|
|
26,455
|
|
|
23,438
|
|
Due from T-Mobile,
IP Transit Services Agreement, net of discount of
$19,558 and $27,916, respectively
|
|
|
222,108
|
|
|
263,750
|
|
Due from T-Mobile,
Purchase Agreement, net of discount of $6,581 and
$13,725, respectively
|
|
|
21,534
|
|
|
38,585
|
|
Total assets
|
|
$
|
3,344,173
|
|
$
|
3,211,619
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
38,510
|
|
$
|
48,356
|
|
Accrued and other
current liabilities
|
|
|
189,131
|
|
|
120,523
|
|
Due to T-Mobile –
Transition Services Agreement
|
|
|
2,286
|
|
|
66,908
|
|
Due to T-Mobile –
Purchase Agreement
|
|
|
—
|
|
|
4,981
|
|
Current maturities,
operating lease liabilities
|
|
|
61,780
|
|
|
67,962
|
|
Finance lease
obligations, current maturities
|
|
|
21,253
|
|
|
64,594
|
|
Total current
liabilities
|
|
|
312,960
|
|
|
373,324
|
|
Senior secured 2026
notes, net of unamortized debt costs of $511 and
$645, respectively, and discounts of $680
and
$857,
respectively
|
|
|
498,809
|
|
|
498,498
|
|
Senior unsecured
2027 notes, net of unamortized debt costs of $2,163
and $941, respectively, and discounts of
$8,332
and
$1,970, respectively
|
|
|
739,505
|
|
|
447,088
|
|
Secured IPv4 notes,
net of debt costs of $7,323
|
|
|
198,677
|
|
|
—
|
|
Operating lease
liabilities, net of current maturities
|
|
|
309,055
|
|
|
330,095
|
|
Finance lease
obligations, net of current maturities
|
|
|
405,176
|
|
|
419,921
|
|
Deferred income tax
liabilities
|
|
|
406,335
|
|
|
471,498
|
|
Other long-term
liabilities
|
|
|
58,133
|
|
|
61,639
|
|
Total
liabilities
|
|
|
2,928,650
|
|
|
2,602,063
|
|
Commitments and
contingencies:
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
Common stock, $0.001
par value; 75,000,000 shares authorized; 48,990,760 and 48,608,569
shares issued and outstanding,
respectively
|
|
|
49
|
|
|
49
|
|
Additional paid-in
capital
|
|
|
610,905
|
|
|
606,755
|
|
Accumulated other
comprehensive loss
|
|
|
(21,141)
|
|
|
(14,385)
|
|
Accumulated (deficit)
earnings
|
|
|
(174,290)
|
|
|
17,137
|
|
Total stockholders'
equity
|
|
|
415,523
|
|
|
609,556
|
|
Total liabilities
and stockholders' equity
|
|
$
|
3,344,173
|
|
$
|
3,211,619
|
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
FOR THE THREE MONTHS
ENDED JUNE 30, 2024 AND JUNE 30, 2023
|
|
(IN THOUSANDS,
EXCEPT SHARE AND PER SHARE DATA)
|
|
|
|
Three Months
Ended
June 30, 2024
|
|
Three Months
Ended
June 30, 2023
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Service
revenue
|
|
$
|
260,443
|
|
$
|
239,806
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Network operations
(including $350 and $231 of equity-based compensation expense,
respectively,
exclusive of depreciation and amortization
shown separately below)
|
|
|
156,167
|
|
|
137,502
|
|
Selling, general, and
administrative (including $3,215 and $6,018 of equity-based
compensation expense,
respectively)
|
|
|
68,345
|
|
|
83,658
|
|
Acquisition costs –
Sprint Business
|
|
|
12,370
|
|
|
739
|
|
Depreciation and
amortization
|
|
|
74,036
|
|
|
52,511
|
|
Total operating
expenses
|
|
|
310,918
|
|
|
274,410
|
|
Gain on lease
termination
|
|
|
3,332
|
|
|
—
|
|
Operating
loss
|
|
|
(47,143)
|
|
|
(34,604)
|
|
Interest expense,
including change in valuation of interest rate swap
agreement
|
|
|
(29,541)
|
|
|
(29,958)
|
|
Gain on bargain
purchase – Sprint Business
|
|
|
27,673
|
|
|
1,155,719
|
|
Interest income – IP
Transit Services Agreement
|
|
|
5,934
|
|
|
7,669
|
|
Interest income –
Purchase Agreement
|
|
|
402
|
|
|
506
|
|
Interest income and
other, net
|
|
|
2,484
|
|
|
200
|
|
(Loss) income before
income taxes
|
|
|
(40,191)
|
|
|
1,099,532
|
|
Income tax
benefit
|
|
|
7,853
|
|
|
24,331
|
|
Net (loss)
income
|
|
$
|
(32,338)
|
|
$
|
1,123,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
income:
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(32,338)
|
|
$
|
1,123,863
|
|
Foreign currency
translation adjustment
|
|
|
(1,722)
|
|
|
1,741
|
|
Comprehensive (loss)
income
|
|
$
|
(34,060)
|
|
$
|
1,125,604
|
|
|
|
|
|
|
|
|
Net (loss) income
per common share:
|
|
|
|
|
|
|
|
Basic net (loss)
income per common share
|
|
$
|
(0.68)
|
|
$
|
23.84
|
|
Diluted net (loss)
income per common share
|
|
$
|
(0.68)
|
|
$
|
23.65
|
|
Dividends declared
per common share
|
|
$
|
0.975
|
|
$
|
0.935
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - basic
|
|
|
47,511,613
|
|
|
47,137,822
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - diluted
|
|
|
47,511,613
|
|
|
47,526,207
|
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
FOR THE SIX MONTHS
ENDED JUNE 30, 2024 AND JUNE 30, 2023
|
|
(IN THOUSANDS,
EXCEPT SHARE AND PER SHARE DATA)
|
|
|
|
Six Months
Ended
June 30,
2024
|
|
Six Months
Ended
June 30,
2023
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Service
revenue
|
|
$
|
526,613
|
|
$
|
393,395
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Network operations
(including $385 and $380 of equity-based compensation expense,
respectively, exclusive of
depreciation and amortization shown separately
below)
|
|
|
324,752
|
|
|
196,140
|
|
Selling, general, and
administrative (including $10,131 and $12,450 of equity-based
compensation expense,
respectively)
|
|
|
145,392
|
|
|
128,736
|
|
Acquisition costs –
Sprint Business
|
|
|
21,407
|
|
|
1,139
|
|
Depreciation and
amortization
|
|
|
144,930
|
|
|
77,669
|
|
Total operating
expenses
|
|
|
636,481
|
|
|
403,684
|
|
Gain on lease
termination
|
|
|
3,332
|
|
|
—
|
|
Operating
loss
|
|
|
(106,536)
|
|
|
(10,289)
|
|
Interest expense,
including change in valuation interest rate swap
agreement
|
|
|
(58,703)
|
|
|
(47,116)
|
|
Gain on bargain
purchase – Sprint Business
|
|
|
22,202
|
|
|
1,155,719
|
|
Interest income – IP
Transit Services Agreement
|
|
|
13,264
|
|
|
7,669
|
|
Interest income –
Purchase Agreement
|
|
|
(78)
|
|
|
506
|
|
Interest income and
other, net
|
|
|
5,226
|
|
|
3,695
|
|
(Loss) income before
income taxes
|
|
|
(124,625)
|
|
|
1,110,184
|
|
Income tax
benefit
|
|
|
26,980
|
|
|
19,827
|
|
Net (loss)
income
|
|
$
|
(97,645)
|
|
$
|
1,130,011
|
|
|
|
|
|
|
|
|
Comprehensive (loss)
income:
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(97,645)
|
|
$
|
1,130,011
|
|
Foreign currency
translation adjustment
|
|
|
(6,756)
|
|
|
3,529
|
|
Comprehensive (loss)
income
|
|
$
|
(104,401)
|
|
$
|
1,133,540
|
|
|
|
|
|
|
|
|
Net (loss) income
per common share:
|
|
|
|
|
|
|
|
Basic net (loss)
income per common share
|
|
$
|
(2.06)
|
|
$
|
23.97
|
|
Diluted net (loss)
income per common share
|
|
$
|
(2.06)
|
|
$
|
23.79
|
|
Dividends declared
per common share
|
|
$
|
1.940
|
|
$
|
1.860
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - basic
|
|
|
47,408,786
|
|
|
47,142,074
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - diluted
|
|
|
47,408,786
|
|
|
47,508,334
|
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
FOR THE THREE MONTHS
ENDED JUNE 30, 2024 AND JUNE 30, 2023
|
|
(IN
THOUSANDS)
|
|
|
|
Three Months
Ended
June 30, 2024
|
|
Three Months
Ended
June 30, 2023
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(32,338)
|
|
$
|
1,123,862
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
74,039
|
|
|
52,511
|
|
Amortization of debt
costs and discounts
|
|
|
764
|
|
|
328
|
|
Amortization of
discounts, due from T-Mobile, IP Transit Services & Purchase
Agreements
|
|
|
(6,336)
|
|
|
(8,175)
|
|
Equity-based
compensation expense (net of amounts capitalized)
|
|
|
3,566
|
|
|
6,249
|
|
Gain on bargain
purchase – Sprint Business
|
|
|
(27,673)
|
|
|
(1,155,719)
|
|
Gains – lease
terminations and other, net
|
|
|
(3,332)
|
|
|
7
|
|
Deferred income
taxes
|
|
|
(10,485)
|
|
|
(28,080)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(4,507)
|
|
|
(4,058)
|
|
Prepaid expenses and
other current assets
|
|
|
12,010
|
|
|
(11,221)
|
|
Due to T-Mobile –
Transition Services Agreement
|
|
|
(3,530)
|
|
|
118,777
|
|
Due from T-Mobile –
Transition Services Agreement
|
|
|
(8,619)
|
|
|
(7,015)
|
|
Unfavorable lease
liabilities
|
|
|
(1,392)
|
|
|
(6,469)
|
|
Accounts payable,
accrued liabilities, change in swap valuation and other
long-term liabilities
|
|
|
(15,008)
|
|
|
1,560
|
|
Deposits and other
assets
|
|
|
670
|
|
|
97
|
|
Net cash (used in)
provided by operating activities
|
|
|
(22,171)
|
|
|
82,654
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Cash payments - IP
Transit Services Agreement – T-Mobile
|
|
|
66,667
|
|
|
29,167
|
|
Acquisition of Sprint
Business, net of $47.1 million of cash acquired
|
|
|
7,989
|
|
|
(14,034)
|
|
Purchases of property
and equipment
|
|
|
(48,767)
|
|
|
(37,449)
|
|
Net cash provided by
(used in) investing activities
|
|
|
25,889
|
|
|
(22,316)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(93,304)
|
|
|
(44,907)
|
|
Purchases of common
stock
|
|
|
(7,968)
|
|
|
—
|
|
Net proceeds from
issuance of senior unsecured 2027 Notes - net of discount of $6.8
million
and debt costs of $1.4 million
|
|
|
291,879
|
|
|
—
|
|
Net proceeds from
issuance of secured IPv4 notes – net of debt costs of $7.6
million
|
|
|
198,420
|
|
|
|
|
Proceeds from exercises
of stock options
|
|
|
40
|
|
|
240
|
|
Principal payments of
finance lease obligations
|
|
|
(18,896)
|
|
|
(7,797)
|
|
Settlement of finance
lease – at a discount
|
|
|
(114,576)
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
|
|
255,595
|
|
|
(52,464)
|
|
Effect of exchange
rates changes on cash
|
|
|
3,654
|
|
|
1,657
|
|
Net increase in
cash, cash equivalents and restricted cash
|
|
|
262,967
|
|
|
9,531
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
163,274
|
|
|
234,422
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
426,241
|
|
$
|
243,953
|
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
FOR THE SIX MONTHS
ENDED JUNE 30, 2024 AND JUNE 30, 2023
|
|
(IN
THOUSANDS)
|
|
|
|
Six Months
Ended
June 30, 2024
|
|
Six Months
Ended
June 30, 2023
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(97,645)
|
|
$
|
1,130,011
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
144,930
|
|
|
77,669
|
|
Amortization of debt
costs and discounts
|
|
|
1,106
|
|
|
652
|
|
Amortization of
discounts, due from T-Mobile, IP Transit Services & Purchase
Agreements
|
|
|
(13,186)
|
|
|
(8,175)
|
|
Equity-based
compensation expense (net of amounts capitalized)
|
|
|
10,516
|
|
|
12,830
|
|
Gain on bargain
purchase – Sprint Business
|
|
|
(22,202)
|
|
|
(1,155,719)
|
|
Gains – lease
terminations and other, net
|
|
|
(3,332)
|
|
|
(608)
|
|
Deferred income
taxes
|
|
|
(43,554)
|
|
|
(27,190)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
23,799
|
|
|
(4,918)
|
|
Prepaid expenses and
other current assets
|
|
|
12,900
|
|
|
(14,140)
|
|
Due to T-Mobile –
Transition Services Agreement
|
|
|
(64,622)
|
|
|
118,777
|
|
Due from T-Mobile –
Transition Services Agreement
|
|
|
(11,671)
|
|
|
(7,015)
|
|
Unfavorable lease
liabilities
|
|
|
(3,843)
|
|
|
(6,469)
|
|
Accounts payable,
accrued liabilities, change in swap valuation and other long-term
liabilities
|
|
|
66,541
|
|
|
2,637
|
|
Deposits and other
assets
|
|
|
(2,688)
|
|
|
133
|
|
Net cash (used in)
provided by operating activities
|
|
|
(2,951)
|
|
|
118,475
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Cash payments - IP
Transit Services Agreement – T-Mobile
|
|
|
154,167
|
|
|
29,167
|
|
Acquisition of Sprint
Business, net of $47.1 million of cash acquired
|
|
|
12,323
|
|
|
(14,034)
|
|
Purchases of property
and equipment
|
|
|
(89,650)
|
|
|
(60,653)
|
|
Net cash provided by
(used in) investing activities
|
|
|
76,840
|
|
|
(45,520)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(93,782)
|
|
|
(90,218)
|
|
Purchases of common
stock
|
|
|
(7,968)
|
|
|
—
|
|
Net proceeds from
issuance of senior unsecured 2027 Notes - net of discount of $6.8
million
and debt costs of $1.4 million
|
|
|
291,879
|
|
|
—
|
|
Net proceeds from
issuance of secured IPv4 notes – net of debt costs of $7.6
million
|
|
|
198,420
|
|
|
|
|
Proceeds from exercises
of stock options
|
|
|
204
|
|
|
385
|
|
Principal payments of
finance lease obligations
|
|
|
(42,131)
|
|
|
(17,247)
|
|
Settlement of finance
lease – at a discount
|
|
|
(114,576)
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
|
|
232,046
|
|
|
(107,080)
|
|
Effect of exchange
rates changes on cash
|
|
|
6,525
|
|
|
2,166
|
|
Net increase
(decrease) in cash, cash equivalents and restricted
cash
|
|
|
312,460
|
|
|
(31,959)
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
113,781
|
|
|
275,912
|
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
426,241
|
|
$
|
243,953
|
|
Supplemental
disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
Fair value of equipment
acquired in leases
|
|
$
|
—
|
|
$
|
171
|
|
Finance lease
obligations incurred
|
|
$
|
96,606
|
|
$
|
42,639
|
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 our acquisition of the
Wireline Business, including our difficulties integrating our
business with the acquired Wireline Business, which may result in
the combined company not operating as effectively or efficiently as
expected; transition services required to support the acquired
Wireline Business and the related costs continuing for a longer
period than expected; transition related costs associated with the
acquisition; the COVID-19 pandemic and the related government
policies; future economic instability in the global economy,
including the risk of economic recession, recent bank failures and
liquidity concerns at certain other banks 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; cyber-attacks or
security breaches of our network; 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 and right-of-way agreements on favorable terms; our
reliance on a few equipment vendors, 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 and right-of-way providers; our ability to retain certain
customers that comprise a significant portion of our revenue base;
the management of network failures and/or disruptions; our ability
to make payments on our indebtedness as they become due and
outcomes in litigation, risks associated with variable interest
rates under our interest rate swap agreement, 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, 2023 and our Form
10-Q for the quarterly periods ended June 30, 2023, September
30, 2023, March 31, 2024 and
June 30, 2024. 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.