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Cogent Communications Reports Third Quarter 2017 Results and Increases Regular Quarterly Dividend on Common Stock
[November 02, 2017]

Cogent Communications Reports Third Quarter 2017 Results and Increases Regular Quarterly Dividend on Common Stock


WASHINGTON, Nov. 2, 2017 /PRNewswire/ --

Financial and Business Highlights

  • Cogent approves a 4.3% increase of $0.02 per share to its regular quarterly dividend to $0.48 per common share to be paid on December 4, 2017 to shareholders of record on November 17, 2017
  • Service revenue for Q3 2017 increased by 2.7% from Q2 2017 to $123.0 million and on a constant currency basis increased from Q2 2017 by 1.2%
  • Service revenue for Q3 2017 increased by 8.8% from Q3 2016 and on a constant currency basis increased from Q3 2016 by 7.7%
  • Capital expenditures decreased by 7.5% from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 from $38.0 million to $35.2 million
  • Cash flow from operations increased by 2.6% from Q2 2017 to $28.8 million and increased from Q3 2016 by 26.1%

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $123.0 million for the three months ended September 30, 2017, an increase of 8.8% from the three months ended September 30, 2016 and an increase of 2.7% from the three months ended June 30, 2017.  Foreign exchange positively impacted service revenue growth from the three months ended June 30, 2017 to the three months ended September 30, 2017 by $1.7 million and positively impacted service revenue growth from the three months ended September 30, 2016 to the three months ended September 30, 2017 by $1.3 million.  On a constant currency basis, service revenue grew by 1.2% from the three months ended June 30, 2017 to the three months ended September 30, 2017 and grew by 7.7% from the three months ended September 30, 2016 to the three months ended September 30, 2017.

Cogent Communications Logo. (PRNewsFoto/Cogent Communications)

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 $87.9 million for the three months ended September 30, 2017; an increase of 2.7% from the three months ended June 30, 2017 and an increase of 7.4% over the three months ended September 30, 2016.

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 $34.9 million for the three months ended September 30, 2017; an increase of 2.6% over the three months ended June 30, 2017 and an increase of 12.6% over the three months ended September 30, 2016.

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 10.6% from the three months ended September 30, 2016 to $50.2 million for the three months ended September 30, 2017 and increased by 1.0% from the three months ended June 30, 2017. GAAP gross margin was 40.9% for the three months ended September 30, 2017, 40.2% for the three months ended September 30, 2016 and 41.5% for the three months ended June 30, 2017.  Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $2.7 million for the three months ended September 30, 2017, $2.7 million for the three months ended June 30, 2017 and $2.4 million for the three months ended September 30, 2016.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Non-GAAP gross profit increased by 8.0% from the three months ended September 30, 2016 to $69.6 million for the three months ended September 30, 2017 and increased by 1.1% from the three months ended June 30, 2017. Non-GAAP gross profit margin was 56.6% for the three months ended September 30, 2017, 57.0% for the three months ended September 30, 2016 and 57.4% for the three months ended June 30, 2017. 

Cash flow from operating activities increased by 26.1% from the three months ended September 30, 2016 to $28.8 million for the three months ended September 30, 2017 and increased by 2.6% from the three months ended June 30, 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 8.2% from the three months ended September 30, 2016 to $40.2 million for the three months ended September 30, 2017 and increased by 0.3% from the three months ended June 30, 2017. EBITDA margin was 32.7% for the three months ended September 30, 2017, 32.9% for the three months ended September 30, 2016 and 33.5% for the three months ended June 30, 2017. 

EBITDA, as adjusted, increased by 7.2% from the three months ended September 30, 2016 to $40.6 million for the three months ended September 30, 2017 and decreased by 1.3% from the three months ended June 30, 2017. EBITDA, as adjusted, margin was 33.0% for the three months ended September 30, 2017, 33.5% for the three months ended September 30, 2016 and 34.3% for the three months ended June 30, 2017.

Basic and diluted net income per share was $0.08 for the three months ended September 30, 2017, $0.08 for the three months ended September 30, 2016 and $0.10 for the three months ended June 30, 2017.

Total customer connections increased by 16.2% from September 30, 2016 to 69,417 as of September 30, 2017 and increased by 3.6% from June 30, 2017. On-net customer connections increased by 16.2% from September 30, 2016 to 59,357 as of September 30, 2017 and increased by 3.6% from June 30, 2017. Off-net customer connections increased by 17.7% from September 30, 2016 to 9,724 as of September 30, 2017 and increased by 4.2% from June 30, 2017. 

The number of on-net buildings increased by 138 on-net buildings from September 30, 2016 to 2,472 on-net buildings as of September 30, 2017 and increased by 34 on-net buildings from June 30, 2017.

Quarterly Dividend Increase Approved
On November 1, 2017, Cogent's board approved a regular quarterly dividend of $0.48 per common share payable on December 4, 2017 to shareholders of record on November 17, 2017. This fourth quarter 2017 regular dividend represents a 4.3% increase of $0.02 per share from the third quarter 2017 regular dividend of $0.46 per share. 

The payment of any future dividends and any other returns of capital will be at the discretion of Cogent's board of directors and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent's debt indenture agreements and other factors deemed relevant by Cogent's board of directors.

Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on November 2, 2017 to discuss Cogent's operating results for the third quarter of 2017 and to discuss Cogent's expectations for full year 2017. 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 (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 195 markets globally.

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

 



COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results



Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

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








On-Net revenue

$78,705

$79,539

$81,846

$83,511

$83,586

$85,586

$87,898

  % Change from previous Qtr.

2.9%

1.1%

2.9%

2.0%

0.1%

2.4%

2.7%

Off-Net revenue

$29,356

$30,149

$30,972

$31,861

$33,386

$33,980

$34,865

  % Change from previous Qtr.

3.3%

2.7%

2.7%

2.9%

4.8%

1.8%

2.6%

Non-Core revenue (1)

$230

$267

$239

$224

$231

$211

$206

  % Change from previous Qtr.

-5.3%

16.1%

-10.5%

-6.3%

3.1%

-8.7%

-2.4%

Service revenue – total

$108,291

$109,955

$113,057

$115,596

$117,203

$119,777

$122,969

  % Change from previous Qtr.

3.0%

1.5%

2.8%

2.2%

1.4%

2.2%

2.7%

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

3.0%

0.9%

3.1%

2.9%

1.6%

1.7%

1.2%

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

12.2%

11.1%

9.7%

10.2%

8.7%

9.6%

7.7%

Network operations expenses (2)

$47,156

$47,727

$48,666

$49,943

$50,551

$50,974

$53,405

  % Change from previous Qtr.

3.2%

1.2%

2.0%

2.6%

1.2%

0.8%

4.8%

GAAP gross profit (3)

$43,261

$43,479

$45,426

$45,434

$48,003

$49,765

$50,238

  % Change from previous Qtr.

4.7%

0.5%

4.5%

0.0%

5.7%

3.7%

1.0%

GAAP gross margin (3)

39.9%

39.5%

40.2%

39.3%

41.0%

41.5%

40.9%

Non-GAAP gross profit (4) (6)

$61,135

$62,228

$64,391

$65,653

$66,652

$68,803

$69,564

  % Change from previous Qtr.

2.8%

1.8%

3.5%

2.0%

1.5%

3.2%

1.1%

Non-GAAP gross margin (4) (6)

56.5%

56.6%

57.0%

56.8%

56.9%

57.4%

56.6%

Selling, general and administrative expenses (5)

$27,472

$27,278

$27,220

$28,576

$28,925

$28,704

$29,360

  % Change from previous Qtr.

11.1%

-0.7%

-0.2%

5.0%

1.2%

-0.8%

2.3%

Depreciation and amortization expense

$17,753

$18,604

$18,804

$20,073

$18,538

$18,897

$19,147

  % Change from previous Qtr.

-1.4%

4.8%

1.1%

6.7%

-7.6%

1.9%

1.3%

Equity-based compensation expense

$2,181

$2,687

$2,991

$2,876

$2,647

$3,225

$3,734

  % Change from previous Qtr.

-15.2%

23.2%

11.3%

-3.8%

-8.0%

21.8%

15.8%

Operating income

$15,675

$17,511

$16,063

$14,795

$18,666

$19,000

$17,891

  % Change from previous Qtr.

-3.1%

11.7%

-8.3%

-7.9%

26.2%

1.8%

-5.8%

Interest expense

$10,065

$10,243

$9,891

$10,602

$11,891

$12,090

$12,266

  % Change from previous Qtr.

-2.1%

1.8%

-3.4%

7.2%

12.2%

1.7%

1.5%

Net income

$3,354

$4,224

$3,459

$3,892

$4,136

$4,317

$3,650

Basic net income per common share

$0.08

$0.09

$0.08

$0.09

$0.09

$0.10

$0.08

Diluted net income per common share

$0.08

$0.09

$0.08

$0.09

$0.09

$0.10

$0.08

Weighted average common shares – basic

44,402,640

44,491,899

44,574,583

44,577,826

44,649,645

44,717,372

44,767,163

  % Change from previous Qtr.

0.2%

0.2%

0.2%

0.0%

0.2%

0.2%

0.1%

Weighted average common shares – diluted

44,593,710

44,757,494

44,816,860

44,803,782

44,917,014

44,988,655

45,118,607

  % Change from previous Qtr.

0.2%

0.4%

0.1%

0.0%

0.3%

0.2%

0.3%

EBITDA (6)

$33,663

$34,950

$37,171

$37,077

$37,727

$40,099

$40,204

  % Change from previous Qtr.

-3.1%

3.8%

6.4%

-0.3%

1.8%

6.3%

0.3%

EBITDA margin

31.1%

31.8%

32.9%

32.1%

32.2%

33.5%

32.7%

Gains on asset related transactions

$1,946

$4,439

$687

$667

$2,124

$1,023

$397

EBITDA, as adjusted (6)

$35,609

$39,389

$37,858

$37,744

$39,851

$41,122

$40,601

  % Change from previous Qtr.

-3.1%

10.6%

-3.9%

-0.3%

5.6%

3.2%

-1.3%

EBITDA, as adjusted, margin

32.9%

35.8%

33.5%

32.7%

34.0%

34.3%

33.0%

 Fees – net neutrality

$493

$1,036

$1,315

$432

$2

$188

$824

Net cash provided by operating activities

$27,557

$23,698

$22,833

$33,879

$23,514

$28,045

$28,783

  % Change from previous Qtr.

25.3%

-14.0%

-3.7%

48.4%

-30.6%

19.3%

2.6%

Capital expenditures

$15,034

$14,260

$8,745

$7,195

$12,249

$12,007

$10,927

  % Change from previous Qtr.

203.0%

-5.1%

-38.7%

-17.7%

70.2%

-2.0%

-9.0%

Principal payments on capital leases

$3,369

$3,935

$2,354

$2,808

$3,854

$2,194

$3,320

  % Change from previous Qtr.

2.9%

16.8%

-40.2%

19.3%

37.3%

-43.1%

51.3%

Dividends paid

$16,171

$16,671

$17,169

$18,199

$18,999

$19,946

$20,879

Purchases of common stock

$ -

$ -

$ 1,666

$ 2,826

$ -

$ 1,829

$ -

Gross Leverage Ratio

4.39

3.94

3.89

4.73

4.64

4.62

4.57

Net Leverage Ratio

2.97

2.88

2.90

2.90

2.94

2.98

3.00

Customer Connections – end of period








On-Net

47,252

49,243

51,079

52,874

54,805

57,307

59,357

  % Change from previous Qtr.

3.9%

4.2%

3.7%

3.5%

3.7%

4.6%

3.6%

Off-Net

7,654

7,971

8,259

8,598

9,055

9,355

9,724

  % Change from previous Qtr.

5.2%

4.1%

3.6%

4.1%

5.3%

3.1%

4.2%

Non-Core (1)

450

349

386

350

383

340

336

  % Change from previous Qtr.

12.5%

-22.4%

10.6%

-9.3%

9.4%

-11.2%

-1.2%

Total customer connections

55,356

57,563

59,724

61,822

64,243

66,982

69,417

  % Change from previous Qtr.

4.1%

4.0%

3.8%

3.5%

3.9%

4.3%

3.6%

On-Net Buildings – end of period








Multi-Tenant office buildings

1,545

1,560

1,577

1,592

1,601

1,618

1,635

Carrier neutral data center buildings

675

686

706

729

752

767

784

Cogent data centers

51

51

51

52

53

53

53

Total on-net buildings

2,271

2,297

2,334

2,373

2,406

2,438

2,472

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

834,341,216

840,042,330

847,266,071

858,958,167

864,432,176

872,293,092

881,184,145

Network  – end of period








Intercity route miles

56,183

56,183

56,684

57,213

57,213

57,403

57,403

Metro fiber miles

28,316

28,874

29,326

29,536

30,190

30,516

31,071

Connected networks – AS's

5,617

5,700

5,834

5,927

5,949

5,983

6,076

Headcount – end of period








Sales force – quota bearing

398

397

394

422

432

434

444

Sales force - total

517

519

516

542

554

559

565

Total employees

855

854

858

887

900

909

919

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

6.3

5.9

5.7

6.1

6.1

6.5

5.7

FTE – sales reps

373

373

377

384

416

410

420



(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 $121, $145, $161, $146, $111, $141 and $179 in the three month periods ended March 31, 2016 through September 30, 2017, respectively.  Network operations expense includes excise taxes, including Universal Service Fund fees of $2,003, $2,156, $2,362, $2,549, $2,604, $2,672 and $2,691 in the three month periods ended March 31, 2016 through September 30, 2017, respectively. 

(3)

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

(4)

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

(5)

Excludes equity-based compensation expense of $2,060, $2,542, $2,830, $2,730, $2,536, $3,084 and $3,555 in the three month periods ended March 31, 2016 through September 30, 2017, respectively. 

(6)

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

 

Schedules of Non-GAAP Measures

EBITDA and EBITDA, as adjusted

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

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

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


Q1
2016

Q2
2016

Q3
2016

Q4
2016

Year
2016

Q1

2017

Q2

2017

Q3

2017

($ in 000's) – unaudited









Net cash flows provided by operating activities

$27,557

$23,698

$22,833

$33,879

$107,967

$23,514

$28,045

$28,783

Changes in operating assets and liabilities

(3,681)

1,755

4,737

(6,781)

(3,968)

3,192

950

721

Cash interest expense and income tax expense

9,787

9,497

9,601

9,979

38,861

11,021

11,104

10,700

EBITDA

$33,663

$34,950

$37,171

$37,077

$142,860

$37,727

$40,099

$40,204

PLUS: Gains on asset related transactions

1,946

4,439

687

667

7,739

2,124

1,023

397

EBITDA, as adjusted

$35,609

$39,389

$37,858

$37,744

$150,599

$39,851

$41,122

$40,601

EBITDA margin

31.1%

31.8%

32.9%

32.1%

32.0%

32.2%

33.5%

32.7%

EBITDA, as adjusted, margin

32.9%

35.8%

33.5%

32.7%

33.7%

34.0%

34.3%

33.0%

 

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

2016

Q2

2016

Q3

2016

Q4

2016

Year

2016

Q1

2017

Q2

2017

Q3

2017

Service revenue, as reported – current period

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

Impact of foreign currencies on service revenue

(10)

(709)

273

749

892

195

(531)

(1,701)

Service revenue - as adjusted  for currency impact (1)

$108,281

$109,246

$113,330

$116,345

$447,792

$117,398

$119,246

$121,268

Service revenue, as reported – prior sequential period

$105,177

$108,291

$109,955

$113,057

$404,234

$115,596

$117,203

$119,777

Constant currency increase

$3,104

$955

$3,375

$3,288

$43,558

$1,802

$2,043

$1,491

Constant currency percent increase

3.0%

0.9%

3.1%

2.9%

10.8%

1.6%

1.7%

1.2%



(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

2016

Q2

2016

Q3

2016

Q4

2016

Year

2016

Q1

2017

Q2

2017

Q3

2017

Service revenue, as reported – current period

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

Impact of foreign currencies on service revenue

855

(168)

(68)

276

892

503

743

(1,257)

Service revenue - as adjusted for currency impact  (2)

$109,146

$109,787

$112,989

$115,872

$447,792

$117,706

$120,520

$121,712

Service revenue, as reported – prior year period

$97,242

$98,799

$103,017

$105,177

$404,234

$108,291

$109,955

$113,057

Constant currency increase

$11,904

$10,988

$9,972

$10,695

$43,558

$9,415

$10,565

$8,655

Percent increase

12.2%

11.1%

9.7%

10.2%

10.8%

8.7%

9.6%

7.7%



(2)

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

 

Non-GAAP gross profit and Non-GAAP gross margin

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


Q1 2016

Q2 2016

Q3 2016

Q4 2016

Year 2016

Q1 2017

Q2 2017

Q3 2017

($ in 000's) – unaudited









Service revenue total

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

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

65,030

66,476

67,631

70,162

269,299

69,200

70,012

72,731

GAAP Gross Profit (1)

$43,261

$43,479

$45,426

$45,434

$177,601

$48,003

$49,765

$50,238

Plus  - Equity-based compensation – network operations expense

121

145

161

146

573

111

141

179

Plus – Depreciation and amortization expense

17,753

18,604

18,804

20,073

75,234

18,538

18,897

19,147

Non-GAAP Gross Profit (2)

$61,135

$62,228

$64,391

$65,653

$253,408

$66,652

$68,803

$69,564

GAAP Gross Margin (1)

39.9%

39.5%

40.2%

39.3%

39.7%

41.0%

41.5%

40.9%

Non-GAAP Gross Margin (2)

56.5%

56.6%

57.0%

56.8%

56.7%

56.9%

57.4%

56.6%



(1)

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

(2)

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

 

Gross and Net Leverage Ratios

Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted.  Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted.  Cogent's gross leverage ratio was 4.62 at June 30, 2017 and 4.57 at September 30, 2017 and Cogent's net leverage ratio was 2.98 at June 30, 2017 and 3.00 at September 30, 2017 and as shown below.

($ in 000's) – unaudited

As of June 30, 2017

As of September 30, 2017

Cash and cash equivalents

$256,492

$250,765

Debt



Capital leases – current portion

7,635

6,698

Capital leases – long term

142,155

147,623

Senior unsecured notes

189,225

189,225

Senior secured notes

375,000

375,000

Note payable

9,445

9,915

Total debt

723,460

728,461

Total net debt

466,968

477,696

Trailing 12 months EBITDA, as adjusted

156,575

159,318

Gross leverage ratio

4.62

4.57

Net leverage ratio

2.98

3.00

Cogent's SEC filings are available online via the Investor Relations section of www.cogentco.com or on the Securities and Exchange Commission's website at www.sec.gov.

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(IN THOUSANDS, EXCEPT SHARE DATA)




September 30,
2017


December 31,
2016




      (Unaudited)


Assets






Current assets:






Cash and cash equivalents


$

250,765


$

274,319


Accounts receivable, net of allowance for doubtful accounts of $2,044 and $1,734, respectively


39,118


33,598


Prepaid expenses and other current assets


20,427


19,706


Total current assets


310,310


327,623


Property and equipment, net


381,010


361,641


Deferred tax assets, net


32,668


42,241


Deposits and other assets - $727 and $128 restricted, respectively


5,872


6,387


Total assets


$

729,860


$

737,892








Liabilities and stockholders' equity






Current liabilities:






Accounts payable


$

12,314


$

11,551


Accrued and other current liabilities


47,449


47,149


Installment payment agreement, current portion, net of discount of $309 and $204, respectively


7,090


2,587


Current maturities, capital lease obligations


6,698


6,626


Total current liabilities


73,551


67,913


Senior secured 2022 notes, net of unamortized debt costs of $1,969 and $2,257, respectively and including premium of $402 and $462, respectively


373,433


373,205


Senior unsecured 2021 notes, net of unamortized debt costs of $2,200 and $2,575, respectively


187,025


186,650


Capital lease obligations, net of current maturities


147,623


135,335


Other long term liabilities


28,351


28,043


Total liabilities


809,983


791,146


Commitments and contingencies:






Stockholders' equity:






Common stock, $0.001 par value; 75,000,000 shares authorized; 45,946,226 and 45,478,787 shares issued and outstanding, respectively


46


45


Additional paid-in capital


452,369


442,799


Accumulated other comprehensive income — foreign currency translation


(5,912)


(17,193)


Accumulated deficit


(526,626)


(478,905)


Total stockholders' deficit


(80,123)


(53,254)


Total liabilities and stockholders' deficit


$

729,860


$

737,892




COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Three Months
Ended
September 30, 2017


Three Months
Ended
September 30, 2016




(Unaudited)


(Unaudited)


Service revenue


$

122,969


$

113,057


Operating expenses:






Network operations (including $179 and $161 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)


53,584


48,827


Selling, general, and administrative (including $3,555 and $2,830 of equity-based compensation expense, respectively)


32,915


30,050


Depreciation and amortization


19,147


18,804


Total operating expenses


105,646


97,681


Gains on equipment transactions


397


687


Operating income


17,720


16,063


Interest income and other, net


1,632


207


Interest expense


(12,266)


(9,891)


Income before income taxes


7,086


6,379


Income tax provision


(3,436)


(2,920)


Net income


$

3,650


$

3,459








Comprehensive income:






Net income


$

3,650


$

3,459


Foreign currency translation adjustment


3,790


688


Comprehensive income


$

7,440


$

4,147








Net income per common share:






Basic and diluted net income per common share


$

0.08


$

0.08








Dividends declared per common share


$

0.46


$

0.38








Weighted-average common shares – basic


44,767,163


44,574,583








Weighted-average common shares - diluted


45,118,607


44,816,860




COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Nine Months
Ended
September 30, 2017


Nine Months
Ended
September 30, 2016




(Unaudited)


(Unaudited)


Service revenue


$

359 ,949


$

331,304


Operating expenses:






Network operations (including $431 and $427 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)


155,362


143,976


Selling, general, and administrative (including $9,175 and $7,432 of equity-based compensation expense, respectively)


96,165


89,403


Depreciation and amortization


56,583


55,161


Total operating expenses


308,110


288,540


Losses on debt purchases and installment loan repayment



(587)


Gains on equipment transactions


3,543


7,071


Operating income


55,382


49,248


Interest income and other, net


3,502


677


Interest expense


(36,245)


(30,200)


Income before income taxes


22,639


19,725


Income tax provision


(10,536)


(8,688)


Net income


$

12,103


$

11,037








Comprehensive income:






Net income


$

12,103


$

11,037


Foreign currency translation adjustment


11,281


2,795


Comprehensive income


$

23,384


$

13,832








Net income per common share:






Basic and diluted net income per common share


$

0.27


$

0.25








Dividends declared per common share


$

1.32


$

1.11








Weighted-average common shares - basic


44,787,067


44,563,279








Weighted-average common shares - diluted


45,083,765


44,796,259




COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(IN THOUSANDS)




Three months
Ended
September 30, 2017


Three months
Ended
September 30, 2016




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income


$

3,650


$

3,459


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






Depreciation and amortization


19,148


18,804


Amortization of debt discount


332


183


Equity-based compensation expense (net of amounts capitalized)


3,734


2,991


Gains — equipment transactions and other, net


(766)


(645)


Deferred income taxes


3,209


2,820


Changes in operating assets and liabilities:






Accounts receivable


(3,976)


(1,033)


Prepaid expenses and other current assets


1,845


179


Accounts payable, accrued liabilities and other long-term liabilities


673


(4,265)


Deposits and other assets


934


340


Net cash provided by operating activities


28,783


22,833


Cash flows from investing activities:






Purchases of property and equipment


(10,927)


(8,745)


Net cash used in investing activities


(10,927)


(8,745)


Cash flows from financing activities:






Dividends paid


(20,879)


(17,169)


Purchases of common stock



(1,666)


Proceeds from exercises of stock options


433


264


Principal payments on installment payment agreement


(1,232)



Principal payments of capital lease obligations


(3,320)


(2,354)


Net cash used in financing activities


(24,998)


(20,925)


Effect of exchange rates changes on cash


1,415


21


Net decrease in cash and cash equivalents


(5,727)


(6,816)


Cash and cash equivalents, beginning of period


256,492


154,967


Cash and cash equivalents, end of period


$

250,765


$

148,151




COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

(IN THOUSANDS)




Nine months
Ended
September 30, 2017


Nine months
Ended
September 30, 2016




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income


$

12,103


$

11,037


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






Depreciation and amortization


56,583


55,161


Amortization of debt discount and premium


899


879


Equity-based compensation expense (net of amounts capitalized)


9,606


7,859


Losses on debt purchases and installment loan repayment



587


Gains — equipment transactions and other, net


(4,394)


(7,124)


Deferred income taxes


9,835


8,453


Changes in operating assets and liabilities:






Accounts receivable


(4,317)


(2,478)


Prepaid expenses and other current assets


645


(3,256)


Accounts payable, accrued liabilities and other long-term liabilities


(1,411)


4,499


Deposits and other assets


793


(1,529)


Net cash provided by operating activities


80,342


74,088


Cash flows from investing activities:






Purchases of property and equipment


(35,183)


(38,039)


Net cash used in investing activities


(35,183)


(38,039)


Cash flows from financing activities:






Dividends paid


(59,824)


(50,011)


Purchases of common stock


(1,829)


(1,666)


Purchases of senior secured 2021 notes



(10,775)


Proceeds from exercises of stock options


919


894


Principal payments on installment payment agreement


(2,183)


(21,203)


Principal payments of capital lease obligations


(9,368)


(9,658)


Net cash used in financing activities


(72,285)


(92,419)


Effect of exchange rates changes on cash


3,572


930


Net decrease in cash and cash equivalents


(23,554)


(55,440)


Cash and cash equivalents, beginning of period


274,319


203,591


Cash and cash equivalents, end of period


$

250,765


$

148,151









 

 

Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.  The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.  Numerous factors could cause or contribute to such differences, including future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules  by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our report on Form 10-Q  for the quarter ended September 30, 2017 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time. 

View original content with multimedia:http://www.prnewswire.com/news-releases/cogent-communications-reports-third-quarter-2017-results-and-increases-regular-quarterly-dividend-on-common-stock-300547477.html

SOURCE Cogent Communications Holdings, Inc.


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