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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
February 29, 2024
Cogent Communications Holdings, Inc.
(Exact name of registrant as specified in
its charter)
| Delaware |
|
000-51829 |
|
46-5706863 |
(State or other
jurisdiction of
incorporation) |
|
(Commission File
Number) |
|
(I.R.S. Employer
Identification No.) |
2450 N St NW,
Washington, D.C. |
|
20037 |
| (Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: 202-295-4200
Not Applicable
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of
the Act:
| Title of Each Class |
Trading Symbol |
Name of Each Exchange on which Registered |
| Common Stock, par value $0.001 per share |
CCOI |
NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of
the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth
company ¨
If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On February 29, 2024, Cogent Communications Holdings, Inc.
issued a press release summarizing its financial results for the fourth quarter of 2023 and the full year of 2023. The Company will hold
a conference call regarding its financial results at 8:30 a.m. ET on February 29, 2024, which will be simultaneously broadcast
on a link available through the Company’s website at www.cogentco.com. The press release is furnished as Exhibit 99.1 to this
current report on Form 8-K.
The information in Item 2.02 of this Current Report on Form 8-K,
including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly
set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
Cogent Communications Holdings, Inc. |
| |
|
| February 29, 2024 |
By: |
/s/ David Schaeffer |
| |
|
Name: |
David Schaeffer |
| |
|
Title: |
President and Chief Executive Officer |
Exhibit
99.1
| |
 | | FOR
IMMEDIATE RELEASE |
|
| |
Cogent Contacts:
For Public Relations:
Jocelyn Johnson
+ 1 (202) 295-4299
jajohnson@cogentco.com | | For
Investor Relations:
John Chang
+
1 (202) 295-4212
investor.relations@cogentco.com |
Cogent Communications
Reports Fourth Quarter and Full Year 2023 Results and Increases its Regular Quarterly Dividend on its Common Stock
Financial and Business Highlights
| · | The gain on bargain purchase from the Sprint acquisition was $254.0 million
for Q4 2023 and was $1.4 billion for full year 2023. |
| o | Included in the gain on bargain purchase in Q4 2023 and full year 2023 was the estimated fair value of acquired IPv4 internet addresses
totaling $458.0 million. |
| · | Basic and fully diluted earnings per share for Q4 2023 were $4.23 and $4.17,
respectively, and were $26.88 and $26.62 for full year 2023, respectively. |
| · | Gross leverage ratio was 4.79 for Q3 2023 and was 4.07 for Q4 2023. |
| o | Net leverage ratio was 4.23 for Q3 2023 and was 3.75 for Q4 2023 |
| · | Service revenue decreased from Q3 2023 to Q4 2023 by 1.2% to $272.1 million,
increased from Q4 2022 to Q4 2023 by 79.0% and increased from full year 2022 to full year 2023 by 56.9% to $940.9 million. |
| o | Non-core revenue decreased from Q3 2023 to Q4 2023 by 43.5% from $12.8 million to $7.3 million. |
| · | Net cash used in operating activities was $52.4 million for Q3 2023 and was
$48.7 million for Q4 2023, net cash provided by operating activities was $173.7 million for full year 2022 and $17.3 million for full
year 2023. |
| o | Net cash provided by investing activities was $62.1 million for Q3 2023, $60.1 million for Q4 2023 and was $76.7 million for full
year 2023. Net cash used in investing activities was $79.0 million for full year 2022. |
| § | Cash received under an IP Transit Agreement with T-Mobile, and included in
cash provided by investing activities, was $87.5 million for Q3 2023, $87.5 million for Q4 2023 and $204.2 million for full year 2023. |
| · | EBITDA, as adjusted for Sprint acquisition costs and cash received under
an IP Transit Agreement with T-Mobile was $131.4 million for Q3 2023, $110.5 million for Q4 2023, $232.9 million for full year 2022 and
$352.5 million for full year 2023. |
| · | EBITDA, as adjusted for Sprint acquisition costs and cash received under
an IP Transit Agreement with T-Mobile, margin was 47.7% for Q3 2023, 40.6% for Q4 2023, 38.8% for full year 2022 and 37.5% for full year
2023. |
| · | Cogent approved an increase of $0.01 per share to its regular quarterly dividend
for a total of $0.965 per share for Q1 2024 as compared to $0.955 per share for Q4 2023 – Cogent’s forty-sixth consecutive
quarterly dividend increase. |
[WASHINGTON, D.C. February 29, 2024] Cogent Communications
Holdings, Inc. (NASDAQ: CCOI) (“Cogent”) today announced service revenue of $272.1 million for the three months ended
December 31, 2023, a decrease of 1.2% from the three months ended September 30, 2023 and an increase of 79.0% from the three
months ended December 31, 2022. Service revenue was $940.9 million for the year ended December 31, 2023, an increase of 56.9%
from the year ended December 31, 2022. Foreign exchange rates negatively impacted service revenue growth from the three months ended
September 30, 2023 to the three months ended December 31, 2023 by $0.4 million, positively impacted service revenue growth from
the three months ended December 31, 2022 to the three months ended December 31, 2023 by $1.4 million and positively impacted
service revenue growth from the year ended December 31, 2022 to the year ended December 31, 2023 by $2.1 million. On a constant
currency basis, service revenue decreased by 1.1% from the three months ended September 30, 2023 to the three months ended December 31,
2023, increased by 78.1% for the three months ended December 31, 2022 to the three months ended December 31, 2023 and increased
by 56.6% for the year ended December 31, 2022 to the year ended December 31, 2023.
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 $141.2 million for the three months ended December 31,
2023, an increase of 6.9% from the three months ended September 30, 2023 and an increase of 22.8% from the three months ended December 31,
2022. On-net revenue was $518.6 million for the year ended December 31, 2023; an increase of 14.5% over the year ended December 31,
2022.
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 $123.7 million for the three months ended December 31, 2023, a decrease of 5.3% from
the three months ended September 30, 2023 and an increase of 235.4% from the three months ended December 31, 2022. Off-net revenue
was $393.5 million for the year ended December 31, 2023; an increase of 169.2% from the year ended December 31, 2022.
Non-core services are legacy services, which Cogent acquired and continues
to support but does not actively sell. Non-core revenue was $7.3 million for the three months ended December 31, 2023, $12.8 million
for the three months ended September 30, 2023 and was $0.2 million for the three months ended December 31, 2022. Non-core revenue
was $28.8 million for the year ended December 31, 2023 and $0.7 million for the year ended December 31, 2022.
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 58.4% from the three months ended December 31,
2022 to $29.7 million for the three months ended December 31, 2023 and increased by 97.0% from the three months ended September 30,
2023. GAAP gross profit decreased by 41.1% from the year ended December 31, 2022 to $164.4 million for the year ended December 31,
2023.
GAAP gross margin was 10.9% for the three months ended December 31,
2023, 5.5% for the three months ended September 30, 2023, 47.0% for the three months ended December 31, 2022, 46.6% for the
year ended December 31, 2022 and 17.5% for the year ended December 31, 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 3.0% from the three months ended
December 31, 2022 to $97.9 million for the three months ended December 31, 2023 and decreased by 4.2% from the three months
ended September 30, 2023. Non-GAAP gross profit increased by 6.9% from the year ended December 31, 2022 to $397.8 million for
the year ended December 31, 2023.
Non-GAAP gross margin was 36.0% for the three months ended December 31,
2023, 37.1% for the three months ended September 30, 2023, 62.6% for the three months ended December 31, 2022, 62.0% for the
year ended December 31, 2022 and 42.3% for the year ended December 31, 2023.
Net cash used in operating activities was $48.7 million for the three
months ended December 31, 2023 and $52.4 million for the three months ended September 30, 2023. Net cash provided by operating
activities was $36.3 million for the three months ended December 31, 2022. Net cash provided by operating activities was $173.7 million
for the year ended December 31, 2022 and was $17.3 million for the year ended December 31, 2023.
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 $110.5 million for
the three months ended December 31, 2023, $131.4 million for the three months ended September 30, 2023 and $57.4 million for
the three months ended December 31, 2022. EBITDA, as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services
Agreement was $232.9 million for the year ended December 31, 2022 and $352.5 million for the year ended December 31, 2023.
EBITDA as adjusted, for Sprint acquisition costs and cash paid under
the IP Transit Services Agreement margin, was 37.8% for the three months ended December 31, 2022, 47.7% for the three months ended
September 30, 2023 and 40.6% for the three months ended December 31, 2023. EBITDA, as adjusted, for Sprint acquisition costs
and cash paid under the IP Transit Services Agreement margin was 38.8% for the year ended December 31, 2022 and 37.5% for the year
ended December 31, 2023.
Basic net income (loss) per share was $0.02 for the three months ended
December 31, 2022, $4.23 for the three months ended December 31, 2023 and $(1.20) for the three months ended September 30,
2023. Diluted net income (loss) per share was $0.02 for the three months ended December 31, 2022, $4.17 for the three months ended
December 31, 2023 and $(1.20) for the three months ended September 30, 2023. Basic net income per share was $0.11 for the year
ended December 31, 2022 and $26.88 for the year ended December 31, 2023. Diluted net income per share was $0.11 for the year
ended December 31, 2022 and $26.62 for the year ended December 31, 2023.
Total customer connections increased by 42.6% from December 31,
2022 to 137,603 as of December 31, 2023 and decreased by 0.3% from September 30, 2023. On-net customer connections increased
by 7.4% from December 31, 2022 to 88,733 as of December 31, 2023 and increased by 0.1% from September 30, 2023. Off-net
customer connections increased by 172.7% from December 31, 2022 to 36,895 as of December 31, 2023 and decreased by 0.1% from
September 30, 2023. Non-core customer connections were 11,975 as of December 31, 2023, 12,403 as of September 30, 2023
and 363 as of December 31, 2022.
The number of on-net buildings increased by 122 from December 31,
2022 to 3,277 as of December 31, 2023 and increased by 20 from September 30, 2023.
Gain on bargain purchase
The estimated gain on bargain purchase from the Sprint acquisition
was $1.4 billion as shown below. The amounts presented are provisional and are subject to change as Cogent refines its estimates and inputs
used in the calculations of the assets acquired and liabilities assumed.
(In thousands) Gain on bargain purchase |
|
| |
| Fair value of net assets acquired |
|
$ | 799,214 | |
| Total net consideration to be received from Seller, net of discounts |
|
| 607,221 | |
| Gain on bargain purchase |
|
$ | 1,406,435 | |
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 billed and amounts paid under the IP Transit Services Agreement were $87.5 million and $87.5 million
in the three months ended September 30, 2023, respectively. Amounts billed and amounts paid under the IP Transit Services Agreement
were $87.5 million and $87.5 million in the three months ended December 31, 2023, respectively. Amounts billed and amounts paid under
the IP Transit Services Agreement were $233.3 million and $204.2 million in the year ended December 31, 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 $8.6 million for the three months ended December 31, 2023, an increase of 6.8% from $8.0 million
for the three months ended September 30, 2023. Revenue under the Commercial Agreement was $23.9 million for the year ended December 31,
2023 and none for the year ended December 31, 2022.
Quarterly Dividend Increase Approved
On February 28, 2024, Cogent’s Board approved a regular
quarterly dividend of $0.965 per share payable on April 9, 2024 to shareholders of record on March 15, 2024. This first quarter
2024 regular dividend represents an increase of $0.01 per share, or 1.0%, from the fourth quarter 2023 regular dividend of $0.955 per
share and an annual increase of 4.3% from the first quarter 2023 dividend of $0.925 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.
Tax Treatment of 2023 Dividends
Cogent paid four quarterly dividends in 2023 totaling $181.7 million,
or $3.76 per share. The expected tax treatment of these dividends are generally that 100.0% are treated as a return of capital and 0.0%
are generally treated as dividends for United States federal income tax purposes. While the above information includes general statements
about the tax classification of dividends paid on Cogent common stock, these statements do not constitute tax advice. The taxation of
corporate distributions can be complex, and stockholders are encouraged to consult their tax advisers to determine what impact the above
information may have on their specific tax situation.
Residual Impact of COVID-19 Pandemic on Corporate Results
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. More recently, 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 became part of the remote work environment, which benefits Cogent’s corporate business as these
customers upgrade their Internet access infrastructure to higher capacity connections. During the three months ended December 31,
2023, 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.
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 March 31, 2023, June 30, 2023, and September 30, 2023.
Conference Call and Website Information
Cogent
will host a conference call with financial analysts at 8:30 a.m. (ET) on February 29, 2024 to discuss Cogent’s operating
results for the fourth quarter of 2023 and full year 2023. 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 228 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
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4
2022 | | |
Q1
2023 | | |
Q2
2023 | | |
Q3
2023 | | |
Q4
2023 | |
| Metric
($ in 000’s, except share, per share, customer connections and network related data) – unaudited | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| On-Net
revenue | |
$ | 112,634 | | |
$ | 111,975 | | |
$ | 113,219 | | |
$ | 114,949 | | |
$ | 116,143 | | |
$ | 129,250 | | |
$ | 132,023 | | |
$ | 141,173 | |
| %
Change from previous Qtr. | |
| 1.7 | % | |
| -0.6 | % | |
| 1.1 | % | |
| 1.5 | % | |
| 1.0 | % | |
| 11.3 | % | |
| 2.1 | % | |
| 6.9 | % |
| Off-Net
revenue | |
$ | 36,387 | | |
$ | 36,282 | | |
$ | 36,611 | | |
$ | 36,873 | | |
$ | 37,283 | | |
$ | 101,984 | | |
$ | 130,560 | | |
$ | 123,669 | |
| %
Change from previous Qtr. | |
| 0.2 | % | |
| -0.3 | % | |
| 0.9 | % | |
| 0.7 | % | |
| 1.1 | % | |
| 173.5 | % | |
| 28.0 | % | |
| -5.3 | % |
| Non-Core
revenue (1) (16) | |
$ | 154 | | |
$ | 193 | | |
$ | 170 | | |
$ | 157 | | |
$ | 162 | | |
$ | 8,572 | | |
$ | 12,846 | | |
$ | 7,258 | |
| %
Change from previous Qtr. | |
| -0.6 | % | |
| 25.3 | % | |
| -11.9 | % | |
| -7.6 | % | |
| 3.2 | % | |
| NM | | |
| 49.9 | % | |
| -43.5 | % |
| Service
revenue – total | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | |
| %
Change from previous Qtr. | |
| 1.3 | % | |
| -0.5 | % | |
| 1.0 | % | |
| 1.3 | % | |
| 1.1 | % | |
| 56.1 | % | |
| 14.9 | % | |
| -1.2 | % |
| Constant
currency total revenue quarterly growth rate – sequential quarters (2) | |
| 1.7 | % | |
| 0.4 | % | |
| 2.0 | % | |
| 1.3 | % | |
| 0.2 | % | |
| 55.9 | % | |
| 14.9 | % | |
| -1.1 | % |
| Constant
currency total revenue quarterly growth rate – year over year quarters (2) | |
| 2.9 | % | |
| 2.7 | % | |
| 4.3 | % | |
| 5.5 | % | |
| 4.0 | % | |
| 61.4 | % | |
| 82.4 | % | |
| 78.1 | % |
| Constant
currency and excise tax impact on total revenue quarterly growth rate – sequential quarters (2) | |
| 2.1 | % | |
| 0.6 | % | |
| 1.6 | % | |
| 1.3 | % | |
| 0.1 | % | |
| 51.4 | % | |
| 13.4 | % | |
| -3.2 | % |
| Constant
currency and excise tax impact on total revenue quarterly growth rate – year over year quarters (2) | |
| 3.5 | % | |
| 3.6 | % | |
| 4.7 | % | |
| 5.7 | % | |
| 3.7 | % | |
| 56.2 | % | |
| 75.5 | % | |
| 67.4 | % |
| Excise
Taxes included in service revenue (3) | |
$ | 3,742 | | |
$ | 3,448 | | |
$ | 4,118 | | |
$ | 4,086 | | |
$ | 4,193 | | |
$ | 11,040 | | |
$ | 14,557 | | |
$ | 20,428 | |
| %
Change from previous Qtr. | |
| -13.7 | % | |
| -7.9 | % | |
| 19.4 | % | |
| -0.8 | % | |
| 2.6 | % | |
| 163.3 | % | |
| 31.9 | % | |
| 40.3 | % |
| Corporate
revenue (16) | |
$ | 86,116 | | |
$ | 85,177 | | |
$ | 85,495 | | |
$ | 85,783 | | |
$ | 85,627 | | |
$ | 110,998 | | |
$ | 120,484 | | |
$ | 126,634 | |
| %
Change from previous Qtr. | |
| -0.8 | % | |
| -1.1 | % | |
| 0.4 | % | |
| 0.3 | % | |
| -0.2 | % | |
| 29.6 | % | |
| 8.5 | % | |
| 5.1 | % |
| Net-centric
revenue (15) | |
$ | 63,060 | | |
$ | 63,274 | | |
$ | 64,506 | | |
$ | 66,196 | | |
$ | 67,961 | | |
$ | 87,582 | | |
$ | 94,936 | | |
$ | 93,148 | |
| %
Change from previous Qtr. | |
| 4.4 | % | |
| 0.3 | % | |
| 1.9 | % | |
| 2.6 | % | |
| 2.7 | % | |
| 28.9 | % | |
| 8.4 | % | |
| -1.9 | % |
| Enterprise
revenue (4) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 41,227 | | |
$ | 60,009 | | |
$ | 52,318 | |
| %
Change from previous Qtr. | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| NM | | |
| 45.6 | % | |
| -12.8 | % |
| Network
operations expenses (3) | |
$ | 57,305 | | |
$ | 56,369 | | |
$ | 57,044 | | |
$ | 56,884 | | |
$ | 58,489 | | |
$ | 137,271 | | |
$ | 173,224 | | |
$ | 174,180 | |
| %
Change from previous Qtr. | |
| 1.8 | % | |
| -1.6 | % | |
| 1.2 | % | |
| -0.3 | % | |
| 2.8 | % | |
| 134.7 | % | |
| 26.2 | % | |
| 0.6 | % |
| GAAP
gross profit (5) | |
$ | 69,038 | | |
$ | 68,865 | | |
$ | 69,883 | | |
$ | 71,444 | | |
$ | 69,790 | | |
$ | 49,793 | | |
$ | 15,101 | | |
$ | 29,744 | |
| %
Change from previous Qtr. | |
| 1.2 | % | |
| -0.3 | % | |
| 1.5 | % | |
| 2.2 | % | |
| -2.3 | % | |
| -28.7 | % | |
| -69.7 | % | |
| 97.0 | % |
| GAAP
gross margin (5) | |
| 46.3 | % | |
| 46.4 | % | |
| 46.6 | % | |
| 47.0 | % | |
| 45.4 | % | |
| 20.8 | % | |
| 5.5 | % | |
| 10.9 | % |
| Non-GAAP
gross profit (2) (6) | |
$ | 91,870 | | |
$ | 92,081 | | |
$ | 92,956 | | |
$ | 95,095 | | |
$ | 95,099 | | |
$ | 102,535 | | |
$ | 102,205 | | |
$ | 97,919 | |
| %
Change from previous Qtr. | |
| 1.0 | % | |
| 0.2 | % | |
| 1.0 | % | |
| 2.3 | % | |
| 0.0 | % | |
| 7.8 | % | |
| -0.3 | % | |
| -4.2 | % |
| Non-GAAP
gross margin (2) (6) | |
| 61.6 | % | |
| 62.0 | % | |
| 62.0 | % | |
| 62.6 | % | |
| 61.9 | % | |
| 42.8 | % | |
| 37.1 | % | |
| 36.0 | % |
| Selling,
general and administrative expenses (7) | |
$ | 34,715 | | |
$ | 33,624 | | |
$ | 33,079 | | |
$ | 37,713 | | |
$ | 38,646 | | |
$ | 77,640 | | |
$ | 58,267 | | |
$ | 74,907 | |
| %
Change from previous Qtr. | |
| 3.5 | % | |
| -3.1 | % | |
| -1.6 | % | |
| 14.0 | % | |
| 2.5 | % | |
| 100.9 | % | |
| -25.0 | % | |
| 28.6 | % |
| Depreciation
and amortization expense | |
$ | 22,688 | | |
$ | 23,071 | | |
$ | 22,897 | | |
$ | 23,563 | | |
$ | 25,160 | | |
$ | 52,511 | | |
$ | 86,734 | | |
$ | 67,805 | |
| %
Change from previous Qtr. | |
| 0.5 | % | |
| 1.7 | % | |
| -0.8 | % | |
| 2.9 | % | |
| 6.8 | % | |
| 108.7 | % | |
| 65.2 | % | |
| -21.8 | % |
| Equity-based
compensation expense | |
$ | 6,056 | | |
$ | 5,907 | | |
$ | 6,211 | | |
$ | 6,264 | | |
$ | 6,581 | | |
$ | 6,249 | | |
$ | 7,411 | | |
$ | 6,684 | |
| %
Change from previous Qtr. | |
| 0.0 | % | |
| -2.5 | % | |
| 5.1 | % | |
| 0.9 | % | |
| 5.1 | % | |
| -5.0 | % | |
| 18.6 | % | |
| -9.8 | % |
| Operating
income (loss) | |
$ | 28,784 | | |
$ | 29,566 | | |
$ | 28,095 | | |
$ | 27,311 | | |
$ | 24,312 | | |
$ | (34,604 | ) | |
$ | (50,558 | ) | |
$ | (68,478 | ) |
| %
Change from previous Qtr. | |
| -20.4 | % | |
| 2.7 | % | |
| -5.0 | % | |
| -2.8 | % | |
| -11.0 | % | |
| NM | | |
| 46.1 | % | |
| 35.4 | % |
| Interest
expense (8) | |
$ | 14,168 | | |
$ | 13,478 | | |
$ | 17,948 | | |
$ | 21,990 | | |
$ | 19,005 | | |
$ | 28,653 | | |
$ | 24,198 | | |
$ | 34,928 | |
| %
Change from previous Qtr. | |
| 3.3 | % | |
| -4.9 | % | |
| 33.2 | % | |
| 22.5 | % | |
| -13.6 | % | |
| 50.8 | % | |
| -15.5 | % | |
| 44.3 | % |
| Non-cash
change in valuation – Swap Agreement (8) | |
$ | 21,271 | | |
$ | 7,510 | | |
$ | 16,923 | | |
$ | (2,590 | ) | |
$ | (1,847 | ) | |
$ | 1,305 | | |
$ | 4,825 | | |
$ | (17,722 | ) |
| Gain
(loss) on bargain purchase (9) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 1,155,719 | | |
$ | (3,332 | ) | |
$ | 254,049 | |
| Net
income (loss) | |
$ | 1,137 | | |
$ | 11,164 | | |
$ | (8,007 | ) | |
$ | 851 | | |
$ | 6,148 | | |
$ | 1,123,863 | | |
$ | (56,723 | ) | |
$ | 200,153 | |
| Foreign
exchange gains on 2024 Euro Notes | |
$ | 8,014 | | |
$ | 23,547 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Basic
net income (loss) per common share | |
$ | 0.02 | | |
$ | 0.24 | | |
$ | (0.17 | ) | |
$ | 0.02 | | |
$ | 0.13 | | |
$ | 23.84 | | |
$ | (1.20 | ) | |
$ | 4.23 | |
| Diluted
net income (loss) per common share | |
$ | 0.02 | | |
$ | 0.24 | | |
$ | (0.17 | ) | |
$ | 0.02 | | |
$ | 0.13 | | |
$ | 23.65 | | |
$ | (1.20 | ) | |
$ | 4.17 | |
| Weighted
average common shares – basic | |
| 46,575,848 | | |
| 46,691,142 | | |
| 46,736,742 | | |
| 46,885,512 | | |
| 47,037,091 | | |
| 47,137,822 | | |
| 47,227,338 | | |
| 47,353,291 | |
| %
Change from previous Qtr. | |
| 0.3 | % | |
| 0.2 | % | |
| 0.1 | % | |
| 0.3 | % | |
| 0.3 | % | |
| 0.2 | % | |
| 0.2 | % | |
| 0.3 | % |
| Weighted
average common shares – diluted | |
| 46,929,191 | | |
| 47,029,446 | | |
| 46,736,742 | | |
| 47,196,890 | | |
| 47,381,226 | | |
| 47,526,207 | | |
| 47,227,338 | | |
| 48,037,841 | |
| %
Change from previous Qtr. | |
| -0.1 | % | |
| 0.2 | % | |
| -0.6 | % | |
| 1.0 | % | |
| 0.4 | % | |
| 0.3 | % | |
| -0.6 | % | |
| 1.7 | % |
| EBITDA
(2) | |
$ | 57,155 | | |
$ | 58,457 | | |
$ | 57,873 | | |
$ | 57,138 | | |
$ | 56,053 | | |
$ | 24,156 | | |
$ | 43,587 | | |
$ | 6,011 | |
| %
Change from previous Qtr. | |
| -0.4 | % | |
| 2.3 | % | |
| -1.0 | % | |
| -1.3 | % | |
| -1.9 | % | |
| -56.9 | % | |
| 80.4 | % | |
| -86.2 | % |
| EBITDA
margin (2) | |
| 38.3 | % | |
| 39.4 | % | |
| 38.6 | % | |
| 37.6 | % | |
| 36.5 | % | |
| 10.1 | % | |
| 15.8 | % | |
| 2.2 | % |
| Sprint
acquisition costs (14) | |
$ | - | | |
$ | - | | |
$ | 2,004 | | |
$ | 244 | | |
$ | 400 | | |
$ | 739 | | |
$ | 351 | | |
$ | 17,001 | |
| Cash
payments under IP Transit Services Agreement (10) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 29,167 | | |
$ | 87,500 | | |
$ | 87,500 | |
| EBITDA,
as adjusted for Sprint acquisition costs and cash payments under IP Transit Services Agreement (2) (10) (14) | |
$ | 57,155 | | |
$ | 58,457 | | |
$ | 59,877 | | |
$ | 57,382 | | |
$ | 56,453 | | |
$ | 54,062 | | |
$ | 131,438 | | |
$ | 110,512 | |
| %
Change from previous Qtr. | |
| -0.4 | % | |
| 2.3 | % | |
| 2.4 | % | |
| -4.2 | % | |
| -1.6 | % | |
| -4.2 | % | |
| 143.1 | % | |
| -15.9 | % |
| EBITDA,
as adjusted for Sprint acquisition costs and cash payments under IP Transit Services Agreement, margin (2) (10) (14) | |
| 38.3 | % | |
| 39.4 | % | |
| 39.9 | % | |
| 37.8 | % | |
| 36.8 | % | |
| 22.5 | % | |
| 47.7 | % | |
| 40.6 | % |
| Net
cash provided by (used in) operating activities | |
$ | 49,411 | | |
$ | 34,403 | | |
$ | 53,570 | | |
$ | 36,323 | | |
$ | 35,821 | | |
$ | 82,654 | | |
$ | (52,433 | ) | |
$ | (48,701 | ) |
| %
Change from previous Qtr. | |
| 37.3 | % | |
| -30.4 | % | |
| 55.7 | % | |
| -32.2 | % | |
| -1.4 | % | |
| 130.7 | % | |
| -163.4 | % | |
| -7.1 | % |
| Capital
expenditures | |
$ | 18,121 | | |
$ | 17,288 | | |
$ | 23,971 | | |
$ | 19,591 | | |
$ | 23,204 | | |
$ | 37,449 | | |
$ | 25,373 | | |
$ | 43,609 | |
| %
Change from previous Qtr. | |
| 18.5 | % | |
| -4.6 | % | |
| 38.7 | % | |
| -18.3 | % | |
| 18.4 | % | |
| 61.4 | % | |
| -32.2 | % | |
| 71.9 | % |
| Principal
payments of capital (finance) lease obligations | |
$ | 5,863 | | |
$ | 5,236 | | |
$ | 9,859 | | |
$ | 24,514 | | |
$ | 9,450 | | |
$ | 7,797 | | |
$ | 41,302 | | |
$ | 18,813 | |
| %
Change from previous Qtr. | |
| -5.9 | % | |
| -10.7 | % | |
| 88.3 | % | |
| 148.6 | % | |
| -61.5 | % | |
| -17.5 | % | |
| 429.7 | % | |
| -54.5 | % |
| Dividends
paid | |
$ | 41,298 | | |
$ | 41,855 | | |
$ | 42,729 | | |
$ | 43,975 | | |
$ | 45,311 | | |
$ | 44,907 | | |
$ | 45,136 | | |
$ | 46,362 | |
| Gross
Leverage Ratio (2) (10) | |
| 4.94 | | |
| 5.22 | | |
| 5.32 | | |
| 5.39 | | |
| 5.47 | | |
| 5.63 | | |
| 4.79 | | |
| 4.07 | |
| Net
Leverage Ratio (2) (10) | |
| 3.58 | | |
| 3.70 | | |
| 3.93 | | |
| 4.20 | | |
| 4.46 | | |
| 4.56 | | |
| 4.24 | | |
| 3.75 | |
| Customer
Connections – end of period (15) (16) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| On-Net
customer connections | |
| 81,627 | | |
| 82,277 | | |
| 82,614 | | |
| 82,620 | | |
| 83,268 | | |
| 93,260 | | |
| 88,699 | | |
| 88,733 | |
| %
Change from previous Qtr. | |
| 1.1 | % | |
| 0.8 | % | |
| 0.4 | % | |
| 0.0 | % | |
| 0.8 | % | |
| 12.0 | % | |
| -4.9 | % | |
| 0.0 | % |
| Off-Net
customer connections | |
| 12,922 | | |
| 13,160 | | |
| 13,359 | | |
| 13,531 | | |
| 13,785 | | |
| 38,762 | | |
| 36,923 | | |
| 36,895 | |
| %
Change from previous Qtr. | |
| 2.0 | % | |
| 1.8 | % | |
| 1.5 | % | |
| 1.3 | % | |
| 1.9 | % | |
| 181.2 | % | |
| -4.7 | % | |
| -0.1 | % |
| Non-Core
customer connections (1) (16) | |
| 335 | | |
| 340 | | |
| 348 | | |
| 363 | | |
| 374 | | |
| 19,408 | | |
| 12,403 | | |
| 11,975 | |
| %
Change from previous Qtr. | |
| 0.3 | % | |
| 1.5 | % | |
| 2.4 | % | |
| 4.3 | % | |
| 3.0 | % | |
| NM | | |
| -36.1 | % | |
| -3.5 | % |
| Total
customer connections (15) (16) | |
| 94,884 | | |
| 95,777 | | |
| 96,321 | | |
| 96,514 | | |
| 97,427 | | |
| 151,430 | | |
| 138,025 | | |
| 137,603 | |
| %
Change from previous Qtr. | |
| 1.2 | % | |
| 0.9 | % | |
| 0.6 | % | |
| 0.2 | % | |
| 0.9 | % | |
| 55.4 | % | |
| -8.9 | % | |
| -.3 | % |
| Corporate
customer connections (16) | |
| 45,393 | | |
| 45,103 | | |
| 45,176 | | |
| 44,844 | | |
| 44,570 | | |
| 61,284 | | |
| 55,045 | | |
| 54,493 | |
| %
Change from previous Qtr. | |
| -0.1 | % | |
| -0.6 | % | |
| 0.2 | % | |
| -0.7 | % | |
| -0.6 | % | |
| 37.5 | % | |
| -10.2 | % | |
| -1.0 | % |
| Net-centric
customer connections (15) | |
| 49,491 | | |
| 50,674 | | |
| 51,145 | | |
| 51,670 | | |
| 52,857 | | |
| 66,711 | | |
| 62,291 | | |
| 62,370 | |
| %
Change from previous Qtr. | |
| 2.5 | % | |
| 2.4 | % | |
| 0.9 | % | |
| 1.0 | % | |
| 2.3 | % | |
| 26.2 | % | |
| -6.6 | % | |
| 0.1 | % |
| Enterprise customer
connections (4) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 23,435 | | |
| 20,689 | | |
| 20,740 | |
| %
Change from previous Qtr. | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| NM | | |
| -11.7 | % | |
| 0.2 | % |
| On-Net
Buildings – end of period | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Multi-Tenant
office buildings | |
| 1,824 | | |
| 1,826 | | |
| 1,832 | | |
| 1,837 | | |
| 1,841 | | |
| 1,844 | | |
| 1,860 | | |
| 1,862 | |
| Carrier
neutral data center buildings | |
| 1,187 | | |
| 1,216 | | |
| 1,240 | | |
| 1,264 | | |
| 1,294 | | |
| 1,327 | | |
| 1,337 | | |
| 1,347 | |
| Cogent
data centers | |
| 54 | | |
| 53 | | |
| 54 | | |
| 54 | | |
| 55 | | |
| 56 | | |
| 60 | | |
| 68 | |
| Total
on-net buildings | |
| 3,065 | | |
| 3,095 | | |
| 3,126 | | |
| 3,155 | | |
| 3,190 | | |
| 3,227 | | |
| 3,257 | | |
| 3,277 | |
| Total
carrier neutral data center nodes | |
| 1,383 | | |
| 1,409 | | |
| 1,433 | | |
| 1,458 | | |
| 1,490 | | |
| 1,526 | | |
| 1,528 | | |
| 1,558 | |
| Square
feet – multi-tenant office buildings – on-net | |
| 992,336,259 | | |
| 993,590,499 | | |
| 995,522,774 | | |
| 1,000,044,418 | | |
| 1,001,382,577 | | |
| 1,001,491,002 | | |
| 1,006,523,795 | | |
| 1,008,006,655 | |
| Total
Technical Buildings Owned (11) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 482 | | |
| 482 | | |
| 482 | |
| Square
feet – Technical Buildings Owned (11) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,603,569 | | |
| 1,603,569 | | |
| 1,603,569 | |
| Network –
end of period (12) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Intercity
route miles – Leased (12) | |
| 60,869 | | |
| 61,024 | | |
| 61,065 | | |
| 61,292 | | |
| 61,300 | | |
| 72,694 | | |
| 72,694 | | |
| 72,552 | |
| Metro
route miles – Leased (12) | |
| 16,614 | | |
| 16,822 | | |
| 17,477 | | |
| 17,616 | | |
| 17,826 | | |
| 22,556 | | |
| 22,128 | | |
| 24,779 | |
| Metro
fiber miles – Leased (12) | |
| 40,113 | | |
| 40,529 | | |
| 42,212 | | |
| 42,491 | | |
| 42,863 | | |
| 75,577 | | |
| 69,943 | | |
| 77,365 | |
| Intercity
route miles – Owned (12) | |
| 2,748 | | |
| 2,748 | | |
| 2,748 | | |
| 2,748 | | |
| 2,748 | | |
| 21,883 | | |
| 21,883 | | |
| 21,883 | |
| Metro
route miles – Owned (12) | |
| 445 | | |
| 445 | | |
| 445 | | |
| 445 | | |
| 445 | | |
| 1,704 | | |
| 1,704 | | |
| 1,704 | |
| Connected
networks – AS’s | |
| 7,625 | | |
| 7,685 | | |
| 7,766 | | |
| 7,792 | | |
| 7,864 | | |
| 7,891 | | |
| 7,971 | | |
| 7,988 | |
| Headcount
– end of period (13) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Sales
force – quota bearing (13) | |
| 479 | | |
| 477 | | |
| 522 | | |
| 548 | | |
| 562 | | |
| 647 | | |
| 637 | | |
| 657 | |
| Sales
force – total (13) | |
| 620 | | |
| 619 | | |
| 669 | | |
| 698 | | |
| 714 | | |
| 841 | | |
| 833 | | |
| 847 | |
| Total
employees (13) | |
| 987 | | |
| 988 | | |
| 1,041 | | |
| 1,076 | | |
| 1,107 | | |
| 2,020 | | |
| 1,990 | | |
| 1,947 | |
| Sales
rep productivity – units per full time equivalent sales rep (“FTE”) per month (15) | |
| 4.7 | | |
| 4.9 | | |
| 4.6 | | |
| 3.8 | | |
| 4.0 | | |
| 9.2 | | |
| 3.6 | | |
| 3.3 | |
| FTE
– sales reps | |
| 453 | | |
| 449 | | |
| 465 | | |
| 503 | | |
| 539 | | |
| 567 | | |
| 621 | | |
| 620 | |
(1) Consists of legacy services of companies whose assets or businesses
were acquired by Cogent.
(2) See Schedules of Non-GAAP measures below for definitions
and reconciliations to GAAP measures.
(3) Network operations expense excludes equity-based compensation
expense of $144, $145, $176, $88, $149, $231, $370 and $370 in the three month periods ended March 31, 2022 through December 31,
2023, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees, of $3,742, $3,448, $4,118,
$4,086, $4,193, $11,040, $14,557 and $20,428 in the three month periods ended March 31, 2022 through December 31, 2023, respectively.
(4) In connection with the acquisition of the Wireline Business,
Cogent classified $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 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).
(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 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.
(7) Excludes equity-based compensation expense of $5,912, $5,762,
$6,035, $6,176, $6,432, $6,018, $7,041 and $6,314 in the three month periods ended March 31, 2022 through December 31, 2023,
respectively and excludes $2,004, $244, $400, $739, $351 and $17,001 of Sprint acquisition costs for the three month periods ended September 30,
2022, December 31, 2022, March 31, 2023 June 30, 2023, September 30, 2023 and December 31, 2023, respectively.
(8) As of December 31, 2023, 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 $(1.2 million),
$3.3 million, $9.5 million and $12.0 million of interest (income) expense for the three month periods ended June 30, 2022, December 31,
2022, June 30, 2023 and December 31, 2023, respectively related to the Swap Agreement.
(9) The estimated gain on bargain purchase from the Sprint acquisition
was $1.4 billion as shown below. The amounts presented are provisional and are subject to change as Cogent refines its estimates and
inputs used in the calculations of the assets acquired and liabilities assumed.
(In thousands) Gain on bargain purchase |
|
| |
| Fair value of net assets acquired |
|
$ | 799,214 | |
| Total net consideration to be received from Seller, net of discounts |
|
| 607,221 | |
| Gain on bargain purchase |
|
$ | 1,406,435 | |
(10) Includes cash payments under the IP Transit Services Agreement,
as discussed above, of
| · | $29.2 million for the three months ended June 30, 2023. Amounts billed
and amounts paid under the IP Transit Services Agreement were $58.3 million and $29.2 million in the three months ended June 30,
2023, respectively. |
| · | $87.5 million for the three months ended September 30, 2023. Amounts
billed and amounts paid under the IP Transit Services Agreement were $87.5 million and $87.5 million in the three months ended September 30,
2023, respectively. |
| · | $87.5 million for the three months ended December 31, 2023. Amounts
billed and amounts paid under the IP Transit Services Agreement were $87.5 million and $87.5 million in the three months ended December 31,
2023, respectively. |
(11) In connection with the acquisition of the Wireline Business,
Cogent acquired 482 technical buildings. Thirteen of those buildings have been converted to a Cogent Data Centers.
(12) As of June 30, 2023,
| o | Leased intercity route miles of dark fiber include 11,376 former Sprint route miles and 61,318 Cogent route miles. |
| o | Leased metro route miles of dark fiber include 4,527 former Sprint route miles and 18,029 Cogent route miles. |
| o | Leased metro fiber miles of dark fiber include 32,346 former Sprint fiber miles and 43,231 Cogent fiber miles |
| · | As of September 30, 2023, |
| o | Leased intercity route miles of dark fiber include 11,376 former Sprint route miles and 61,318 Cogent route miles. |
| o | Leased metro route miles of dark fiber include 4,047 former Sprint route miles and 18,081 Cogent route miles. |
| o | Leased metro fiber miles of dark fiber include 26,602 former Sprint fiber miles and 43,341 Cogent fiber miles. |
| · | As of December 31, 2023, |
| o | Leased intercity route miles of dark fiber include 11,017 former Sprint route miles and 61,535 Cogent route miles. |
| o | Leased metro route miles of dark fiber include 3,911 former Sprint route miles and 20,868 Cogent route miles. |
| o | Leased metro fiber miles of dark fiber include 25,252 former Sprint fiber miles and 52,113 Cogent fiber miles. |
| · | In connection with Cogent’s Sprint acquisition, Cogent acquired 19,135
owned intercity route miles of dark fiber and 1,259 owned metro route miles of dark fiber. |
(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.
(14) In connection with the acquisition of the Wireline Business and
negotiation of the related purchase agreement, the Company incurred $2.2 million of professional fees in the year ended December 31,
2022, $0.4 million in the three months ended March 31, 2023, $0.7 million in the three months ended June 30, 2023 and $0.4
million in the three months ended September 30, 2023, In connection with the acquisition of the Wireline Business the Company
incurred $0.8 million of professional fees and $16.2 million of reimbursable severance costs in the three months ended December 31,
2023.
(15) Sales rep productivity for Q2 2023 includes 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, was $8.0 million for the three months ended September 30,
2023 and was $8.6 million for the three months ended December 31, 2023. Net-centric customer connections under the CSA were 8,028
as of June 30, 2023, 4,661 as of September 30, 2023, and 3,576 as of December 31, 2023.
(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 or December 31, 2023.
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.
| ($
in 000’s) – unaudited | |
Q1
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4
2022 | | |
Q1
2023 | | |
Q2
2023 | | |
Q3
2023 | | |
Q4
2023 | | |
YEAR
2022 | | |
YEAR
2023 | |
| Net
cash provided by (used in) operating activities | |
$ | 49,411 | | |
$ | 34,403 | | |
$ | 53,570 | | |
$ | 36,323 | | |
$ | 35,821 | | |
$ | 82,654 | | |
$ | (52,433 | ) | |
$ | (48,701 | ) | |
$ | 173,707 | | |
$ | 17,345 | |
| Changes
in operating assets and liabilities | |
$ | (6,294 | ) | |
$ | 5,108 | | |
$ | (13,017 | ) | |
$ | 4,152 | | |
$ | 1,435 | | |
$ | (90,373 | ) | |
$ | 51,064 | | |
$ | 36,288 | | |
$ | (10,250 | ) | |
| (1,589 | ) |
| Cash
interest expense and income tax expense | |
| 14,038 | | |
| 18,946 | | |
| 17,320 | | |
| 16,663 | | |
| 18,797 | | |
| 31,875 | | |
| 44,956 | | |
| 18,424 | | |
| 67,163 | | |
| 114,048 | |
| EBITDA | |
$ | 57,155 | | |
$ | 58,457 | | |
$ | 57,873 | | |
$ | 57,138 | | |
$ | 56,053 | | |
$ | 24,156 | | |
$ | 43,587 | | |
$ | 6,011 | | |
$ | 230,620 | | |
$ | 129,804 | |
| PLUS:
Sprint acquisition costs | |
| - | | |
| - | | |
$ | 2,004 | | |
$ | 244 | | |
$ | 400 | | |
$ | 739 | | |
$ | 351 | | |
$ | 17,001 | | |
$ | 2,248 | | |
$ | 18,492 | |
| PLUS:
Cash payments made to the Company under IP Transit Services Agreement | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 29,167 | | |
| 87,500 | | |
| 87,500 | | |
| - | | |
| 204,167 | |
| EBITDA,
as adjusted for Sprint acquisition costs and cash payments made to the Company under IP Transit Services Agreement | |
$ | 57,155 | | |
$ | 58,457 | | |
$ | 59,877 | | |
$ | 57,382 | | |
$ | 56,453 | | |
$ | 54,062 | | |
$ | 131,438 | | |
$ | 110,512 | | |
$ | 232,868 | | |
$ | 352,463 | |
| EBITDA
margin | |
| 38.3 | % | |
| 39.4 | % | |
| 38.6 | % | |
| 37.6 | % | |
| 36.5 | % | |
| 10.1 | % | |
| 15.8 | % | |
| 2.2 | % | |
| 38.5 | % | |
| 13.8 | % |
| EBITDA,
as adjusted for Sprint acquisition costs and cash payments made to the Company under IP Transit Services Agreement, margin | |
| 38.3 | % | |
| 39.4 | % | |
| 39.9 | % | |
| 37.8 | % | |
| 36.8 | % | |
| 22.5 | % | |
| 47.7 | % | |
| 40.6 | % | |
| 38.8 | % | |
| 37.5 | % |
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
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4 2022 | | |
Q1 2023 | | |
Q2 2023 | | |
Q3 2023 | | |
Q4 2023 | | |
YEAR 2022 | | |
YEAR 2023 | |
| Service
revenue, as reported – current period | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | | |
$ | 599,604 | | |
$ | 940,922 | |
| Impact
of foreign currencies on service revenue | |
| 516 | | |
| 1,350 | | |
| 1,486 | | |
| (92 | ) | |
| (1,292 | ) | |
| (417 | ) | |
| 10 | | |
| 375 | | |
| 13,063 | | |
| (2,079 | ) |
| Service
revenue - as adjusted for currency impact (1) | |
$ | 149,691 | | |
$ | 149,800 | | |
$ | 151,486 | | |
$ | 151,887 | | |
$ | 152,296 | | |
$ | 239,389 | | |
$ | 275,439 | | |
$ | 272,474 | | |
$ | 612,667 | | |
$ | 938,843 | |
| Service
revenue, as reported – prior sequential period | |
$ | 147,208 | | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 589,797 | | |
$ | 599,604 | |
| Constant
currency revenue increase (decrease) | |
$ | 2,483 | | |
$ | 625 | | |
$ | 3,036 | | |
$ | 1,887 | | |
$ | 317 | | |
$ | 85,801 | | |
$ | 35,633 | | |
$ | (2,955 | ) | |
$ | 22,870 | | |
$ | 339,239 | |
| Constant
currency revenue percent increase (decrease) | |
| 1.7 | % | |
| 0.4 | % | |
| 2.0 | % | |
| 1.3 | % | |
| 0.2 | % | |
| 55.9 | % | |
| 14.9 | % | |
| -1.1 | % | |
| 3.9 | % | |
| 56.6 | % |
| (1) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average
foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth
without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted
for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial
information. |
Constant currency impact on revenue changes – prior year
periods
| ($
in 000’s) – unaudited | |
Q1
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4 2022 | | |
Q1 2023 | | |
Q2 2023 | | |
Q3 2023 | | |
Q4 2023 | | |
YEAR 2022 | | |
YEAR 2023 | |
| Service
revenue, as reported – current period | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | | |
$ | 599,604 | | |
$ | 940,922 | |
| Impact
of foreign currencies on service revenue | |
| 1,914 | | |
| 3,417 | | |
| 4,246 | | |
| 3,371 | | |
| 1,553 | | |
| (277 | ) | |
| (1,768 | ) | |
| (1,412 | ) | |
| 13,063 | | |
| (2,079 | ) |
| Service
revenue - as adjusted for currency impact (2) | |
$ | 151,089 | | |
$ | 151,867 | | |
$ | 154,246 | | |
$ | 155,350 | | |
$ | 155,141 | | |
$ | 239,529 | | |
$ | 273,661 | | |
$ | 270,687 | | |
$ | 612,667 | | |
$ | 938,843 | |
| Service
revenue, as reported – prior year period | |
$ | 146,777 | | |
$ | 147,879 | | |
$ | 147,927 | | |
| 147,208 | | |
| 149,175 | | |
| 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 589,797 | | |
$ | 599,604 | |
| Constant
currency revenue increase | |
$ | 4,312 | | |
$ | 3,988 | | |
$ | 6,319 | | |
| 8,142 | | |
| 5,966 | | |
| 91,079 | | |
$ | 123,661 | | |
$ | 118,708 | | |
$ | 22,870 | | |
$ | 339,239 | |
| Constant
currency percent revenue increase | |
| 2.9 | % | |
| 2.7 | % | |
| 4.3 | % | |
| 5.5 | % | |
| 4.0 | % | |
| 61.4 | % | |
| 82.4 | % | |
| 78.1 | % | |
| 3.9 | % | |
| 56.6 | % |
| (2) | Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average
foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth
without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency
impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. |
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
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4 2022 | | |
Q1 2023 | | |
Q2 2023 | | |
Q3 2023 | | |
Q4 2023 | | |
YEAR 2022 | | |
YEAR 2023 | |
| Service
revenue, as reported – current period | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | | |
$ | 599,604 | | |
$ | 940,922 | |
| Impact
of foreign currencies on service revenue | |
| 516 | | |
| 1,350 | | |
| 1,486 | | |
| (92 | ) | |
| (1,292 | ) | |
| (417 | ) | |
| 10 | | |
| 375 | | |
| 13,063 | | |
| (2,079 | ) |
| Impact
of excise taxes on service revenue | |
| 594 | | |
| 294 | | |
| (670 | ) | |
| 32 | | |
| (107 | ) | |
| (6,847 | ) | |
| (3,517 | ) | |
| (5,871 | ) | |
| 3,093 | | |
| (34,824 | ) |
| Service
revenue - as adjusted for currency and excise taxes impact (3) | |
$ | 150,285 | | |
$ | 150,094 | | |
$ | 150,816 | | |
$ | 151,919 | | |
$ | 152,189 | | |
$ | 232,542 | | |
$ | 271,922 | | |
$ | 266,603 | | |
$ | 615,760 | | |
$ | 904,019 | |
| Service
revenue, as reported – prior sequential period | |
$ | 147,208 | | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 589,797 | | |
$ | 599,604 | |
| Constant
currency and excise taxes revenue increase (decrease) | |
$ | 3,077 | | |
$ | 919 | | |
$ | 2,366 | | |
$ | 1,919 | | |
$ | 210 | | |
$ | 78,954 | | |
$ | 32,116 | | |
$ | (8,826 | ) | |
$ | 25,963 | | |
$ | 304,415 | |
| Constant
currency and excise tax revenue percent increase (decrease) | |
| 2.1 | % | |
| 0.6 | % | |
| 1.6 | % | |
| 1.3 | % | |
| 0.1 | % | |
| 51.4 | % | |
| 13.4 | % | |
| -3.2 | % | |
| 4.4 | % | |
| 50.8 | % |
| (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
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4 2022 | | |
Q1 2023 | | |
Q2 2023 | | |
Q3 2023 | | |
Q4 2023 | | |
YEAR 2022 | | |
YEAR 2023 | |
| Service
revenue, as reported – current period | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | | |
$ | 599,604 | | |
$ | 940,922 | |
| Impact
of foreign currencies on service revenue | |
| 1,914 | | |
| 3,417 | | |
| 4,246 | | |
| 3,371 | | |
| 1,553 | | |
| (277 | ) | |
| (1,768 | ) | |
| (1,412 | ) | |
| 13,063 | | |
| (2,079 | ) |
| Impact
of excise taxes on service revenue | |
| 786 | | |
| 1,363 | | |
| 695 | | |
| 250 | | |
| (451 | ) | |
| (7,592 | ) | |
| (10,439 | ) | |
| (16,342 | ) | |
| 3,093 | | |
| (34,824 | ) |
| Service
revenue - as adjusted for currency and excise taxes impact (4) | |
$ | 151,875 | | |
$ | 153,230 | | |
$ | 154,941 | | |
$ | 155,600 | | |
$ | 154,690 | | |
$ | 231,937 | | |
$ | 263,222 | | |
$ | 254,345 | | |
$ | 615,760 | | |
$ | 904,019 | |
| Service
revenue, as reported – prior year period | |
$ | 146,777 | | |
$ | 147,879 | | |
$ | 147,927 | | |
$ | 147,208 | | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 589,797 | | |
$ | 599,604 | |
| Constant
currency and excise taxes revenue increase | |
$ | 5,098 | | |
$ | 5,351 | | |
$ | 7,014 | | |
$ | 8,392 | | |
$ | 5,515 | | |
$ | 83,487 | | |
$ | 113,222 | | |
$ | 102,366 | | |
$ | 25,963 | | |
$ | 304,401 | |
| Constant
currency and excise tax percent revenue increase | |
| 3.5 | % | |
| 3.6 | % | |
| 4.7 | % | |
| 5.7 | % | |
| 3.7 | % | |
| 56.2 | % | |
| 75.5 | % | |
| 67.4 | % | |
| 4.4 | % | |
| 50.8 | % |
| (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.
| ($
in 000’s) – unaudited | |
Q1
2022 | | |
Q2
2022 | | |
Q3
2022 | | |
Q4
2022 | | |
Q1
2023 | | |
Q2
2023 | | |
Q3
2023 | | |
Q4
2023 | | |
YEAR
2022 | | |
YEAR
2023 | |
| Service
revenue total | |
$ | 149,175 | | |
$ | 148,450 | | |
$ | 150,000 | | |
$ | 151,979 | | |
$ | 153,588 | | |
$ | 239,806 | | |
$ | 275,429 | | |
$ | 272,099 | | |
$ | 599,604 | | |
$ | 940,922 | |
| Minus
- Network operations expense including equity-based compensation and depreciation and amortization expense | |
| 80,137 | | |
| 79,585 | | |
| 80,117 | | |
| 80,535 | | |
| 83,798 | | |
| 190,013 | | |
| 260,328 | | |
| 242,355 | | |
| 320,376 | | |
| 776,493 | |
| GAAP
Gross Profit (1) | |
$ | 69,038 | | |
$ | 68,865 | | |
$ | 69,883 | | |
$ | 71,444 | | |
$ | 69,790 | | |
$ | 49,793 | | |
$ | 15,101 | | |
$ | 29,744 | | |
$ | 279,228 | | |
$ | 164,429 | |
| Plus -
Equity-based compensation – network operations expense | |
| 144 | | |
| 145 | | |
| 176 | | |
| 88 | | |
| 149 | | |
| 231 | | |
| 370 | | |
| 370 | | |
| 553 | | |
| 1,120 | |
| Plus
– Depreciation and amortization expense | |
| 22,688 | | |
| 23,071 | | |
| 22,897 | | |
$ | 23,563 | | |
$ | 25,160 | | |
$ | 52,511 | | |
$ | 86,734 | | |
$ | 67,805 | | |
$ | 92,222 | | |
$ | 232,208 | |
| Non-GAAP
Gross Profit (2) | |
$ | 91,870 | | |
$ | 92,081 | | |
$ | 92,956 | | |
$ | 95,095 | | |
$ | 95,099 | | |
$ | 102,535 | | |
$ | 102,205 | | |
$ | 97,919 | | |
$ | 372,003 | | |
$ | 397,757 | |
| GAAP
Gross Margin (1) | |
| 46.3 | % | |
| 46.4 | % | |
| 46.6 | % | |
| 47.0 | % | |
| 45.4 | % | |
| 20.8 | % | |
| 5.5 | % | |
| 10.9 | % | |
| 46.6 | % | |
| 17.5 | % |
| Non-GAAP
Gross Margin (2) | |
| 61.6 | % | |
| 62.0 | % | |
| 62.0 | % | |
| 62.6 | % | |
| 61.9 | % | |
| 42.8 | % | |
| 37.1 | % | |
| 36.0 | % | |
| 62.0 | % | |
| 42.3 | % |
| (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 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
31,2022 | | |
As
of
June 30,
2022 | | |
As
of
September
30,2022 | | |
As
of
December
31,2022 | | |
As
of
March
31,2023 | | |
As
of
June 30,
2023 | | |
As
of
September
30,2023 | | |
As
of
December
31,2023 | |
| Cash
and cash equivalents & restricted cash | |
$ | 311,771 | | |
$ | 349,847 | | |
$ | 323,664 | | |
$ | 275,912 | | |
$ | 234,422 | | |
$ | 243,953 | | |
$ | 166,072 | | |
$ | 113,781 | |
| Debt | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Capital
(finance) leases – current portion | |
| 17,147 | | |
| 17,562 | | |
| 24,135 | | |
| 17,182 | | |
| 19,782 | | |
| 20,114 | | |
| 63,236 | | |
| 64,594 | |
| Capital
(finance) leases – long term | |
| 228,102 | | |
| 236,652 | | |
| 263,750 | | |
| 287,044 | | |
| 300,600 | | |
| 311,405 | | |
| 419,941 | | |
| 419,921 | |
| Senior
Unsecured 2024 Euro Notes | |
| 389,019 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Senior
Secured 2026 Notes | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | | |
| 500,000 | |
| Senior
Unsecured 2027 Notes | |
| - | | |
| 450,000 | | |
| 450,000 | | |
| 450,000 | | |
| 450,000 | | |
| 450,000 | | |
| 450,000 | | |
| 450,000 | |
| Note
payable | |
| 219 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Total
debt | |
| 1,134,487 | | |
| 1,204,214 | | |
| 1,237,885 | | |
| 1,254,226 | | |
| 1,270,382 | | |
| 1,281,519 | | |
| 1,433,177 | | |
| 1,434,515 | |
| Total
net debt | |
| 822,716 | | |
| 854,637 | | |
| 914,221 | | |
| 978,314 | | |
| 1,035,960 | | |
| 1,037,566 | | |
| 1,267,105 | | |
| 1,320,734 | |
| Trailing
12 months EBITDA, as adjusted for Sprint acquisition costs and cash payments from the IP Transit Services Agreement | |
| 229,499 | | |
| 230,775 | | |
| 232,921 | | |
| 232,871 | | |
| 232,169 | | |
| 227,774 | | |
| 298,984 | | |
| 352,465 | |
| Gross
leverage ratio | |
| 4.94 | | |
| 5.22 | | |
| 5.31 | | |
| 5.39 | | |
| 5.47 | | |
| 5.63 | | |
| 4.79 | | |
| 4.07 | |
| Net
leverage ratio | |
| 3.58 | | |
| 3.70 | | |
| 3.93 | | |
| 4.20 | | |
| 4.46 | | |
| 4.56 | | |
| 4.24 | | |
| 3.75 | |
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
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2023 AND 2022
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| | |
2023 | | |
2022 | |
| Assets | |
| | | |
| | |
| Current
assets: | |
| | | |
| | |
| Cash
and cash equivalents | |
$ | 75,092 | | |
$ | 223,783 | |
| Restricted
cash | |
| 38,689 | | |
| 52,129 | |
| Accounts
receivable, net of allowance for credit losses of $3,677 and $2,303, respectively | |
| 135,475 | | |
| 44,123 | |
| Due
from T-Mobile, IP Transit Services Agreement, current portion, net of discount of $24,898 | |
| 179,269 | | |
| — | |
| Due
from T-Mobile, Transition Services Agreement | |
| 4,514 | | |
| — | |
| Prepaid
expenses and other current assets | |
| 80,588 | | |
| 45,878 | |
| Total
current assets | |
| 513,627 | | |
| 365,913 | |
| Property
and equipment: | |
| | | |
| | |
| Property
and equipment | |
| 2,947,376 | | |
| 1,714,906 | |
| Accumulated
depreciation and amortization | |
| (1,409,559 | ) | |
| (1,170,476 | ) |
| Total
property and equipment, net | |
| 1,537,817 | | |
| 544,430 | |
| Right-of-use
leased assets | |
| 361,587 | | |
| 81,601 | |
| Intangible
assets, net | |
| 472,815 | | |
| — | |
| Due
from T-Mobile, IP Transit Services Agreement, net of discount of $27,916 | |
| 263,750 | | |
| — | |
| Due
from T-Mobile, Purchase Agreement, net of discount of $13,725 | |
| 38,585 | | |
| — | |
| Deposits
and other assets | |
| 23,438 | | |
| 18,238 | |
| Total
assets | |
$ | 3,211,619 | | |
$ | 1,010,182 | |
| Liabilities
and stockholders’ equity | |
| | | |
| | |
| Current
liabilities: | |
| | | |
| | |
| Accounts
payable | |
$ | 48,356 | | |
$ | 27,208 | |
| Accrued
and other current liabilities | |
| 120,523 | | |
| 63,889 | |
| Due
to T-Mobile – Transition Services Agreement | |
| 66,908 | | |
| — | |
| Due
to T-Mobile – Purchase Agreement | |
| 4,981 | | |
| — | |
| Current
maturities, operating lease liabilities | |
| 67,962 | | |
| 12,005 | |
| Finance
lease obligations, current maturities | |
| 64,594 | | |
| 17,182 | |
| Total
current liabilities | |
| 373,324 | | |
| 120,284 | |
| Senior
secured 2026 notes, net of unamortized debt costs of $645 and $905, respectively, and discount of $857 and $1,203, respectively | |
| 498,498 | | |
| 497,892 | |
| Senior
unsecured 2027 notes, net of unamortized debt costs of $941 and $1,173, respectively, and discount of $1,970 and $2,456, respectively | |
| 447,088 | | |
| 446,371 | |
| Operating
lease liabilities, net of current maturities | |
| 330,095 | | |
| 94,587 | |
| Finance
lease obligations, net of current maturities | |
| 419,921 | | |
| 287,044 | |
| Deferred
income tax liabilities | |
| 471,498 | | |
| 47,646 | |
| Other
long-term liabilities | |
| 61,639 | | |
| 34,990 | |
| Total
liabilities | |
| 2,602,063 | | |
| 1,528,814 | |
| Commitments
and contingencies | |
| | | |
| | |
| Stockholders’
equity: | |
| | | |
| | |
| Common
stock, $0.001 par value; 75,000,000 shares authorized; 48,608,569 and 48,013,330 shares issued and outstanding, respectively | |
| 49 | | |
| 48 | |
| Additional
paid-in capital | |
| 606,755 | | |
| 575,064 | |
| Accumulated
other comprehensive loss | |
| (14,385 | ) | |
| (19,156 | ) |
| Accumulated
earnings (deficit) | |
| 17,137 | | |
| (1,074,588 | ) |
| Total
stockholders’ equity (deficit) | |
| 609,556 | | |
| (518,632 | ) |
| Total
liabilities and stockholders’ equity (deficit) | |
$ | 3,211,619 | | |
$ | 1,010,182 | |
COGENT COMMUNICATIONS HOLDINGS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
FOR EACH OF THE THREE YEARS ENDED DECEMBER
31, 2023
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| | |
2023 | | |
2022 | | |
2021 | |
| Service
revenue | |
$ | 940,922 | | |
$ | 599,604 | | |
$ | 589,797 | |
| Operating
expenses: | |
| | | |
| | | |
| | |
| Network
operations (including $1,069, $553 and $2,521 of equity-based compensation expense, respectively), exclusive of amounts shown separately | |
| 544,232 | | |
| 228,154 | | |
| 226,337 | |
| Selling,
general, and administrative (including $25,855, $23,886 and $24,301 of equity-based compensation expense, respectively) | |
| 275,318 | | |
| 163,021 | | |
| 162,380 | |
| Acquisition
costs – Sprint Business | |
| 18,492 | | |
| 2,248 | | |
| — | |
| Depreciation
and amortization | |
| 232,209 | | |
| 92,222 | | |
| 89,240 | |
| Total
operating expenses | |
| 1,070,251 | | |
| 485,645 | | |
| 477,957 | |
| Gain
on lease terminations and other | |
| — | | |
| — | | |
| 7,393 | |
| Operating
(loss) income | |
| (129,329 | ) | |
| 113,959 | | |
| 119,233 | |
| Interest
expense | |
| (106,783 | ) | |
| (67,584 | ) | |
| (58,059 | ) |
| Change
in valuation – interest rate swap | |
| 13,439 | | |
| (43,113 | ) | |
| (9,015 | ) |
| Foreign
exchange gain on 2024 Notes | |
| — | | |
| 31,561 | | |
| 32,522 | |
| Loss
on debt extinguishment and redemption – 2022 Notes | |
| — | | |
| — | | |
| (14,698 | ) |
| Loss
on debt extinguishment and redemption – 2024 Notes | |
| — | | |
| (11,885 | ) | |
| — | |
| Gain
on bargain purchase – Sprint Business | |
| 1,406,435 | | |
| — | | |
| — | |
| Interest
income – IP Transit Services Agreement | |
| 26,796 | | |
| — | | |
| — | |
| Interest
income – Purchase Agreement | |
| 1,889 | | |
| — | | |
| — | |
| Interest
income and other | |
| 7,030 | | |
| 3,438 | | |
| 1,437 | |
| Income
before income taxes | |
| 1,219,477 | | |
| 26,376 | | |
| 71,420 | |
| Income
tax benefit (expense) | |
| 53,964 | | |
| (21,230 | ) | |
| (23,235 | ) |
| Net
income | |
$ | 1,273,441 | | |
$ | 5,146 | | |
$ | 48,185 | |
| Comprehensive
income (loss): | |
| | | |
| | | |
| | |
| Net
income | |
$ | 1,273,441 | | |
$ | 5,146 | | |
$ | 48,185 | |
| Foreign
currency translation adjustment | |
| 4,772 | | |
| (8,153 | ) | |
| (9,697 | ) |
| Comprehensive
income (loss) | |
$ | 1,278,213 | | |
$ | (3,007 | ) | |
$ | 38,488 | |
| Basic
net income per common share | |
$ | 26.88 | | |
$ | 0.11 | | |
$ | 1.04 | |
| Diluted
net income per common share | |
$ | 26.62 | | |
$ | 0.11 | | |
$ | 1.03 | |
| Dividends
declared per common share | |
$ | 3.760 | | |
$ | 3.555 | | |
$ | 3.170 | |
| Weighted-average
common shares-basic | |
| 47,373,361 | | |
| 46,875,992 | | |
| 46,419,180 | |
| Weighted-average
common shares -diluted | |
| 47,837,512 | | |
| 47,207,298 | | |
| 46,963,920 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR
THE THREE MONTHS ENDED DECEMBER 31, 2023 AND DECEMBER 31, 2022
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| | |
Three
Months Ended December
31, 2023 | | |
Three
Months Ended December
31, 2022 | |
| Service
revenue | |
$ | 272,099 | | |
$ | 151,979 | |
| Operating
expenses: | |
| | | |
| | |
| Network
operations (including $370 and $88 of equity-based compensation expense, respectively), exclusive of amounts shown separately | |
| 174,550 | | |
| 56,972 | |
| Selling,
general, and administrative (including $6,314 and $6,176 of equity-based compensation expense, respectively) | |
| 81,221 | | |
| 43,889 | |
| Acquisition
costs – Sprint Business | |
| 17,001 | | |
| 244 | |
| Depreciation
and amortization | |
| 67,805 | | |
| 23,563 | |
| Total
operating expenses | |
| 340,577 | | |
| 124,668 | |
| Operating
(loss) income | |
| (68,478 | ) | |
| 27,311 | |
| Interest
expense | |
| (34,928 | ) | |
| (21,990 | ) |
| Change
in valuation – interest rate swap | |
| 17,722 | | |
| 2,590 | |
| Gain
on bargain purchase – Sprint Business | |
| 254,049 | | |
| — | |
| Interest
income – IP Transit Services Agreement | |
| 8,828 | | |
| — | |
| Interest
income – Purchase Agreement | |
| 720 | | |
| — | |
| Interest
income and other | |
| 1,797 | | |
| 4,106 | |
| Income
before income taxes | |
| 179,710 | | |
| 12,017 | |
| Income
tax benefit (expense) | |
| 20,443 | | |
| (11,166 | ) |
| Net
income | |
$ | 200,153 | | |
$ | 851 | |
| Comprehensive
income: | |
| | | |
| | |
| Net
income | |
$ | 200,153 | | |
$ | 851 | |
| Foreign
currency translation adjustment | |
| 5,377 | | |
| 9,257 | |
| Comprehensive
income | |
$ | 205,530 | | |
$ | 10,108 | |
| Basic
net income per common share | |
$ | 4.23 | | |
$ | 0.02 | |
| Diluted
net income per common share | |
$ | 4.17 | | |
$ | 0.02 | |
| Dividends
declared per common share | |
$ | 0.955 | | |
$ | 0.915 | |
| Weighted-average
common shares-basic | |
| 47,353,291 | | |
| 46,885,512 | |
| Weighted-average
common shares -diluted | |
| 48,037,841 | | |
| 47,196,890 | |
COGENT COMMUNICATIONS HOLDINGS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS ENDED DECEMBER
31, 2023
(IN THOUSANDS)
| | |
2023 | | |
2022 | | |
2021 | |
| Cash
flows from operating activities: | |
| | | |
| | | |
| | |
| Net
income | |
$ | 1,273,441 | | |
$ | 5,146 | | |
$ | 48,185 | |
| Adjustments
to reconcile net income to net cash provided by operating activities: | |
| | | |
| | | |
| | |
| Depreciation
and amortization | |
| 232,209 | | |
| 92,222 | | |
| 89,240 | |
| Amortization
of debt discounts and premium | |
| 1,323 | | |
| 1,464 | | |
| 1,759 | |
| Amortization
of discounts, due from T-Mobile, IP Transit Services & Purchase Agreements | |
| (28,685 | ) | |
| — | | |
| — | |
| Equity-based
compensation expense (net of amounts capitalized) | |
| 26,924 | | |
| 24,439 | | |
| 26,822 | |
| Gain
on bargain purchase – Sprint Business | |
| (1,406,435 | ) | |
| — | | |
| — | |
| Foreign
currency exchange gain on 2024 Notes | |
| — | | |
| (31,561 | ) | |
| (32,522 | ) |
| Loss
on extinguishment & redemption of 2024 notes | |
| — | | |
| 11,885 | | |
| — | |
| Loss
on extinguishment & redemption of 2022 notes | |
| — | | |
| — | | |
| 14,698 | |
| Gain
– lease termination | |
| — | | |
| — | | |
| (7,375 | ) |
| Gains—equipment
transactions and other, net | |
| 212 | | |
| 372 | | |
| 69 | |
| Deferred
income taxes | |
| (69,582 | ) | |
| 16,539 | | |
| 18,159 | |
| Changes
in operating assets and liabilities: | |
| | | |
| | | |
| | |
| Accounts
receivable | |
| (51,002 | ) | |
| (2,838 | ) | |
| 1,385 | |
| Prepaid
expenses and other current assets | |
| (11,001 | ) | |
| (7,427 | ) | |
| (17 | ) |
| Change
in valuation – interest rate swap agreement | |
| (13,439 | ) | |
| 43,113 | | |
| 9,015 | |
| Due
to T-Mobile – Transition Services Agreement | |
| 66,908 | | |
| — | | |
| — | |
| Due
from T-Mobile – Transition Services Agreement | |
| (4,514 | ) | |
| — | | |
| — | |
| Deposits
and other assets | |
| (1,548 | ) | |
| (282 | ) | |
| (12 | ) |
| Unfavorable
lease liabilities | |
| (26,511 | ) | |
| | | |
| | |
| Accounts
payable, accrued liabilities and other long-term liabilities | |
| 29,045 | | |
| 20,635 | | |
| 851 | |
| Net
cash provided by operating activities | |
| 17,345 | | |
| 173,707 | | |
| 170,257 | |
| Cash
flows from investing activities: | |
| | | |
| | | |
| | |
| Cash
receipts - IP Transit Agreement – T-Mobile | |
| 204,167 | | |
| — | | |
| — | |
| Acquisition
of Sprint Business, net of $47.1 million of cash acquired | |
| 2,191 | | |
| — | | |
| — | |
| Purchases
of property and equipment | |
| (129,632 | ) | |
| (78,971 | ) | |
| (69,916 | ) |
| Net
cash provided by (used in) investing activities | |
| 76,726 | | |
| (78,971 | ) | |
| (69,916 | ) |
| Cash
flows from financing activities: | |
| | | |
| | | |
| | |
| Net
proceeds from issuance of 2027 Notes, net of debt costs of $1,290 | |
| — | | |
| 446,010 | | |
| — | |
| Net
proceeds from issuance of 2026 Notes, net of debt costs of $1,317 | |
| — | | |
| — | | |
| 496,933 | |
| Redemption
and extinguishment of 2024 Notes | |
| — | | |
| (375,354 | ) | |
| — | |
| Redemption
and extinguishment of 2022 Notes | |
| — | | |
| — | | |
| (459,317 | ) |
| Dividends
paid | |
| (181,716 | ) | |
| (169,857 | ) | |
| (150,288 | ) |
| Principal
payments of finance lease obligations | |
| (77,362 | ) | |
| (45,472 | ) | |
| (23,054 | ) |
| Principal
payments of installment payment agreement | |
| — | | |
| (790 | ) | |
| (6,922 | ) |
| Proceeds
from exercises of common stock options | |
| 1,227 | | |
| 614 | | |
| 1,823 | |
| Net
cash used in financing activities | |
| (257,851 | ) | |
| (144,849 | ) | |
| (140,825 | ) |
| Effect
of exchange rate changes on cash | |
| 1,649 | | |
| (2,599 | ) | |
| (2,193 | ) |
| Net
decrease in cash and cash equivalents & restricted cash | |
| (162,131 | ) | |
| (52,712 | ) | |
| (42,677 | ) |
| Cash
and cash equivalents & restricted cash, beginning of year | |
| 275,912 | | |
| 328,624 | | |
| 371,301 | |
| Cash
and cash equivalents & restricted cash, end of year | |
$ | 113,781 | | |
$ | 275,912 | | |
$ | 328,624 | |
COGENT COMMUNICATIONS HOLDINGS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE MONTHS ENDED DECEMBER
31, 2023 AND DECEMBER 31, 2022
(IN THOUSANDS)
| | |
Three
Months
Ended
December 31,
2023 | | |
Three
Months
Ended
December 31,
2022 | |
| Cash
flows from operating activities: | |
| | | |
| | |
| Net
income | |
$ | 200,153 | | |
$ | 851 | |
| Adjustments
to reconcile net income to net cash (used in) provided by operating activities: | |
| | | |
| | |
| Depreciation
and amortization | |
| 67,805 | | |
| 23,563 | |
| Amortization
of debt discounts | |
| 337 | | |
| 320 | |
| Amortization
of discounts, due from T-Mobile, IP Transit Services & Purchase Agreements | |
| (9,548 | ) | |
| — | |
| Equity-based
compensation expense (net of amounts capitalized) | |
| 6,684 | | |
| 6,264 | |
| Gain
on bargain purchase – Sprint Business | |
| (254,049 | ) | |
| — | |
| Gains—equipment
transactions and other, net | |
| 489 | | |
| (3,159 | ) |
| Deferred
income taxes | |
| (6,073 | ) | |
| 11,857 | |
| Changes
in operating assets and liabilities: | |
| | | |
| | |
| Accounts
receivable | |
| (47,755 | ) | |
| 265 | |
| Prepaid
expenses and other current assets | |
| (6,238 | ) | |
| 1,977 | |
| Change
in valuation – interest rate swap agreement | |
| (17,722 | ) | |
| (2,590 | ) |
| Due
to T-Mobile – Transition Services Agreement | |
| (2,721 | ) | |
| — | |
| Due from T-Mobile –
Transition Services Agreement | |
| 12,317 | | |
| — | |
| Deposits
and other assets | |
| (1,371 | ) | |
| (518 | ) |
| Unfavorable
lease liabilities | |
| (10,337 | ) | |
| — | |
| Accounts
payable, accrued liabilities and other long-term liabilities | |
| 19,328 | | |
| (2,507 | ) |
| Net
cash (used in) provided by operating activities | |
| (48,701 | ) | |
| 36,323 | |
| Cash
flows from investing activities: | |
| | | |
| | |
| Severance
reimbursement – T-Mobile | |
| 16,228 | | |
| — | |
| Cash
receipts - IP Transit Agreement – T-Mobile | |
| 87,500 | | |
| — | |
| Purchases
of property and equipment | |
| (43,609 | ) | |
| (19,591 | ) |
| Net
cash provided by (used in) investing activities | |
| 60,119 | | |
| (19,591 | ) |
| Cash
flows from financing activities: | |
| | | |
| | |
| Dividends
paid | |
| (46,362 | ) | |
| (43,975 | ) |
| Principal
payments of finance lease obligations | |
| (18,813 | ) | |
| (24,514 | ) |
| Proceeds
from exercises of common stock options | |
| 440 | | |
| 188 | |
| Net
cash used in financing activities | |
| (64,735 | ) | |
| (68,301 | ) |
| Effect
of exchange rate changes on cash | |
| 1,026 | | |
| 3,817 | |
| Net
decrease in cash and cash equivalents & restricted cash | |
| (52,291 | ) | |
| (47,752 | ) |
| Cash
and cash equivalents & restricted cash, beginning of period | |
| 166,072 | | |
| 323,664 | |
| Cash
and cash equivalents & restricted cash, end of period | |
$ | 113,781 | | |
$ | 275,912 | |
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 March 31, 2023, June 30, 2023 and September 30, 2023. 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.
###
v3.24.0.1
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