Telecom Ramblings

PR Archives:  LatestBy Company By Date


Press Release -- February 22nd, 2018
Source: Cogent Communications
Tags:

Cogent Communications Reports Fourth Quarter 2017 and Full Year 2017 Results and Increases Regular Quarterly Dividend on Common Stock

WASHINGTONFeb. 22, 2018 /PRNewswire/ --

Financial and Business Highlights

  • Cogent approves a 4.2% increase of $0.02 per share to its regular quarterly dividend to $0.50 per common share to be paid on March 26, 2018 to shareholders of record on March 9, 2018
  • Dividends for 2017 totaled $81.7 million, or $1.80 per share, with 50.2% treated as a return of capital and 49.8% treated as dividends for US federal income tax purposes
  • Service revenue increased by 1.8% from Q3 2017 to Q4 2017 to $125.2 million, increased from Q4 2016 to Q4 2017 by 8.3% and increased from fully year 2016 to full year 2017 by 8.6% to $485.2 million
  • Cash flow from operations for Q4 2017 increased by 9.0% from Q3 2017 to $31.4 million and increased from full year 2016 to full year 2017 by 3.5% to $111.7 million
  • EBITDA increased by 7.6% from Q3 2017 to Q4 2017 to $43.2 million, increased from Q4 2016 to Q4 2017 by 16.6% and increased from full year 2016 to full year 2017 by 12.9% to $161.3 million
  • EBITDA margin for Q4 2017 increased by 240 basis points to 34.5% from Q4 2016 and increased by 180 basis points from Q3 2017
  • GAAP gross profit increased by 12.6% from full year 2016 to $200.0 million for full year 2017 and GAAP gross margin increased by 150 basis points to 41.2% from full year 2016 to full year 2017

Cogent Communications Holdings, Inc. (CCOI) today announced service revenue of $125.2 million for the three months ended December 31, 2017, an increase of 8.3% from the three months ended December 31, 2016 and an increase of 1.8% from the three months ended September 30, 2017. Service revenue was $485.2 million for the year ended December 31, 2017, an increase of 8.6% from the year ended December 31, 2016.   Foreign exchange had no impact on service revenue growth from the three months ended September 30, 2017 to the three months ended December 31, 2017.  Foreign exchange positively impacted service revenue growth from the three months ended December 31, 2016 to the three months ended December 31, 2017 by $2.1 million and positively impacted service revenue growth from the year ended December 31, 2016 to the year ended December 31, 2017 by $1.9 million.  On a constant currency basis, service revenue grew by 1.8% from the three months ended September 30, 2017 to the three months ended December 31, 2017, grew by 6.6% from the three months ended December 31, 2016 to the three months ended December 31, 2017 and grew by 8.1% from the year ended December 31, 2016 to the year ended December 31, 2017.

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 $89.4 million for the three months ended December 31, 2017; an increase of 1.7% from the three months ended September 30, 2017 and an increase of 7.0% over the three months ended December 31, 2016. On-net revenue was $346.4 million for the year ended December 31, 2017; an increase of 7.1% over the year ended December 31, 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 $35.7 million for the three months ended December 31, 2017; an increase of 2.3% over the three months ended September 30, 2017 and an increase of 11.9% over the three months ended December 31, 2016. Off-net revenue was $137.9 million for the year ended December 31, 2017; an increase of 12.7% over the year ended December 31, 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 14.4% from the three months ended December 31, 2016 to $52.0 million for the three months ended December 31, 2017 and increased by 3.4% from the three months ended September 30, 2017. GAAP gross profit increased by 12.6% from the year ended December 31, 2016 to $200.0 million for the year ended December 31, 2017. GAAP gross margin was 41.5% for the three months ended December 31, 2017, 39.3% for the three months ended December 31, 2016 and 40.9% for the three months ended September 30, 2017.  GAAP gross margin was 41.2% for the year ended December 31, 2017, and 39.7% for the year ended December 31, 2016.  Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $2.9 million for the three months ended December 31, 2017$2.7 million for the three months ended September 30, 2017$2.5 million for the three months ended December 31, 2016$9.1 million for the year ended December 31, 2016 and $10.9 million for the year ended December 31, 2017.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Non-GAAP gross profit increased by 8.9% from the three months ended December 31, 2016 to $71.5 million for the three months ended December 31, 2017 and increased by 2.8% from the three months ended September 30, 2017. Non-GAAP gross profit increased by 9.1% from the year ended December 31, 2016 to $276.5 million for the year ended December 31, 2017. Non-GAAP gross profit margin was 57.1% for the three months ended December 31, 2017, 56.8% for the three months ended December 31, 2016 and 56.6% for the three months ended September 30, 2017.  Non-GAAP gross margin was 57.0% for the year ended December 31, 2017, and 56.7% for the year ended December 31, 2016.

Cash flow from operating activities decreased by 7.4% from the three months ended December 31, 2016 to $31.4 million for the three months ended December 31, 2017 and increased by 9.0% from the three months ended September 30, 2017. Cash flow from operating activities increased by 3.5% from the year ended December 31, 2016 to $111.7 million for the year ended December 31, 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 16.6% from the three months ended December 31, 2016 to $43.2 million for the three months ended December 31, 2017 and increased by 7.6% from the three months ended September 30, 2017. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 12.9% from the year ended December 31, 2016 to $161.3 millionfor the year ended December 31, 2017. EBITDA margin was 34.5% for the three months ended December 31, 2017, 32.1% for the three months ended December 31, 2016 and 32.7% for the three months ended September 30, 2017.  EBITDA margin was 33.2% for the year ended December 31, 2017 and 32.0% for the year ended December 31, 2016.

EBITDA, as adjusted, increased by 15.4% from the three months ended December 31, 2016 to $43.6 million for the three months ended December 31, 2017 and increased by 7.3% from the three months ended September 30, 2017. EBITDA, as adjusted, increased by 9.7% from the year ended December 31, 2016 to $165.1 million for the year ended December 31, 2017. EBITDA, as adjusted, margin was 34.8% for the three months ended December 31, 2017, 32.7% for the three months ended December 31, 2016 and 33.0% for the three months ended September 30, 2017. EBITDA, as adjusted, margin was 34.0% for the year ended December 31, 2017 and was 33.7% for the year ended December 31, 2016.

Basic and diluted net (loss) income per share was $(0.14) for the three months ended December 31, 2017$0.09 for the three months ended December 31, 2016 and $0.08 for the three months ended September 30, 2017. Basic and diluted net income per share was $0.13 for the year ended December 31, 2017 and $0.33 for the year ended December 31, 2016. The signing of the Tax Cuts and Jobs Act in December 2017 that amended the Internal Revenue Code and reduced the corporate tax rate from a maximum of 35% to a flat 21% rate increased Cogent's non-cash deferred income tax expense by approximately $11.3 million in the three months and year ended December 31, 2017.  This represents a (loss) of $(0.25) per basic and diluted share for the three months ended December 31, 2017 a (loss) of $(0.25) per basic and diluted share for the year ended December 31, 2017.

Total customer connections increased by 15.8% from December 31, 2016 to 71,613 as of December 31, 2017 and increased by 3.2% from September 30, 2017. On-net customer connections increased by 16.0% from December 31, 2016 to 61,334 as of December 31, 2017 and increased by 3.3% from September 30, 2017. Off-net customer connections increased by 15.8% from December 31, 2016 to 9,953 as of December 31, 2017 and increased by 2.4% from September 30, 2017.

The number of on-net buildings increased by 133 on-net buildings from December 31, 2016 to 2,506 on-net buildings as of December 31, 2017 and increased by 34 on-net buildings from September 30, 2017.

Quarterly Dividend Increase Approved

On February 21, 2018, Cogent's board approved a regular quarterly dividend of $0.50 per common share payable on March 26, 2018 to shareholders of record on March 9, 2018. This first quarter 2018 regular dividend represents a 4.2% increase of $0.02 per share from the fourth quarter 2017 regular dividend of $0.48 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.

Tax Treatment of 2017 Dividends

Cogent paid four quarterly dividends in 2017 totaling $81.7 million, or $1.80 per share. The expected tax treatment of these dividends are generally that 50.2% are treated as a return of capital and 49.8% 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.

Conference Call and Website Information

Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 22, 2018 to discuss Cogent's operating results for the fourth quarter of 2017 and full year 2017 and to discuss Cogent's expectations for full year 2018. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.

About Cogent Communications

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

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

#  #  #

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 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

$89,374

  % Change from previous Qtr.

2.9%

1.1%

2.9%

2.0%

0.1%

2.4%

2.7%

1.7%

Off-Net revenue

$29,356

$30,149

$30,972

$31,861

$33,386

$33,980

$34,865

$35,662

  % Change from previous Qtr.

3.3%

2.7%

2.7%

2.9%

4.8%

1.8%

2.6%

2.3%

Non-Core revenue (1)

$230

$267

$239

$224

$231

$211

$206

$190

  % Change from previous Qtr.

-5.3%

16.1%

-10.5%

-6.3%

3.1%

-8.7%

-2.4%

-7.8%

Service revenue – total

$108,291

$109,955

$113,057

$115,596

$117,203

$119,777

$122,969

$125,226

  % Change from previous Qtr.

3.0%

1.5%

2.8%

2.2%

1.4%

2.2%

2.7%

1.8%

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

3.0%

0.9%

3.1%

2.9%

1.6%

1.7%

1.2%

1.8%

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%

6.6%

Network operations expenses (2)

$47,156

$47,727

$48,666

$49,943

$50,551

$50,974

$53,405

$53,745

  % Change from previous Qtr.

3.2%

1.2%

2.0%

2.6%

1.2%

0.8%

4.8%

0.6%

GAAP gross profit (3)

$43,261

$43,479

$45,426

$45,434

$48,003

$49,765

$50,238

$51,964

  % Change from previous Qtr.

4.7%

0.5%

4.5%

0.0%

5.7%

3.7%

1.0%

3.4%

GAAP gross margin (3)

39.9%

39.5%

40.2%

39.3%

41.0%

41.5%

40.9%

41.5%

Non-GAAP gross profit (4) (6)

$61,135

$62,228

$64,391

$65,653

$66,652

$68,803

$69,564

$71,481

  % Change from previous Qtr.

2.8%

1.8%

3.5%

2.0%

1.5%

3.2%

1.1%

2.8%

Non-GAAP gross margin (4) (6)

56.5%

56.6%

57.0%

56.8%

56.9%

57.4%

56.6%

57.1%

Selling, general and administrative expenses (5)

$27,472

$27,278

$27,220

$28,576

$28,925

$28,704

$29,360

$28,238

  % Change from previous Qtr.

11.1%

-0.7%

-0.2%

5.0%

1.2%

-0.8%

2.3%

-3.8%

Depreciation and amortization expense

$17,753

$18,604

$18,804

$20,073

$18,538

$18,897

$19,147

$19,344

  % Change from previous Qtr.

-1.4%

4.8%

1.1%

6.7%

-7.6%

1.9%

1.3%

1.0%

Equity-based compensation expense

$2,181

$2,687

$2,991

$2,876

$2,647

$3,225

$3,734

$3,684

  % Change from previous Qtr.

-15.2%

23.2%

11.3%

-3.8%

-8.0%

21.8%

15.8%

-1.3%

Operating income

$15,675

$17,511

$16,063

$14,795

$18,666

$19,000

$17,891

$20,534

  % Change from previous Qtr.

-3.1%

11.7%

-8.3%

-7.9%

26.2%

1.8%

-5.8%

14.8%

Interest expense

$10,065

$10,243

$9,891

$10,602

$11,891

$12,090

$12,266

$12,222

  % Change from previous Qtr.

-2.1%

1.8%

-3.4%

7.2%

12.2%

1.7%

1.5%

-0.4%

Net income (loss)

$3,354

$4,224

$3,459

$3,892

$4,136

$4,317

$3,650

$(6,227)

Basic net income (loss) per common share

$0.08

$0.09

$0.08

$0.09

$0.09

$0.10

$0.08

$(0.14)

Diluted net income (loss) per common share

$0.08

$0.09

$0.08

$0.09

$0.09

$0.10

$0.08

$(0.14)

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

44,844,469

  % Change from previous Qtr.

0.2%

0.2%

0.2%

0.0%

0.2%

0.2%

0.1%

0.2%

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

44,844,469

  % Change from previous Qtr.

0.2%

0.4%

0.1%

0.0%

0.3%

0.2%

0.3%

-0.6%

EBITDA (6)

$33,663

$34,950

$37,171

$37,077

$37,727

$40,099

$40,204

$43,243

  % Change from previous Qtr.

-3.1%

3.8%

6.4%

-0.3%

1.8%

6.3%

0.3%

7.6%

EBITDA margin

31.1%

31.8%

32.9%

32.1%

32.2%

33.5%

32.7%

34.5%

Gains on asset related transactions

$1,946

$4,439

$687

$667

$2,124

$1,023

$397

$319

EBITDA, as adjusted (6)

$35,609

$39,389

$37,858

$37,744

$39,851

$41,122

$40,601

$43,562

  % Change from previous Qtr.

-3.1%

10.6%

-3.9%

-0.3%

5.6%

3.2%

-1.3%

7.3%

EBITDA, as adjusted, margin

32.9%

35.8%

33.5%

32.7%

34.0%

34.3%

33.0%

34.8%

 Fees – net neutrality

$493

$1,036

$1,315

$432

$2

$188

$824

$260

Net cash provided by operating activities

$27,557

$23,698

$22,833

$33,879

$23,514

$28,045

$28,783

$31,360

  % Change from previous Qtr.

25.3%

-14.0%

-3.7%

48.4%

-30.6%

19.3%

2.6%

9.0%

Capital expenditures

$15,034

$14,260

$8,745

$7,195

$12,249

$12,007

$10,927

$10,618

  % Change from previous Qtr.

203.0%

-5.1%

-38.7%

-17.7%

70.2%

-2.0%

-9.0%

-2.8%

Principal payments on capital leases

$3,369

$3,935

$2,354

$2,808

$3,854

$2,194

$3,320

$1,833

  % Change from previous Qtr.

2.9%

16.8%

-40.2%

19.3%

37.3%

-43.1%

51.3%

-44.8%

Dividends paid

$16,171

$16,671

$17,169

$18,199

$18,999

$19,946

$20,879

$21,833

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

4.44

Net Leverage Ratio

2.97

2.88

2.90

2.90

2.94

2.98

3.00

2.94

Customer Connections – end of period

On-Net

47,252

49,243

51,079

52,874

54,805

57,307

59,357

61,334

  % Change from previous Qtr.

3.9%

4.2%

3.7%

3.5%

3.7%

4.6%

3.6%

3.3%

Off-Net

7,654

7,971

8,259

8,598

9,055

9,355

9,724

9,953

  % Change from previous Qtr.

5.2%

4.1%

3.6%

4.1%

5.3%

3.1%

4.2%

2.4%

Non-Core (1)

450

349

386

350

383

340

336

326

  % Change from previous Qtr.

12.5%

-22.4%

10.6%

-9.3%

9.4%

-11.2%

-1.2%

-3.0%

Total customer connections

55,356

57,563

59,724

61,822

64,243

66,982

69,417

71,613

  % Change from previous Qtr.

4.1%

4.0%

3.8%

3.5%

3.9%

4.3%

3.6%

3.2%

On-Net Buildings – end of period

Multi-Tenant office buildings

1,545

1,560

1,577

1,592

1,601

1,618

1,635

1,653

Carrier neutral data center buildings

675

686

706

729

752

767

784

800

Cogent data centers

51

51

51

52

53

53

53

53

Total on-net buildings

2,271

2,297

2,334

2,373

2,406

2,438

2,472

2,506

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

893,580,297

Network  – end of period

Intercity route miles

56,183

56,183

56,684

57,213

57,213

57,403

57,403

57,403

Metro fiber miles

28,316

28,874

29,326

29,536

30,190

30,516

31,071

31,254

Connected networks – AS's

5,617

5,700

5,834

5,927

5,949

5,983

6,076

6,152

Headcount – end of period

Sales force – quota bearing

398

397

394

422

432

434

444

455

Sales force - total

517

519

516

542

554

559

565

574

Total employees

855

854

858

887

900

909

919

929

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

5.8

FTE – sales reps

373

373

377

384

416

410

420

429

(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, $179 and $173 in the three month periods ended March 31, 2016 through December 31, 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, $2,691 and $2,943 in the three month periods ended March 31, 2016 through December 31, 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, $3,555 and $3,511 in the three month periods ended March 31, 2016 through December 31, 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

Q4

2017

Year
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

$31,360

$111,702

Changes in operating assets and liabilities

(3,681)

1,755

4,737

(6,781)

(3,968)

3,192

950

721

300

5,270

Cash interest expense and income tax expense

9,787

9,497

9,601

9,979

38,861

11,021

11,104

10,700

11,583

44,300

EBITDA

$33,663

$34,950

$37,171

$37,077

$142,860

$37,727

$40,099

$40,204

$43,243

$161,272

PLUS: Gains on asset related transactions

1,946

4,439

687

667

7,739

2,124

1,023

397

319

3,862

EBITDA, as adjusted

$35,609

$39,389

$37,858

$37,744

$150,599

$39,851

$41,122

$40,601

$43,562

$165,134

EBITDA margin

31.1%

31.8%

32.9%

32.1%

32.0%

32.2%

33.5%

32.7%

34.5%

33.2%

EBITDA, as adjusted, margin

32.9%

35.8%

33.5%

32.7%

33.7%

34.0%

34.3%

33.0%

34.8%

34.0%

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

Q4

2017

Year

2017

Service revenue, as reported – current period

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

$125,226

$485,175

Impact of foreign currencies on service revenue

(10)

(709)

273

749

892

195

(531)

(1,701)

16

(1,905)

Service revenue - as adjusted  for currency impact (1)

$108,281

$109,246

$113,330

$116,345

$447,792

$117,398

$119,246

$121,268

$125,242

$483,270

Service revenue, as reported – prior sequential period

$105,177

$108,291

$109,955

$113,057

$404,234

$115,596

$117,203

$119,777

$122,969

$446,900

Constant currency increase

$3,104

$955

$3,375

$3,288

$43,558

$1,802

$2,043

$1,491

$2,273

$36,370

Constant currency percent increase

3.0%

0.9%

3.1%

2.9%

10.8%

1.6%

1.7%

1.2%

1.8%

8.1%

(1)

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

Constant currency impact on revenue changes – prior year periods

($ in 000's) – unaudited

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Year

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Year

2017

Service revenue, as reported – current period

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

$125,226

$485,175

Impact of foreign currencies on service revenue

855

(168)

(68)

276

892

503

743

(1,257)

(2,055)

(1,905)

Service revenue - as adjusted for currency impact  (2)

$109,146

$109,787

$112,989

$115,872

$447,792

$117,706

$120,520

$121,712

$123,171

$483,270

Service revenue, as reported – prior year period

$97,242

$98,799

$103,017

$105,177

$404,234

$108,291

$109,955

$113,057

$115,596

$446,900

Constant currency increase

$11,904

$10,988

$9,972

$10,695

$43,558

$9,415

$10,565

$8,655

$7,575

$36,370

Percent increase

12.2%

11.1%

9.7%

10.2%

10.8%

8.7%

9.6%

7.7%

6.6%

8.1%

(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

Q4
2017

Year
2017

($ in 000's) – unaudited

Service revenue total

$108,291

$109,955

$113,057

$115,596

$446,900

$117,203

$119,777

$122,969

$125,226

$485,175

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

73,262

285,205

GAAP Gross Profit (1)

$43,261

$43,479

$45,426

$45,434

$177,601

$48,003

$49,765

$50,238

$51,964

$199,970

Plus  - Equity-based compensation – network operations expense

121

145

161

146

573

111

141

179

173

604

Plus – Depreciation and amortization expense

17,753

18,604

18,804

20,073

75,234

18,538

18,897

19,147

19,344

75,926

Non-GAAP Gross Profit (2)

$61,135

$62,228

$64,391

$65,653

$253,408

$66,652

$68,803

$69,564

$71,481

$276,500

GAAP Gross Margin (1)

39.9%

39.5%

40.2%

39.3%

39.7%

41.0%

41.5%

40.9%

41.5%

41.2%

Non-GAAP Gross Margin (2)

56.5%

56.6%

57.0%

56.8%

56.7%

56.9%

57.4%

56.6%

57.1%

57.0%

(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 4.57 at September 30, 2017 and 4.44 at December 31, 2017 and Cogent's net leverage ratio was 3.00 at September 30, 2017 and 2.94 at December 31, 2017 and as shown below.

($ in 000's) – unaudited

As of September 30, 2017

As of December 31, 2017

Cash and cash equivalents

$250,765

$247,011

Debt

Capital leases – current portion

6,698

7,171

Capital leases – long term

147,623

150,333

Senior unsecured notes

189,225

189,225

Senior secured notes

375,000

375,000

Note payable

9,915

10,748

Total debt

728,461

732,477

Total net debt

477,696

485,466

Trailing 12 months EBITDA, as adjusted

159,318

165,136

Gross leverage ratio

4.57

4.44

Net leverage ratio

3.00

2.94

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, 2017 AND 2016

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2017

2016

Assets

Current assets:

Cash and cash equivalents

$

247,011

$

274,319

Accounts receivable, net of allowance for doubtful accounts of $1,499 and $1,734, respectively

39,096

33,598

Prepaid expenses and other current assets

20,011

19,706

Total current assets

306,118

327,623

Property and equipment:

Property and equipment

1,233,756

1,136,470

Accumulated depreciation and amortization

(852,474)

(774,829)

Total property and equipment, net

381,282

361,641

Deferred tax assets

17,616

42,241

Deposits and other assets ($736 and $128 restricted, respectively)

5,572

6,387

Total assets

$

710,588

$

737,892

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

11,592

$

11,551

Accrued and other current liabilities

47,947

47,149

Installment payment agreement, current portion, net of discount of $337 and $204, respectively

7,816

2,587

Current maturities, capital lease obligations

7,171

6,626

Total current liabilities

74,526

67,913

Senior secured 2022 notes, net of unamortized debt costs of $1,870 and $2,257, respectively and including premium of $382 and $462, respectively

373,512

373,205

Senior unsecured 2021 notes, net of unamortized debt costs of $2,060 and $2,575, respectively

187,165

186,650

Capital lease obligations, net of current maturities

150,333

135,335

Other long term liabilities

27,596

28,043

Total liabilities

813,132

791,146

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 45,960,799 and 45,478,787 shares issued and outstanding, respectively

46

45

Additional paid-in capital

456,696

442,799

Accumulated other comprehensive income

(4,600)

(17,193)

Accumulated deficit

(554,686)

(478,905)

Total stockholders' deficit

(102,544)

(53,254)

Total liabilities and stockholders' equity

$

710,588

$

737,892

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 AND DECEMBER 31, 2016

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Three Months
Ended
December 31, 2017

Three Months
Ended
December 31, 2016

(Unaudited)

(Unaudited)

Service revenue

$

125,226

$

115,596

Operating expenses:

Network operations (including $173 and $146 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)

53,918

50,089

Selling, general, and administrative (including $3,511 and $2,730 of equity-based compensation expense, respectively)

31,749

31,306

Depreciation and amortization

19,344

20,073

Total operating expenses

105,011

101,468

Gains on equipment transactions

319

667

Operating income

20,534

14,795

Interest income and other, net

166

341

Interest expense

(12,222)

(10,602)

Income before income taxes

8,478

4,534

Income tax expense

(14,705)

(642)

Net (loss) income

$

(6,227)

$

3,892

Comprehensive loss:

Net (loss) income

$

(6,227)

$

3,892

Foreign currency translation adjustment

1,312

(5,295)

Comprehensive loss

$

(4,915)

$

(1,403)

Net (loss) income per common share:

Basic and diluted net (loss) income per common share

$

(0.14)

$

0.09

Dividends declared per common share

$

0.48

$

0.40

Weighted-average common shares - basic

44,844,469

44,577,826

Weighted-average common shares - diluted

44,844,469

44,803,782

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2017

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2017

2016

Service revenue

$

485,175

$

446,900

Operating expenses:

Network operations (including $604 and $573 of equity-based compensation expense, respectively), exclusive of amounts shown separately

209,278

194,066

Selling, general, and administrative (including $12,686 and $10,162 of equity-based compensation expense, respectively)

127,915

120,709

Depreciation and amortization

75,926

75,235

Total operating expenses

413,119

390,010

Gains on equipment transactions

3,862

7,739

Losses on debt extinguishment and redemption

(587)

Operating income

75,918

64,042

Interest income and other

3,667

1,021

Interest expense

(48,467)

(40,803)

Income before income taxes

31,118

24,260

Income tax expense

(25,242)

(9,331)

Net income

$

5,876

$

14,929

Comprehensive income:

Net income

$

5,876

$

14,929

Foreign currency translation adjustment

12,593

(2,500)

Comprehensive income

$

18,469

$

12,429

Net income per common share:

Basic and diluted net income per common share

$

0.13

$

0.33

Dividends declared per common share

$

1.80

$

1.51

Weighted-average common shares—basic

44,855,263

44,641,805

Weighted-average common shares—diluted

45,184,203

44,873,030

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 AND DECEMBER 31, 2016

(IN THOUSANDS)

Three months
Ended
December 31, 2017

Three months
Ended
December 31, 2016

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net (loss) income

$

(6,227)

$

3,892

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

19,343

20,074

Amortization of debt discount and premium

340

226

Equity-based compensation expense (net of amounts capitalized)

3,684

2,876

(Gains) losses — equipment transactions and other, net

(439)

(549)

Deferred income taxes

14,844

771

Changes in operating assets and liabilities:

Accounts receivable, net

156

(705)

Prepaid expenses and other current assets

501

333

Accounts payable, accrued liabilities and other long-term liabilities

(1,160)

5,768

Deposits and other assets

318

1,193

Net cash provided by operating activities

31,360

33,879

Cash flows from investing activities:

Purchases of property and equipment

(10,618)

(7,195)

Net cash used in investing activities

(10,618)

(7,195)

Cash flows from financing activities:

Dividends paid

(21,833)

(18,199)

Purchases of common stock

(2,826)

Net proceeds from issuance of senior secured 2022 notes—net of debt costs of $1,202

124,267

Proceeds from exercises of stock options

303

326

Principal payments of installment payment agreement

(1,619)

Principal payments of capital lease obligations

(1,833)

(2,808)

Net cash (used in) provided by financing activities

(24,982)

100,760

Effect of exchange rates changes on cash

486

(1,276)

Net (decrease) increase in cash and cash equivalents

(3,754)

126,168

Cash and cash equivalents, beginning of period

250,765

148,151

Cash and cash equivalents, end of period

$

247,011

$

274,319

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2017

(IN THOUSANDS)

2017

2016

Cash flows from operating activities:

Net income

$

5,876

$

14,929

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

Depreciation and amortization

75,926

75,235

Amortization of debt discount and premium

1,239

1,105

Equity-based compensation expense (net of amounts capitalized)

13,290

10,735

Losses on debt extinguishment and redemption

587

Gains—equipment transactions and other, net

(4,833)

(7,674)

Deferred income taxes

24,679

9,224

Changes in operating assets and liabilities:

Accounts receivable

(4,161)

(3,183)

Prepaid expenses and other current assets

1,146

(2,923)

Deposits and other assets

1,111

(336)

Accounts payable, accrued liabilities and other long-term liabilities

(2,571)

10,268

Net cash provided by operating activities

111,702

107,967

Cash flows from investing activities:

Purchases of property and equipment

(45,801)

(45,234)

Net cash used in investing activities

(45,801)

(45,234)

Cash flows from financing activities:

Net proceeds from issuance of 2022 secured notes—net of debt costs of $1,202 and $1,397, respectively

124,267

Extinguishment of 2021 unsecured notes

(10,775)

Dividends paid

(81,657)

(68,210)

Principal payments of capital lease obligations

(11,201)

(12,466)

Principal payments of installment payment agreement

(3,802)

(21,203)

Purchases of common stock

(1,829)

(4,492)

Proceeds from exercises of common stock options

1,222

1,220

Net cash (used in) provided by financing activities

(97,267)

8,341

Effect of exchange rate changes on cash

4,058

(346)

Net (decrease) increase in cash and cash equivalents

(27,308)

70,728

Cash and cash equivalents, beginning of year

274,319

203,591

Cash and cash equivalents, end of year

$

247,011

$

274,319

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-K  for the year ended December 31, 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. 

PR Archives: Latest, By Company, By Date