Cogent Communications Reports Second Quarter 2019 Results and Increases Regular Quarterly Dividend on Common Stock

8/8/19

Financial and Business Highlights

  • Cogent approves a $0.02 increase per share to its regular quarterly dividend to $0.62 per share for Q3 2019 from $0.60 per share for Q2 2019 - the twenty-eighth consecutive quarterly dividend increase.
    • The Q3 2019 $0.62 dividend per share represents an annual increase of 14.8% from the dividend per share of $0.54 for Q3 2018.
  • Cogent Group issued 135.0 million Euros ($153.7 million) of senior unsecured notes in June 2019. The notes accrue interest at 4.375% and mature on June 30, 2024.
  • Service revenue, on a constant currency basis, increased by 0.7% from Q1 2019 to Q2 2019 and increased from Q2 2018 to Q2 2019 by 5.4%.
    • Service revenue increased by 0.5% from Q1 2019 to Q2 2019 and increased from Q2 2018 to Q2 2019 by 4.2%.
  • GAAP gross profit increased by 10.4% from Q2 2018 to $60.4 million for Q2 2019 and non-GAAP gross profit increased by 7.3% from Q2 2018 to $80.6 million for Q2 2019
    • GAAP gross margin increased by 250 basis points from Q2 2018 to Q2 2019 to 44.8% and non-GAAP gross margin increased by 170 basis points from Q2 2018 to Q2 2019 to 59.8%.
  • Cash flow from operations increased by 29.9% from Q2 2018 to $40.6 million for Q2 2019 and increased by 41.9% from Q1 2019.

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $134.8 million for the three months ended June 30, 2019, an increase of 4.2% from the three months ended June 30, 2018 and an increase of 0.5% from the three months ended March 31, 2019. Foreign exchange negatively impacted service revenue growth from the three months ended March 31, 2019 to the three months ended June 30, 2019 by $0.3 million and negatively impacted service revenue growth from the three months ended June 30, 2018 to the three months ended June 30, 2019 by $1.5 million. On a constant currency basis, service revenue grew by 0.7% from the three months ended March 31, 2019 to the three months ended June 30, 2019 and grew by 5.4% from the three months ended June 30, 2018 to the three months ended June 30, 2019.

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 $97.5 million for the three months ended June 30, 2019; an increase of 0.3% from the three months ended March 31, 2019 and an increase of 4.8% over the three months ended June 30, 2018.

Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $37.2 million for the three months ended June 30, 2019; an increase of 0.9% over the three months ended March 31, 2019 and an increase of 3.0% over the three months ended June 30, 2018.

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit increased by 10.4% from the three months ended June 30, 2018 to $60.4 million for the three months ended June 30, 2019 and increased by 1.1% from the three months ended March 31, 2019. GAAP gross margin was 44.8% for the three months ended June 30, 2019, 42.3% for the three months ended June 30, 2018 and 44.5% for the three months ended March 31, 2019. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.2 million for the three months ended June 30, 2019, $3.4 million for the three months ended March 31, 2019 and $3.1 million for the three months ended June 30, 2018.

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 7.3% from the three months ended June 30, 2018 to $80.6 million for the three months ended June 30, 2019 and increased by 0.6% from the three months ended March 31, 2019. Non-GAAP gross profit margin was 59.8% for the three months ended June 30, 2019, 58.1% for the three months ended June 30, 2018 and 59.8% for the three months ended March 31, 2019.

Cash flow from operating activities increased by 29.9% from the three months ended June 30, 2018 to $40.6 million for the three months ended June 30, 2019 and increased by 41.9% from the three months ended March 31, 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 2.6% from the three months ended June 30, 2018 to $47.1 million for the three months ended June 30, 2019 and decreased by 1.0% from the three months ended March 31, 2019. EBITDA margin was 34.9% for the three months ended June 30, 2019, 35.5% for the three months ended June 30, 2018 and 35.5% for the three months ended March 31, 2019.

EBITDA, as adjusted, increased by 2.2% from the three months ended June 30, 2018 to $47.3 million for the three months ended June 30, 2019 and decreased by 1.7% from the three months ended March 31, 2019. EBITDA, as adjusted, margin was 35.1% for the three months ended June 30, 2019, 35.8% for the three months ended June 30, 2018 and 35.9% for the three months ended March 31, 2019.

Basic net income per share was $0.16 for the three months ended June 30, 2019, $0.15 for the three months ended June 30, 2018 and $0.20 for the three months ended March 31, 2019.

Total customer connections increased by 10.3% from June 30, 2018 to 84,054 as of June 30, 2019 and increased by 1.9% from March 31, 2019. On-net customer connections increased by 10.7% from June 30, 2018 to 72,415 as of June 30, 2019and increased by 1.9% from March 31, 2019. Off-net customer connections increased by 8.0% from June 30, 2018 to 11,321 as of June 30, 2019 and increased by 1.6% from March 31, 2019.

The number of on-net buildings increased by 138 on-net buildings from June 30, 2018 to 2,737 on-net buildings as of June 30, 2019 and increased by 31 on-net buildings from March 31, 2019.

Quarterly Dividend Increase Approved On August 7, 2019, Cogent's board approved a regular quarterly dividend of $0.62 per common share payable on September 9, 2019 to shareholders of record on August 23, 2019. This third quarter 2019 regular dividend represents a 3.3% increase of $0.02 per share from the second quarter 2019 regular dividend of $0.60 per share and an annual increase of 14.8% from the Q3 2018 dividend of $0.54 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.

About Cogent Communications

Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 200 markets globally.

Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. 

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