FT Markets Data
Cogent Communications Holdings Inc

Cogent Communications Reports Third Quarter 2024 Results and Increases its Regular Quarterly Dividend on its Common Stock

Financial and Business Highlights

  • Service revenue was $260.4 million for Q2 2024 and was $257.2 million for Q3 2024.
    • Wavelength revenue increased by 45.8%, sequentially, and was $3.6 million for Q2 2024 and $5.3 million for Q3 2024.
    • Revenue from leasing IPv4 addresses increased by 11.8%, sequentially, and was $11.5 million for Q2 2024 and $12.8 million for Q3 2024.
  • EBITDA increased by 32.2% from Q2 2024 to $35.9 million for Q3 2024.
    • EBITDA margin was 10.4% for Q2 2024 and 13.9% for Q3 2024.
    • Net cash used in operating activities was $52.4 million for Q3 2023, $22.2 million for Q2 2024 and $20.2 million for Q3 2024.
  • Cogent approved an increase of $0.01 per share to its regular quarterly dividend for a total of $0.995 per share for Q4 2024 as compared to $0.985 per share for Q3 2024 – Cogent's forty-ninth consecutive quarterly dividend increase.

WASHINGTON , Nov. 7, 2024 /PRNewswire/ -- Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $257.2 million for the three months ended September 30, 2024, a decrease of 1.2% from the three months ended June 30, 2024 and a decrease of 6.6% from the three months ended September 30, 2023. 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 $4.1 million for the three months ended September 30, 2024, $5.9 million for the three months ended June 30, 2024 and $8.0 million for the three months ended September 30, 2023.  In July 2024, we terminated an uneconomic resale agreement.  Our on-net revenue and enterprise revenue from this resale customer acquired in connection with the Wireline Business was $1.7 million for the three months ended September 30, 2024, $5.1 million for the three months ended June 30, 2024 and $5.1 million for the three months ended September 30, 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 $136.5 million for the three months ended September 30, 2024, a decrease of 3.0% from the three months ended June 30, 2024 and an increase of 5.8% from the three months ended September 30, 2023.

Off-net customers are located in buildings directly connected to Cogent's network using other carriers' facilities and services to provide the last mile portion of the link from the customers' premises to Cogent's network. Off-net revenue was $111.3 million for the three months ended September 30, 2024, a decrease of 0.1% from the three months ended June 30, 2024 and a decrease of 14.8% from the three months ended September 30, 2023.

Wavelength revenue was $5.3 million for the three months ended September 30, 2024, an increase of 45.8% from the three months ended June 30, 2024 and an increase of 76.7% from the three months ended September 30, 2023.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.  Non-core revenue was $4.1 million for the three months ended September 30, 2024, $4.6 million for the three months ended June 30, 2024 and was $12.8 million for the three months ended September 30, 2023. 

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue. GAAP gross profit decreased by 34.9% from the three months ended September 30, 2023 to $9.8 million for the three months ended September 30, 2024 and decreased by 67.5% from the three months ended June 30, 2024.

GAAP gross margin was 3.8% for the three months ended September 30, 2024, 11.6% for the three months ended June 30, 2024 and 5.5% for the three months ended September 30, 2023.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue.  Non-GAAP gross profit decreased by 6.0% from the three months ended September 30, 2023 to $96.1 million for the three months ended September 30, 2024 and decreased by 8.1% from the three months ended June 30, 2024.

Non-GAAP gross margin was 37.4% for the three months ended September 30, 2024, 40.2% for the three months ended June 30, 2024 and 37.1% for the three months ended September 30, 2023.

Net cash used in operating activities was $20.2 million for the three months ended September 30, 2024, $22.2 million for the three months ended June 30, 2024 and $52.4 million for the three months ended September 30, 2023.

Total Sprint acquisition costs were $0 for the three months ended September 30, 2024, $12.4 million for the three months ended June 30, 2024 and $0.4 million for the three months ended September 30, 2023. 

IP Transit Services Agreement 
 On May 1, 2023, the closing date of the Sprint acquisition, Cogent and T-Mobile USA, Inc. ("TMUSA"), a Delaware corporation and direct subsidiary of T-Mobile US, Inc., a Delaware corporation ("T-Mobile") , entered into an agreement for IP transit services (the "IP Transit Services Agreement"), pursuant to which TMUSA will pay Cogent an aggregate of $700.0 million, consisting of (i) $350.0 million paid in equal monthly installments during the first year after the closing date of the Sprint acquisition and (ii) $350.0 million paid in equal monthly installments over the subsequent 42 months. Amounts paid under the IP Transit Services Agreement were $25.0 million, $66.7 million and $87.5 million in the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement, was $60.9 million for the three months ended September 30, 2024, $106.2 million for the three months ended June 30, 2024 and $131.4 million for the three months ended September 30, 2023.  

EBITDA as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement margin, was 23.7% for the three months ended September 30, 2024, 40.8% for the three months ended June 30, 2024 and 47.7% for the three months ended September 30, 2023. 

Basic and diluted net (loss) per share was $(1.33) for the three months ended September 30, 2024, $(0.68) for the three months ended June 30, 2024 and $(1.20) for the three months ended September 30, 2023.

Total customer connections decreased by 8.5% from September 30, 2023 to 126,333 as of September 30, 2024 and decreased by 1.9% from June 30, 2024.  On-net customer connections decreased by 0.7% from September 30, 2023 to 87,655 as of September 30, 2024 and increased by 0.3% from June 30, 2024. Off-net customer connections decreased by 12.2% from September 30, 2023 to 32,420 as of September 30, 2024 and decreased by 1.0% from June 30, 2024. Wavelength customer connections were 1,041 as of September 30, 2024, 754 as of June 30, 2024 and 449 as of September 30, 2023.  Non-core customer connections were 5,217 as of September 30, 2024, 7,883 as of June 30, 2024 and 12,403 as of September 30, 2023. 

The number of on-net buildings increased by 167 from September 30, 2023 to 3,424 as of September 30, 2024 and increased by 38 from June 30, 2024.

Quarterly Dividend Increase Approved 
 On November 6, 2024, Cogent's Board approved a regular quarterly dividend of $0.995 per share payable on December 6, 2024 to shareholders of record on November 22, 2024. This fourth quarter 2024 regular dividend represents an increase of $0.01 per share, or 1.0%, from the third quarter 2024 regular dividend of $0.985 per share and an annual increase of 4.2% from the fourth quarter 2023 dividend of $0.955 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.

Continued Impact of Changing Office Occupancy Rates on Corporate Results
Cogent continues to witness lower office occupancy rates overall in the buildings it serves in central business districts in North America, largely attributable to remote work policies originally instituted during the COVID-19 pandemic. Since the end of the pandemic, and despite some improvement in certain markets, Cogent continues to see office occupancy rates that do not approach pre-2020 levels. Because of the rising vacancy levels and/or lower numbers of  lease initiations or renewals resulting in fewer tenants, Cogent has experienced a slowdown in new sales to its corporate customers, which has negatively impacted its corporate revenue results. This overall trend is not uniform throughout North America; Cogent has seen declining vacancy rates and increasing office occupancy rates in some cities, including in the three months ended September 30, 2024. Moreover, as the option to fully or partially work from home becomes permanently established at many companies, Cogent's corporate customers are integrating some of the new applications that were part of the remote work environment into their everyday use, which benefits Cogent's corporate business as these customers upgrade their Internet access infrastructure to higher capacity connections. These factors have helped mitigate the impact of lower office occupancy rates and during the three months ended September 30, 2024, Cogent continued to see these positive trends in its corporate business in some markets.  If and when companies eventually return to the buildings in which Cogent operates, whether existing tenants or new tenants, Cogent believes it will present an opportunity for increased sales. However, the exact timing, path and spread of these positive trends remains uncertain, office occupancy rates in some markets may not recover, and Cogent may continue to see increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities, which would negatively impact Cogent's corporate revenue growth. 

These and other risks are described in more detail in Cogent's Annual Report on Form 10-K for the year ended December 31, 2023 and in its Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2023, September 30, 2023, March 31, 2024, June 30, 2024 and September 30, 2024.

Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on November 7, 2024 to discuss Cogent's operating results for the third quarter of 2024.  Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.  A downloadable file of Cogent's "Summary of Financial and Operational Results" and a transcript of its conference call will also be available on Cogent's website following the conference call. 

About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high-speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in 260 markets globally.

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

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results


Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

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








On-Net revenue (15) (18)

$116,143

$127,665

$129,031

$138,064

$138,624

$140,757

$136,485

 % Change from previous Qtr

1.0 %

9.9 %

1.1 %

7.0 %

0.4 %

1.5 %

-3.0 %

Off-Net revenue

$37,283

$101,984

$130,560

$123,669

$118,178

$111,451

$111,291

 % Change from previous Qtr

1.1 %

173.5 %

28.0 %

-5.3 %

-4.4 %

-5.7 %

-0.1 %

Wavelength revenue (1)

$-

$1,585

$2,992

$3,108

$3,327

$3,625

$5,287

 % Change from previous Qtr

-

-

88.8 %

3.9 %

7.0 %

9.0 %

45.8 %

Non-Core revenue (2) (16)

$162

$8,572

$12,846

$7,258

$6,039

$4,610

$4,139

 % Change from previous Qtr

3.2 %

NM

49.9 %

-43.5 %

-16.8 %

-23.7 %

-10.2 %

 Service revenue – total (18)

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

 % Change from previous Qtr

1.1 %

56.1 %

14.9 %

-1.2 %

-2.2 %

-2.2 %

-1.2 %

Constant currency total revenue
quarterly growth rate –
sequential quarters (3) (18)

0.2 %

55.9 %

14.9 %

-1.1 %

-2.3 %

-2.0 %

-1.5 %

Constant currency total revenue
quarterly growth rate – year
over year quarters (3) (18)

4.0 %

61.4 %

82.4 %

78.1 %

73.1 %

8.8 %

-6.7 %

Constant currency and excise
tax impact on total revenue
quarterly growth rate –
sequential quarters (3) (18)

0.1 %

51.4 %

13.4 %

-3.2 %

-2.3 %

-1.5 %

-1.7 %

Constant currency and excise
tax impact on total revenue
quarterly growth rate – year
over year quarters (3) (18)

3.7 %

56.2 %

75.5 %

67.4 %

62.4 %

5.4 %

-8.6 %

Excise Taxes included in
service revenue (4)

$4,193

$11,040

$14,557

$20,428

$20,549

$19,182

$19,752

 % Change from previous Qtr

2.6 %

163.3 %

31.9 %

40.3 %

0.6 %

-6.7 %

3.0 %

IPv4 Revenue, included in On-
Net revenue

$9,575

$9,472

$9,747

$9,956

$10,701

$11,469

$12,822

 % Change from previous Qtr

NM

-1.1 %

2.9 %

2.1 %

7.5 %

7.2 %

11.8 %

IPv4 Addresses Billed

9,839,870

10,465,694

10,987,884

11,438,286

12,213,414

12,813,955

12,943,590

 % Change from previous Qtr

NM

6.4 %

5.0 %

4.1 %

6.8 %

4.9 %

1.0 %

Corporate revenue (5) (16)

$85,627

$110,998

$120,484

$126,634

$124,864

$119,557

$116,244

 % Change from previous Qtr

-0.2 %

29.6 %

8.5 %

5.1 %

-1.4 %

-4.3 %

-2.8 %

Net-centric revenue (5) (15)

$67,961

$87,582

$94,936

$93,148

$91,979

$91,107

$91,873

  % Change from previous Qtr

2.7 %

28.9 %

8.4 %

-1.9 %

-1.3 %

-0.9 %

0.8 %

Enterprise revenue (5) (18)

-

$41,227

$60,009

$52,318

$49,325

$49,781

$49,085

  % Change from previous Qtr

-

NM

45.6 %

-12.8 %

-5.7 %

0.9 %

-1.4 %

Network operations expenses
(4)

$58,489

$137,271

$173,224

$174,180

$168,548

$155,817

$161,083

 % Change from previous Qtr

2.8 %

134.7 %

26.2 %

0.6 %

-3.2 %

-7.6 %

3.4 %

GAAP gross profit (6)

$69,790

$49,793

$15,101

$29,744

$26,344

$30,240

$9,835

 % Change from previous Qtr

-2.3 %

-28.7 %

-69.7 %

97.0 %

-11.4 %

14.8 %

-67.5 %

GAAP gross margin (6)

45.4 %

20.8 %

5.5 %

10.9 %

9.9 %

11.6 %

3.8 %

Non-GAAP gross profit (3) (7)

$95,099

$102,535

$102,205

$97,919

$97,620

$104,626

$96,119

 % Change from previous Qtr

0.0 %

7.8 %

-0.3 %

-4.2 %

-0.3 %

7.2 %

-8.1 %

Non-GAAP gross margin (3) (7)

61.9 %

42.8 %

37.1 %

36.0 %

36.7 %

40.2 %

37.4 %

Selling, general and
administrative expenses (8)

$38,646

$77,640

$58,267

$74,907

$70,131

$65,130

$60,258

 % Change from previous Qtr

2.5 %

100.9 %

-25.0 %

28.6 %

-6.4 %

-7.1 %

-7.5 %

Depreciation and amortization
expense

$25,160

$52,511

$86,734

$67,805

$70,891

$74,036

$85,815

 % Change from previous Qtr

6.8 %

108.7 %

65.2 %

-21.8 %

4.6 %

4.4 %

15.9 %

Equity-based compensation
expense

$6,581

$6,249

$7,411

$6,684

$6,950

$3,565

$7,875

 % Change from previous Qtr

5.1 %

-5.0 %

18.6 %

-9.8 %

4.0 %

-48.7 %

120.9 %

Operating income (loss)

$24,312

$(34,604)

$(50,558)

$(68,478)

$(59,389)

$(47,143)

$(57,829)

 % Change from previous Qtr

-11.0 %

NM

46.1 %

35.4 %

13.3 %

20.6 %

22.7 %

Interest expense (9)

$19,005

$28,653

$24,198

$34,928

$23,010

$38,840

$32,474

 % Change from previous Qtr

-13.6 %

50.8 %

-15.5 %

44.3 %

-34.1 %

68.8 %

-16.4 %

Non-cash change in valuation –
Swap Agreement (9)

$(1,847)

$1,305

$4,825

$(17,722)

$6,152

$(9,299)

$(5,597)

Gain on bargain purchase (10)

-

$1,155,719

$(3,332)

$254,049

$(5,470)

$27,673

$-

Net income (loss)

$6,148

$1,123,863

$(56,723)

$200,153

$(65,307)

$(32,338)

$(63,112)

Basic net income (loss) per
common share

$0.13

$23.84

$(1.20)

$4.23

$(1.38)

$(0.68)

$(1.33)

Diluted net income (loss) per
common share

$0.13

$23.65

$(1.20)

$4.17

$(1.38)

$(0.68)

$(1.33)

Weighted average common
shares – basic

47,037,091

47,137,822

47,227,338

47,353,291

47,416,268

47,511,613

47,426,131

 % Change from previous Qtr

0.3 %

0.2 %

0.2 %

0.3 %

0.1 %

0.2 %

-0.2 %

Weighted average common
shares – diluted

47,381,226

47,526,207

47,227,338

48,037,841

47,416,268

47,511,613

47,426,131

 % Change from previous Qtr

0.4 %

0.3 %

-0.6 %

1.7 %

-1.3 %

0.2 %

-0.2 %

EBITDA (3)

$56,053

$24,156

$43,587

$6,011

$18,452

$27,126

$35,861

 % Change from previous Qtr

-1.9 %

-56.9 %

80.4 %

-86.2 %

207.0 %

47.0 %

32.2 %

EBITDA margin (3)

36.5 %

10.1 %

15.8 %

2.2 %

6.9 %

10.4 %

13.9 %

Sprint acquisition costs (14)

$400

$739

$351

$17,001

$9,037

$12,370

$-

Cash payments under IP Transit
Services Agreement (11)

$-

$29,167

$87,500

$87,500

$87,500

$66,667

$25,000

EBITDA, as adjusted for Sprint
acquisition costs and cash
payments under IP Transit
Services Agreement (3) (11) (14)

$56,453

$54,062

$131,438

$110,512

$114,989

$106,163

$60,861

 % Change from previous Qtr

-1.6 %

-4.2 %

143.1 %

-15.9 %

4.1 %

-7.7 %

-42.7 %

EBITDA, as adjusted for Sprint
acquisition costs and cash
payments under IP Transit
Services Agreement, margin (3)
(11) (14)

36.8 %

22.5 %

47.7 %

40.6 %

43.2 %

40.8 %

23.7 %

Net cash provided by (used in)
operating activities

$35,821

$82,654

$(52,433)

$(48,701)

$19,219

$(22,171)

$(20,226)

  % Change from previous Qtr

-1.4 %

130.7 %

-163.4 %

-7.1 %

-139.5 %

-215.4 %

-8.8 %

Capital expenditures

$23,204

$37,449

$25,373

$43,609

$40,883

$48,767

$59,244

 % Change from previous Qtr

18.4 %

61.4 %

-32.2 %

71.9 %

-6.3 %

19.3 %

21.5 %

Principal payments of capital
(finance) lease obligations

$9,450

$7,797

$41,302

$18,813

$23,235

$133,472

$4,516

 % Change from previous Qtr

-61.5 %

-17.5 %

429.7 %

-54.5 %

23.5 %

474.4 %

-96.6 %

Dividends paid  (17)

$45,311

$44,907

$45,136

$46,362

$478

$93,304

$47,210

Gross Leverage Ratio (3) (11)

5.47

5.63

4.79

4.07

3.57

4.06

4.94

Net Leverage Ratio (3) (11)

4.46

4.56

4.24

3.75

3.17

3.14

4.13

Customer Connections – end of
period (15) (16)








On-Net customer connections

83,268

92,846

88,250

88,291

87,574

87,387

87,655

 % Change from previous Qtr

0.8 %

11.5 %

-5.0 %

0.0 %

-0.8 %

-0.2 %

0.3 %

Off-Net customer connections

13,785

38,762

36,923

36,676

34,579

32,758

32,420

 % Change from previous Qtr

1.9 %

181.2 %

-4.7 %

-0.7 %

-5.7 %

-5.3 %

-1.0 %

Wavelength customer
connections (1)


414

449

661

693

754

1,041

 % Change from previous Qtr


-

8.5 %

47.2 %

4.8 %

8.8 %

38.1 %

Non-Core customer connections
(2) (16)

374

19,408

12,403

11,975

10,037

7,883

5,217

 % Change from previous Qtr

3.0 %

NM

-36.1 %

-3.5 %

-16.2 %

-21.5 %

-33.8 %

Total customer connections (15)
(16)

97,427

151,430

138,025

137,603

132,883

128,782

126,333

 % Change from previous Qtr

0.9 %

55.4 %

-8.9 %

-0.3 %

-3.4 %

-3.1 %

-1.9 %

Corporate customer
connections (5)(16)

44,570

61,284

55,045

54,493

51,821

48,690

47,613

 % Change from previous Qtr

-0.6 %

37.5 %

-10.2 %

-1.0 %

-4.9 %

-6.0 %

-2.2 %

Net-centric customer
connections (5) (15)

52,857

66,711

62,291

62,370

61,599

61,736

62,273

 % Change from previous Qtr

2.3 %

26.2 %

-6.6 %

0.1 %

-1.2 %

0.2 %

0.9 %

Enterprise customer
connections (5)

-

23,435

20,689

20,740

19,463

18,356

16,447

  % Change from previous Qtr

-

NM

-11.7 %

0.2 %

-6.2 %

-5.7 %

-10.4 %

On-Net Buildings – end of
period








Multi-Tenant office buildings

1,841

1,844

1,860

1,862

1,861

1,864

1,870

Carrier neutral data center buildings

1,294

1,327

1,337

1,347

1,382

1,436

1,459

Cogent data centers

55

56

60

68

78

86

95

Total on-net buildings

3,190

3,227

3,257

3,277

3,321

3,386

3,424

Total carrier neutral data center nodes

1,490

1,526

1,528

1,558

1,586

1,602

1,627

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

1,001,382,577

1,001,491,002

1,006,523,795

1,008,006,655

1,009,702,653

1,011,171,523

1,015,544,543

Total Technical Buildings
Owned (12)

-

482

482

482

482

482

482

Square feet – Technical
Buildings Owned (12)

-

1,603,569

1,603,569

1,603,569

1,603,569

1,603,569

1,603,569

Network – end of period








Intercity route miles – Leased

61,300

72,694

72,694

72,552

76,211

75,965

77,561

Metro route miles – Leased

17,826

22,556

22,128

24,779

25,977

27,373

28,510

Metro fiber miles – Leased

42,863

75,577

69,943

77,365

79,138

80,042

84,476

Intercity route miles – Owned

2,748

21,883

21,883

21,883

21,883

21,883

21,883

Metro route miles – Owned

445

1,704

1,704

1,704

1,704

1,704

1,704

Connected networks – AS's

7,864

7,891

7,971

7,988

8,098

8,135

8,212

Headcount – end of period (13)








Sales force – quota bearing (13)

562

647

637

657

677

656

655

Sales force – total (13)

714

841

833

847

871

851

847

Total employees (13)

1,107

2,020

1,990

1,947

1,955

1,901

1,908

Sales rep productivity – units
per full time equivalent sales rep
("FTE") per month (15)

4.0

9.2

3.6

3.3

4.0

3.8

4.0

FTE – sales reps

539

567

621

620

627

632

620

(1) In connection with the acquisition of the Wireline Business, Cogent began to provide optical wavelength services and optical transport services over its fiber network.
(2) Consists of legacy services of companies whose assets or businesses were acquired by Cogent.
(3) See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures.
(4) Network operations expense excludes equity-based compensation expense of $149, $231, $370, $370, $385, $350 and $469 in the three-month periods ended March 31, 2023 through September 30, 2024, respectively.  Network operations expense includes excise taxes, including Universal Service Fund fees, of $4,193, $11,040, $14,557, $20,428, $20,549, $19,182 and $19,752 in the three-month periods ended March 31, 2023 through September 30, 2024, respectively.
(5) In connection with the acquisition of the Wireline Business, Cogent classified revenue and customer connections as follows:

  • $12.9 million of the Wireline Business monthly recurring revenue and 17,823 customer connections as corporate revenue and corporate customer connections, respectively,
  • $6.5 million of monthly recurring revenue and 5,711 customer connections as net-centric revenue and net-centric customer connections, respectively, and
  • $20.1 million of monthly recurring revenue and 23,209 customer connections as enterprise revenue and enterprise customer connections, respectively.
  • Conversely, Cogent reclassified $0.3 million of monthly recurring revenue and 387 customer connections of legacy Cogent monthly recurring revenue to enterprise revenue and enterprise customer connections, respectively
    • $0.3 million of corporate monthly recurring revenue and 363 corporate customer connections and $0.02 million of net-centric monthly recurring revenue and 24 net-centric customer connections.

(6) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue.
(7) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant measures to provide investors. Management uses them to measure the margin available to the company after network service costs, in essence a measure of the efficiency of the Company's network.
(8) Excludes equity-based compensation expense of $6,432, $6,018, $7,041, $6,314, $6,565, $3,215 and $7,406 in the three-month periods ended March 31, 2023 through September 30, 2024, respectively and excludes $400, $739, $351, $17,001, $9,037 and $12,370 of Sprint acquisition costs for the three-month periods ended March 31, 2023 through June 30, 2024, respectively.  There were no fee Sprint acquisition costs for the three months ended June 30, 2024.
(9) As of September 30, 2024, Cogent was party to an interest rate swap agreement (the "Swap Agreement") that has the economic effect of modifying the fixed interest rate obligation associated with its Senior Secured 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate ("SOFR") so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR. Interest expense includes payments of $9.5 million, $12.0 million and $12.1 million for the three-month periods ended June 30, 2023, December 31, 2023 and June 30, 2024, respectively related to the Swap Agreement. Under GAAP, changes in the valuation of the Swap Agreement are classified with interest expense in the condensed consolidated statements of comprehensive (loss) income.
(10) The gain on bargain purchase from the Sprint acquisition was $1.4 billion as shown below.

(In thousands)

Gain on bargain purchase




Fair value of net assets acquired



$826,067

Total net consideration to be received from Seller, net of discounts



602,581

Gain on bargain purchase



$1,428,648

(11) Includes cash payments under the IP Transit Services Agreement, as discussed above, of

  • $29.2 million for the three months ended June 30, 2023,
  • $87.5 million for the three months ended September 30, 2023, 
  • $87.5 million for the three months ended December 31, 2023,
  • $87.5 million for the three months ended March 31, 2024,
  • $66.7 million for the three months ended June 30, 2024, and
  • $25.0 million for the three months ended September 30, 2024.

(12) In connection with the acquisition of the Wireline Business, Cogent acquired 482 technical buildings.  Forty-three of those buildings have been converted to a Cogent Data Center.

(13) In connection with the acquisition of the Wireline Business, Cogent hired 942 total employees, including 75 quota bearing sales employees and 114 sales employees.

  • As of June 30, 2023, there were 888 employees remaining from the original Wireline Business employees.
  • As of September 30, 2023, there were 839 employees remaining from the original Wireline Business employees.
  • As of December 31, 2023, there were 758 employees remaining from the original Wireline Business employees.
  • As of March 31, 2024, there were 718 employees remaining from the original Wireline Business employees.
  • As of June 30, 2024, there were 655 employees remaining from the original Wireline Business employees.
  • As of September 30, 2024, there were 635 employees remaining from the original Wireline Business employees.

(14) In connection with the acquisition of the Wireline Business the Company incurred the following Sprint Acquisition Costs

  • $0.4 million of in the three months ended March 31, 2023,
  • $0.7 million in the three months ended June 30, 2023,
  • $0.4 million in the three months ended September 30, 2023,
  • $17.0 million in the three months ended December 31, 2023,
  • $9.0 million in the three months ended March 31, 2024, and
  • $12.4 million in the three months ended June 30, 2024.

Included in Sprint acquisition costs were the following reimbursable severance   

  • $16.2 million of reimbursable severance costs in the three months ended December 31, 2023,
  • $4.3 million of reimbursable severance costs in the three months ended March 31, 2024, and
  • $8.0 million of reimbursable severance costs in the three months ended June 30, 2024

(15) Sales rep productivity for Q2 2023 included 9,084 net-centric customer connections from a commercial services agreement ("CSA") with TMUSA entered into in May 2023.  Net-centric revenue under the CSA (predominantly on-net revenue) was

  • $7.3 million for the three months ended June 30, 2023,
  • $8.0 million for the three months ended September 30, 2023,
  • $8.6 million for the three months ended December 31, 2023
  • $3.2 million for the three months ended March 31, 2024,
  • $5.9 million for the three months ended June 30, 2024, and
  • $4.1 million for the three months ended September 30, 2024.

Net-centric customer connections under the CSA were

  • 8,028 as of June 30, 2023,
  • 4,661 as of September 30, 2023,
  • 3,576 as of December 31, 2023,
  • 2,658 as of March 31, 2024,
  • 2,117 as of June 30, 2024, and
  • 2,053 as of September 30, 2024.

(16) As of June 30, 2023, total non-core customer connections included 8,486 Session Initiation Protocol ("SIP") customer connections. This non-core corporate product was discontinued. There were no SIP, non-core customer connections from September 30, 2023 to September 30, 2024.

(17) The first quarter 2024 dividend totaling $45.8 million was declared on February 28, 2024, and paid on April 9, 2024.

(18) Included in on-net revenue and enterprise revenue from May 2023 to July 2024 was $1.7 million of monthly revenue from an uneconomic  resale customer acquired in connection with the Wireline Business. The service was cancelled on July 31, 2024

NM  Not meaningful

Schedules of Non-GAAP Measures 

EBITDA, EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement, EBITDA margin and EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement, margin

EBITDA represents net cash flows provided by operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense.  Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is net cash provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers.  EBITDA, as adjusted for Sprint acquisition costs and cash payments under the IP Transit Services Agreement with T-Mobile, represents EBITDA plus costs related to the Company's acquisition of the Wireline Business and cash payments made to the Company under the IP Transit Agreement. EBITDA margin is defined as EBITDA divided by total service revenue. EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Agreement margin is defined as EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Agreement, divided by total service revenue.

The Company believes that EBITDA, EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement, EBITDA margin and EBITDA as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement margin are useful measures of its ability to service debt, fund capital expenditures, pay dividends and expand its business.  The company believes its EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement, is a useful measure because it includes recurring cash flows stemming from the IP Transit Services Agreement that are of the same type as contracted payments under commercial contracts.  The measurements are an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. EBITDA, EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Agreement, EBITDA margin and EBITDA as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Agreement margin are not recognized terms under GAAP and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, these measures are not intended to reflect the Company's free cash flow, as they do not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, and changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of these measures may also differ from the calculations performed by its competitors and other companies and as such, their utility as a comparative measure is limited.

EBITDA, and EBITDA, as adjusted for Sprint acquisition costs and cash payments made to the Company under the IP Transit Services Agreement, are reconciled to net cash provided by operating activities in the table below.


Q1
2023

Q2
2023

Q3
2023

Q4
2023

Q1
2024

Q2
2024

Q3
2024

($ in 000's) – unaudited








Net cash provided by (used in) operating
activities

$35,821

$82,654

$(52,433)

$(48,701)

$19,219

$(22,171)

$(20,226)

Changes in operating assets and liabilities

$1,435

$(90,373)

$51,064

$36,288

$(34,640)

$11,077

$22,868

Cash interest expense and income tax
expense

18,797

31,875

44,956

18,424

33,873

38,220

33,219

EBITDA

$56,053

$24,156

$43,587

$6,011

$18,452

$27,126

$35,861

PLUS: Sprint acquisition costs

$400

$739

$351

$17,001

$9,037

$12,370

$-

PLUS: Cash payments made to the
Company under IP Transit Services
Agreement

-

29,167

87,500

87,500

87,500

66,667

25,000

EBITDA, as adjusted for Sprint
acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement

$56,453

$54,062

$131,438

$110,512

$114,989

$106,163

$60,861

EBITDA margin

36.5 %

10.1 %

15.8 %

2.2 %

6.9 %

10.4 %

13.9 %

EBITDA, as adjusted for Sprint
 acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement, margin

36.8 %

22.5 %

47.7 %

40.6 %

43.2 %

40.8 %

23.7 %

Constant currency revenue is reconciled to service revenue as reported in the tables below

Constant currency impact on revenue changes – sequential periods

($ in 000's) – unaudited

Q1

2023

Q2

2023

Q3

2023

Q4

2023

Q1

2024

Q2

2024

Q3

2024

Service revenue, as reported – current
period

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

Impact of foreign currencies on service
revenue

(1,292)

(417)

10

375

(304)

323

(620)

Service revenue - as adjusted for
currency impact (1)

$152,296

$239,389

$275,439

$272,474

$265,864

$260,766

$256,582

Service revenue, as reported – prior
sequential period

$151,979

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

Constant currency revenue increase
(decrease)

$317

$85,801

$35,633

$(2,955)

$(6,235)

$(5,402)

$(3,861)

Constant currency revenue percent
increase (decrease)

0.2 %

55.9 %

14.9 %

-1.1 %

-2.3 %

-2.0 %

-1.5 %



(1)

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

Constant currency impact on revenue changes – prior year periods

($ in 000's) – unaudited

Q1

2023

Q2

2023

Q3

2023

Q4

2023

Q1

2024

Q2

2024

Q3

2024

Service revenue, as reported – current
period

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

Impact of foreign currencies on service
revenue

1,553

(277)

(1,768)

(1,412)

(362)

420

(213)

Service revenue - as adjusted for
currency impact (2)

$155,141

$239,529

$273,661

$270,687

$265,806

$260,863

$256,989

Service revenue, as reported – prior
year period

149,175

148,450

$150,000

$151,979

$153,588

$239,806

$275,429

Constant currency revenue increase

5,966

91,079

$123,661

$118,708

$112,218

$21,057

$(18,440)

Constant currency percent revenue
increase

4.0 %

61.4 %

82.4 %

78.1 %

73.1 %

8.8 %

-6.7 %



(2)

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

Revenue on a constant currency basis and adjusted for the impact of excise taxes is reconciled to service revenue as reported in the tables below.

Constant currency and excise tax impact on revenue changes – sequential periods

($ in 000's) – unaudited

Q1

2023

Q2

2023

Q3

2023

Q4

2023

Q1

2024

Q2

2024

Q3

2024

Service revenue, as reported – current
period

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

Impact of foreign currencies on service
revenue

(1,292)

(417)

10

375

(304)

323

(620)

Impact of excise taxes on service
revenue

(107)

(6,847)

(3,517)

(5,871)

(121)

1,367

(570)

Service revenue - as adjusted for
currency and excise taxes impact (3)

$152,189

$232,542

$271,922

$266,603

$265,743

$262,133

$256,012

Service revenue, as reported – prior
sequential period

$151,979

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

Constant currency and excise taxes
revenue increase (decrease)

$210

$78,954

$32,116

$(8,826)

$(6,356)

$(4,035)

$(4,431)

Constant currency and excise tax
revenue percent increase (decrease)

0.1 %

51.4 %

13.4 %

-3.2 %

-2.3 %

-1.5 %

-1.7 %



(3)

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

Constant currency and excise tax impact on revenue changes – prior year periods

($ in 000's) – unaudited

Q1

2023

Q2

2023

Q3

2023

Q4

2023

Q1

2024

Q2

2024

Q3

2024

Service revenue, as reported – current
period

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

Impact of foreign currencies on service
revenue

1,553

(277)

(1,768)

(1,412)

(362)

420

(213)

Impact of excise taxes on service
revenue

(451)

(7,592)

(10,439)

(16,342)

(16,356)

(8,142)

(5,195)

Service revenue - as adjusted for
currency and excise taxes impact
(4)

$154,690

$231,937

$263,222

$254,345

$249,450

$252,721

$251,794

Service revenue, as reported –
prior year period

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

Constant currency and excise
taxes revenue increase

$5,515

$83,487

$113,222

$102,366

$95,862

$12,915

$(23,635)

Constant currency and excise tax
percent revenue increase

3.7 %

56.2 %

75.5 %

67.4 %

62.4 %

5.4 %

-8.6 %



(4)

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

Non-GAAP gross profit and non-GAAP gross margin

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


Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

($ in 000's) – unaudited








Service revenue total

$153,588

$239,806

$275,429

$272,099

$266,168

$260,443

$257,202

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

83,798

190,013

260,328

242,355

239,824

230,203

247,367

GAAP Gross Profit (5)

$69,790

$49,793

$15,101

$29,744

$26,344

$30,240

$9,835

Plus - Equity-based compensation –
network operations expense

149

231

370

370

385

350

469

Plus – Depreciation and amortization
expense

$25,160

$52,511

$86,734

$67,805

$70,891

$74,036

$85,815

Non-GAAP Gross Profit (6)

$95,099

$102,535

$102,205

$97,919

$97,620

$104,626

$96,119

GAAP Gross Margin (5)

45.4 %

20.8 %

5.5 %

10.9 %

9.9 %

11.6 %

3.8 %

Non-GAAP Gross Margin (6)

61.9 %

42.8 %

37.1 %

36.0 %

36.7 %

40.2 %

37.4 %



(5)

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

(6)

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

Gross and Net Leverage Ratios

Gross leverage ratio is defined as total debt divided by the trailing 12 months EBITDA, as adjusted for Sprint acquisition costs and cash payments under the IP Transit Services Agreement.  Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the last 12 months EBITDA, as adjusted for Sprint acquisition costs and cash payments under the IP Transit Services Agreement.  Cogent's gross leverage ratios and net leverage ratios are shown below.

($ in 000's) – unaudited

As of
March 31,
2023

As of
June 30,
2023

As of
September 30,
2023

As of
December 31,
2023

As of
March 31,
2024

As of
June 30,
2024

As of
September 30,
2024

Cash and cash equivalents & restricted
cash

$234,422

$243,953

$166,072

$113,781

$163,274

$426,241

$316,092

Debt








Capital (finance) leases – current portion

19,782

20,114

63,236

64,594

64,043

21,253

21,939

Capital (finance) leases – long term

300,600

311,405

419,941

419,921

453,473

405,176

460,632

Senior Secured 2026 Notes

500,000

500,000

500,000

500,000

500,000

500,000

500,000

Secured IPV4 Notes






206,000

206,000

Senior Unsecured 2027 Notes

450,000

450,000

450,000

450,000

450,000

750,000

750,000

Total debt

1,270,382

1,281,519

1,433,177

1,434,515

1,467,516

1,882,429

1,938,571

Total net debt

1,035,960

1,037,566

1,267,105

1,320,734

1,304,242

1,456,188

1,622,479

Trailing 12 months EBITDA, as adjusted
for Sprint acquisition costs and cash
payments from the IP Transit Services
Agreement

232,169

227,774

298,984

352,465

411,001

463,102

392,525

Gross leverage ratio

5.47

5.63

4.79

4.07

3.57

4.06

4.94

Net leverage ratio

4.46

4.56

4.24

3.75

3.17

3.14

4.13

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

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

(IN THOUSANDS, EXCEPT SHARE DATA)



September 30,

2024


December 31,

2023



(Unaudited)




Assets







Current assets:







Cash and cash equivalents


$

279,191


$

75,092

Restricted cash



36,901



38,689

Accounts receivable, net of allowance for credit losses of $10,223 and $3,677, respectively



99,565



135,475

Due from T-Mobile,IP Transit Services Agreement, current portion, net of discount of $18,468 and $24,898, respectively



81,532



179,269

Due from T-Mobile, Transition Services Agreement



—



4,514

Prepaid expenses and other current assets



72,214



80,588

Total current assets



569,403



513,627

Property and equipment:







Property and equipment



3,227,805



2,947,376

Accumulated depreciation and amortization



(1,607,122)



(1,409,559)

Total property and equipment, net



1,620,683



1,537,817

Right-of-use leased assets



289,894



361,587

IPv4 intangible assets



458,000



458,000

Other intangible assets, net



13,481



14,815

Deposits and other assets



29,668



23,438

Due from T-Mobile, IP Transit Services Agreement, net of discount of $15,644 and $27,916, respectively



201,022



263,750

Due from T-Mobile, Purchase Agreement, net of discount of $6,172 and $13,725, respectively



21,943



38,585

Total assets


$

3,204,094


$

3,211,619

Liabilities and stockholders' equity







Current liabilities:







Accounts payable


$

53,053


$

48,356

Accrued and other current liabilities



148,204



120,523

Due to T-Mobile – Transition Services Agreement



1,570



66,908

Due to T-Mobile – Purchase Agreement



—



4,981

Current maturities, operating lease liabilities



55,867



67,962

Finance lease obligations, current maturities



21,939



64,594

Total current liabilities



280,633



373,324

Senior secured 2026 notes, net of unamortized debt costs of $443 and $645, respectively, and discounts of $590 and $857,
     respectively



498,967



498,498

Senior unsecured 2027 notes, net of unamortized debt costs of $1,997 and $941, respectively, and discounts of $7,699 and
      $1,970, respectively



740,304



447,088

Secured IPv4 notes, net of debt costs of $7,016



198,984



—

Operating lease liabilities, net of current maturities



270,932



330,095

Finance lease obligations, net of current maturities



460,632



419,921

Deferred income tax liabilities



382,987



471,498

Other long-term liabilities



47,102



61,639

Total liabilities



2,880,541



2,602,063

Commitments and contingencies:







Stockholders' equity:







Common stock, $0.001 par value; 75,000,000 shares authorized; 49,012,688 and 48,608,569 shares issued and outstanding,
     respectively



49



49

Additional paid-in capital



620,410



606,755

Accumulated other comprehensive loss



(12,294)



(14,385)

Accumulated (deficit) earnings



(284,612)



17,137

Total stockholders' equity



323,553



609,556

Total liabilities and stockholders' equity


$

3,204,094


$

3,211,619

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



Three Months Ended

September 30, 2024


Three Months Ended

September 30, 2023



(Unaudited)


(Unaudited)

Service revenue


$

257,202


$

275,429

Operating expenses:







Network operations (including $469 and $370 of equity-based compensation expense, respectively, exclusive of
depreciation and amortization shown separately below)



161,552



173,594

Selling, general, and administrative (including $7,406 and $7,041 of equity-based compensation expense,
     respectively)



67,664



65,308

Acquisition costs – Sprint Business



—



351

Depreciation and amortization



85,815



86,734

Total operating expenses



315,031



325,987

Operating loss



(57,829)



(50,558)

Interest expense, including change in valuation interest rate swap agreement



(26,877)



(29,023)

Gain on bargain purchase – Sprint Business



—



(3,332)

Interest income – IP Transit Services Agreement



5,438



10,299

Interest income – Purchase Agreement



409



664

Interest income and other, net



(1,153)



1,604

Loss before income taxes



(80,012)



(70,346)

Income tax benefit



16,900



13,623

Net loss


$

(63,112)


$

(56,723)








Comprehensive loss:







Net loss


$

(63,112)


$

(56,723)

Foreign currency translation adjustment



8,847



(4,134)

Comprehensive loss


$

(54,265)


$

(60,857)








Net loss per common share:







Basic net loss per common share


$

(1.33)


$

(1.20)

Diluted net loss per common share


$

(1.33)


$

(1.20)

Dividends declared per common share


$

0.985


$

0.945








Weighted-average common shares - basic



47,426,131



47,227,338








Weighted-average common shares - diluted



47,426,131



47,227,338

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



Nine Months Ended

September 30, 2024


Nine Months Ended

September 30, 2023



(Unaudited)


(Unaudited)

Service revenue


$

783,813


$

668,822

Operating expenses:







Network operations (including $1,204 and $750 of equity-based compensation expense, respectively, exclusive of
     depreciation and amortization shown separately below)



486,657



369,734

Selling, general, and administrative (including $17,186 and $19,491 of equity-based compensation expense,
     respectively)



212,706



194,046

Acquisition costs – Sprint Business



21,407



1,490

Depreciation and amortization



230,747



164,403

Total operating expenses



951,517



729,673

Gain on lease termination



3,332



—

Operating loss



(164,372)



(60,851)

Interest expense, including change in valuation interest rate swap agreement



(85,575)



(76,138)

Gain on bargain purchase – Sprint Business



22,202



1,152,386

Interest income – IP Transit Services Agreement



18,702



17,968

Interest income – Purchase Agreement



331



1,170

Interest income and other, net



4,074



5,154

(Loss) income before income taxes



(204,638)



1,039,689

Income tax benefit



43,881



33,599

Net (loss) income


$

(160,757)


$

1,073,288








Comprehensive (loss) income:







Net (loss) income


$

(160,757)


$

1,073,288

Foreign currency translation adjustment



2,091



(605)

Comprehensive (loss) income


$

(158,666)


$

1,072,683








Net (loss) income per common share:







Basic net (loss) income per common share


$

(3.39)


$

22.72

Diluted net (loss) income per common share


$

(3.39)


$

22.54

Dividends declared per common share


$

2.925


$

2.805








Weighted-average common shares - basic



47,453,906



47,234,025








Weighted-average common shares - diluted



47,453,906



47,624,709

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS)



Three Months Ended

September 30, 2024


Three Months Ended

September 30, 2023



(Unaudited)


(Unaudited)

Cash flows from operating activities:







Net loss


$

(63,112)


$

(56,723)

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







Depreciation and amortization



85,815



86,734

Amortization of debt costs and discounts



1,260



334

Amortization of discounts, due from T-Mobile,IP Transit Services & Purchase Agreements



(5,847)



(10,963)

Equity-based compensation expense (net of amounts capitalized)



7,874



7,411

Gain on bargain purchase – Sprint Business



—



3,332

Gains – lease terminations and other, net



—



354

Deferred income taxes



(23,348)



(36,319)

Changes in operating assets and liabilities:







Accounts receivable



12,111



1,671

Prepaid expenses and other current assets



(16,849)



9,377

Due to T-Mobile – Transition Services Agreement



16,185



9,530

Due from T-Mobile – Transition Services Agreement



(716)



(9,816)

Accounts payable, accrued liabilities and other long-term liabilities



(29,913)



(57,045)

Deposits and other assets



(3,686)



(310)

Net cash used in operating activities



(20,226)



(52,433)

Cash flows from investing activities:







Cash payments - IP Transit Services Agreement – T-Mobile



25,000



87,500

Purchases of property and equipment



(59,244)



(25,373)

Net cash (used in) provided by investing activities



(34,244)



62,127

Cash flows from financing activities:







Dividends paid



(47,210)



(45,136)

Proceeds from exercises of stock options



748



402

Principal payments of finance lease obligations



(4,516)



(41,302)

Net cash used in financing activities



(50,978)



(86,036)

Effect of exchange rates changes on cash



(4,701)



(1,539)

Net decrease in cash, cash equivalents and restricted cash



(110,149)



(77,881)

Cash, cash equivalents and restricted cash, beginning of period



426,241



243,953

Cash, cash equivalents and restricted cash, end of period


$

316,092


$

166,072

 

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS)



Nine Months Ended

September 30, 2024


Nine Months Ended

September 30, 2023



(Unaudited)


(Unaudited)

Cash flows from operating activities:







Net (loss) income


$

(160,757)


$

1,073,288

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







Depreciation and amortization



230,747



164,403

Amortization of debt costs and discounts



2,364



986

Amortization of discounts, due from T-Mobile,IP Transit Services & Purchase Agreements



(19,033)



(19,138)

Equity-based compensation expense (net of amounts capitalized)



18,390



20,241

Gain on bargain purchase – Sprint Business



(22,202)



(1,152,386)

Gains – lease terminations and other, net



(3,332)



(277)

Deferred income taxes



(66,902)



(63,509)

Changes in operating assets and liabilities:







Accounts receivable



35,910



(3,247)

Prepaid expenses and other current assets



(3,949)



(4,763)

Due to T-Mobile – Transition Services Agreement



(65,338)



69,629

Due from T-Mobile – Transition Services Agreement



4,514



(16,831)

Accounts payable, accrued liabilities and other long-term liabilities



32,785



(2,176)

Deposits and other assets



(6,374)



(177)

Net cash (used in) provided by operating activities



(23,177)



66,043

Cash flows from investing activities:







Cash payments - IP Transit Services Agreement – T-Mobile



179,167



116,667

Acquisition of Sprint Business, net of $47.1 million of cash acquired in 2023



12,323



(14,037)

Purchases of property and equipment



(148,894)



(86,023)

Net cash provided by investing activities



42,596



16,607

Cash flows from financing activities:







Dividends paid



(140,992)



(135,354)

Purchases of common stock



(7,968)



—

Net proceeds from issuance of senior unsecured 2027 Notes - net of discount of $6.8 million and debt costs of $1.4
     million



291,879



—

Net proceeds from issuance of secured IPv4 notes – net of debt costs of $7.6 million



198,426



—

Proceeds from exercises of stock options



952



787

Principal payments of finance lease obligations



(46,653)



(58,549)

Settlement of finance lease – at a discount



(114,576)



—

Net cash provided by (used in) financing activities



181,068



(193,116)

Effect of exchange rates changes on cash



1,824



626

Net increase (decrease) in cash, cash equivalents and restricted cash



202,311



(109,840)

Cash, cash equivalents and restricted cash, beginning of period



113,781



275,912

Cash, cash equivalents and restricted cash, end of period


$

316,092


$

166,072








Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.  The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.  Numerous factors could cause or contribute to such differences, including the impact of our acquisition of the Wireline Business, including our difficulties integrating our business with the acquired Wireline Business, which may result in the combined company not operating as effectively or efficiently as expected; transition services required to support the acquired Wireline Business and the related costs continuing for a longer period than expected; transition related costs associated with the acquisition; the COVID-19 pandemic and the related government policies; future economic instability in the global economy, including the risk of economic recession, recent bank failures and liquidity concerns at certain other banks or a contraction of the capital markets, which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including net neutrality rules  by the United States Federal Communications Commission and in the area of data protection; cyber-attacks or security breaches of our network; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements and right-of-way agreements on favorable terms; our reliance on a few equipment vendors, and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber and right-of-way providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; our ability to make payments on our indebtedness as they become due and outcomes in litigation, risks associated with variable interest rates under our interest rate swap agreement, and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2023 and our Form 10-Q for the quarterly  periods ended June 30, 2023, September 30, 2023, March 31, 2024, June 30, 2024 and September 30, 2024.  Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time.

 

 

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SOURCE Cogent Communications Holdings, Inc.