COGENT COMMUNICATIONS HOLDINGS, INC. WASHINGTON, Feb. 23, 2017 /PRNewswire/ --
Financial and Business Highlights
-- Cogent approves a 5.0% increase of $0.02 per share to its regular
quarterly dividend to $0.42 per common share to be paid on March 24,
2017 to shareholders of record on March 10, 2017
-- Service revenue for Q4 2016 increased by 2.2% from Q3 2016 to $115.6
million and on a constant currency basis increased from Q3 2016 by 2.9%
-- Service revenue for Q4 2016 increased by 9.9% from Q4 2015 and on a
constant currency basis increased from Q4 2015 by 10.2%
-- Service revenue for 2016 increased by 10.6% from 2015 to $446.9 million
and on a constant currency basis increased from 2015 by 10.8%
-- Dividends in 2016 totaled $68.2 million, or $1.51 per share, with 78.7%
treated as a return of capital and 21.3% treated as dividends for US
federal income tax purposes
-- Net cash provided by operating activities increased by 48.4% from Q3
2016 to $33.9 million and increased by 28.8% from 2015 to $108.0 million
for 2016
Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $115.6 million for the three months ended December 31, 2016, an increase of 9.9% from $105.2 million for the three months ended December 31, 2015 and an increase of 2.2% from $113.1 million for the three months ended September 30, 2016. Service revenue was $446.9 million for the year ended December 31, 2016, an increase of 10.6% from $404.2 million for the year ended December 31, 2015. Foreign exchange negatively impacted service revenue from Q3 2016 to Q4 2016 by $0.7 million, negatively impacted service revenue growth from Q4 2015 to Q4 2016 by $0.3 million and negatively impacted service revenue growth from 2015 to 2016 by $0.9 million. On a constant currency basis, service revenue grew by 10.2% from Q4 2015 to Q4 2016, grew by 2.9% from Q3 2016 to Q4 2016 and grew by 10.8% from 2015 to 2016.
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 $83.5 million for the three months ended December 31, 2016; an increase of 9.1% over $76.5 million for the three months ended December 31, 2015 and an increase of 2.0% from $81.8 million for the three months ended September 30, 2016. On-net revenue was $323.6 million for the year ended December 31, 2016; an increase of 9.8% over $294.8 million for the year ended December 31, 2015.
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 $31.9 million for the three months ended December 31, 2016; an increase of 12.1% over $28.4 million for the three months ended December 31, 2015 and an increase of 2.9% over $31.0 million for the three months ended September 30, 2016. Off-net revenue was $122.3 million for the year ended December 31, 2016; an increase of 12.9% over $108.4 million for the year ended December 31, 2015.
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 9.9% from $41.3 million for the three months ended December 31, 2015 to $45.4 million for the three months ended December 31, 2016 and increased by 0.0% from $45.4 million for the three months ended September 30, 2016. GAAP gross profit increased by 11.6% from $159.2 million for the year ended December 31, 2015 to $177.6 million for the year ended December 31, 2016. GAAP gross margin was 39.3% for the three months ended December 31, 2016, 39.3% for the three months ended December 31, 2015 and 40.2% for the three months ended September 30, 2016. GAAP gross margin was 39.7% for the year ended December 31, 2016, and 39.4% for the year ended December 31, 2015. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $2.5 million for the three months ended December 31, 2016, $2.4 million for the three months ended September 30, 2016, $1.7 million for the three months ended December 31, 2015, $3.6 million for the year ended December 31, 2015 and $9.1 million for the year ended December 31, 2016.
Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 10.4% from $59.5 million for the three months ended December 31, 2015 to $65.7 million for the three months ended December 31, 2016 and increased by 2.0% from $64.4 million for the three months ended September 30, 2016. Non-GAAP gross profit increased by 10.0% from $230.3 million for the year ended December 31, 2015 to $253.4 million for the year ended December 31, 2016. Non-GAAP gross profit margin was 56.8% for the three months ended December 31, 2016, 56.5% for the three months ended December 31, 2015 and 57.0% for the three months ended September 30, 2016. Non-GAAP gross profit margin was 56.7% for the year ended December 31, 2016, and 57.0% for the year ended December 31, 2015.
Cash flow from operating activities increased by 54.0% from $22.0 million for the three months ended December 31, 2015 to $33.9 million for the three months ended December 31, 2016 and increased by 48.4% from $22.8 million for the three months ended September 30, 2016. Cash flow from operating activities increased by 28.8% from $83.8 million for the year ended December 31, 2015 to $108.0 million for the year ended December 31, 2016.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 6.8% from $34.7 million for the three months ended December 31, 2015 to $37.1 million for the three months ended December 31, 2016 and decreased by 0.3% from $37.2 million for the three months ended September 30, 2016. EBITDA increased by 11.5% from $128.1 million for the year ended December 31, 2015 to $142.9 million for the year ended December 31, 2016. EBITDA margin was 32.1% for the three months ended December 31, 2016, 33.0% for the three months ended December 31, 2015, 32.9% for the three months ended September 30, 2016, 31.7% for the year ended December 31, 2015 and 32.0% for the year ended December 31, 2016. In addition to on-going fees associated with defending net-neutrality, and included in SG&A expenses and negatively impacting EBITDA for the three months ended December 31, 2016 were $2.9 million of expenses associated with the proposed settlement of a class action wage and hour claim for certain of our current and former sales representatives.
EBITDA, as adjusted, increased by 2.7% from $36.8 million for the three months ended December 31, 2015 to $37.7 million for the three months ended December 31, 2016 and decreased by 0.3% from $37.9 million for the three months ended September 30, 2016. EBITDA, as adjusted, increased by 12.7% from $133.6 million for the year ended December 31, 2015 to $150.6 million for the year ended December 31, 2016. EBITDA, as adjusted, margin was 32.7% for the three months ended December 31, 2016, 34.9% for the three months ended December 31, 2015, 33.5% for the three months ended September 30, 2016, 33.0% for the year ended December 31, 2015 and 33.7% for the year ended December 31, 2016.
Basic and diluted net income per share was $0.09 for the three months ended December 31, 2016, $0.06 for the three months ended December 31, 2015 and $0.08 for the three months ended September 30, 2016. Basic and diluted net income per share was $0.11 for the year ended December 31, 2015 and $0.33 for the year ended December 31, 2016.
Total customer connections increased by 16.3% from 53,152 as of December 31, 2015 to 61,822 as of December 31, 2016 and increased by 3.5% from 59,724 as of September 30, 2016. On-net customer connections increased by 16.3% from 45,473 as of December 31, 2015 to 52,874 as of December 31, 2016 and increased by 3.5% from 51,079 as of September 30, 2016. Off-net customer connections increased by 18.1% from 7,279 as of December 31, 2015 to 8,598 as of December 31, 2016 and increased by 4.1% from 8,259 as of September 30, 2016.
The number of on-net buildings increased by 122 on-net buildings from 2,251 on-net buildings as of December 31, 2015 to 2,373 on-net buildings as of December 31, 2016 and increased by 39 on-net buildings from 2,334 on-net buildings as of September 30, 2016.
Quarterly Dividend Increase Approved
On February 22, 2017, Cogent's board approved a regular quarterly dividend of $0.42 per common share payable on March 24, 2017 to shareholders of record on March 10, 2017. This first quarter 2017 regular dividend represents a 5.0% increase of $0.02 per share from the fourth quarter 2016 regular dividend of $0.40 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 2016 Dividends
Cogent paid four quarterly dividends in 2016 totaling $68.2 million, or $1.51 per share. The expected tax treatment of these dividends are generally that 78.7% are treated as a return of capital and 21.3% are generally treated as dividends for United States federal income tax purposes. While the above information includes general statements about the tax classification of dividends paid on Cogent common stock, these statements do not constitute tax advice. The taxation of corporate distributions can be complex, and stockholders are encouraged to consult their tax advisers to determine what impact the above information may have on their specific tax situation.
Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 23, 2017 to discuss Cogent's operating results for the fourth quarter of 2016 and full year 2016 and to discuss Cogent's expectations for full year 2017. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call.
About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 190 markets globally.
Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
------- ------- ------- ------- ------- ------- ------- -------
Metric ($ in 000's, except share and per share data) -
unaudited
------------------------------------------------------
On-Net revenue $71,234 $72,010 $75,088 $76,513 $78,705 $79,539 $81,846 $83,511
-------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. -0.1% 1.1% 4.3% 1.9% 2.9% 1.1% 2.9% 2.0%
---------------------- ---- --- --- --- --- --- --- ---
Off-Net revenue $25,730 $26,522 $27,688 $28,421 $29,356 $30,149 $30,972 $31,861
--------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 2.3% 3.1% 4.4% 2.6% 3.3% 2.7% 2.7% 2.9%
---------------------- --- --- --- --- --- --- --- ---
Non-Core revenue (1) $278 $267 $241 $243 $230 $267 $239 $224
------------------- ---- ---- ---- ---- ---- ---- ---- ----
% Change from previous
Qtr. -3.8% -4.0% -9.7% 0.8% -5.3% 16.1% -10.5% -6.3%
---------------------- ---- ---- ---- --- ---- ---- ----- ----
Service revenue - total $97,242 $98,799 $103,017 $105,177 $108,291 $109,955 $113,057 $115,596
----------------------- ------- ------- -------- -------- -------- -------- -------- --------
% Change from previous
Qtr. 0.5% 1.6% 4.3% 2.1% 3.0% 1.5% 2.8% 2.2%
---------------------- --- --- --- --- --- --- --- ---
Constant currency total
revenue quarterly growth
rate - sequential
quarters (4) 2.9% 2.0% 4.4% 2.5% 3.0% 0.9% 3.1% 2.9%
------------------------- --- --- --- --- --- --- --- ---
Constant currency total
revenue quarterly growth
rate - year over year
quarters (4) 9.3% 9.5% 12.1% 12.1% 12.2% 11.1% 9.7% 10.2%
------------------------- --- --- ---- ---- ---- ---- --- ----
Network operations
expenses (2) $40,907 $42,252 $45,056 $45,710 $47,156 $47,727 $48,666 $49,943
------------------ ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 0.0% 3.3% 6.6% 1.5% 3.2% 1.2% 2.0% 2.6%
---------------------- --- --- --- --- --- --- --- ---
GAAP gross profit (3) $38,650 $39,016 $40,201 $41,333 $43,261 $43,479 $45,426 $45,434
-------------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 1.3% 0.9% 3.0% 2.8% 4.7% 0.5% 4.5% 0.0%
---------------------- --- --- --- --- --- --- --- ---
GAAP gross margin (3) 39.7% 39.5% 39.0% 39.3% 39.9% 39.5% 40.2% 39.3%
-------------------- ---- ---- ---- ---- ---- ---- ---- ----
Non-GAAP gross profit
(4) (6) $56,335 $56,547 $57,961 $59,467 $61,135 $62,228 $64,391 $65,653
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 0.9% 0.4% 2.5% 2.6% 2.8% 1.8% 3.5% 2.0%
---------------------- --- --- --- --- --- --- --- ---
Non-GAAP gross margin
(4) (6) 57.9% 57.2% 56.3% 56.5% 56.5% 56.6% 57.0% 56.8%
--------------------- ---- ---- ---- ---- ---- ---- ---- ----
Selling, general and
administrative expenses
(5) $26,708 $25,987 $24,740 $24,737 $27,472 $27,278 $27,220 $28,576
------------------------ ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 6.6% -2.7% -4.8% 0.0% 11.1% -0.7% -0.2% 5.0%
---------------------- --- ---- ---- --- ---- ---- ---- ---
Depreciation and
amortization expense $17,513 $17,371 $17,634 $18,008 $17,753 $18,604 $18,804 $20,073
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. -0.2% -0.8% 1.5% 2.1% -1.4% 4.8% 1.1% 6.7%
---------------------- ---- ---- --- --- ---- --- --- ---
Equity-based
compensation expense $3,141 $3,098 $2,704 $2,571 $2,181 $2,687 $2,991 $2,876
--------------------- ------ ------ ------ ------ ------ ------ ------ ------
% Change from previous
Qtr. 4.7% -1.4% -12.7% -4.9% -15.2% 23.2% 11.3% -3.8%
---------------------- --- ---- ----- ---- ----- ---- ---- ----
Operating income $10,487 $10,810 $15,519 $16,174 $15,675 $17,511 $16,063 $14,795
----------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. -19.7% 3.1% 43.6% 4.2% -3.1% 11.7% -8.3% -7.9%
---------------------- ----- --- ---- --- ---- ---- ---- ----
Interest expense $11,307 $9,692 $10,002 $10,280 $10,065 $10,243 $9,891 $10,602
---------------- ------- ------ ------- ------- ------- ------- ------ -------
% Change from previous
Qtr. -7.2% -14.3% 3.2% 2.8% -2.1% 1.8% -3.4% 7.2%
---------------------- ---- ----- --- --- ---- --- ---- ---
Net income (loss) $(1,585) $840 $3,161 $2,480 $3,354 $4,224 $3,459 $3,892
---------------- ------- ---- ------ ------ ------ ------ ------ ------
Basic net income (loss)
per common share $(0.04) $0.02 $0.07 $0.06 $0.08 $0.09 $0.08 $0.09
----------------------- ------ ----- ----- ----- ----- ----- ----- -----
Diluted net income (loss)
per common share $(0.04) $0.02 $0.07 $0.06 $0.08 $0.09 $0.08 $0.09
------------------------- ------ ----- ----- ----- ----- ----- ----- -----
Weighted average common
shares - basic 45,158,250 44,774,831 44,474,724 44,323,131 44,402,640 44,491,899 44,574,583 44,577,826
----------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
% Change from previous
Qtr. -0.2% -0.8% -0.7% -0.3% 0.2% 0.2% 0.2% 0.0%
---------------------- ---- ---- ---- ---- --- --- --- ---
Weighted average common
shares - diluted 45,158,250 45,054,507 44,702,127 44,558,089 44,571,937 44,705,037 44,776,918 44,803,782
----------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
% Change from previous
Qtr. -0.2% -0.2% -0.8% -0.3% 0.0% 0.3% 0.2% 0.1%
---------------------- ---- ---- ---- ---- --- --- --- ---
EBITDA (6) $29,627 $30,560 $33,221 $34,730 $33,663 $34,950 $37,171 $37,077
--------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. -3.8% 3.1% 8.7% 4.5% -3.1% 3.8% 6.4% -0.3%
---------------------- ---- --- --- --- ---- --- --- ----
EBITDA margin 30.5% 30.9% 32.2% 33.0% 31.1% 31.8% 32.9% 32.1%
------------- ---- ---- ---- ---- ---- ---- ---- ----
Gains on asset related
transactions $1,548 $719 $1,152 $2,023 $1,946 $4,439 $687 $667
---------------------- ------ ---- ------ ------ ------ ------ ---- ----
EBITDA, as adjusted (6) $31,175 $31,279 $34,373 $36,753 $35,609 $39,389 $37,858 $37,744
---------------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. -7.3% 0.3% 9.9% 6.9% -3.1% 10.6% -3.9% -0.3%
---------------------- ---- --- --- --- ---- ---- ---- ----
EBITDA, as adjusted,
margin 32.1% 31.7% 33.4% 34.9% 32.9% 35.8% 33.5% 32.7%
-------------------- ---- ---- ---- ---- ---- ---- ---- ----
Fees - net neutrality $1,405 $952 $816 $569 $493 $1,036 $1,315 $432
--------------------- ------ ---- ---- ---- ---- ------ ------ ----
Net cash provided by
operating activities $18,372 $20,035 $23,403 $21,999 $27,557 $23,698 $22,833 $33,879
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
% Change from previous
Qtr. 2.4% 9.1% 16.8% -6.0% 25.3% -14.0% -3.7% 48.4%
---------------------- --- --- ---- ---- ---- ----- ---- ----
Capital expenditures $12,916 $10,866 $6,838 $4,962 $15,034 $14,260 $8,745 $7,195
-------------------- ------- ------- ------ ------ ------- ------- ------ ------
% Change from previous
Qtr. -0.8% -15.9% -37.1% -27.4% 203.0% -5.1% -38.7% -17.7%
---------------------- ---- ----- ----- ----- ----- ---- ----- -----
Principal payments on
capital leases $3,650 $7,332 $5,956 $3,273 $3,369 $3,935 $2,354 $2,808
--------------------- ------ ------ ------ ------ ------ ------ ------ ------
% Change from previous
Qtr. 31.8% 100.9% -18.8% -45.0% 2.9% 16.8% -40.2% 19.3%
---------------------- ---- ----- ----- ----- --- ---- ----- ----
Dividends paid $16,001 $18,972 $15,296 $16,045 $16,171 $16,671 $17,169 $18,199
-------------- ------- ------- ------- ------- ------- ------- ------- -------
Purchases of common stock $8,119 $19,106 $12,169 $ - $ - $ - $1,666 $2,826
------------------------- ------ ------- ------- --- --- --- ------ ------
Gross Leverage Ratio 4.42 4.50 4.57 4.55 4.39 3.94 3.89 4.73
-------------------- ---- ---- ---- ---- ---- ---- ---- ----
Net Leverage Ratio 2.45 2.77 2.98 3.02 2.97 2.88 2.90 2.90
------------------ ---- ---- ---- ---- ---- ---- ---- ----
Customer Connections - end of period
------------------------------------
On-Net 40,732 42,002 43,364 45,473 47,252 49,243 51,079 52,874
------ ------ ------ ------ ------ ------ ------ ------ ------
% Change from previous
Qtr. 2.4% 3.1% 3.2% 4.9% 3.9% 4.2% 3.7% 3.5%
---------------------- --- --- --- --- --- --- --- ---
Off-Net 6,368 6,583 6,897 7,279 7,654 7,971 8,259 8,598
------- ----- ----- ----- ----- ----- ----- ----- -----
% Change from previous
Qtr. 4.8% 3.4% 4.8% 5.5% 5.2% 4.1% 3.6% 4.1%
---------------------- --- --- --- --- --- --- --- ---
Non-Core (1) 311 325 356 400 450 349 386 350
----------- --- --- --- --- --- --- --- ---
% Change from previous
Qtr. -14.1% 4.5% 9.5% 12.4% 12.5% -22.4% 10.6% -9.3%
---------------------- ----- --- --- ---- ---- ----- ---- ----
Total customer
connections 47,411 48,910 50,617 53,152 55,356 57,563 59,724 61,822
-------------- ------ ------ ------ ------ ------ ------ ------ ------
% Change from previous
Qtr. 2.6% 3.2% 3.5% 5.0% 4.1% 4.0% 3.8% 3.5%
---------------------- --- --- --- --- --- --- --- ---
On-Net Buildings - end of period
--------------------------------
Multi-Tenant office
buildings 1,488 1,510 1,523 1,541 1,545 1,560 1,577 1,592
------------------- ----- ----- ----- ----- ----- ----- ----- -----
Carrier neutral data
center buildings 618 631 647 659 675 686 706 729
-------------------- --- --- --- --- --- --- --- ---
Cogent data centers 49 50 51 51 51 51 51 52
------------------- --- --- --- --- --- --- --- ---
Total on-net buildings 2,155 2,191 2,221 2,251 2,271 2,297 2,334 2,373
---------------------- ----- ----- ----- ----- ----- ----- ----- -----
Square feet - multi-
tenant office buildings
- on-net 804,760,238 818,039,601 823,712,433 831,585,875 834,341,216 840,042,330 847,266,071 858,958,167
------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Network - end of period
------------------------
Intercity route miles 59,161 55,191 56,079 56,079 56,183 56,183 56,684 57,213
--------------------- ------ ------ ------ ------ ------ ------ ------ ------
Metro fiber miles 27,619 28,036 28,067 28,158 28,316 28,874 29,326 29,536
----------------- ------ ------ ------ ------ ------ ------ ------ ------
Connected networks - AS's 5,334 5,435 5,511 5,582 5,617 5,700 5,834 5,927
------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Headcount - end of period
-------------------------
Sales force - quota
bearing 343 358 363 378 398 397 394 422
------------------- --- --- --- --- --- --- --- ---
Sales force - total 459 464 474 495 517 519 516 542
------------------- --- --- --- --- --- --- --- ---
Total employees 785 799 808 828 855 854 858 887
--------------- --- --- --- --- --- --- --- ---
Sales rep productivity -
units per full time
equivalent sales rep
("FTE") per month 5.3 5.6 6.0 6.3 6.3 5.9 5.7 6.1
------------------------ --- --- --- --- --- --- --- ---
FTE - sales reps 326 330 337 351 373 373 377 384
---------------- --- --- --- --- --- --- --- ---
(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 $172, $160, $126, $126, $121,
$145, $161 and $146 in the three
month periods ended March 31, 2015
through December 31, 2016,
respectively. Network operations
expense includes excise taxes,
including Universal Service Fund
fees of $53, $57, $1,757, $1,729,
$2,003, $2,156, $2,362 and $2,549
in the three month periods ended
March 31, 2015 through December
31, 2016, 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 it 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 $2,969, $2,938, $2,578,
$2,445, $2,060, $2,542, $2,830 and
$2,730 in the three month periods
ended March 31, 2015 through
December 31, 2016, 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 2015 Q2 2015 Q3 2015 Q4 2015 Year 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Year 2016
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
($ in 000's) -
unaudited
--------------
Net cash flows
provided by
operating
activities $18,372 $20,035 $23,403 $21,999 $83,809 $27,557 $23,698 $22,833 $33,879 $107,967
-------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Changes in
operating assets
and liabilities (159) 1,245 (68) 3,047 4,067 (3,681) 1,755 4,737 (6,781) (3,968)
----------------- ---- ----- --- ----- ----- ------ ----- ----- ------ ------
Cash interest
expense and
income tax
expense 11,414 9,280 9,886 9,684 40,260 9,787 9,497 9,601 9,979 38,861
------------- ------ ----- ----- ----- ------ ----- ----- ----- ----- ------
EBITDA $29,627 $30,560 $33,221 $34,730 $128,136 $33,663 $34,950 $37,171 $37,077 $142,860
------ ------- ------- ------- ------- -------- ------- ------- ------- ------- --------
PLUS: Gains on
asset related
transactions 1,548 719 1,152 2,023 5,443 1,946 4,439 687 667 7,739
-------------- ----- --- ----- ----- ----- ----- ----- --- --- -----
EBITDA, as
adjusted $31,175 $31,279 $34,373 $36,753 $133,579 $35,609 $39,389 $37,858 $37,744 $150,599
---------- ------- ------- ------- ------- -------- ------- ------- ------- ------- --------
EBITDA margin 30.5% 30.9% 32.2% 33.0% 31.7% 31.1% 31.8% 32.9% 32.1% 32.0%
------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
EBITDA, as
adjusted margin 32.1% 31.7% 33.4% 34.9% 33.0% 32.9% 35.8% 33.5% 32.7% 33.7%
---------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Constant currency revenue is reconciled to service revenue as reported in the tables below.
Constant currency impact on revenue changes - sequential periods
----------------------------------------------------------------
($ in 000's) -
unaudited Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
2015 2015 2015 2015 2015 2016 2016 2016 2016 2016
--- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Service
revenue, as
reported -
current period $97,242 $98,799 $103,017 $105,177 $404,234 $108,291 $109,955 $113,057 $115,596 $446,900
--------------- ------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Impact of
foreign
currencies on
service
revenue 2,287 340 154 385 16,639 (10) (709) 273 749 892
-------------- ----- --- --- --- ------ --- ---- --- --- ---
Service revenue
-as adjusted
for currency
impact (1) $99,529 $99,139 $103,171 $105,562 $420,873 $108,281 $109,246 $113,330 $116,345 $447,792
--------------- ------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Service
revenue, as
reported -
prior
sequential
period $96,749 $97,242 $98,799 $103,017 $380,003 $105,177 $108,291 $109,955 $113,057 $404,234
------------ ------- ------- ------- -------- -------- -------- -------- -------- -------- --------
Constant
currency
increase $2,780 $1,897 $4,372 $2,545 $40,870 $3,104 $955 $3,375 $3,288 $43,558
--------- ------ ------ ------ ------ ------- ------ ---- ------ ------ -------
Constant
currency
percent
increase 2.9% 2.0% 4.4% 2.5% 10.8% 3.0% 0.9% 3.1% 2.9% 10.8%
--------- --- --- --- --- ---- --- --- --- --- ----
(1) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the prior
sequential period. The Company
believes that disclosing
quarterly sequential revenue
growth without the impact of
foreign currencies on service
revenue is a useful measure of
sequential revenue growth.
Service revenue, as adjusted
for currency impact, is an
integral part of the internal
reporting and planning system
used by management as a
supplement to GAAP financial
information.
Constant currency impact on revenue changes - prior year periods
----------------------------------------------------------------
($ in 000's) -
unaudited Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
2015 2015 2015 2015 2015 2016 2016 2016 2016 2016
--- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Service
revenue, as
reported -
current period $97,242 $98,799 $103,017 $105,177 $404,234 $108,291 $109,955 $113,057 $115,596 $446,900
--------------- ------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Impact of
foreign
currencies on
service
revenue 4,321 4,785 4,278 3,305 16,639 855 (168) (68) 276 892
-------------- ----- ----- ----- ----- ------ --- ---- --- --- ---
Service revenue
-as adjusted
for currency
impact (2) $101,563 $103,584 $107,295 $108,482 $420,873 $109,146 $109,787 $112,989 $115,872 $447,792
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Service
revenue, as
reported -
prior year
period $92,937 $94,623 $95,691 $96,749 $380,003 $97,242 $98,799 $103,017 $105,177 $404,234
------------ ------- ------- ------- ------- -------- ------- ------- -------- -------- --------
Constant
currency
increase $8,626 $8,961 $11,604 $11,733 $40,870 $11,904 $10,988 $9,972 $10,695 $43,558
--------- ------ ------ ------- ------- ------- ------- ------- ------ ------- -------
Percent
increase 9.3% 9.5% 12.1% 12.1% 10.8% 12.2% 11.1% 9.7% 10.2% 10.8%
--------- --- --- ---- ---- ---- ---- ---- --- ---- ----
(2) Service revenue, as adjusted for
currency impact, is determined
by translating the service
revenue for the current period
at the average foreign currency
exchange rates for the
comparable prior year period.
The Company believes that
disclosing year over year
revenue growth without the
impact of foreign currencies on
service revenue is a useful
measure of revenue growth.
Service revenue, as adjusted
for currency impact, is an
integral part of the internal
reporting and planning system
used by management as a
supplement to GAAP financial
information.
Non-GAAP gross profit and Non-GAAP gross margin
-----------------------------------------------
Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below.
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Year 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Year 2016
------- ------- ------- ------- --------- ------- ------- ------- ------- ---------
($ in 000's) - unaudited
------------------------
Service revenue
total $97,242 $98,799 $103,017 $105,177 $404,235 $108,291 $109,955 $113,057 $115,596 $446,900
--------------- ------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Minus - Network
operations expense
including equity-
based compensation
and including
depreciation and
amortization
expense 58,592 59,783 62,816 63,844 245,035 65,030 66,476 67,631 70,162 269,299
------------------- ------ ------ ------ ------ ------- ------ ------ ------ ------ -------
GAAP Gross Profit
(1) $38,650 $39,016 $40,201 $41,333 $159,200 $43,261 $43,479 $45,426 $45,434 $177,601
----------------- ------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Plus - Equity-
based compensation
- network
operations expense 172 160 126 126 584 121 145 161 146 573
------------------- --- --- --- --- --- --- --- --- --- ---
Plus - Depreciation
and amortization
expense 17,513 17,371 17,634 18,008 70,526 17,753 18,604 18,804 20,073 75,234
------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Non-GAAP Gross
Profit (2) $56,335 $56,547 $57,961 $59,467 $230,310 $61,135 $62,228 $64,391 $65,653 $253,408
-------------- ------- ------- ------- ------- -------- ------- ------- ------- ------- --------
GAAP Gross Margin
(1) 39.7% 39.5% 39.0% 39.3% 39.4% 39.9% 39.5% 40.2% 39.3% 39.7%
----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Non-GAAP Gross
Margin (2) 57.9% 57.2% 56.3% 56.5% 57.0% 56.5% 56.6% 57.0% 56.8% 56.7%
-------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(1) GAAP gross profit is defined as
total service revenue less
network operations expense,
depreciation and amortization and
equity based compensation
included in network operations
expense. GAAP gross margin is
defined as GAAP gross profit
divided by total service revenue.
(2) Non-GAAP gross profit represents
service revenue less network
operations expense, excluding
equity-based compensation and
amounts shown separately
(depreciation and amortization
expense). Non-GAAP gross margin
is defined as non-GAAP gross
profit divided by total service
revenue. Management believes
that non-GAAP gross profit and
non-GAAP gross margin are
relevant metrics to provide to
investors, as they are metrics
that management uses to measure
the margin and amount available
to the Company after network
service costs, in essence these
are measures of the efficiency of
the Company's network.
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio was 3.89 at September 30, 2016 and 4.73 at December 31, 2016 and Cogent's net leverage ratio was 2.90 at September 30, 2016 and 2.90 at December 31, 2016 and as shown below.
($ in 000's)
- unaudited As of September 30, 2016 As of December 31, 2016
------------ ------------------------ -----------------------
Cash and cash
equivalents $148,151 $274,319
------------- -------- --------
Debt
----
Capital
leases -
current
portion 6,122 6,626
--------- ----- -----
Capital
leases -
long term 134,229 135,335
---------- ------- -------
Senior
unsecured
notes 189,225 189,225
---------- ------- -------
Senior
secured
notes 250,000 375,000
-------- ------- -------
Note payable 2,746 5,521
------------ ----- -----
Total debt 582,322 711,707
---------- ------- -------
Total net
debt 434,171 437,388
--------- ------- -------
Trailing 12
months
EBITDA, as
adjusted 149,609 150,599
----------- ------- -------
Gross
leverage
ratio 3.89 4.73
--------- ---- ----
Net leverage
ratio 2.90 2.90
------------ ---- ----
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, 2016 AND 2015
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $274,319 $203,591
Accounts receivable, net of allowance for doubtful accounts of $1,734 and $1,757,
respectively 33,598 30,718
Prepaid expenses and other current assets 19,706 17,030
------ ------
Total current assets 327,623 251,339
Property and equipment:
Property and equipment 1,136,470 1,070,111
Accumulated depreciation and amortization (774,829) (709,975)
-------- --------
Total property and equipment, net 361,641 360,136
Deferred tax assets 42,241 45,142
Deposits and other assets ($128 and $355 restricted, respectively) 6,387 6,199
----- -----
Total assets $737,892 $662,816
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $11,551 $12,401
Accrued and other current liabilities 47,149 38,355
Installment payment agreement, current portion, net of discounts of $204 and $678,
respectively 2,587 11,901
Current maturities, capital lease obligations 6,626 6,247
----- -----
Total current liabilities 67,913 68,904
Senior secured 2022 notes, net of unamortized debt costs of $2,257 and $1,252,
respectively and including premium of $462 in 2016 373,205 248,748
Senior unsecured 2021 notes, net of unamortized debt costs of $2,575 and $3,305,
respectively 186,650 196,695
Capital lease obligations, net of current maturities 135,335 129,763
Other long term liabilities 28,043 30,977
------ ------
Total liabilities 791,146 675,087
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 45,478,787 and
45,198,718 shares issued and outstanding, respectively 45 45
Additional paid-in capital 442,799 434,161
Accumulated other comprehensive income (17,193) (14,693)
Accumulated deficit (478,905) (431,784)
-------- --------
Total stockholders' deficit (53,254) (12,271)
------- -------
Total liabilities and stockholders' equity $737,892 $662,816
======== ========
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2015
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Three Months
Ended Ended
December 31, 2016 December 31, 2015
----------------- -----------------
(Unaudited) (Unaudited)
Service revenue $115,596 $105,177
Operating expenses:
Network operations (including $146 and $126 of equity-based compensation expense,
respectively, exclusive of depreciation and amortization shown separately below) 50,089 45,836
Selling, general, and administrative (including $2,730 and $2,445 of equity-based
compensation expense, respectively) 31,306 27,182
Depreciation and amortization 20,073 18,008
------ ------
Total operating expenses 101,468 91,026
Gains on equipment transactions 667 2,023
--- -----
Operating income 14,795 16,174
Interest income and other, net 341 440
Interest expense (10,602) (10,280)
------- -------
Income before income taxes 4,534 6,334
Income tax expense (642) (3,854)
---- ------
Net income $3,892 $2,480
====== ======
Comprehensive loss:
Net income $3,892 $2,480
Foreign currency translation adjustment (5,295) (2,746)
------ ------
Comprehensive loss $(1,403) $(266)
======= =====
Net income per common share:
Basic and diluted net income per common share $0.09 $0.06
Dividends declared per common share $0.40 $0.35
Weighted-average common shares - basic 44,577,826 44,323,131
Weighted-average common shares - diluted 44,803,782 44,558,089
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2016
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2016 2015
---- ----
Service revenue $446,900 $404,234
Operating expenses:
Network operations (including $573 and $584 of equity-based compensation expense,
respectively), exclusive of amounts shown separately 194,066 174,510
Selling, general, and administrative (including $10,162 and $10,931 of equity-based
compensation expense, respectively) 120,709 113,103
Depreciation and amortization 75,235 70,527
------ ------
Total operating expenses 390,010 358,140
------- -------
Gains on equipment transactions 7,739 5,443
Gains on capital lease terminations - 11,643
Losses on debt extinguishment and redemption (587) (10,144)
---- -------
Operating income 64,042 53,036
Interest income and other 1,021 956
Interest expense (40,803) (41,280)
------- -------
Income before income taxes 24,260 12,712
Income tax expense (9,331) (7,816)
------ ------
Net income $14,929 $4,896
======= ======
Comprehensive income (loss):
Net income $14,929 $4,896
Foreign currency translation adjustment (2,500) (8,231)
------ ------
Comprehensive income (loss) $12,429 $(3,335)
======= =======
Net income per common share:
Basic and diluted net income per common share $0.33 $0.11
Dividends declared per common share $1.51 $1.46
Weighted-average common shares-basic 44,641,805 44,888,723
Weighted-average common shares-diluted 44,873,030 45,159,489
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2015
(IN THOUSANDS)
Three months Three months
Ended Ended
December 31, 2016 December 31, 2015
----------------- -----------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $3,892 $2,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 20,074 18,008
Amortization of debt discount and premium 226 181
Equity-based compensation expense (net of amounts capitalized) 2,876 2,571
(Gains) losses - equipment transactions and other, net (549) (1,898)
Deferred income taxes 771 3,879
Changes in operating assets and liabilities:
Accounts receivable, net (705) 1
Prepaid expenses and other current assets 333 356
Accounts payable, accrued liabilities and other long-term liabilities 5,768 (3,408)
Deposits and other assets 1,193 (171)
----- ----
Net cash provided by operating activities 33,879 21,999
------ ------
Cash flows from investing activities:
Purchases of property and equipment (7,195) (4,962)
------ ------
Net cash used in investing activities (7,195) (4,962)
------ ------
Cash flows from financing activities:
Dividends paid (18,199) (16,045)
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 326 135
Principal payments of installment payment agreement - (575)
Principal payments of capital lease obligations (2,808) (3,273)
------ ------
Net cash provided by (used in) financing activities 100,760 (19,758)
------- -------
Effect of exchange rates changes on cash (1,276) (978)
------ ----
Net increase (decrease) in cash and cash equivalents 126,168 (3,699)
Cash and cash equivalents, beginning of period 148,151 207,290
------- -------
Cash and cash equivalents, end of period $274,319 $203,591
======== ========
COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2016
(IN THOUSANDS)
2016 2015
---- ----
Cash flows from operating activities:
Net income $14,929 $4,896
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 75,235 70,527
Amortization of debt discount and premium 1,105 171
Equity-based compensation expense (net of amounts capitalized) 10,735 11,515
Loss on debt extinguishment and redemption 587 10,144
Gains on capital lease terminations - (11,643)
Gains-equipment transactions and other, net (7,674) (4,866)
Deferred income taxes 9,224 7,709
Changes in operating assets and liabilities:
Accounts receivable (3,183) 1,119
Prepaid expenses and other current assets (2,923) (2,898)
Deposits and other assets (336) (221)
Accounts payable, accrued liabilities and other long-term liabilities 10,268 (2,644)
------ ------
Net cash provided by operating activities 107,967 83,809
------- ------
Cash flows from investing activities:
Purchases of property and equipment (45,234) (35,582)
Proceeds from asset sales - 111
--- ---
Net cash used in investing activities (45,234) (35,471)
------- -------
Cash flows from financing activities:
Net proceeds from issuance of senior secured 2022 notes-net of debt costs of $1,202
and $1,397, respectively 124,267 248,603
Extinguishment of 2021 senior unsecured notes (10,775) -
Redemption of 2018 secured notes - (251,280)
Dividends paid (68,210) (66,314)
Principal payments of capital lease obligations (12,466) (20,215)
Principal payments on installment payment agreement (21,203) (670)
Purchases of common stock (4,492) (39,394)
Proceeds from exercises of common stock options 1,220 423
----- ---
Net cash provided by (used in) financing activities 8,341 (128,847)
----- --------
Effect of exchange rate changes on cash (346) (3,690)
---- ------
Net increase (decrease) in cash and cash equivalents 70,728 (84,199)
Cash and cash equivalents, beginning of year 203,591 287,790
------- -------
Cash and cash equivalents, end of year $274,319 $203,591
======== ========
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; 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, 2016 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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cogent-communications-reports-fourth-quarter-and-full-year-2016-results-and-increases-regular-quarterly-dividend-on-common-stock-300411806.html
SOURCE Cogent Communications Holdings, Inc.
