PR Newswire | Feb 25, 2021 07:00AM EST

Increases its Regular Quarterly Dividend on its Common Stock by $0.025

02/25 05:59 CST

Cogent Communications Reports Fourth Quarter and Full Year 2020 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025 WASHINGTON, Feb. 25, 2021

WASHINGTON, Feb. 25, 2021 /PRNewswire/ --

Financial and Business Highlights

* Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.755 per share for Q1 2021 as compared to $0.730 per share for Q4 2020 - Cogent's thirty-fourth consecutive quarterly dividend increase. * The Q1 2021 $0.755 dividend per share represents an annual increase of 14.4% from the dividend per share of $0.660 for Q1 2020.

* Dividends for 2020 totaled $129.4 million, or $$2.780 per share, with 63.1% treated as a return of capital and 36.9% treated as dividends for US federal income tax purposes. * Service revenue increased by 1.1% from Q3 2020 to Q4 2020, increased from Q4 2019 to Q4 2020 by 2.6% and increased from full year 2019 to full year 2020 by 4.0%. * GAAP gross profit increased by 3.6% from Q4 2019 to $66.6 million for Q4 2020 and increased from full year 2019 to full year 2020 by 2.3% to $251.9 million. Non-GAAP gross profit increased by 5.6% from Q4 2019 to $89.4 million for Q4 2020 and increased from full year 2019 to full year 2020 by 7.0% to $350.2 million. * GAAP gross margin increased by 50 basis points from Q4 2019 to Q4 2020 to 46.3% and increased from full year 2019 to full year 2020 by 160 basis points to 46.7%. Non-GAAP gross margin increased by 180 basis points from Q4 2019 to Q4 2020 to 62.1% and increased from full year 2019 to full year 2020 by 170 basis points to 61.6%.

* Net cash provided by operating activities was $37.6 million for Q4 2020, $33.0 million for Q3 2020 and $46.1 million for Q4 2019. Net cash provided by operating activities was $148.8 million for full year 2019 and $140.3 million for full year 2020. * Sales rep productivity - units per full time equivalent sales rep per month - increased from 3.7 for Q3 2020 to 4.2 for Q4 2020. * EBITDA margin increased by 30 basis points from Q3 2020 to 38.7% for Q4 2020, increased by 110 basis points from Q4 2019 to Q4 2020 and increased from full year 2019 to full year 2020 by 150 basis points to 37.7%. * EBITDA increased by 2.0% from Q3 2020 to $55.7 million for Q4 2020, increased by 5.6% from Q4 2019 to Q4 2020 and increased from full year 2019 to full year 2020 by 8.1% to $214.0 million.

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $143.9 million for the three months ended December 31, 2020, an increase of 1.1% from the three months ended September 30, 2020 and an increase of 2.6% from the three months ended December 31, 2019. Service revenue was $568.1 million for the year ended December 31, 2020, an increase of 4.0% from the year ended December 31, 2019. Foreign exchange positively impacted service revenue growth from the three months ended September 30, 2020 to the three months ended December 31, 2020 by $0.6 million, positively impacted service revenue growth from the three months ended December 31, 2019 to the three months ended December 31, 2020 by $1.9 million and positively impacted service revenue growth from the year ended December 31, 2019 to the year ended December 31, 2020 by $1.5 million. On a constant currency basis, service revenue increased by 0.7% from the three months ended September 30, 2020 to the three months ended December 31, 2020, grew by 1.2% from the three months ended December 31, 2019 to the three months ended December 31, 2020 and grew by 3.7% from the year ended December 31, 2019 to the year ended December 31, 2020.

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 $107.1 million for the three months ended December 31, 2020; an increase of 1.9% from the three months ended September 30, 2020 and an increase of 4.3% over the three months ended December 31, 2019. On-net revenue was $419.5 million for the year ended December 31, 2020; an increase of 5.7% over the year ended December 31, 2019.

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 $36.7 million for the three months ended December 31, 2020; a decrease of 1.1% from the three months ended September 30, 2020 and a decrease of 2.2% from the three months ended December 31, 2019. Off-net revenue was $148.1 million for the year ended December 31, 2020; a decrease of 0.5% from the year ended December 31, 2019.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.

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 3.6% from the three months ended December 31, 2019 to $66.6 million for the three months ended December 31, 2020 and increased by 0.7% from the three months ended September 30, 2020. GAAP gross profit increased by 7.9% from the year ended December 31, 2019 to $265.5 million for the year ended December 31, 2020. GAAP gross margin was 46.3% for the three months ended December 31, 2020, 45.8% for the three months ended December 31, 2019 and 46.5% for the three months ended September 30, 2020. GAAP gross margin was 46.7% for the year ended December 31, 2020 and 45.1% for the year ended December 31, 2019.

Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $4.1 million for the three months ended December 31, 2020, $4.3 million for the three months ended December 31, 2019, $3.9 million for the three months ended September 30, 2020, $15.1 million for the year ended December 31, 2020 and $14.9 million for the year ended December 31, 2019.

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 5.6% from the three months ended December 31, 2019 to $89.4 million for the three months ended December 31, 2020 and increased by 1.4% from the three months ended September 30, 2020. Non-GAAP gross profit increased by 7.0% from the year ended December 31, 2019 to $350.2 million for the year ended December 31, 2020. Non-GAAP gross profit margin was 62.1% for the three months ended December 31, 2020, 60.3% for the three months ended December 31, 2019 and 61.9% for the three months ended September 30, 2020. Non-GAAP gross margin was 61.6% for the year ended December 31, 2020 and 59.9% for the year ended December 31, 2019.

Net cash provided by operating activities decreased by 18.5% from the three months ended December 31, 2019 to $37.6 million for the three months ended December 31, 2020 and increased by 13.9% from the three months ended September 30, 2020. Net cash provided by operating activities decreased by 5.7% from the year ended December 31, 2019 to $140.3 million for the year ended December 31, 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 5.6% from the three months ended December 31, 2019 to $55.7 million for the three months ended December 31, 2020 and increased by 2.0% from the three months ended September 30, 2020. EBITDA increased by 8.1% from the year ended December 31, 2019 to $214.0 million for the year ended December 31, 2020. EBITDA margin was 38.7% for the three months ended December 31, 2020, 37.6% for the three months ended December 31, 2019 and 38.4% for the three months ended September 30, 2020. EBITDA margin was 37.7% for the year ended December 31, 2020 and 36.2% for the year ended December 31, 2019.

Basic and diluted net (loss) income per share was $(0.14) for the three months ended December 31, 2020, $0.16 for the three months ended December 31, 2019 and $(0.11) for the three months ended September 30, 2020. Basic net income per share was $0.14 for the year ended December 31, 2020 and $0.82 for the year ended December 31, 2019. Diluted net income per share was $0.13 for the year ended December 31, 2020 and $0.81 for the year ended December 31, 2019.

Unrealized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Unsecured Notes were $(19.2) million for the three months ended December 31, 2020, $(4.1) million for the three months ended December 31, 2019, $(17.3) million for the three months ended September 30, 2020, $(37.0) million for the year ended December 31, 2020 and $2.3 million for the year ended December 31, 2019.

Total customer connections increased by 3.5% from December 31, 2019 to 89,600 as of December 31, 2020 and increased by 1.2% from September 30, 2020. On-net customer connections increased by 3.7% from December 31, 2019 to 77,305 as of December 31, 2020 and increased by 1.3% from September 30, 2020. Off-net customer connections increased by 2.7% from December 31, 2019 to 11,970 as of December 31, 2020 and increased by 1.0% from September 30, 2020.

The number of on-net buildings increased by 113 from December 31, 2019 to 2,914 as of December 31, 2020 and increased by 30 from September 30, 2020.

Quarterly Dividend Increase Approved

On February 24, 2021, Cogent's Board approved a regular quarterly dividend of $0.755 per common share payable on March 26, 2021 to shareholders of record on March 12, 2021. This first quarter 2021 regular dividend represents a 3.4% increase of $0.025 per share from the fourth quarter 2020 regular dividend of $0.730 per share and an annual increase of 14.4% from the Q1 2020 dividend of $0.660 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 indenture agreements and other factors deemed relevant by the Board.

Tax Treatment of 2020 Dividends

Cogent paid four quarterly dividends in 2020 totaling $129.4 million, or $2.78 per share. The expected tax treatment of these dividends are generally that 63.1% are treated as a return of capital and 36.9% 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.

Impact of COVID-19

Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. Cogent's workforce continues to work remotely with dedication.

The ongoing impact of the COVID-19 pandemic and related government restrictions on Cogent's business is unknown as a significant amount of uncertainty and volatility remains. Cogent does not know the ultimate scope and duration of the pandemic, the availability and efficacy of vaccines and therapeutic treatments, government actions that have been taken, or may be taken in the future in response to the pandemic and global economic conditions during and after the pandemic. While Cogent's workforce is working remotely, Cogent provides no assurance that this will be sufficient to protect its workforce or its key employees. Moreover, Cogent's results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue. Cogent may also experience slowdowns in new customer orders, find it difficult to collect from customers who are experiencing financial distress, undergo an increase in customer churn, encounter difficulties accessing the buildings and locations where Cogent installs new services and serves existing customers, or have difficulties procuring, shipping or installing necessary equipment on its network. Cogent may also find that its largest customer base, which is served primarily in its multi-tenant office buildings, may be adversely affected by falling demand for commercial office space in central business districts as companies located in these buildings elect not to return to their office space either on a temporary or even permanent basis or slow the pace of opening new offices. In addition, Cogent's corporate customer base may reduce their overall number of locations due to adverse economic conditions or new working configurations which may adversely affect Cogent's number of corporate connections and service revenues. As a result, the global economic impact of the COVID-19 pandemic may have prolonged effects that impact Cogent's business well into the future. These and other risks will be described in more detail in Cogent's Annual Report on Form 10-K for the year ended December 31, 2020 and are set forth in its Quarterly Reports on Form 10-Q for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020.

Conference Call and Website Information

Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 25, 2021 to discuss Cogent's operating results for the fourth quarter of 2020 and full year 2020 and to discuss Cogent's expectations for full year 2021. 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 over 200 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 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020

Metric ($ in 000's, except share and per share data) - unaudited

On-Net revenue$97,183 $97,472 $99,416 $102,683 $103,457 $103,800 $105,091 $107,109

% Change from previous 1.9% 0.3% 2.0% 3.3% 0.8% 0.3% 1.2% 1.9% Qtr.

Off-Net $36,843 $37,191 $37,418 $37,479 $37,321 $37,044 $37,092 $36,672 revenue

% Change from previous 0.8% 0.9% 0.6% 0.2% -0.4% -0.7% 0.1% -1.1% Qtr.

Non-Core $111 $126 $108 $130 $137 $146 $119 $120 revenue (1)

% Change from previous -24.5% 13.5% -14.3% 20.4% 5.4% 6.6% -18.5% 0.8% Qtr.

Service revenue - $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302 $143,901 total

% Change from previous 1.6% 0.5% 1.6% 2.4% 0.4% 0.1% 0.9% 1.1% Qtr.

Constant currency total revenue quarterly 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% -0.2% 0.7% growth rate - sequential quarters (6)

Constant currency total revenue quarterly 5.8% 5.4% 6.0% 6.8% 5.6% 5.1% 3.1% 1.2% growth rate - year over year quarters (6)

Excise Taxes included in $3,391 $3,191 $3,998 $4,334 $3,743 $3,298 $3,902 $4,144 service revenue

% Change from previous 4.9% -5.9% 25.3% 8.4% -13.6% -11.9% 18.3% 6.2% Qtr.

Network operations $53,970 $54,181 $54,971 $55,684 $55,669 $53,581 $54,173 $54,513 expenses (2)

% Change from previous -2.6% 0.4% 1.5% 1.3% -% -3.8% 1.1% 0.6% Qtr.

GAAP gross $59,724 $60,403 $61,683 $64,300 $65,486 $67,208 $66,164 $66,617 profit (3)

% Change from previous 7.7% 1.1% 2.1% 4.2% 1.8% 2.6% -1.6% 0.7% Qtr.

GAAP gross 44.5% 44.8% 45.0% 45.8% 46.5% 47.7% 46.5% 46.3% margin (3)

Non-GAAP gross$80,167 $80,608 $81,971 $84,608 $85,246 $87,409 $88,129 $89,388 profit (4) (6)

% Change from previous 4.6% 0.6% 1.7% 3.2% 0.8% 2.5% 0.8% 1.4% Qtr.

Non-GAAP gross59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9% 62.1% margin (4) (6)

Selling, general and $32,568 $33,503 $31,456 $31,884 $34,852 $34,061 $33,546 $33,713 administrative expenses (5)

% Change from previous 12.2% 2.9% -6.1% 1.4% 9.3% -2.3% -1.5% 0.5% Qtr.

Depreciation and $20,263 $19,979 $20,006 $20,002 $19,508 $19,896 $21,619 $22,455 amortization expense

% Change from previous -3.3% -1.4% 0.1% -% -2.5% 2.0% 8.7% 3.9% Qtr.

Equity-based compensation $3,434 $5,289 $4,797 $4,940 $5,075 $6,083 $6,522 $5,846 expense

% Change from previous -22.1% 54.0% -9.3% 3.0% 2.7% 19.9% 7.2% -10.4% Qtr.

Operating $24,400 $22,022 $25,799 $28,033 $25,850 $27,574 $26,036 $27,384 income

% Change from previous 9.4% -9.7% 17.2% 8.7% -7.8% 6.7% -5.6% 5.2% Qtr.

Interest $13,456 $13,595 $15,191 $15,211 $15,220 $15,499 $15,760 $16,007 expense

% Change from previous -0.4% 1.0% 11.7% 0.1% 0.1% 1.8% 1.7% 1.6% Qtr.

Net income $9,217 $7,136 $13,701 $7,465 $9,227 $8,564 $(4,955) $(6,620) (loss)

Realized and unrealized gains (losses)$- $177 $6,128 $(4,068) $2,908 $(873) $(17,315) $(19,170) on 2024 Euro Notes

Basic net income (loss) $0.20 $0.16 $0.30 $0.16 $0.20 $0.19 $(0.11) $(0.14) per common share

Diluted net income (loss) $0.20 $0.16 $0.30 $0.16 $0.20 $0.18 $(0.11) $(0.14) per common share

Weighted average common45,223,157 45,354,327 45,438,656 45,553,727 45,658,565 45,754,880 45,815,718 45,904,943 shares - basic

% Change from previous -0.1% 0.3% 0.2% 0.3% 0.2% 0.2% 0.1% 0.2% Qtr.

Weighted average common45,644,236 45,912,291 46,019,691 46,145,970 46,391,066 46,686,665 45,815,718 45,904,943 shares - diluted

% Change from previous -0.3% 0.6% 0.2% 0.3% 0.5% 0.6% -1.9% 0.2% Qtr.

EBITDA (6) $47,561 $47,105 $50,515 $52,724 $50,394 $53,348 $54,583 $55,675

% Change from previous -% -1.0% 7.2% 4.4% -4.4% 5.9% 2.3% 2.0% Qtr.

EBITDA margin 35.5% 34.9% 36.9% 37.6% 35.8% 37.8% 38.4% 38.7%

Gains on asset related $536 $185 $87 $251 $39 $205 $99 $10 transactions

EBITDA, as $48,097 $47,290 $50,602 $52,975 $50,433 $53,553 $54,682 $55,685 adjusted (6)

% Change from previous 0.9% -1.7% 7.0% 4.7% -4.8% 6.2% 2.1% 1.8% Qtr.

EBITDA, as adjusted, 35.9% 35.1% 37.0% 37.8% 35.8% 38.0% 38.4% 38.7% margin

Net cash provided by $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 $32,980 $37,571 operating activities

% Change from previous -29.7% 41.9% -17.7% 37.8% -38.3% 45.2% -20.2% 13.9% Qtr.

Capital $13,288 $11,720 $12,051 $9,899 $12,866 $13,930 $13,296 $15,860 expenditures

% Change from previous 21.5% -11.8% 2.8% -17.9% 30.0% 8.3% -4.6% 19.3% Qtr.

Principal payments of capital $3,030 $1,976 $2,029 $2,056 $6,167 $3,716 $9,509 $4,598 (finance) lease obligations

% Change from previous 42.4% -34.8% 2.7% 1.3% 200.0% -39.7% 155.9% -51.6% Qtr.

Dividends paid$26,565 $27,741 $28,565 $29,776 $30,557 $31,738 $32,657 $34,460

Purchases of $ - $ - $ - $ - $ - $- $270 $4,225 common stock

Gross Leverage4.28 5.08 4.97 4.86 4.78 5.08 5.10 5.14 Ratio

Net Leverage 2.92 2.93 2.92 2.86 2.92 3.07 3.24 3.40 Ratio

Customer Connections - end of period

On-Net 71,066 72,415 73,870 74,554 75,163 75,927 76,338 77,305

% Change from previous 3.3% 1.9% 2.0% 0.9% 0.8% 1.0% 0.5% 1.3% Qtr.

Off-Net 11,138 11,321 11,503 11,660 11,721 11,846 11,849 11,970

% Change from previous 1.5% 1.6% 1.6% 1.4% 0.5% 1.1% 0.0% 1.0% Qtr.

Non-Core (1) 318 318 319 325 329 339 322 325

% Change from previous -12.2% -% -0.3% 1.9% 1.2% 3.0% -5.0% 0.9% Qtr.

Total customer82,522 84,054 85,692 86,539 87,213 88,112 88,509 89,600 connections

% Change from previous 3.0% 1.9% 1.9% 1.0% 0.8% 1.0% 0.5% 1.2% Qtr.

On-Net Buildings - end of period

Multi-Tenant office 1,746 1,751 1,757 1,767 1,769 1,771 1,783 1,792 buildings

Carrier neutral data 908 933 960 980 1,000 1,029 1,047 1,068 center buildings

Cogent data 52 53 54 54 54 54 54 54 centers

Total on-net 2,706 2,737 2,771 2,801 2,823 2,854 2,884 2,914 buildings

Total carrier neutral data 1,071 1,101 1,128 1,153 1,175 1,203 1,225 1,252 center nodes

Square feet - multi-tenant office 949,486,923951,031,709954,013,024957,173,183961,154,384962,049,183968,355,695976,813,678buildings - on-net

Network - end of period

Intercity 57,426 57,426 57,426 57,600 58,009 58,009 58,142 58,285 route miles

Metro fiber 33,664 34,163 34,985 35,526 36,079 36,438 36,725 37,567 miles

Connected networks - 6,668 6,762 6,844 6,954 7,042 7,133 7,222 7,338 AS's

Headcount - end of period

Sales force - 501 519 530 548 542 572 597 569 quota bearing

Sales force - 639 656 667 686 684 716 740 712 total

Total 997 1,026 1,036 1,055 1,052 1,083 1,110 1,083 employees

Sales rep productivity - units per full time 5.1 4.9 4.4 4.1 4.5 4.0 3.7 4.2 equivalent sales rep ("FTE") per month

FTE - sales 464 478 488 502 522 533 563 542 reps

(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent.

Network operations expense excludes equity-based compensation expense of $180, $226, $282, $306, $252, $305, $346 and $316 in the three month periods ended March 31, 2019 through December 31, 2020, respectively. (2) Network operations expense includes excise taxes, including Universal Service Fund fees of $3,391, $3,191, $3,998, $4,334, $3,743, $3,298, $3,902 and $4,144 in the three month periods ended March 31, 2019 through December 31, 2020, respectively.

GAAP gross profit is defined as total service revenue less network(3) 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.

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(4) as non-GAAP gross profit divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross profit margin are relevant metrics to provide investors, as they are metrics that management uses to measure the margin available to the company after network service costs, in essence a measure of the efficiency of the Company's network.

Excludes equity-based compensation expense of $3,254, $5,063, $4,515,(5) $4,634, $4,823, $5,778, $6,176 and $5,530 in the three month periods ended March 31, 2019 through December 31, 2020, respectively.

(6) See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures.

Schedules of Non-GAAP Measures

EBITDA and EBITDA, as adjusted

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, 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 net cash provided by operating activities in the table below.



Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020

($ in 000's) - unaudited

Net cash provided by $28,637$40,632$33,443$46,097$148,809$28,458$41,311$32,980$37,571$140,320operating activities

Changes in operating 6,727 (5,729)3,785 (6,557)(1,949) 5,325 $ $6,255 $1,920 $12,780 assets and (3,232) liabilities

Cash interest expense and 12,197 12,202 13,287 13,184 51,045 16,611 15,269 15,348 16,184 60,895 income tax expense

EBITDA $47,561$47,105$50,515$52,724$197,905$50,394$53,348$54,583$55,675$213,995

PLUS: Gains on asset 536 185 87 251 1,059 39 205 99 10 352 related transactions

EBITDA, as $48,097$47,290$50,602$52,975$198,964$50,433$53,553$54,682$55,685$214,347adjusted

EBITDA 35.5% 34.9% 36.9% 37.6% 36.2% 35.8% 37.8% 38.4% 38.7% 37.7% margin

EBITDA, as adjusted, 35.9% 35.1% 37.0% 37.8% 36.4% 35.8% 38.0% 38.4% 38.7% 37.7% margin







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



Constant currency impact on revenue changes - sequential periods



($ in Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year 000's) - 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 unaudited

Service revenue, as $134,137$134,789$136,942$140,292$546,159$140,915$140,990$142,302$143,901$568,103reported - current period

Impact of foreign currencies135 260 176 88 5,286 184 202 (1,616) (621) (1,492) on service revenue

Service revenue - as adjusted $134,272$135,049$137,118$140,380$551,445$141,099$141,192$140,686$143,280$566,611for currency impact (1)

Service revenue, as reported -$132,049$134,137$134,789$136,942$520,193$140,292$140,915$140,990$142,302$546,159prior sequential period

Constant currency $2,223 $912 $2,329 $3,438 $31,252 $807 $277 $(304) $978 $20,452 (decrease) increase

Constant currency percent 1.7% 0.7% 1.7% 2.5% 6.0% 0.6% 0.2% (0.2)% 0.7% 3.7% (decrease) increase

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(1) 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 Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year 000's) - 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 unaudited

Service revenue, as $134,137$134,789$136,942$140,292$546,159$140,915$140,990$142,302$143,901$568,103reported - current period

Impact of foreign currencies2,078 1,505 1,058 683 5,286 746 674 (1,141) (1,891) (1,492) on service revenue

Service revenue - as adjusted $136,215$136,294$138,000$140,975$551,445$141,661$141,664$141,161$142,010$566,611for currency impact (2)

Service revenue, as $128,706$129,296$130,139$132,049$520,193$134,137$134,789$136,942$140,292$546,159reported - prior year period

Constant currency $7,509 $6,998 $7,861 $8,926 $31,252 $7,524 $6,875 $4,219 $1,718 $20,452 increase

Percent 5.8% 5.4% 6.0% 6.8% 6.0% 5.6% 5.1% 3.1% 1.2% 3.7% increase

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(2) 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 2019 Q2 2019 Q3 2019 Q4 2019 Year Q1 2020 Q2 2020 Q3 2020 Q4 2020 Year 2019 2020

($ in 000's) - unaudited

Service revenue $134,137$134,789$136,942$140,292$546,159$140,915$140,990$142,302$143,901$568,103total

Minus - Network operations expense including equity-based compensation74,413 74,386 75,259 75,992 300,050 75,429 73,782 76,138 77,284 302,633 and including depreciation and amortization expense

GAAP Gross $59,724 $60,403 $61,683 $64,300 $246,109$65,486 $67,208 $66,164 $66,617 $265,470Profit (1)

Plus - Equity-based compensation180 226 282 306 994 252 305 346 316 1,219 - network operations expense

Plus - Depreciation and 20,263 19,979 20,006 20,002 80,247 19,508 19,896 21,619 22,455 83,477 amortization expense

Non-GAAP Gross Profit$80,167 $80,608 $81,971 $84,608 $327,350$85,246 $87,409 $88,129 $89,388 $350,166(2)

GAAP Gross 44.5% 44.8% 45.0% 45.8% 45.1% 46.5% 47.7% 46.5% 46.3% 46.7% Margin (1)

Non-GAAP Gross Margin59.8% 59.8% 59.9% 60.3% 59.9% 60.5% 62.0% 61.9% 62.1% 61.6% (2)

GAAP gross profit is defined as total service revenue less network(1) 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.

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(2) 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 and net leverage ratio are shown below.

($ in 000's) - unaudited As of September 30, As of December 31, 2020 2020

Cash and cash equivalents $393,293 $371,301

Debt

Capital (finance) leases - current 15,252 15,702 portion

Capital (finance) leases - long term197,688 203,438

Senior Secured 2022 Notes 445,000 445,000

Senior Unsecured Euro 2024 Notes 410,365 429,264

Note payable 10,404 7,712

Total debt 1,078,709 1,101,116

Total net debt 685,416 729,815

Trailing 12 months EBITDA, as 211,643 214,353 adjusted

Gross leverage ratio 5.10 5.14

Net leverage ratio 3.24 3.40

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, 2020 AND 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



2020 2019

Assets

Current assets:

Cash and cash equivalents $371,301 $399,422

Accounts receivable, net of allowance for credit 44,185 40,484 losses of $1,921 and $1,771, respectively

Prepaid expenses and other current assets 40,851 35,822

Total current assets 456,337 475,728

Property and equipment:

Property and equipment 1,515,867 1,366,782

Accumulated depreciation and amortization (1,085,532) (997,853)

Total property and equipment, net 430,335 368,929

Right-of-use leased assets 99,666 73,460

Deposits and other assets 14,139 14,007

Total assets $1,000,477 $932,124

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $9,775 $11,075

Accrued and other current liabilities 51,029 51,301

Current maturities, operating lease liabilities 11,151 10,101

Installment payment agreement, current portion, 6,786 9,063 net of discount of $136 and $350, respectively

Finance lease obligations, current maturities 15,702 8,154

Total current liabilities 94,443 89,694

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $2,961 and $1,410, respectively and 425,160 150,001 net of discount of $1,142 and $0, respectively

Senior secured 2022 notes, net of unamortized debt costs of $1,052 and $1,897 respectively and including 444,492 444,088 premium of $544 and $985, respectively

Senior unsecured 2021 notes, net of unamortized - 188,368 debt costs of $857

Operating lease liabilities, net of current 111,318 86,690 maturities

Finance lease obligations, net of current 203,438 161,635 maturities

Other long-term liabilities 14,792 15,327

Total liabilities 1,293,643 1,135,803

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 47,214,077 and 46,840,434 shares issued and 47 47 outstanding, respectively

Additional paid-in capital 515,867 493,178

Accumulated other comprehensive income (loss) (1,306) (12,326)

Accumulated deficit (807,774) (684,578)

Total stockholders' deficit (293,166) (203,679)

Total liabilities and stockholders' equity $1,000,477 $932,124

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Three Months Three Months Ended Ended December 31, 2020 December 31, 2019

Service revenue $ 143,901 $ 140,292

Operating expenses:

Network operations (including $316 and$306 of equity- based compensation expense, 54,829 55,990respectively), exclusive of amounts shown separately

Selling, general, and administrative(including $5,530 and $4,634 of equity-based 39,243 36,518compensation expense, respectively)

Depreciation and amortization 22,455 20,002

Total operating expenses 116,527 112,510

Gains on equipment transactions 10 251

Operating income 27,384 28,033

Interest expense (16,007) (15,211)

Unrealized foreign exchange (loss) gain (19,170) (4,068)on 2024 Euro Notes

Interest income and other 529 2,012

(Loss) income before income taxes (7,264) 10,766

Income tax benefit (expense) 644 (3,301)

Net (loss) income $ (6,620) $ 7,465

Comprehensive (loss) income:

Net (loss) income $ (6,620) $ 7,465

Foreign currency translation adjustment 6,192 3,350

Comprehensive (loss) income $ (428) $ 10,815

Basic net (loss) income per common share $ (0.14) $ 0.16

Diluted net (loss) income per common $ (0.14) $ 0.16share

Dividends declared per common share $ 0.73 $ 0.64

Weighted-average common shares-basic 45,904,943 45,553,727

Weighted-average common shares-diluted 45,904,943 46,145,970







COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2020

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



2020 2019 2018

Service revenue $568,103 $546,159 $520,193

Operating expenses:

Network operations (including $1,219, $994 and $895 of equity-based compensation expense, 219,157 219,801 219,526 respectively), exclusive of amounts shown separately

Selling, general, and administrative (including $22,306, $17,466 and $16,813 of equity-based 158,476 146,913 133,858 compensation expense, respectively)

Depreciation and amortization 83,477 80,247 81,233

Total operating expenses 461,110 446,961 434,617

Gains on equipment transactions 352 1,059 982

Losses on lease terminations (423) - -

Operating income 106,922 100,257 86,558

Interest expense (62,486) (57,453) (51,056)

Realized foreign exchange gain on 2024 2,533 - - Euro Notes

Unrealized foreign exchange (loss) (36,997) 2,271 - gain on 2024 Euro Notes

Loss on debt extinguishment and (638) - - redemption - 2021 Notes

Interest income and other 978 7,599 5,880

Income before income taxes 10,312 52,674 41,382

Income tax expense (4,096) (15,154) (12,715)

Net income $6,216 $37,520 $28,667



Comprehensive income:

Net income $6,216 $37,520 $28,667

Foreign currency translation 11,020 (1,398) (6,328) adjustment

Comprehensive income $17,236 $36,122 $22,339



Basic net income per common share $0.14 $0.82 $0.63

Diluted net income per common share $0.13 $0.81 $0.63



Dividends declared per common share $2.78 $2.44 $2.12



Weighted-average common shares-basic 45,947,772 45,542,315 45,280,161



Weighted-average common shares-diluted 46,668,198 46,080,395 45,780,954

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

(IN THOUSANDS)

Three Months Three Months Ended Ended December 31, 2020 December 31, 2019

Cash flows from operating activities:

Net (loss) income $ (6,620) $ 7,466

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

Depreciation and amortization 22,455 20,001

Amortization of debt discount and 468 479premium

Equity-based compensation expense (net 5,846 4,940of amounts capitalized)

Gains-equipment transactions and other, (115) (263)net

Unrealized foreign currency exchange 19,170 4,068loss on 2024 Euro notes

Deferred income taxes (1,818) 2,873

Changes in operating assets andliabilities:

Accounts receivable (1,600) 1,110

Prepaid expenses and other current 482 1,132assets

Deposits and other assets (245) 599

Accounts payable, accrued liabilities (452) 3,692and other long-term liabilities

Net cash provided by operating 37,571 46,097activities

Cash flows from investing activities:

Purchases of property and equipment (15,860) (9,899)

Net cash used in investing activities (15,860) (9,899)

Cash flows from financing activities:

Dividends paid (34,460) (34,460)

Principal payments of capital lease (4,598) (2,056)obligations

Principal payments of installment (2,692) (2,659)payment agreement

Purchases of common stock (4,225) -

Proceeds from exercises of common stock 207 367options

Net cash used in financing activities (45,768) (34,124)

Effect of exchange rate changes on cash 2,065 1,077

Net (decrease) increase in cash and cash (21,992) 3,151equivalents

Cash and cash equivalents, beginning of 393,293 396,271period

Cash and cash equivalents, end of period $ 371,301 $ 399,422







COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2020

(IN THOUSANDS)



2020 2019 2018

Cash flows from operating activities:

Net income $6,216 $37,520 $28,667

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

Depreciation and amortization 83,477 80,247 81,233

Amortization of debt discount and 1,894 1,807 1,533 premium

Equity-based compensation expense (net 23,525 18,460 17,708 of amounts capitalized)

Unrealized foreign currency exchange 36,997 (2,271) - loss (gain) on 2024 Euro Notes

Realized foreign currency exchange gain (2,533) - - on 2024 Euro Notes

Loss on extinguishment of 2021 notes 638 - -

Gains-equipment transactions and other, (546) (358) (1,109) net

Deferred income taxes 282 12,158 11,117

Changes in operating assets and liabilities:

Accounts receivable (2,702) 1,067 (3,204)

Prepaid expenses and other current (2,771) (3,730) (438) assets

Deposits and other assets (873) (1,131) (1,490)

Accounts payable, accrued liabilities (3,284) 5,040 (96) and other long-term liabilities

Net cash provided by operating 140,320 148,809 133,921 activities

Cash flows from investing activities:

Purchases of property and equipment (55,952) (46,958) (49,937)

Net cash used in investing activities (55,952) (46,958) (49,937)

Cash flows from financing activities:

Net proceeds from issuance of senior 2024 Euro Notes, net of debt costs of $2,137 240,285 152,134 - and $1,556, respectively

Net proceeds from issuance of 2022 - - 69,861 Notes, net of debt costs of $1,364

Redemption and extinguishment of 2021 (189,225) - - Notes

Dividends paid (129,412) (112,647) (97,887)

Principal payments of finance lease (23,990) (9,097) (10,286)obligations

Principal payments of installment (10,547) (10,007) (9,437) payment agreement

Purchases of common stock (4,495) - (6,564)

Proceeds from exercises of common stock 1,382 1,637 1,768 options

Net cash (used in) provided by (116,002) 22,020 (52,545)financing activities

Effect of exchange rate changes on cash 3,513 (542) (2,357)

Net (decrease) increase in cash and (28,121) 123,329 29,082 cash equivalents

Cash and cash equivalents, beginning of 399,422 276,093 247,011 year

Cash and cash equivalents, end of year $371,301 $399,422 $276,093

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 the COVID-19 pandemic and the related government policies; future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets;the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue;changes in government policy and/or regulation, including net neutrality rules by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q for the quarters ended March 31,2020, June 30, 2020 and September 30, 2020. 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.