PR Newswire | Nov 5, 2020 07:01AM EST

Regular Quarterly Dividend on its Common Stock by $0.025

11/05 06:00 CST

Cogent Communications Reports Third Quarter 2020 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025 WASHINGTON, Nov. 5, 2020

WASHINGTON, Nov. 5, 2020 /PRNewswire/ --

Financial and Business Highlights

* Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.730 per share for Q4 2020 as compared to $0.705 per share for Q3 2020 - Cogent's thirty-third consecutive quarterly dividend increase * The Q4 2020 $0.730 dividend per share represents an annual increase of 14.1% from the dividend per share of $0.640 for Q4 2019.

* Service revenue increased by 0.9% from Q2 2020 to Q3 2020 and increased from Q3 2019 to Q3 2020 by 3.9%. * GAAP gross profit increased by 7.3% from Q3 2019 to $66.2 million for Q3 2020. Non-GAAP gross profit increased by 7.5% from Q3 2019 to $88.1 million for Q3 2020. * GAAP gross margin increased by 150 basis points from Q3 2019 to Q3 2020 to 46.5%. Non-GAAP gross margin increased by 200 basis points from Q3 2019 to Q3 2020 to 61.9%.

* Net cash provided by operating activities was $33.0 million for Q3 2020, $41.3 million for Q2 2020 and $33.4 million for Q3 2019. * EBITDA margin increased by 60 basis points from Q2 2020 to 38.4% for Q3 2020 and increased by 150 basis points from Q3 2019. * EBITDA increased by 2.3% from Q2 2020 to $54.6 million for Q3 2020 and increased by 8.1% from Q3 2019.

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $142.3 million for the three months ended September 30, 2020, an increase of 0.9% from the three months ended June 30, 2020 and an increase of 3.9% from the three months ended September 30, 2019. Foreign exchange positively impacted service revenue growth from the three months ended June 30, 2020 to the three months ended September 30, 2020 by $1.6 million and positively impacted service revenue growth from the three months ended September 30, 2019 to the three months ended September 30, 2020 by $1.1 million. On a constant currency basis, service revenue declined by 0.2% from the three months ended June 30, 2020 to the three months ended September 30, 2020 and grew by 3.1% from the three months ended September 30, 2019 to the three months ended September 30, 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 $105.1 million for the three months ended September 30, 2020; an increase of 1.2% from the three months ended June 30, 2020 and an increase of 5.7% over the three months ended September 30, 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 $37.1 million for the three months ended September 30, 2020; an increase of 0.1% over the three months ended June 30, 2020 and a decrease of 0.9% over the three months ended September 30, 2019.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell. Non-core revenue was $119,000 for the three months ended September 30, 2020; a decrease of 18.5% from the three months ended June 30, 2020. Non-core revenue was $108,000 for the three months ended September 30, 2019.

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 7.3% from the three months ended September 30, 2019 to $66.2 million for the three months ended September 30, 2020 and decreased by 1.6% from the three months ended June 30, 2020. GAAP gross margin was 46.5% for the three months ended September 30, 2020, 45.0% for the three months ended September 30, 2019 and 47.7% for the three months ended June 30, 2020. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.9 million for the three months ended September 30, 2020, $4.0 million for the three months ended September 30, 2019 and $3.3 million for the three months ended June 30, 2020.

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as Non-GAAP gross profit divided by total service revenue. Non-GAAP gross profit increased by 7.5% from the three months ended September 30, 2019 to $88.1 million for the three months ended September 30, 2020 and increased by 0.8% from the three months ended June 30, 2020. Non-GAAP gross profit margin was 61.9% for the three months ended September 30, 2020, 59.9% for the three months ended September 30, 2019 and 62.0% for the three months ended June 30, 2020.

Net cash provided by operating activities decreased by 1.4% from the three months ended September 30, 2019 to $33.0 million for the three months ended September 30, 2020 and decreased by 20.2% from the three months ended June 30, 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 8.1% from the three months ended September 30, 2019 to $54.6 million for the three months ended September 30, 2020 and increased by 2.3% from the three months ended June 30, 2020. EBITDA margin was 38.4% for the three months ended September 30, 2020, 36.9% for the three months ended September 30, 2019 and 37.8% for the three months ended June 30, 2020.

Basic net (loss) income per share was $(0.11) for the three months ended September 30, 2020, $0.30 for the three months ended September 30, 2019 and $0.19 for the three months ended June 30, 2020. Diluted net (loss) income per share was $(0.11) for the three months ended September 30, 2020, $0.30 for the three months ended September 30, 2019 and $0.18 for the three months ended June 30, 2020.

Unrealized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Notes were $(17.3) million for the three months ended September 30, 2020, $6.2 million for the three months ended September 30, 2019 and $(3.4) million for the three months ended June 30, 2020.

Total customer connections increased by 3.3% from 85,692 as of September 30, 2019 to 88,509 as of September 30, 2020 and increased by 0.5% from 88,112 as of June 30, 2020. On-net customer connections increased by 3.3% from 73,870 as of September 30, 2019 to 76,338 as of September 30, 2020 and increased by 0.5% from 75,927 as of June 30, 2020. Off-net customer connections increased by 3.0% from 11,503 as of September 30, 2019 to 11,849 as of September 30, 2020 and off-net customer connections were 11,846 as of June 30, 2020.

The number of on-net buildings increased by 113 buildings from September 30, 2019 to 2,884 on-net buildings as of September 30, 2020 and increased by 30 on-net buildings from June 30, 2020.

Quarterly Dividend Increase Approved

On November 4, 2020, Cogent's Board approved a regular quarterly dividend of $0.730 per common share payable on December 4, 2020 to shareholders of record on November 20, 2020. This fourth quarter 2020 regular dividend represents a 3.5% increase of $0.025 per share from the third quarter 2020 regular dividend of $0.705 per share and an annual increase of 14.1% from the Q4 2019 dividend of $0.640 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.

Share Buy-back Program Extension and Stock Purchases

On November 4, 2020, the Board extended Cogent's share buy-back program to December 31, 2021.

During the three months ended September 30, 2020 Cogent purchased 4,567 shares of its common stock for $0.3 million. Subsequent to September 30, 2020, Cogent purchased 53,516 shares of its common stock for $3.1 million.

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. During the third quarter of 2020, Cogent experienced a decrease in sales productivity as certain new potential customers decided to delay the purchase of services and certain existing and new corporate customers decided to reduce their number of secondary service locations.

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 scope and duration of the pandemic, what actions governments may take in the future in response to the pandemic and what the impact will be on the economies of the world. 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, 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. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and are set forth in its annual report on Form 10-K for the year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarters ended 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 November 5, 2020 to discuss Cogent's operating results for the third quarter of 2020 and to discuss Cogent's expectations for full year 2020. 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

Metric ($ in000's, exceptshare and pershare data) -unaudited

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

% Changefrom previous 1.9% 0.3% 2.0% 3.3% 0.8% 0.3% 1.2%Qtr.

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

% Changefrom previous 0.8% 0.9% 0.6% 0.2% -0.4% -0.7% 0.1%Qtr.

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

% Changefrom previous -24.5% 13.5% -14.3% 20.4% 5.4% 6.6% -18.5%Qtr.

Servicerevenue - $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302total

% Changefrom previous 1.6% 0.5% 1.6% 2.4% 0.4% 0.1% 0.9%Qtr.

Constantcurrency totalrevenuequarterly 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% -0.2%growth rate -sequentialquarters (6)

Constantcurrency totalrevenuequarterly 5.8% 5.4% 6.0% 6.8% 5.6% 5.1% 3.1%growth rate -year over yearquarters (6)

Excise Taxesincluded in $3,391 $3,191 $3,998 $4,334 $3,743 $3,298 $3,902servicerevenue

% Changefrom previous 4.9% -5.9% 25.3% 8.4% -13.6% -11.9% 18.3%Qtr.

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

% Changefrom previous -2.6% 0.4% 1.5% 1.3% -% -3.8% 1.1%Qtr.

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

% Changefrom previous 7.7% 1.1% 2.1% 4.2% 1.8% 2.6% -1.6%Qtr.

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

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

% Changefrom previous 4.6% 0.6% 1.7% 3.2% 0.8% 2.5% 0.8%Qtr.

Non-GAAP gross 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9%margin (4) (6)

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

% Changefrom previous 12.2% 2.9% -6.1% 1.4% 9.3% -2.3% -1.5%Qtr.

Depreciationand $20,263 $19,979 $20,006 $20,002 $19,508 $19,896 $21,619amortizationexpense

% Changefrom previous -3.3% -1.4% 0.1% -% -2.5% 2.0% 8.7%Qtr.

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

% Changefrom previous -22.1% 54.0% -9.3% 3.0% 2.7% 19.9% 7.2%Qtr.

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

% Changefrom previous 9.4% -9.7% 17.2% 8.7% -7.8% 6.7% -5.6%Qtr.

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

% Changefrom previous -0.4% 1.0% 11.7% 0.1% 0.1% 1.8% 1.7%Qtr.

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

Realized andunrealizedgains (losses) $- $177 $6,128 $(4,032) $2,908 $(873) $(17,315)on 2024 euronotes

Basic netincome per $0.20 $0.16 $0.30 $0.16 $0.20 $0.19 $(0.11)common share

Diluted netincome per $0.20 $0.16 $0.30 $0.16 $0.20 $0.18 $(0.11)common share

Weightedaverage common 45,223,157 45,354,327 45,438,656 45,553,727 45,658,565 45,754,880 45,815,718shares - basic

% Changefrom previous -0.1% 0.3% 0.2% 0.3% 0.2% 0.2% 0.1%Qtr.

Weightedaverage common 45,644,236 45,912,291 46,019,691 46,145,970 46,391,066 46,686,665 45,815,718shares -diluted

% Changefrom previous -0.3% 0.6% 0.2% 0.3% 0.5% 0.6% -1.9%Qtr.

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

% Changefrom previous -% -1.0% 7.2% 4.4% -4.4% 5.9% 2.3%Qtr.

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

Gains on assetrelated $536 $185 $87 $251 $39 $205 $99transactions

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

% Changefrom previous 0.9% -1.7% 7.0% 4.7% -4.8% 6.2% 2.1%Qtr.

EBITDA, asadjusted, 35.9% 35.1% 37.0% 37.8% 35.8% 38.0% 38.4%margin

Net cashprovided by $28,637 $40,632 $33,443 $46,097 $28,458 $41,311 $32,980operatingactivities

% Changefrom previous -29.7% 41.9% -17.7% 37.8% -38.3% 45.2% -20.2%Qtr.

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

% Changefrom previous 21.5% -11.8% 2.8% -17.9% 30.0% 8.3% -4.6%Qtr.

Principalpayments ofcapital $3,030 $1,976 $2,029 $2,056 $6,167 $3,716 $9,509(finance)leaseobligations

% Changefrom previous 42.4% -34.8% 2.7% 1.3% 200.0% -39.7% 155.9%Qtr.

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

Purchases of $ - $ - $ - $ - $ - $- $270common stock

Gross Leverage 4.28 5.08 4.97 4.86 4.78 5.08 5.10Ratio

Net Leverage 2.92 2.93 2.92 2.86 2.92 3.07 3.24Ratio

CustomerConnections -end of period

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

% Changefrom previous 3.3% 1.9% 2.0% 0.9% 0.8% 1.0% 0.5%Qtr.

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

% Changefrom previous 1.5% 1.6% 1.6% 1.4% 0.5% 1.1% 0.0%Qtr.

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

% Changefrom previous -12.2% -% -0.3% 1.9% 1.2% 3.0% -5.0%Qtr.

Total customer 82,522 84,054 85,692 86,539 87,213 88,112 88,509connections

% Changefrom previous 3.0% 1.9% 1.9% 1.0% 0.8% 1.0% 0.5%Qtr.

On-NetBuildings -end of period

Multi-Tenantoffice 1,746 1,751 1,757 1,767 1,769 1,771 1,783buildings

Carrierneutral data 908 933 960 980 1,000 1,029 1,047centerbuildings

Cogent data 52 53 54 54 54 54 54centers

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

Square feet -multi-tenantoffice 949,486,923 951,031,709 954,013,024 957,173,183 961,154,384 962,049,183 968,355,695buildings -on-net

Network - endof period

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

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

Connectednetworks - 6,668 6,762 6,844 6,954 7,042 7,133 7,222AS's

Headcount -end of period

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

Sales force - 639 656 667 686 684 716 740total

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

Sales repproductivity -units per fulltime 5.1 4.9 4.4 4.1 4.5 4.0 3.7equivalentsales rep("FTE") permonth

FTE - sales 464 478 488 502 522 533 563reps

Consists of legacy services of companies whose assets or businesses were(1) acquired by Cogent, primarily including voice services (only provided in Toronto, Canada).

Network operations expense excludes equity-based compensation expense of $180, $226, $282, $306, $252, $305 and $346 in the three month periods ended March 31, 2019 through September 30, 2020, respectively. Network(2) operations expense includes excise taxes, including Universal Service Fund fees of $3,391, $3,191, $3,998, $4,334, $3,743, $3,298 and $3,902 in the three month periods ended March 31, 2019 through September 30, 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 and $6,176 in the three month periods ended March 31, 2019 through September 30, 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 byoperating activities in the table below.

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

($ in 000's) - unaudited

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

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

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

EBITDA $47,561 $47,105 $50,515 $52,724 $50,394 $53,348 $54,583

PLUS: Gains on asset related transactions 536 185 87 251 39 205 99

EBITDA, as adjusted $48,097 $47,290 $50,602 $52,975 $50,433 $53,553 $54,682

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

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

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

Constant currency impact on revenue changes - sequential periods

($ in 000's) - Q1 Q2 Q3 Q4 Q1 Q2 Q3unaudited 2019 2019 2019 2019 2020 2020 2020

Service revenue,as reported - $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302current period

Impact offoreign 135 260 176 88 184 202 (1,616)currencies onservice revenue

Service revenue- as adjusted $134,272 $135,049 $137,118 $140,380 $141,099 $141,192 $140,686for currencyimpact (1)

Service revenue,as reported - $132,049 $134,137 $134,789 $136,942 $140,292 $140,915 $140,990prior sequentialperiod

Constantcurrency $2,223 $912 $2,329 $3,438 $807 $277 $(304)(decrease)increase

Constantcurrency percent 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% (0.2)%(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 000's) - Q1 Q2 Q3 Q4 Q1 Q2 Q3unaudited 2019 2019 2019 2019 2020 2020 2020

Service revenue,as reported - $134,137 $134,789 $136,942 $140,292 $140,915 $140,990 $142,302current period

Impact offoreign 2,078 1,505 1,058 683 746 674 (1,141)currencies onservice revenue

Service revenue- as adjusted $136,215 $136,294 $138,000 $140,975 $141,661 $141,664 $141,161for currencyimpact (2)

Service revenue,as reported - $128,706 $129,296 $130,139 $132,049 $134,137 $134,789 $136,942prior yearperiod

Constantcurrency $7,509 $6,998 $7,861 $8,926 $7,524 $6,875 $4,219increase

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

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 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 grossprofit and GAAP gross margin in the table below.

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

($ in 000's) - unaudited

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

Minus - Network operations expense including equity-basedcompensation and including depreciation and amortization 74,413 74,386 75,259 75,992 75,429 73,782 76,138expense

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

Plus - Equity-based compensation - network operations expense 180 226 282 306 252 305 346

Plus - Depreciation and amortization expense 20,263 19,979 20,006 20,002 19,508 19,896 21,619

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

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

Non-GAAP Gross Margin (2) 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% 61.9%

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 June 30, 2020As of September 30, 2020

Cash and cash equivalents $417,026 $393,293

Debt

Capital (finance) leases - current portion14,734 15,252

Capital (finance) leases - long term 189,044 197,688

Senior secured notes 445,000 445,000

Senior unsecured euro 2024 notes 393,011 410,365

Note payable 12,831 10,404

Total debt 1,054,620 1,078,709

Total net debt 637,594 685,416

Trailing 12 months EBITDA, as adjusted 207,563 211,643

Gross leverage ratio 5.08 5.10

Net leverage ratio 3.07 3.24

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

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30, December 31, 2020 2019

(Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 393,293 $ 399,422

Accounts receivable, net of allowance for credit losses of $2,204 and $1,771, 42,053 40,484respectively

Prepaid expenses and other current assets 40,007 35,822

Total current assets 475,353 475,728

Property and equipment, net 421,251 368,929

Right-of-use leased assets 90,400 73,460

Deposits and other assets 13,910 14,007

Total assets $ 1,000,914 $ 932,124

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 11,983 $ 11,075

Accrued and other current liabilities 47,714 51,301

Installment payment agreement, current portion, net of discounts of $245 and 8,292 9,063$350, respectively

Current maturities, operating lease liabilities 12,006 10,101

Current maturities, finance lease obligations 15,252 8,154

Total current liabilities 95,247 89,694

Senior secured 2022 notes, net of unamortized debt costs of $1,267 and $1,897, 444,389 444,088 respectively and including premiums of $656 and $985, respectively

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $3,166 and 406,034 150,001 $1,410, respectively and net of discounts of $1,164 and $0, respectively

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

Operating lease liabilities, net of current maturities 101,447 86,690

Finance lease obligations, net of current maturities 197,688 161,635

Other long term liabilities 16,800 15,327

Total liabilities 1,261,605 1,135,803

Commitments and contingencies:

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 47,284,336 and 47 47 46,840,434 shares issued and outstanding, respectively

Additional paid-in capital 513,454 493,178

Accumulated other comprehensive income - foreign currency translation (7,498) (12,326)

Accumulated deficit (766,694) (684,578)

Total stockholders' deficit (260,691) (203,679)

Total liabilities and stockholders' deficit $ 1,000,914 $ 932,124

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEMPTEMBER 30, 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Three Months Three Months Ended Ended September 30, 2020 September 30, 2019

(Unaudited) (Unaudited)

Service revenue $ 142,302 $ 136,942

Operating expenses:

Network operations (including $346 and $282 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown 54,519 55,253 separately below)

Selling, general, and administrative (including $6,176 and $4,515 ofequity-based 39,722 35,971 compensation expense, respectively)

Depreciation and amortization 21,619 20,006

Total operating expenses 115,860 111,230

Loss on finance leases amendment (505) -

Gains on equipment transactions 99 87

Operating income 26,036 25,799

Interest expense (15,760) (15,191)

Unrealized foreign exchange (loss) gain on 2024 Euro Notes (17,315) 6,162

Interest income and other, net 484 2,185

(Loss) income before income taxes (6,555) 18,955

Income tax benefit (provision) 1,600 (5,254)

Net (loss) income $ (4,955) $ 13,701

Comprehensive (loss) income:

Net (loss) income $ (4,955) $ 13,701

Foreign currency translation adjustment 5,408 (4,709)

Comprehensive income $ 453 $ 8,992

Net (loss) income per common share:

Basic net (loss) income per common share $ (0.11) $ 0.30

Diluted net (loss) income per common share $ (0.11) $ 0.30

Dividends declared per common share $ 0.705 $ 0.620

Weighted-average common shares - basic 45,815,718 45,438,656

Weighted-average common shares - diluted 45,815,718 46,019,691

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Nine Months Nine Months Ended Ended September 30, 2020 September 30, 2019

(Unaudited) (Unaudited)

Service revenue $ 424,205 $ 405,866

Operating expenses:

Network operations (including $903 and $688 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown 164,326 163,811 separately below)

Selling, general, and administrative (including $16,776 and $12,832 of equity- 119,232 110,396 based compensation expense, respectively)

Depreciation and amortization 61,022 60,246

Total operating expenses 344,580 334,453

Loss on finance lease amendments (423) -

Gains on equipment transactions 343 808

Operating income 79,545 72,221

Interest expense (46,481) (42,243)

Realized foreign exchange gain on issuance of 2024 Euro Notes 2,547 -

Unrealized (loss) gain on foreign exchange on 2024 Euro Notes (17,827) 6,339

Interest income and other, net 430 5,588

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

Income before income taxes 17,576 41,905

Income tax provision (4,740) (11,851)

Net income $ 12,836 $ 30,054

Comprehensive income:

Net income $ 12,836 $ 30,054

Foreign currency translation adjustment 4,828 (4,748)

Comprehensive income $ 17,664 $ 25,306

Net income per common share:

Basic net income per common share $ 0.28 $ 0.66

Diluted net income per common share $ 0.28 $ 0.65

Dividends declared per common share $ 2.045 $ 1.800

Weighted-average common shares - basic 45,818,677 45,428,305

Weighted-average common shares - diluted 46,598,870 45,948,331

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS)

Three months Three months Ended Ended September 30, 2020 September 30, 2019

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net (loss) income $ (4,955) $ 13,701

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

Depreciation and amortization 21,619 20,006

Amortization of debt costs, discounts 496 486and premiums

Equity-based compensation expense (net 6,522 4,796of amounts capitalized)

Unrealized losses (gains) on foreign 17,378 (6,128)exchange

Gains - equipment transactions and 406 176other, net

Deferred income taxes (2,153) 4,454

Changes in operating assets andliabilities:

Accounts receivable (1,009) (1,048)

Prepaid expenses and other current (788) (1,315)assets

Accounts payable, accrued liabilities (4,305) (3,738)and other long-term liabilities

Deposits and other assets (231) 2,053

Net cash provided by operating 32,980 33,443activities

Cash flows from investing activities:

Purchases of property and equipment (13,296) (12,051)

Net cash used in investing activities (13,296) (12,051)

Cash flows from financing activities:

Dividends paid (32,657) (28,565)

Purchases of common stock (270) -

Principal payments on installment (2,727) (2,574)payment agreement

Principal payments of finance lease (9,509) (2,029)obligations

Proceeds from exercises of stock 186 351options

Net cash (used in) financing activities (44,977) (32,817)

Effect of exchange rates changes on 1,560 (1,583)cash

Net decrease in cash and cash (23,733) (13,008)equivalents

Cash and cash equivalents, beginning of 417,026 409,279period

Cash and cash equivalents, end of $ 393,293 $ 396,271period

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS)

Nine months Nine months Ended Ended September 30, 2020 September 30, 2019

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income $ 12,836 $ 30,054

Adjustments to reconcile net income to net cash provided by operatingactivities:

Depreciation and amortization 61,022 60,246

Amortization of debt costs, discounts and premiums 1,426 1,328

Equity-based compensation expense (net of amounts capitalized) 17,679 13,520

Loss on debt extinguishment and redemption - 2021 Notes 638 -

Unrealized losses (gains) on foreign exchange 17,281 (6,305)

Realized foreign exchange gain on issuance of 2024 Notes (2,547) -

Gains - equipment transactions and other, net 80 (131)

Deferred income taxes 2,100 9,285

Changes in operating assets and liabilities:

Accounts receivable (1,102) (43)

Prepaid expenses and other current assets (3,253) (4,862)

Accounts payable, accrued liabilities and other long-term liabilities (2,783) 1,350

Deposits and other assets (628) (1,730)

Net cash provided by operating activities 102,749 102,712

Cash flows from investing activities:

Purchases of property and equipment (40,092) (37,059)

Net cash used in investing activities (40,092) (37,059)

Cash flows from financing activities:

Dividends paid (94,952) (82,871)

Purchases of common stock (270) -

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

Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debtcosts 240,285 152,128 of $2,137 and $1,556, respectively

Principal payments on installment payment agreement (7,855) (7,348)

Principal payments of finance lease obligations (19,392) (7,035)

Proceeds from exercises of stock options 1,175 1,270

Net cash (used in) provided by financing activities (70,234) 56,144

Effect of exchange rates changes on cash 1,448 (1,619)

Net (decrease) increase in cash and cash equivalents (6,129) 120,178

Cash and cash equivalents, beginning of period 399,422 276,093

Cash and cash equivalents, end of period $ 393,293 $ 396,271

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 Quarterly Report on Form 10-Q for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020 and our Annual Report on Form 10-K for the year ended December 31, 2019. 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.

View original content to download multimedia: http://www.prnewswire.com/news-releases/cogent-communications-reports-third-quarter-2020-results-and-increases-its-regular-quarterly-dividend-on-its-common-stock-by-0-025--301166728.html

SOURCE Cogent Communications Holdings, Inc.