PR Newswire | Aug 6, 2020 07:02AM EDT

Regular Quarterly Dividend on its Common Stock by $0.025

08/06 06:00 CDT

Cogent Communications Reports Second Quarter 2020 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025 WASHINGTON, Aug. 6, 2020

WASHINGTON, Aug. 6, 2020 /PRNewswire/ --

Financial and Business Highlights

* Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.705 per share for Q3 2020 as compared to $0.68 per share for Q2 2020 - Cogent's thirty-second consecutive quarterly dividend increase and a greater increase than the $0.02 per share increase in Q2 2020. * The Q3 2020 $0.705 dividend per share represents an annual increase of 13.7% from the dividend per share of $0.62 for Q3 2019.

* Service revenue, on a constant currency basis, increased by 0.2% from Q1 2020 to Q2 2020 and increased from Q2 2019 to Q2 2020 by 5.1%. * Service revenue increased by 0.1% from Q1 2020 to Q2 2020 and increased from Q2 2019 to Q2 2020 by 4.6%.

* GAAP gross profit increased by 11.3% from Q2 2019 to $67.2 million for Q2 2020. Non-GAAP gross profit increased by 8.4% from Q2 2019 to $87.4 million for Q2 2020. * GAAP gross margin increased by 290 basis points from Q2 2019 to Q2 2020 to 47.7%. Non-GAAP gross margin increased by 220 basis points from Q2 2019 to Q2 2020 to 62.0%.

* Net cash provided by operating activities increased by 45.2% from Q1 2020 to $41.3 million for Q2 2020 and increased by 1.7% from Q2 2019. * EBITDA increased by 5.9% from Q1 2020 to $53.3 million for Q2 2020 and increased by 13.3% from Q2 2019. * EBITDA margin increased by 200 basis points from Q1 2020 to 37.8% for Q2 2020 and increased by 290 basis points from Q2 2019.

* Cogent issued (euro)215 million of Senior Euro Notes due in 2024 in June for net proceeds of $240.3 million. The net proceeds were used to redeem and extinguish its $189.2 million of Senior Notes due in 2021 at par and to provide cash for general corporate purposes including to dividend cash from its operating companies to Cogent Holdings, Inc.

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $141.0 million for the three months ended June 30, 2020, an increase of 0.1% from the three months ended March 31, 2020 and an increase of 4.6% from the three months ended June 30, 2019. Foreign exchange negatively impacted service revenue growth from the three months ended March 31, 2020 to the three months ended June 30, 2020 by $0.2 million and negatively impacted service revenue growth from the three months ended June 30, 2019 to the three months ended June 30, 2020 by $0.7 million. On a constant currency basis, service revenue grew by 0.2% from the three months ended March 31, 2020 to the three months ended June 30, 2020 and grew by 5.1% from the three months ended June 30, 2019 to 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 $3.3 million for the three months ended June 30, 2020, $3.2 million for the three months ended June 30, 2019 and $3.7 million for the three months ended March 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 $103.8 million for the three months ended June 30, 2020; an increase of 0.3% from the three months ended March 31, 2020 and an increase of 6.5% over the three months ended June 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 $37.0 million for the three months ended June 30, 2020; a decrease of 0.7% over the three months ended March 31, 2020 and a decrease of 0.4% over the three months ended June 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 11.3% from the three months ended June 30, 2019 to $67.2 million for the three months ended June 30, 2020 and increased by 2.6% from the three months ended March 31, 2020. GAAP gross margin was 47.7% for the three months ended June 30, 2020, 44.8% for the three months ended June 30, 2019 and 46.5% for the three months ended March 31, 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 $3.3 million for the three months ended June 30, 2020, $3.2 million for the three months ended June 30, 2019 and $3.7 million for the three months ended March 31, 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 8.4% from the three months ended June 30, 2019 to $87.4 million for the three months ended June 30, 2020 and increased by 2.5% from the three months ended March 31, 2020. Non-GAAP gross profit margin was 62.0% for the three months ended June 30, 2020, 59.8% for the three months ended June 30, 2019 and 60.5% for the three months ended March 31, 2020.

Net cash provided by operating activities increased by 1.7% from the three months ended June 30, 2019 to $41.3 million for the three months ended June 30, 2020 and increased by 45.2% from the three months ended March 31, 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 13.3% from the three months ended June 30, 2019 to $53.3 million for the three months ended June 30, 2020 and increased by 5.9% from the three months ended March 31, 2020. EBITDA margin was 37.8% for the three months ended June 30, 2020, 34.9% for the three months ended June 30, 2019 and 35.8% for the three months ended March 31, 2020.

EBITDA, as adjusted, increased by 13.2% from the three months ended June 30, 2019 to $53.6 million for the three months ended June 30, 2020 and increased by 6.2% from the three months ended March 31, 2020. EBITDA, as adjusted, margin was 38.0% for the three months ended June 30, 2020, 35.1% for the three months ended June 30, 2019 and 35.8% for the three months ended March 31, 2020.

Basic net income per share was $0.19 for the three months ended June 30, 2020, $0.16 for the three months ended June 30, 2019 and $0.20 for the three months ended March 31, 2020. Diluted net income per share was $0.18 for the three months ended June 30, 2020, $0.16 for the three months ended June 30, 2019 and $0.20 for the three months ended March 31, 2020.

Unrealized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Notes were $(3.4) million for the three months ended June 30, 2020, $0.2 million for the three months ended June 30, 2019 and $2.9 million for the three months ended March 31, 2020. Cogent realized a $2.5 million foreign exchange gain related to the issuance of its (euro)215 million of 2024 Senior Euro Notes in the three months ended June 30, 2020.

Total customer connections increased by 4.8% from June 30, 2019 to 88,112 as of June 30, 2020 and increased by 1.0% from March 31, 2020. On-net customer connections increased by 4.8% from June 30, 2019 to 75,927 as of June 30, 2020 and increased by 1.0% from March 31, 2020. Off-net customer connections increased by 4.6% from June 30, 2019 to 11,846 as of June 30, 2020 and increased by 1.1% from March 31, 2020.

The number of on-net buildings increased by 117 buildings from June 30, 2019 to 2,854 on-net buildings as of June 30, 2020 and increased by 31 on-net buildings from March 31, 2020.

Quarterly Dividend Increase Approved

On August 5, 2020, the Board approved a regular quarterly dividend of $0.705 per common share payable on September 4, 2020 to shareholders of record on August 21, 2020. This third quarter 2020 regular dividend represents a 3.7% increase of $0.025 per share from the second quarter 2020 regular dividend of $0.68 per share and an annual increase of 13.7% from the Q3 2019 dividend of $0.62 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.

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 entire workforce continues to work remotely with dedication. During the second quarter of 2020, the impact of the COVID-19 pandemic on Cogent's business remained limited. Cogent experienced a decrease in sales productivity, particularly in sales to its corporate customers. Traffic on the Cogent network continued to grow at an accelerated rate compared to Cogent's historical growth rates. However, the traffic growth rate for the second quarter of 2020 was slower than the traffic growth rate at the end of the first quarter of 2020.

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, 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 June 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 quarter ended March 31, 2020.

Conference Call and Website Information

Cogent will host a conference call with financial analysts at 8:00 a.m. (ET) on August 6, 2020 to discuss Cogent's operating results for the second 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Depreciation and $20,263 $19,979 $20,006 $20,002 $19,508 $19,896 amortization expense

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

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

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

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

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

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

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

Net income $9,217 $7,136 $13,701 $7,465 $9,227 $8,564

Realized and unrealized gains (losses)$- $177 $6,128 $(4,032) $2,908 $(873) on 2024 euro notes

Basic net income per $0.20 $0.16 $0.30 $0.16 $0.20 $0.19 common share

Diluted net income per $0.20 $0.16 $0.30 $0.16 $0.20 $0.18 common share

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gross Leverage4.28 5.08 4.97 4.86 4.78 5.08 Ratio

Net Leverage 2.92 2.93 2.92 2.86 2.92 3.07 Ratio

Customer Connections - end of period

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

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

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

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

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

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

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

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

On-Net Buildings - end of period

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

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

Cogent data 52 53 54 54 54 54 centers

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

Square feet - multi-tenant office 949,486,923951,031,709954,013,024957,173,183961,154,384962,049,183buildings - on-net

Network - end of period

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

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

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

Headcount - end of period

Sales force - 501 519 530 548 542 572 quota bearing

Sales force - 639 656 667 686 684 716 total

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

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

FTE - sales 464 478 488 502 522 533 reps



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 and $305 in the three month periods ended (2)March 31, 2019 through June 30, 2020, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $3,391, $3,191, $3,998, $4,334, $3,743 and $3,298 in the three month periods ended March 31, 2019 through June 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 as non-GAAP gross profit divided by total service revenue. Management (4)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 and $5,778 in the three month periods ended March 31, 2019 through June 30, 2020, respectively.

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

Schedules of Non-GAAP MeasuresEBITDA 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 Q1 Q2 2019 2019 2019 2019 2020 2020

($ in 000's) - unaudited

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

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

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

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

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

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

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

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

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) - Q1 Q2 Q3 Q4 Q1 Q2 unaudited 2019 2019 2019 2019 2020 2020

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

Impact of foreign currencies on service 135 260 176 88 184 202 revenue

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

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

Constant currency $2,223 $912 $2,329 $3,438 $807 $277 increase

Constant currency 1.7% 0.7% 1.7% 2.5% 0.6% 0.2% percent 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 Company believes that disclosing quarterly sequential revenue growth (1)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 unaudited 2019 2019 2019 2019 2020 2020

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

Impact of foreign currencies on service 2,078 1,505 1,058 683 746 674 revenue

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

Service revenue, as reported - prior year $128,706$129,296$130,139$132,049$134,137$134,789period

Constant currency $7,509 $6,998 $7,861 $8,926 $7,524 $6,875 increase

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



Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the 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 Q1 2020 Q2 2020

($ in 000's) - unaudited

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

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

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

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

Plus - Depreciation and20,263 19,979 20,006 20,002 19,508 19,896 amortization expense

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

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

Non-GAAP Gross Margin 59.8% 59.8% 59.9% 60.3% 60.5% 62.0% (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 March 31, As of June 30, 2020 2020

Cash and cash equivalents $375,116 $417,026

Debt

Capital (finance) leases - current 8,268 14,734 portion

Capital (finance) leases - long term 159,678 189,044

Senior unsecured notes 189,225 -

Senior secured notes 445,000 445,000

Senior unsecured euro 2024 notes 148,507 393,011

Note payable 12,264 12,831

Total debt 962,942 1,054,620

Total net debt 587,826 637,594

Trailing 12 months EBITDA, as adjusted 201,300 207,563

Gross leverage ratio 4.78 5.08

Net leverage ratio 2.92 3.07

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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSAS OF JUNE 30, 2020 AND DECEMBER 31, 2019(IN THOUSANDS, EXCEPT SHARE DATA)

June 30, December 31, 2020 2019

(Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 417,026 $ 399,422

Accounts receivable, net of allowance for credit losses of $2,115 and $1,771, 40,560 40,484respectively

Prepaid expenses and other current assets 39,530 35,822

Total current assets 497,116 475,728

Property and equipment, net 406,747 368,929

Right-of-use leased assets 87,697 73,460

Deposits and other assets 13,841 14,007

Total assets $ 1,005,401 $ 932,124

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 12,171 $ 11,075

Accrued and other current liabilities 52,492 51,301

Installment payment agreement, current portion, net of discounts of $291 and 9,374 9,063$350, respectively

Current maturities, operating lease liabilities 11,292 10,101

Current maturities, finance lease obligations 14,734 8,154

Total current liabilities 100,063 89,694

Senior secured 2022 notes, net of unamortized debt costs of $1,480 and $1,897, 444,287 444,088 respectively and including premiums of $767 and $985, respectively

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $3,365 and$1,410, 388,463 150,001 respectively and net of discounts of $1,183 and $0, respectively

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

Operating lease liabilities, net of current maturities 99,151 86,690

Finance lease obligations, net of current maturities 189,044 161,635

Other long term liabilities 19,943 15,327

Total liabilities 1,240,951 1,135,803

Commitments and contingencies:

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 47,279,201 and46,840,434 47 47

shares issued and outstanding, respectively

Additional paid-in capital 506,391 493,178

Accumulated other comprehensive income - foreign currency translation (12,906) (12,326)

Accumulated deficit (729,082) (684,578)

Total stockholders' deficit (235,550) (203,679)

Total liabilities and stockholders' deficit $ 1,005,401 $ 932,124

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE THREE MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Three Months Three Months Ended Ended June 30, 2020 June 30, 2019

(Unaudited) (Unaudited)

Service revenue $ 140,990 $ 134,789

Operating expenses:

Network operations (including $305 and $226 of equity-based compensationexpense, 53,886 54,407 respectively, exclusive of depreciation and amortization shown separatelybelow)

Selling, general, and administrative (including $5,778 and $5,063 ofequity-based compensation 39,839 38,566

expense, respectively)

Depreciation and amortization 19,896 19,979

Total operating expenses 113,621 112,952

Gains on equipment transactions 205 185

Operating income 27,574 22,022

Interest expense (15,499) (13,595)

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

Unrealized foreign exchange (loss) gain on 2024 Euro Notes (3,420) 177

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

Interest income and other, net 735 1,576

Income before income taxes 11,299 10,180

Income tax provision (2,735) (3,044)

Net income $ 8,564 $ 7,136

Comprehensive income:

Net income $ 8,564 $ 7,136

Foreign currency translation adjustment 2,913 1,786

Comprehensive income $ 11,477 $ 8,922

Net income per common share:

Basic net income per common share $ 0.19 $ 0.16

Diluted net income per common share $ 0.18 $ 0.16

Dividends declared per common share $ 0.68 $ 0.60

Weighted-average common shares - basic 45,754,880 45,354,327

Weighted-average common shares - diluted 46,686,665 45,912,291

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Six Months Six Months Ended Ended June 30, 2020 June 30, 2019

(Unaudited) (Unaudited)

Service revenue $ 281,904 $ 268,930

Operating expenses:

Network operations (including $557 and $406 of equity-based compensationexpense, 109,806 108,557 respectively, exclusive of depreciation and amortization shown separatelybelow)

Selling, general, and administrative (including $10,600 and $8,318 ofequity-based compensation 79,513 74,427

expense, respectively)

Depreciation and amortization 39,402 40,240

Total operating expenses 228,721 223,224

Gains on equipment transactions 244 721

Operating income 53,427 46,427

Interest expense (30,720) (27,051)

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

Unrealized (loss) gain on foreign exchange on 2024 Euro Notes (512) 177

Interest income and other, net 28 3,395

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

Income before income taxes 24,132 22,948

Income tax provision (6,341) (6,595)

Net income $ 17,791 $ 16,353

Comprehensive income:

Net income $ 17,791 $ 16,353

Foreign currency translation adjustment (580) (39)

Comprehensive income $ 17,211 $ 16,314

Net income per common share:

Basic net income per common share $ 0.39 $ 0.36

Diluted net income per common share $ 0.38 $ 0.36

Dividends declared per common share $ 1.34 $ 1.18

Weighted-average common shares - basic 45,760,302 45,349,397

Weighted-average common shares - diluted 46,592,445 45,838,918

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019(IN THOUSANDS)

Three months Three months Ended Ended June 30, 2020 June 30, 2019

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income $ 8,564 $ 7,136

Adjustments to reconcile net income to net cashprovided by operating activities:

Depreciation and amortization 19,896 19,977

Amortization of debt costs, discounts and 453 428premiums

Equity-based compensation expense (net of amounts 6,083 5,290capitalized)

Loss on debt extinguishment and redemption - 2021 638 -Notes

Unrealized losses (gains) on foreign exchange 3,383 (177)

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

Gains - equipment transactions and other, net (448) (76)

Deferred income taxes 1,814 2,259

Changes in operating assets and liabilities:

Accounts receivable 2,697 (1,259)

Prepaid expenses and other current assets 628 (360)

Accounts payable, accrued liabilities and other 453 7,866long-term liabilities

Deposits and other assets (303) (452)

Net cash provided by operating activities 41,311 40,632

Cash flows from investing activities:

Purchases of property and equipment (13,930) (11,720)

Net cash used in investing activities (13,930) (11,720)

Cash flows from financing activities:

Dividends paid (31,738) (27,741)

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

Net proceeds from issuance of senior unsecured2024 Euro Notes - net of debt costs of $2,137 and 240,285 152,128$1,556, respectively

Principal payments on installment payment (2,562) (2,387)agreement

Principal payments of finance lease obligations (3,716) (1,976)

Proceeds from exercises of stock options 271 746

Net cash provided by financing activities 13,315 120,770

Effect of exchange rates changes on cash 1,214 459

Net increase in cash and cash equivalents 41,910 150,141

Cash and cash equivalents, beginning of period 375,116 259,138

Cash and cash equivalents, end of period $ 417,026 $ 409,279

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019(IN THOUSANDS)

Six months Six months Ended Ended June 30, 2020 June 30, 2019

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income $ 17,791 $ 16,353

Adjustments to reconcile net income to net cashprovided by operating activities:

Depreciation and amortization 39,402 40,240

Amortization of debt costs, discounts and 930 842premiums

Equity-based compensation expense (net of amounts 11,157 8,724capitalized)

Loss on debt extinguishment and redemption - 2021 638 -Notes

Unrealized losses (gains) on foreign exchange 479 (177)

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

Gains - equipment transactions and other, net (902) (307)

Deferred income taxes 4,253 4,831

Changes in operating assets and liabilities:

Accounts receivable (93) 1,005

Prepaid expenses and other current assets (2,465) (3,547)

Accounts payable, accrued liabilities and other 1,523 5,088long-term liabilities

Deposits and other assets (397) (3,783)

Net cash provided by operating activities 69,769 69,269

Cash flows from investing activities:

Purchases of property and equipment (26,796) (25,008)

Net cash used in investing activities (26,796) (25,008)

Cash flows from financing activities:

Dividends paid (62,295) (54,306)

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

Net proceeds from issuance of senior unsecured2024 Euro Notes - net of debt costs of $2,137 and 240,285 152,128$1,556, respectively

Principal payments on installment payment (5,128) (4,774)agreement

Principal payments of finance lease obligations (9,883) (5,006)

Proceeds from exercises of stock options 989 919

Net cash (used in) provided by financing (25,257) 88,961activities

Effect of exchange rates changes on cash (112) (36)

Net increase in cash and cash equivalents 17,604 133,186

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

Cash and cash equivalents, end of period $ 417,026 $ 409,279

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 for the quarters ended 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.

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SOURCE Cogent Communications Holdings, Inc.