PR Newswire | Aug 5, 2021 06:58AM EDT

Quarterly Dividend on its Common Stock by $0.025

08/05 05:58 CDT

Cogent Communications Reports Second Quarter Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025 WASHINGTON, Aug. 5, 2021

WASHINGTON, Aug. 5, 2021 /PRNewswire/ --

Financial and Business Highlights

* Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.805 per share for Q3 2021 as compared to $0.780 per share for Q2 2021 - Cogent's thirty-sixth consecutive quarterly dividend increase. * The Q3 2021 $0.805 dividend per share represents an annual increase of 14.2% from the dividend per share of $0.705 for Q3 2020.

* Service revenue increased by 0.8% from Q1 2021 to Q2 2021 and increased from Q2 2020 to Q2 2021 by 4.9%. * GAAP gross profit increased by 3.6% from Q2 2020 to $69.6 million for Q2 2021. Non-GAAP gross profit increased by 5.1% from Q2 2020 to $91.8 million for Q2 2021. * GAAP gross margin decreased by 60 basis points from Q2 2020 to Q2 2021 to 47.1%. Non-GAAP gross margin increased by 10 basis points from Q2 2020 to Q2 2021 to 62.1%.

* Net cash provided by operating activities was $39.7 million for Q2 2021, $47.1 million for Q1 2021 and $41.3 million for Q2 2020. * Sales rep productivity - units per full time equivalent sales rep per month - increased from 4.3 for Q1 2021 to 4.5 for Q2 2021. * EBITDA margin increased by 90 basis points from Q1 2021 to 38.7% for Q2 2021 and increased by 90 basis points from Q2 2020 to Q2 2021. * EBITDA increased by 2.9% from Q1 2021 to $57.2 million for Q2 2021 and increased by 7.2% from Q2 2020. * Cogent issued $500.0 million of Senior Secured Notes due in 2026 in May for net proceeds of $496.9 million. The net proceeds were used to redeem and extinguish its remaining $329.1 million of its Senior Secured Notes due in 2022 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 $147.9 million for the three months ended June 30, 2021, an increase of 0.8% from the three months ended March 31, 2021 and an increase of 4.9% from the three months ended June 30, 2020. Foreign exchange positively impacted service revenue growth from the three months ended March 31, 2021 to the three months ended June 30, 2021 by $0.2 million and positively impacted service revenue growth from the three months ended June 30, 2020 to the three months ended June 30, 2021 by $3.0 million. On a constant currency basis, service revenue increased by 0.8% from the three months ended March 31, 2021 to the three months ended June 30, 2021 and grew by 2.8% from the three months ended June 30, 2020 to the three months ended June 30, 2021.

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 $111.0 million for the three months ended June 30, 2021; an increase of 1.0% from the three months ended March 31, 2021 and an increase of 7.0% over the three months ended June 30, 2020.

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 June 30, 2021; a decrease of 0.1% from the three months ended March 31, 2021 and a decrease of 0.9% from the three months ended June 30, 2020.

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 June 30, 2020 to $69.6 million for the three months ended June 30, 2021 and increased by 2.8% from the three months ended March 31, 2021. GAAP gross margin was 47.1% for the three months ended June 30, 2021, 47.7% for the three months ended June 30, 2020 and 46.1% for the three months ended March 31, 2021.

Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $4.8 million for the three months ended June 30, 2021, $3.3 million for the three months ended June 30, 2020 and $4.5 million for the three months ended March 31, 2021.

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 5.1% from the three months ended June 30, 2020 to $91.8 million for the three months ended June 30, 2021 and increased by 0.1% from the three months ended March 31, 2021. Non-GAAP gross profit margin was 62.1% for the three months ended June 30, 2021, 62.0% for the three months ended June 30, 2020 and 62.5% for the three months ended March 31, 2021.

Net cash provided by operating activities decreased by 3.8% from the three months ended June 30, 2020 to $39.7 million for the three months ended June 30, 2021 and decreased by 15.6% from the three months ended March 31, 2021.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 7.2% from the three months ended June 30, 2020 to $57.2 million for the three months ended June 30, 2021 and increased by 2.9% from the three months ended March 31, 2021. EBITDA margin was 38.7% for the three months ended June 30, 2021, 37.8% for the three months ended June 30, 2020 and 37.8% for the three months ended March 31, 2021.

Basic and diluted net income (loss) per share was $(0.05) for the three months ended June 30, 2021, $0.19 and $0.18 for the three months ended June 30, 2020 and $0.41 for the three months ended March 31, 2021.

Unrealized and realized foreign exchange (losses) gains on Cogent's 2024 Senior Euro Unsecured Notes were $(5.3) million for the three months ended June 30, 2021, $(0.9) million for the three months ended June 30, 2020 and $18.9 million for the three months ended March 31, 2021.

Total customer connections increased by 4.3% from June 30, 2020 to 91,868 as of June 30, 2021 and increased by 1.0% from March 31, 2021. On-net customer connections increased by 4.2% from June 30, 2020 to 79,146 as of June 30, 2021 and increased by 1.0% from March 31, 2021. Off-net customer connections increased by 4.6% from June 30, 2020 to 12,386 as of June 30, 2021 and increased by 1.4% from March 31, 2021.

The number of on-net buildings increased by 121 from June 30, 2020 to 2,975 as of June 30, 2021 and increased by 36 from March 31, 2021.

Quarterly Dividend Increase ApprovedOn August 4, 2021, Cogent's Board approved a regular quarterly dividend of $0.805 per common share payable on September 3, 2021 to shareholders of record on August 20, 2021. This third quarter 2021 regular dividend represents a 3.2% increase of $0.025 per share from the second quarter 2021 regular dividend of $0.780 per share and an annual increase of 14.2% from the Q3 2020 dividend of $0.705 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-19Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. The recent spread of the Delta variant of COVID-19 has introduced new uncertainty.

The ongoing impact of the COVID-19 pandemic, including the spread of variant strains, 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, efficacy and uptake 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, it plans to bring its employees in the United States back into its offices this fall on a full-time basis. Cogent is implementing measures to protect its workforce, but it can provide no assurance that these measures will be sufficient. Moreover, Cogent's results of operations may be adversely affected in the future as the pandemic and the related government restrictions continue or are reintroduced. 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 are described in more detail in Cogent's Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

Conference Call and Website InformationCogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 5, 2021 to discuss Cogent's operating results for the second quarter of 2021 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 CommunicationsCogent 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 210 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 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021

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

On-Net revenue$103,457 $103,800 $105,091 $107,109 $109,947 $111,041

% Change from previous 0.8% 0.3% 1.2% 1.9% 2.6% 1.0% Qtr.

Off-Net $37,321 $37,044 $37,092 $36,672 $36,723 $36,699 revenue

% Change from previous -0.4% -0.7% 0.1% -1.1% 0.1% -0.1% Qtr.

Non-Core $137 $146 $119 $120 $107 $139 revenue (1)

% Change from previous 5.4% 6.6% -18.5% 0.8% -10.8% 29.9% Qtr.

Service revenue - $140,915 $140,990 $142,302 $143,901 $146,777 $147,879 total

% Change from previous 0.4% 0.1% 0.9% 1.1% 2.0% 0.8% Qtr.

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

Constant currency total revenue quarterly 5.6% 5.1% 3.1% 1.2% 2.3% 2.8% growth rate - year over year quarters (6)

Excise Taxes included in $3,743 $3,298 $3,902 $4,144 $4,528 $4,811 service revenue

% Change from previous -13.6% -11.9% 18.3% 6.2% 9.3% 6.3% Qtr.

Network operations $55,669 $53,581 $54,173 $54,513 $55,016 $56,044 expenses (2)

% Change from previous -% -3.8% 1.1% 0.6% 0.9% 1.9% Qtr.

GAAP gross $65,486 $67,208 $66,164 $66,617 $67,715 $69,603 profit (3)

% Change from previous 1.8% 2.6% -1.6% 0.7% 1.6% 2.8% Qtr.

GAAP gross 46.5% 47.7% 46.5% 46.3% 46.1% 47.1% margin (3)

Non-GAAP gross$85,246 $87,409 $88,129 $89,388 $91,761 $91,835 profit (4) (6)

% Change from previous 0.8% 2.5% 0.8% 1.4% 2.7% 0.1% Qtr.

Non-GAAP gross60.5% 62.0% 61.9% 62.1% 62.5% 62.1% margin (4) (6)

Selling, general and $34,852 $34,061 $33,546 $33,713 $36,211 $34,654 administrative expenses (5)

% Change from previous 9.3% -2.3% -1.5% 0.5% 7.4% -4.3% Qtr.

Depreciation and $19,508 $19,896 $21,619 $22,455 $21,970 $22,096 amortization expense

% Change from previous -2.5% 2.0% 8.7% 3.9% -2.2% 0.6% Qtr.

Equity-based compensation $5,075 $6,083 $6,522 $5,846 $7,307 $6,874 expense

% Change from previous 2.7% 19.9% 7.2% -10.4% 25.0% -5.9% Qtr.

Operating $25,850 $27,574 $26,036 $27,384 $26,291 $28,211 income

% Change from previous -7.8% 6.7% -5.6% 5.2% -4.0% 7.3% Qtr.

Interest $15,220 $15,499 $15,760 $16,007 $15,836 $14,236 expense

% Change from previous 0.1% 1.8% 1.7% 1.6% -1.1% -10.1% Qtr.

Net income $9,227 $8,564 $(4,955) $(6,620) $18,851 $(2,493) (loss)

Realized and unrealized gains (losses)$2,908 $(873) $(17,315) $(19,170) $18,870 $(5,280) on 2024 Euro Notes

Basic net income (loss) $0.20 $0.19 $(0.11) $(0.14) $0.41 $(0.05) per common share

Diluted net income (loss) $0.20 $0.18 $(0.11) $(0.14) $0.41 $(0.05) per common share

Weighted average common45,658,565 45,754,880 45,815,718 45,904,943 46,067,096 46,229,603 shares - basic

% Change from previous 0.2% 0.2% 0.1% 0.2% 0.4% 0.4% Qtr.

Weighted average common46,391,066 46,686,665 45,815,718 45,904,943 46,507,258 46,229,603 shares - diluted

% Change from previous 0.5% 0.6% -1.9% 0.2% 1.3% -0.6% Qtr.

EBITDA (6) $50,394 $53,348 $54,583 $55,675 $55,550 $57,181

% Change from previous -4.4% 5.9% 2.3% 2.0% -0.2% 2.9% Qtr.

EBITDA margin 35.8% 37.8% 38.4% 38.7% 37.8% 38.7%

Gains on asset related $39 $205 $99 $10 $18 $- transactions

EBITDA, as $50,433 $53,553 $54,682 $55,685 $55,568 $57,181 adjusted (6)

% Change from previous -4.8% 6.2% 2.1% 1.8% -0.2% 2.9% Qtr.

EBITDA, as adjusted, 35.8% 38.0% 38.4% 38.7% 37.9% 38.7% margin

Net cash provided by $28,458 $41,311 $32,980 $37,571 $47,106 $39,749 operating activities

% Change from previous -38.3% 45.2% -20.2% 13.9% 25.4% -15.6% Qtr.

Capital $12,866 $13,930 $13,296 $15,860 $15,444 $17,217 expenditures

% Change from previous 30.0% 8.3% -4.6% 19.3% -2.6% 11.5% Qtr.

Principal payments of capital $6,167 $3,716 $9,509 $4,598 $5,744 $6,192 (finance) lease obligations

% Change from previous 200.0% -39.7% 155.9% -51.6% 24.9% 7.8% Qtr.

Dividends paid$30,557 $31,738 $32,657 $34,460 $36,081 $37,001

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

Gross Leverage4.78 5.08 5.10 5.14 4.39 5.13 Ratio

Net Leverage 2.92 3.07 3.24 3.40 3.31 3.45 Ratio

Customer Connections - end of period

On-Net 75,163 75,927 76,338 77,305 78,389 79,146

% Change from previous 0.8% 1.0% 0.5% 1.3% 1.4% 1.0% Qtr.

Off-Net 11,721 11,846 11,849 11,970 12,216 12,386

% Change from previous 0.5% 1.1% 0.0% 1.0% 2.1% 1.4% Qtr.

Non-Core (1) 329 339 322 325 320 336

% Change from previous 1.2% 3.0% -5.0% 0.9% -1.5% 5.0% Qtr.

Total customer87,213 88,112 88,509 89,600 90,925 91,868 connections

% Change from previous 0.8% 1.0% 0.5% 1.2% 1.5% 1.0% Qtr.

On-Net Buildings - end of period

Multi-Tenant office 1,769 1,771 1,783 1,792 1,796 1,802 buildings

Carrier neutral data 1,000 1,029 1,047 1,068 1,089 1,119 center buildings

Cogent data 54 54 54 54 54 54 centers

Total on-net 2,823 2,854 2,884 2,914 2,939 2,975 buildings

Total carrier neutral data 1,175 1,203 1,225 1,252 1,274 1,309 center nodes

Square feet - multi-tenant office 961,154,384962,049,183968,355,695976,813,678978,095,164979,876,141buildings - on-net

Network - end of period

Intercity 58,009 58,009 58,142 58,285 58,761 59,741 route miles

Metro fiber 36,079 36,438 36,725 37,567 38,058 38,351 miles

Connected networks - 7,042 7,133 7,222 7,338 7,471 7,530 AS's

Headcount - end of period

Sales force - 542 572 597 569 547 565 quota bearing

Sales force - 684 716 740 712 693 710 total

Total 1,052 1,083 1,110 1,083 1,066 1,087 employees

Sales rep productivity - units per full time 4.5 4.0 3.7 4.2 4.3 4.5 equivalent sales rep ("FTE") per month

FTE - sales 522 533 563 542 522 511 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 $252, $305, $346, $316, $2,076 and $136 in the three month periods ended(2) March 31, 2020 through June 30, 2021, respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $3,743, $3,298, $3,902, $4,144, $4,528 and $4,811 in the three month periods ended March 31, 2020 through June 30, 2021, 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 $4,823, $5,778, $6,176,(5) $5,530, $5,231 and $6,738 in the three month periods ended March 31, 2020 through June 30, 2021, 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 Q1 Q2 2020 2020 2020 2020 2021 2021

($ in 000's) - unaudited

Net cash provided by operating activities $28,458 $41,311 $32,980 $37,571 $47,106 $39,749

Changes in operating assets and liabilities 5,325 $(3,232)$6,255 $1,920 $(9,060)$2,352

Cash interest expense and income tax expense 16,611 15,269 15,348 16,184 17,504 15,080

EBITDA $50,394 $53,348 $54,583 $55,675 $55,550 $57,181

PLUS: Gains on asset related transactions 39 205 99 10 18 -

EBITDA, as adjusted $50,433 $53,553 $54,682 $55,685 $55,568 $57,181

EBITDA margin 35.8% 37.8% 38.4% 38.7% 37.8% 38.7%

EBITDA, as adjusted, margin 35.8% 38.0% 38.4% 38.7% 37.9% 38.7%





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



Constant currency impact on revenue changes - sequential periods



Q1 Q2 Q3 Q4 Q1 Q2 ($ in 000's) - unaudited 2020 2020 2020 2020 2021 2021

Service revenue, as reported - current period $140,915$140,990$142,302$143,901$146,777$147,879

Impact of foreign currencies on service revenue 184 202 (1,616) (621) (447) (150)

Service revenue - as adjusted for currency impact (1) $141,099$141,192$140,686$143,280$146,330$147,729

Service revenue, as reported - prior sequential period $140,292$140,915$140,990$142,302$143,901$146,777

Constant currency (decrease) increase $807 $277 $(304) $978 $2,429 $952

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

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 unaudited 2021 2020 2020 2020 2020 2021

Service revenue, as reported - current $140,915$140,990$142,302$143,901$146,777$147,879period

Impact of foreign currencies on service 746 674 (1,141) (1,891) (2,608) (2,965) revenue

Service revenue - as adjusted for currency $141,661$141,664$141,161$142,010$144,169$144,914impact (2)

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

Constant currency $7,524 $6,875 $4,219 $1,718 $3,254 $3,924 increase

Percent increase 5.6% 5.1% 3.1% 1.2% 2.3% 2.8%

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 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021

($ in 000's) - unaudited

Service revenue total $140,915$140,990$142,302$143,901$146,777$147,879

Minus - Network operations expense including equity-based compensation 75,429 73,782 76,138 77,284 79,062 78,276 and including depreciation and amortization expense

GAAP Gross Profit (1) $65,486 $67,208 $66,164 $66,617 $67,715 $69,603

Plus - Equity-based compensation - network operations expense 252 305 346 316 2,076 136

Plus - Depreciation and amortization expense 19,508 19,896 21,619 22,455 21,970 22,096

Non-GAAP Gross Profit (2) $85,246 $87,409 $88,129 $89,388 $91,761 $91,835

GAAP Gross Margin (1) 46.5% 47.7% 46.5% 46.3% 46.1% 47.1%

Non-GAAP Gross Margin (2) 60.5% 62.0% 61.9% 62.1% 62.5% 62.1%

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, 2021As of June 30, 2021

Cash and cash equivalents $237,980 $373,963

Debt

Capital (finance) leases - current 15,996 16,004 portion

Capital (finance) leases - long term202,514 208,588

Senior Secured 2022 Notes 329,080 -

Senior Secured 2026 Notes - 500,000

Senior Unsecured Euro 2024 Notes 410,471 415,751

Note payable 5,334 3,365

Total debt 963,395 1,143,708

Total net debt 725,415 769,745

Trailing 12 months EBITDA, as 219,488 223,116 adjusted

Gross leverage ratio 4.39 5.13

Net leverage ratio 3.31 3.45

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 JUNE 30, 2021 AND DECEMBER 31, 2020

(IN THOUSANDS, EXCEPT SHARE DATA)

June 30, December 31, 2021 2020

(Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 373,963 $ 371,301

Accounts receivable, net of allowance for credit losses of $1,673 and $1,921, 43,751 44,185respectively

Prepaid expenses and other current assets 36,841 40,851

Total current assets 454,555 456,337

Property and equipment, net 435,996 430,335

Right-of-use leased assets 105,072 99,666

Deposits and other assets 15,124 14,139

Total assets $ 1,010,747 $ 1,000,477

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 14,601 $ 9,775

Accrued and other current liabilities 48,014 51,029

Installment payment agreement, current portion, net of discounts of $41 and 3,324 6,786$136, respectively

Current maturities, operating lease liabilities 11,783 11,151

Current maturities, finance lease obligations 16,004 15,702

Total current liabilities 93,726 94,443

Senior secured 2022 notes, net of unamortized debt costs of $1,052 andincluding - 444,492 premiums of $544

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $2,538 and 412,254 425,160 $2,961, respectively and net of discounts of $959 and $1,142, respectively

Senior secured 2026 notes, net of unamortized debt costs of $1,277 and discount 497,025 -of $1,698

Operating lease liabilities, net of current maturities 115,949 111,318

Finance lease obligations, net of current maturities 208,588 203,438

Other long-term liabilities 19,346 14,792

Total liabilities 1,346,888 1,293,643

Commitments and contingencies:

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 47,655,131 and47,214,077 48 47 shares issued and outstanding, respectively

Additional paid-in capital 533,049 515,867

Accumulated other comprehensive income - foreign currency translation (4,740) (1,306)

Accumulated deficit (864,498) (807,774)

Total stockholders' deficit (336,141) (293,166)

Total liabilities and stockholders' deficit $ 1,010,747 $ 1,000,477

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Three Months Three Months Ended Ended June 30, 2021 June 30, 2020

(Unaudited) (Unaudited)

Service revenue $ 147,879 $ 140,990

Operating expenses:

Network operations (including $136 and $305 of equity-based compensationexpense, 56,180 53,886 respectively, exclusive of depreciation and amortization shown separatelybelow)

Selling, general, and administrative (including $6,738 and $5,778 ofequity-based 41,392 39,839 compensation expense, respectively)

Depreciation and amortization 22,096 19,896

Total operating expenses 119,668 113,621

Gains on equipment transactions - 205

Operating income 28,211 27,574

Interest expense (14,236) (15,499)

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

Unrealized foreign exchange losses on 2024 Euro Notes (5,280) (3,420)

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

Loss on debt extinguishment and redemption - 2022 Notes (10,830) -

Interest income and other, net 64 735

(Loss) income before income taxes (2,071) 11,299

Income tax provision (422) (2,735)

Net (loss) income $ (2,493) $ 8,564

Comprehensive (loss) income:

Net (loss) income $ (2,493) $ 8,564

Foreign currency translation adjustment 1,776 2,913

Comprehensive (loss) income $ (717) $ 11,477

Net (loss) income per common share:

Basic net (loss) income per common share $ (0.05) $ 0.19

Diluted net (loss) income per common share $ (0.05) $ 0.18

Dividends declared per common share $ 0.78 $ 0.68

Weighted-average common shares - basic 46,229,603 45,754,880

Weighted-average common shares - diluted 46,229,603 46,686,665

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Six Months Six Months Ended Ended June 30, 2021 June 30, 2020

(Unaudited) (Unaudited)

Service revenue $ 294,656 $ 281,904

Operating expenses:

Network operations (including $2,212 and $557 of equity-based compensationexpense, 113,272 109,806 respectively, exclusive of depreciation and amortization shown separatelybelow)

Selling, general, and administrative (including $11,969 and $10,600 ofequity-based 82,834 79,513 compensation expense, respectively)

Depreciation and amortization 44,065 39,402

Total operating expenses 240,171 228,721

Gains on equipment transactions 18 244

Operating income 54,503 53,427

Interest expense (30,071) (30,720)

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

Unrealized gain (loss) on foreign exchange on 2024 Euro Notes 13,590 (512)

Interest income and other, net 807 28

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

Loss on debt extinguishment and redemption- 2022 Notes (14,698) -

Income before income taxes 24,131 24,132

Income tax provision (7,773) (6,341)

Net income $ 16,358 $ 17,791

Comprehensive income:

Net income $ 16,358 $ 17,791

Foreign currency translation adjustment (3,434) (580)

Comprehensive income $ 12,924 $ 17,211

Net income per common share:

Basic net income per common share $ 0.35 $ 0.39

Diluted net income per common share $ 0.35 $ 0.38

Dividends declared per common share $ 1.535 $ 1.340

Weighted-average common shares - basic 46,227,528 45,760,302

Weighted-average common shares - diluted 46,744,070 46,592,445

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS)

Three months Three months Ended Ended June 30, 2021 June 30, 2020

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net (loss) income $ (2,493) $ 8,564

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

Depreciation and amortization 22,096 19,896

Amortization of debt costs, discounts and premiums 453 453

Equity-based compensation expense (net of amounts capitalized) 6,874 6,083

Loss on debt extinguishment and redemption - 2021 Notes - 638

Loss on debt extinguishment and redemption - 2022 Notes 10,830 -

Unrealized losses on foreign exchange - 2024 Notes 5,280 3,383

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

Gains - equipment transactions and other, net (129) (448)

Deferred income taxes (939) 1,814

Changes in operating assets and liabilities:

Accounts receivable (2,330) 2,697

Prepaid expenses and other current assets (130) 628

Accounts payable, accrued liabilities and other long-term liabilities 852 453

Deposits and other assets (615) (303)

Net cash provided by operating activities 39,749 41,311

Cash flows from investing activities:

Purchases of property and equipment (17,217) (13,930)

Net cash used in investing activities (17,217) (13,930)

Cash flows from financing activities:

Dividends paid (37,001) (31,738)

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

Redemption and extinguishment of 2022 Notes (339,638) -

Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debtcosts of - 240,285 $2,137

Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of 496,933 -$1,317

Principal payments on installment payment agreement (1,969) (2,562)

Principal payments of finance lease obligations (6,192) (3,716)

Proceeds from exercises of stock options 660 271

Net cash provided by financing activities 112,793 13,315

Effect of exchange rates changes on cash 658 1,214

Net increase in cash and cash equivalents 135,983 41,910

Cash and cash equivalents, beginning of period 237,980 375,116

Cash and cash equivalents, end of period $ 373,963 $ 417,026

COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(IN THOUSANDS)

Six months Six months Ended Ended June 30, 2021 June 30, 2020

(Unaudited) (Unaudited)

Cash flows from operating activities:

Net income $ 16,358 $ 17,791

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

Depreciation and amortization 44,065 39,402

Amortization of debt costs, discounts and premiums 894 930

Equity-based compensation expense (net of amounts capitalized) 14,181 11,157

Loss on debt extinguishment and redemption - 2021 Notes - 638

Loss on debt extinguishment and redemption - 2022 Notes 14,698 -

Unrealized (gains) losses on foreign exchange - 2024 Notes (13,590) 512

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

Gains - equipment transactions and other, net 242 (935)

Deferred income taxes 3,558 4,253

Changes in operating assets and liabilities:

Accounts receivable 90 (93)

Prepaid expenses and other current assets 2,696 (2,465)

Accounts payable, accrued liabilities and other long-term liabilities 3,804 1,523

Deposits and other assets (141) (397)

Net cash provided by operating activities 86,855 69,769

Cash flows from investing activities:

Purchases of property and equipment (32,661) (26,796)

Net cash used in investing activities (32,661) (26,796)

Cash flows from financing activities:

Dividends paid (73,082) (62,295)

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

Redemption and extinguishment of 2022 Notes (459,317) -

Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debtcosts of - 240,285 $2,137

Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of 496,933 -$1,317

Principal payments on installment payment agreement (4,347) (5,128)

Principal payments of finance lease obligations (11,936) (9,883)

Proceeds from exercises of stock options 875 989

Net cash used in financing activities (50,874) (25,257)

Effect of exchange rates changes on cash (658) (112)

Net increase in cash and cash equivalents 2,662 17,604

Cash and cash equivalents, beginning of period 371,301 399,422

Cash and cash equivalents, end of period $ 373,963 $ 417,026

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;cyber-attacks or security breaches of our network;increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements 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 Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021. 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.