Cogent Communications Reports Fourth Quarter and Full Year 2015 Results and Increases Regular Quarterly Dividend on Common Stock

Feb 25, 2016, 07:00 ET from Cogent Communications Holdings, Inc.

WASHINGTON, Feb. 25, 2016 /PRNewswire/ --

Financial and Business Highlights

  • Cogent approves a 2.9% increase of its regular quarterly dividend to $0.36 per common share to be paid on March 24, 2016 to shareholders of record on March 10, 2016
  • Dividends paid in 2015 totaling $66.3 million are treated as 100% return of capital for US federal income tax purposes
  • Service revenue for Q4 2015 increased by 2.1% from Q3 2015 to Q4 2015
    • Service revenue for Q4 2015, on a constant currency basis, increased by 2.5% from Q3 2015 to Q4 2015 and increased by 12.1% from Q4 2014
  • Service revenue for 2015 increased by 6.4% from 2014 to 2015
    • Service revenue for 2015, on a constant currency basis, increased by 10.8% from 2014 to 2015
  • EBITDA, as adjusted, for Q4 2015 of $36.8 million – an increase of 6.9% from $34.4 million for Q3 2015 and an increase of 9.3% from $33.6 million for Q4 2014.
  • EBITDA, as adjusted, margin increased by 150 basis points to 34.9% for Q4 2015 from 33.4% for Q3 2015
  • Cash and cash equivalents were $203.6 million at December 31, 2015
  • There were 2,251 buildings on the Cogent network at the end of Q4 2015
  • There were 53,152 customer connections on the Cogent network at the end of Q4 2015 – an increase of 15.0% from 46,222 customer connections at the end of Q4 2014 and an increase of 5.0% from 50,617 customer connections at the end of Q3 2015

 

Cogent Communications Holdings, Inc. (NASDAQ: CCOI) today announced service revenue of $105.2 million for the three months ended December 31, 2015, an increase of 8.7% from $96.7 million for the three months ended December 31, 2014 and an increase of 2.1% from $103.0 million for the three months ended September 30, 2015. Service revenue was $404.2 million for the year ended December 31, 2015, an increase of 6.4% from $380.0 million for the year ended December 31, 2014. The impact of foreign exchange negatively impacted service revenue growth from Q4 2014 to Q4 2015 by $3.3 million, negatively impacted service revenue growth from Q3 2015 to Q4 2015 by $0.4 million and negatively impacted service revenue growth from 2014 to 2015 by $16.6 million. On a constant currency basis, service revenue grew by 12.1% from Q4 2014 to Q4 2015, grew by 2.5% from Q3 2015 to Q4 2015 and grew by 10.8% from 2014 to 2015.

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 $76.5 million for the three months ended December 31, 2015; an increase of 7.3% over $71.3 million for the three months ended December 31, 2014 and an increase of 1.9% from $75.1 million for the three months ended September 30, 2015. On-net revenue was $294.8 million for the year ended December 31, 2015; an increase of 4.6% over $281.9 million for the year ended December 31, 2014.

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 $28.4 million for the three months ended December 31, 2015; an increase of 13.0% over $25.1 million for the three months ended December 31, 2014 and an increase of 2.6% over $27.7 million for the three months ended September 30, 2015. Off-net revenue was $108.4 million for the year ended December 31, 2015; an increase of 11.9% over $96.8 million for the year ended December 31, 2014.

Non-GAAP gross profit increased by 6.5% from $55.9 million for the three months ended December 31, 2014 to $59.5 million for the three months ended December 31, 2015 and increased by 2.6% from $58.0 million for the three months ended September 30, 2015. Non-GAAP gross profit increased by 4.4% from $220.6 million for the year ended December 31, 2014 to $230.3 million for the year ended December 31, 2015. Non-GAAP gross profit margin percentage was 56.5% for the three months ended December 31, 2015, 57.7% for the three months ended December 31, 2014 and 56.3% for the three months ended September 30, 2015.  Non-GAAP gross profit margin percentage was 57.0% for the year ended December 31, 2015, and 58.1% for the year ended December 31, 2014. Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $1.7 million for the three months ended December 31, 2015, $1.8 million for the three months ended September 30, 2015, $0.1 million for the three months ended December 31, 2014, $0.2 million for the year ended December 31, 2014 and $3.6 million for the year ended December 31, 2015.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, increased by 9.3% from $33.6 million for the three months ended December 31, 2014 to $36.8 million for the three months ended December 31, 2015 and increased by 6.9% from $34.4 million for the three months ended September 30, 2015. EBITDA, as adjusted, increased by 0.5% from $133.0 million for the year ended December 31, 2014 to $133.6 million for the year ended December 31, 2015. EBITDA, as adjusted, margin was 34.9% for the three months ended December 31, 2015, 34.7% for the three months ended December 31, 2014, 33.4% for the three months ended September 30, 2015, 35.0% for the year ended December 31, 2014, and 33.0% for the year ended December 31, 2015.

Basic and diluted net income (loss) per share was $0.06 for the three months ended December 31, 2015, $(0.01) for the three months ended December 31, 2014 and $0.07 for the three months ended September 30, 2015. Basic and diluted net income per share was $0.11 for the year ended December 31, 2015, and $0.02 for the year ended December 31, 2014.

Total customer connections increased by 15.0% from 46,222 as of December 31, 2014 to 53,152 as of December 31, 2015 and increased by 5.0% from 50,617 as of September 30, 2015. On-net customer connections increased by 14.3% from 39,786 as of December 31, 2014 to 45,473 as of December 31, 2015 and increased by 4.9% from 43,364 as of September 30, 2015. Off-net customer connections increased by 19.8% from 6,074 as of December 31, 2014 to 7,279 as of December 31, 2015 and increased by 5.5% from 6,897 as of September 30, 2015. 

The number of on-net buildings increased by 126 on-net buildings from 2,125 on-net buildings as of December 31, 2014 to 2,251 on-net buildings as of December 31, 2015 and increased by 30 on-net buildings from 2,221 on-net buildings as of September 30, 2015.

Quarterly Dividend Increase Approved
On February 23, 2016, Cogent's board approved a regular quarterly dividend of $0.36 per common share payable on March 24, 2016 to shareholders of record on March 10, 2016. This first quarter 2016 regular dividend of $0.36 per share represents an increase of 2.9% from the fourth quarter 2015 regular dividend of $0.35 per share. 

The payment of any future dividends and any other returns of capital will be at the discretion of Cogent's board of directors and may be reduced, eliminated or increased and will be dependent upon Cogent's financial position, results of operations, available cash, cash flow, capital requirements, limitations under Cogent's debt indenture agreements and other factors deemed relevant by Cogent's board of directors.

Tax Treatment of 2015 Dividends
Cogent paid four quarterly dividends in 2015 totaling $66.3 million, or $1.46 per share. The expected tax treatment of these dividends are generally that 100.0% are treated as a return of capital and 0% are generally treated as dividends for United States federal income tax purposes. While the above information includes general statements about the tax classification of dividends paid on Cogent common stock, these statements do not constitute tax advice. The taxation of corporate distributions can be complex, and stockholders are encouraged to consult their tax advisers to determine what impact the above information may have on their specific tax situation.

Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 25, 2016 to discuss Cogent's operating results for the fourth quarter of 2015 and full year 2015 and to discuss Cogent's expectations for full year 2016. Investors and other interested parties may access a live audio webcast of the earnings call in the "Events" section of Cogent's website at www.cogentco.com/events. A replay of the webcast, together with the press release, will be available on the website following the earnings call. 

About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.  Cogent specializes in providing businesses with high speed Internet access, Ethernet transport, and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in over 190 markets globally.

Cogent Communications is headquartered at 2450 N Street, NW, Washington, D.C. 20037. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at info@cogentco.com.

 

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results



Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

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









On-Net revenue

$69,087

$70,409

$71,059

$71,317

$71,234

$72,010

$75,088

$76,513

  % Change from previous Qtr.

4.6%

1.9%

0.9%

0.4%

-0.1%

1.1%

4.3%

1.9%

Off-Net revenue

$23,498

$23,859

$24,330

$25,143

$25,730

$26,522

$27,688

$28,421

% Change from previous Qtr.

0.3%

1.5%

2.0%

3.3%

2.3%

3.1%

4.4%

2.6%

Non-Core revenue (1)

$352

$355

$302

$289

$278

$267

$241

$243

  % Change from previous Qtr.

-9.5%

0.9%

-14.9%

-4.3%

-3.8%

-4.0%

-9.7%

0.8%

Service revenue – total

$92,937

$94,623

$95,691

$96,749

$97,242

$98,799

$103,017

$105,177

  % Change from previous Qtr.

3.4%

1.8%

1.1%

1.1%

0.5%

1.6%

4.3%

2.1%

Constant currency total revenue quarterly growth rate – sequential quarters

3.5%

1.7%

1.8%

2.5%

2.9%

2.0%

4.4%

2.5%

Constant currency total revenue quarterly growth rate – year over year quarters

9.6%

9.5%

9.3%

10.0%

9.3%

9.5%

12.1%

12.1%

Network operations expenses (2)

$38,723

$39,491

$40,293

$40,899

$40,907

$42,252

$45,056

$45,710

% Change from previous Qtr.

1.1%

2.0%

2.0%

1.5%

0.0%

3.3%

6.6%

1.5%

Non-GAAP gross margin (2)

$54,214

$55,132

$55,398

$55,850

$56,335

$56,547

$57,961

$59,467

% Change from previous Qtr.

5.1%

1.7%

0.5%

0.8%

0.9%

0.4%

2.5%

2.6%

Non-GAAP gross margin percentage (2)

58.3%

58.3%

57.9%

57.7%

57.9%

57.2%

56.3%

56.5%

Selling, general and administrative expenses (3)

$24,392

$24,380

$24,775

$25,048

$26,708

$25,987

$24,740

$24,737

  % Change from previous Qtr.

16.5%

0.0%

1.6%

1.1%

6.6%

-2.7%

-4.8%

0.0%

Depreciation and amortization expense

$17,204

$17,301

$17,431

$17,545

$17,513

$17,371

$17,634

$18,008

% Change from previous Qtr.

3.9%

0.6%

0.8%

0.7%

-0.2%

-0.8%

1.5%

2.1%

Equity-based compensation expense

$2,006

$1,873

$2,692

$3,001

$3,141

$3,098

$2,704

$2,571

% Change from previous Qtr.

0.0%

-6.6%

43.7%

11.5%

4.7%

-1.4%

-12.7%

-4.9%

Operating  income

$12,907

$14,309

$13,614

$13,066

$10,487

$10,810

$15,519

$16,174

% Change from previous Qtr.

7.0%

10.9%

-4.9%

-4.0%

-19.7%

3.1%

43.6%

4.2%

Interest expense

$11,303

$13,790

$12,662

$12,189

$11,307

$9,692

$10,002

$10,280

% Change from previous Qtr.

1.4%

22.0%

-8.2%

-3.7%

-7.2%

-14.3%

3.2%

2.8%

Net income (loss)

$125

$1,208

$(184)

$(352)

$(1,585)

$840

$3,161

$2,480

Basic net income (loss) per common share

$0.00

$0.03

$(0.00)

$(0.01)

$(0.04)

$0.02

$0.07

$0.06

Diluted net income (loss) per common share

$0.00

$0.03

$(0.00)

$(0.01)

$(0.04)

$0.02

$0.07

$0.06

Weighted average common shares – basic

46,409,735

45,897,449

45,629,079

45,229,125

45,158,250

44,774,831

44,474,724

44,323,131

% Change from previous Qtr.

0.2%

-1.1%

-0.6%

-0.9%

-0.2%

-0.8%

-0.7%

-0.3%

Weighted average common shares – diluted

46,907,360

46,294,966

45,629,079

45,229,125

45,158,250

45,054,507

44,702,127

44,558,089

% Change from previous Qtr.

-3.9%

-1.3%

-1.4%

-0.9%

-0.2%

-0.2%

-0.8%

-0.3%

EBITDA (4)

$29,822

$30,752

$30,623

$30,802

$29,627

$30,560

$33,221

$34,730

% Change from previous Qtr.

-2.7%

3.1%

-0.4%

0.6%

-3.8%

3.1%

8.7%

4.5%

EBITDA margin

32.1%

32.5%

32.0%

31.8%

30.5%

30.9%

32.2%

33.0%

Gains on asset related transactions

$2,295

$2,731

$3,114

$2,810

$1,548

$719

$1,152

$2,023

EBITDA, as adjusted (4)

$32,117

$33,483

$33,737

$33,612

$31,175

$31,279

$34,373

$36,753

  % Change from previous Qtr.

1.8%

4.3%

0.8%

-0.4%

-7.3%

0.3%

9.9%

6.9%

EBITDA, as adjusted, margin

34.6%

35.4%

35.3%

34.7%

32.1%

31.7%

33.4%

34.9%

 Fees – net neutrality

$872

$1,214

$1,858

$1,243

$1,405

$952

$816

$569










Net cash provided by operating activities

$10,636

$28,395

$16,074

$17,941

$18,372

$20,035

$23,403

$21,999

% Change from previous Qtr.

-63.7%

167.0%

-43.4%

11.6%

2.4%

9.1%

16.8%

-6.0%

Capital expenditures

$15,623

$15,985

$15,403

$13,023

$12,916

$10,866

$6,838

$4,962

  % Change from previous Qtr.

54.8%

2.3%

-3.6%

-15.5%

-0.8%

-15.9%

-37.1%

-27.4%

Principal payments on capital leases

$3,379

$4,767

$7,293

$2,769

$3,650

$7,332

$5,956

$3,273

  % Change from previous Qtr.

51.3%

41.1%

53.0%

-62.0%

31.8%

100.9%

-18.8%

-45.0%

Dividends paid

$18,352

$7,882

$13,792

$14,190

$16,001

$18,972

$15,296

$16,045

Purchases of common stock

$14,196

$17,888

$15,943

$10,555

$8,119

$19,106

$12,169

$ -

Gross Leverage Ratio

3.99

4.73

4.60

4.56

4.42

4.50

4.57

4.55

Net Leverage Ratio

1.86

1.99

2.22

2.40

2.45

2.77

2.98

3.02

Customer Connections – end of period









On-Net

36,306

37,411

38,559

39,786

40,732

42,002

43,364

45,473

  % Change from previous Qtr.

4.7%

3.0%

3.1%

3.2%

2.4%

3.1%

3.2%

4.9%

Off-Net

5,244

5,486

5,694

6,074

6,368

6,583

6,897

7,279

% Change from previous Qtr.

3.1%

4.6%

3.8%

6.7%

4.8%

3.4%

4.8%

5.5%

Non-Core (1)

397

390

377

362

311

325

356

400

  % Change from previous Qtr.

-4.3%

-1.8%

-3.3%

-4.0%

-14.1%

4.5%

9.5%

12.4%

Total customer connections

41,947

43,287

44,630

46,222

47,411

48,910

50,617

53,152

  % Change from previous Qtr.

4.4%

3.2%

3.1%

3.6%

2.6%

3.2%

3.5%

5.0%

On-Net Buildings – end of period









Multi-Tenant office buildings

1,400

1,424

1,440

1,466

1,488

1,510

1,523

1,541

Carrier neutral data center buildings

580

585

601

610

618

631

647

659

Cogent data centers

44

48

49

49

49

50

51

51

Total on-net buildings

2,024

2,057

2,090

2,125

2,155

2,191

2,221

2,251

Square feet – multi-tenant office buildings – on-net

759,880,388

770,706,508

781,524,024

791,121,076

804,760,238

818,039,601

823,712,433

831,585,875

Network  – end of period









Intercity route miles

57,584

57,584

57,987

59,038

59,161

55,191

56,079

56,079

Metro fiber miles

27,211

27,381

27,487

27,253

27,619

28,036

28,067

28,158

Connected networks – AS's

5,112

5,232

5,106

5,228

5,334

5,435

5,511

5,582

Headcount – end of period









Sales force – quota bearing

317

337

344

346

343

358

363

378

Sales force - total

420

446

452

457

459

464

474

495

Total employees

724

760

768

776

785

799

808

828

Sales rep productivity – units per full time equivalent sales rep ("FTE") per month

5.9

5.9

5.9

5.5

5.3

5.6

6.0

6.3

FTE – sales reps

303

310

329

329

326

330

337

351



(1)

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

(2)

Network operations expense excludes equity-based compensation expense of $113, $114, $114, $147, $172, $160, $126 and $126 in the three month periods ended March 31, 2014 through December 31, 2015, respectively.  Network operations expense includes excise taxes, including Universal Service Fund fees of $52, $42, $42, $52, $53, $57, $1,757 and $1,729 in the three month periods ended March 31, 2014 through December 31, 2015, respectively.  Non-GAAP gross margin represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation expense).

(3)

Excludes equity-based compensation expense of $1,893, $1,759, $2,578, $2,854, $2,969, $2,938, $2,578 and $2,445 in the three month periods ended March 31, 2014 through December 31, 2015, respectively. 

(4)

See schedule of non-GAAP metrics below for definition and reconciliation to GAAP measures below.

Schedule of Non-GAAP Measures
EBITDA and EBITDA, as adjusted

EBITDA represents net cash flows from operating activities plus changes in operating assets and liabilities, cash interest expense and income tax expense.  Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is cash flows provided by operating activities. The Company also believes that EBITDA is a frequently used measure 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 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.

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

EBITDA, and EBITDA, as adjusted, are reconciled to cash flows provided by operating activities in the table below.



Q1
2014

Q2
2014

Q3
2014

Q4
2014

Q1
2015

Q2
2015

Q3
2015

Q4
2015

($ in 000's) – unaudited









Net cash flows provided by operating activities

$10,636

$28,395

$16,074

$17,941

$18,372

$20,035

$23,403

$21,999

Changes in operating assets and liabilities

9,048

(10,061)

1,563

402

(159)

1,245

(68)

3,047

Cash interest expense and income tax expense

10,138

12,418

12,986

12,459

11,414

9,280

9,886

9,684

EBITDA

$29,822

$30,752

$30,623

$30,802

$29,627

$30,560

$33,221

$34,730

PLUS: Gains on asset related transactions

2,295

2,731

3,114

2,810

1,548

719

1,152

2,023

EBITDA, as adjusted

$32,117

$33,483

$33,737

$33,612

$31,175

$31,279

$34,373

$36,753

 

Impact of foreign currencies ("constant currency" impact) on change in sequential quarterly service revenue


($ in 000's) – unaudited

Q4 2015

Service revenue, as reported – Q4 2015

$105,177

Impact of foreign currencies on service revenue

385

Service revenue -  Q4 2015, as adjusted (1)

$105,562

Service revenue, as reported – Q3 2015

$103,017

Constant currency increase from Q3 2015 to Q4 2015 - (Service revenue, as adjusted for Q4 2015 less service revenue, as reported for Q3 2015)

$2,545

Percent increase (Constant currency increase from Q3 2015 to Q4 2015 divided by service revenue, as reported for Q3 2015)

2.5%



(1)

Service revenue, as adjusted, is determined by translating the service revenue for the three months ended December 31, 2015 at the average foreign currency exchange rates for the three months ended September 30, 2015. The Company believes that disclosing quarterly revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

 

Impact of foreign currencies ("constant currency" impact) on change in prior year quarterly service revenue


($ in 000's) – unaudited

Q4 2015

Service revenue, as reported – Q4 2015

$105,177

Impact of foreign currencies on service revenue

3,305

Service revenue -  Q4 2015, as adjusted (2)

$108,482

Service revenue, as reported – Q4 2014

$96,749

Constant currency increase from Q4 2014 to Q4 2015 - (Service revenue, as adjusted for Q4 2015 less service revenue, as reported for Q4 2014)

$11,733

Percent increase (Constant currency increase from Q4 2014 to Q4 2015 divided by service revenue, as reported for Q4 2014)

12.1%



(2)

Service revenue, as adjusted, is determined by translating the service revenue for the three months ended December 31, 2015 at the average foreign currency exchange rates for the three months ended December 31, 2014. The Company believes that disclosing quarterly revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

 

Impact of foreign currencies ("constant currency" impact) on change in prior year service revenue


($ in 000's) – unaudited

2015

Service revenue, as reported – 2015

$404,234

Impact of foreign currencies on service revenue

16,639

Service revenue -  2015, as adjusted (3)

$420,873

Service revenue, as reported – 2014

$380,003

Constant currency increase from 2014 to 2015 - (Service revenue, as adjusted for 2015 less service revenue, as reported for 2014)

$40,870

Percent increase (Constant currency increase from 2014 to 2015 divided by service revenue, as reported for
2014)

10.8%



(3)

Service revenue, as adjusted, is determined by translating the service revenue for the year ended December 31, 2015 at the average foreign currency exchange rates for the year ended December 31, 2014. The Company believes that disclosing annual revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

Gross and Net Leverage Ratios

Cogent's Gross Leverage Ratio was 4.57 at September 30, 2015 and 4.55 at December 31, 2015 and Cogent's Net Leverage Ratio was 2.98 at September 30, 2015 and 3.02 at December 31, 2015 and as shown below.

($ in 000's) – unaudited

As of September 30, 2015

As of December 31, 2015

Cash and cash equivalents

$207,290

$203,591

Debt



Capital leases – current portion

7,670

6,247

Capital leases – long term

123,207

129,763

Senior unsecured notes

200,000

200,000

Senior secured notes

250,000

250,000

Note payable

15,508

21,203

Total debt

596,385

607,213

Total net debt

389,095

403,622

Trailing 12 months EBITDA, as adjusted

130,439

133,579

Gross Leverage Ratio

4.57

4.55

Net Leverage Ratio

2.98

3.02

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

 

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2015 AND 2014
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)











2015


2014


Assets








Current assets:








Cash and cash equivalents


$

203,591


$

287,790


Accounts receivable, net of allowance for doubtful accounts of $1,757 and $1,707, respectively



30,718



33,089


Prepaid expenses and other current assets



17,030



14,758


Total current assets



251,339



335,637


Property and equipment:








Property and equipment



1,070,111



1,047,590


Accumulated depreciation and amortization



(709,975)



(686,829)


Total property and equipment, net



360,136



360,761


Deferred tax assets—noncurrent



45,142



52,967


Deposits and other assets ($355 and $389 restricted, respectively)



6,199



5,549


Total assets


$

662,816


$

754,914


















Liabilities and stockholders' equity








Current liabilities:








Accounts payable


$

12,401


$

13,287


Accrued and other current liabilities



38,355



32,151


Installment payment agreement, current portion, net of discount of $678



11,901




Current maturities, capital lease obligations



6,247



14,594


Total current liabilities



68,904



60,032


Senior secured 2022 notes, net of unamortized debt costs of $1,252



248,748




Senior unsecured 2021 notes, net of unamortized debt costs of $3,305 and 3,820, respectively



196,695



196,180


Senior secured 2018 notes including premium of $4,230 and net of unamortized debt costs of $3,041





241,189


Capital lease obligations, net of current maturities



129,763



151,944


Other long term liabilities



30,977



21,775


Total liabilities



675,087



671,120


Commitments and contingencies
















Stockholders' equity:








Common stock, $0.001 par value; 75,000,000 shares authorized; 45,198,718 and 46,398,729 shares issued and outstanding, respectively



45



46


Additional paid-in capital



434,161



460,576


Accumulated other comprehensive income



(14,693)



(6,462)


Accumulated deficit



(431,784)



(370,366)


Total stockholders' (deficit) equity



(12,271)



83,794


Total liabilities and stockholders' equity


$

662,816


$

754,914





















COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND DECEMBER 31, 2014

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)




Three Months
Ended
December 31, 2015


Three Months
Ended
December 31, 2014




(Unaudited)


(Unaudited)


Service revenue


$

105,177


$

96,749


Operating expenses:






Network operations (including $126 and $147 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)


45,836


41,046


Selling, general, and administrative (including $2,445 and $2,854 of equity-based compensation expense, respectively)


27,182


27,902


Depreciation and amortization


18,008


17,545


Total operating expenses


91,026


86,493


Gains on equipment transactions


2,023


2,810


Operating income


16,174


13,066


Interest income and other, net


440


(6)


Interest expense


(10,280)


(12,189)


Income before income taxes


6,334


871


Income tax expense


(3,854)


(1,223)


Net income (loss)


$

2,480


$

(352)








Comprehensive income (loss):






Net income (loss)


$

2,480


$

(352)


Foreign currency translation adjustment


(2,746)


(3,058)


Comprehensive income (loss)


$

(266)


$

(3,410)








Net income (loss) per common share:






Basic and diluted net income (loss) per common share


$

0.06


$

(0.01)








Dividends declared per common share


$

0.35


$

0.31








Weighted-average common shares - basic


44,323,131


45,229,125








Weighted-average common shares - diluted


44,558,089


45,229,125








COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2015
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)





2015


2014


Service revenue


$

404,234


$

380,003


Operating expenses:








Network operations (including $584 and $488 and of equity-based compensation expense, respectively), exclusive of amounts shown separately



174,510



159,893


Selling, general, and administrative (including $10,931 and $9,083 of equity-based compensation expense, respectively)



113,103



107,679


Depreciation and amortization



70,527



69,481


Total operating expenses



358,140



337,053


Gains on lease terminations



11,643




Gains on equipment transactions



5,443



10,950


Loss on debt extinguishment and redemption



(10,144)




Operating income



53,036



53,900


Interest income and other



956



536


Interest expense



(41,280)



(49,945)


Income before income taxes



12,712



4,491


Income tax expense



(7,816)



(3,694)


Net income


$

4,896


$

797










Comprehensive (loss) income:








Net income


$

4,896


$

797


Foreign currency translation adjustment



(8,231)



(8,598)


Comprehensive (loss) income


$

(3,335)


$

(7,801)










Net income per common share:








Basic and diluted net income per common share


$

0.11


$

0.02










Dividends declared per common share


$

1.46


$

1.17










Weighted-average common shares—basic



44,888,723



45,960,720










Weighted-average common shares—diluted



45,159,489



46,349,670













COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2015 AND DECEMBER 31, 2014

(IN THOUSANDS)




Three months
Ended
December 31, 2015


Three months
Ended
December 31, 2014




(Unaudited)


(Unaudited)


Cash flows from operating activities:






Net income (loss)


$

2,480


$

(352)


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






Depreciation and amortization


18,008


17,545


Amortization of debt discount and premium


181


(293)


Equity-based compensation expense (net of amounts capitalized)


2,571


3,001


(Gains) losses — equipment transactions and other, net


(1,898)


(2,602)


Deferred income taxes


3,879


1,252


Changes in operating assets and liabilities:






Accounts receivable, net


1


(1,857)


Prepaid expenses and other current assets


356


552


Accounts payable, accrued liabilities and other long-term liabilities


(3,408)


(120)


Deposits and other assets


(171)


815


Net cash provided by operating activities


21,999


17,941


Cash flows from investing activities:






Purchases of property and equipment


(4,962)


(13,023)


Net cash used in investing activities


(4,962)


(13,023)


Cash flows from financing activities:






Dividends paid


(16,045)


(14,190)


Purchases of common stock



(10,555)


Proceeds from exercises of stock options


135


95


Principal payments of installment payment agreement


(575)



Principal payments of capital lease obligations


(3,273)


(2,769)


Net cash used in financing activities


(19,758)


(27,419)


Effect of exchange rates changes on cash


(978)


(1,488)


Net decrease in cash and cash equivalents


(3,699)


(23,989)


Cash and cash equivalents, beginning of period


207,290


311,779


Cash and cash equivalents, end of period


$

203,591


$

287,790





COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE TWO YEARS ENDED DECEMBER 31, 2015
(IN THOUSANDS)











2015


2014


Cash flows from operating activities:








Net income


$

4,896


$

797


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








Depreciation and amortization



70,527



69,481


Amortization of debt discount and premium



171



1,976


Equity-based compensation expense (net of amounts capitalized)          



11,515



9,571


Loss on debt extinguishment and redemption



10,144




Gains on lease terminations



(11,643)




Gains—equipment transactions and other, net



(4,866)



(10,382)


Deferred income taxes



7,709



3,163


Changes in operating assets and liabilities:








Accounts receivable



1,119



(3,938)


Prepaid expenses and other current assets



(2,898)



(2,338)


Deposits and other assets



(221)



219


Accounts payable, accrued liabilities and other long-term liabilities          



(2,644)



4,497


Net cash provided by operating activities



83,809



73,046


Cash flows from investing activities:








Purchases of property and equipment



(35,582)



(60,032)


Proceeds from asset sales



111



90


Net cash used in investing activities



(35,471)



(59,942)


Cash flows from financing activities:








Net proceeds from issuance of 2022 secured notes



248,603




Net proceeds from issuance of 2021 unsecured notes





195,824


Redemption of 2018 secured notes



(251,280)




Repayment of convertible notes





(91,978)


Dividends paid



(66,314)



(54,216)


Principal payments of capital lease obligations



(20,215)



(18,208)


Principal payments on installment payment agreement



(670)




Purchases of common stock



(39,394)



(58,582)


Proceeds from exercises of common stock options



423



533


Net cash used in financing activities



(128,847)



(26,627)


Effect of exchange rate changes on cash



(3,690)



(3,553)


Net decrease in cash and cash equivalents



(84,199)



(17,076)


Cash and cash equivalents, beginning of year



287,790



304,866


Cash and cash equivalents, end of year


$

203,591


$

287,790


 

 

Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.  The statements in this release are based upon the current beliefs and expectations of Cogent's management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.  Numerous factors could cause or contribute to such differences, including future economic instability in the global economy or a contraction of the capital markets which could affect spending on Internet services and our ability to engage in financing activities; the impact of changing foreign exchange rates (in particular the Euro to USD and Canadian dollar to USD exchange rates) on the translation of our non-USD denominated revenues, expenses, assets and liabilities; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the U.S. Universal Service Fund and similar funds in other countries; changes in government policy and/or regulation, including net neutrality rules  by the United States Federal Communications Commission and in the area of data protection; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering arrangements on favorable terms; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; and outcomes in litigation as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our annual report on Form 10-K for the fiscal year ended December 31, 2015 to be filed with the Securities and Exchange Commission. Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time. 

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SOURCE Cogent Communications Holdings, Inc.



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