Financial and Business Highlights
- On May 1, 2023 Cogent completed
its acquisition of the U.S. long-haul fiber network (including the
non-U.S. extensions thereof) of the wireline business of Sprint
Communications and its subsidiaries ("Sprint").
- Cogent approved an increase of $0.01 per share to its regular quarterly dividend
for a total of $0.935 per share for
Q2 2023 as compared to $0.925 per
share for Q1 2023 – Cogent's forty-third consecutive quarterly
dividend increase.
-
- The Q2 2023 $0.935 dividend per
share represents an annual increase of 6.3% from the dividend per
share of $0.880 for Q2 2022.
- Service revenue increased from Q4 2022 to Q1 2023 by 1.1% to
$153.6 million and increased from Q1
2022 to Q1 2023 by 3.0%.
-
- Service revenue, on a constant currency basis, increased from
Q4 2022 to Q1 2023 by 0.2% and increased from Q1 2022 to Q1 2023 by
4.0%.
- Net cash provided by operating activities was $35.8 million for Q1 2023.
- Sprint acquisition costs were $0.4
million for Q1 2023.
- EBITDA margin, including the impact of $0.4 million of Sprint acquisition costs for Q1
2023 was 36.5%.
-
- EBITDA, excluding the impact of $0.4
million of Sprint acquisition costs for Q1 2023 was
36.8%.
WASHINGTON, May 4, 2023
/PRNewswire/ -- Cogent Communications Holdings, Inc. (NASDAQ: CCOI)
("Cogent") today announced service revenue of $153.6 million for the three months ended
March 31, 2023, an increase of 1.1%
from the three months ended December 31,
2022 and an increase of 3.0% from the three months ended
March 31, 2022. Foreign exchange
rates positively impacted service revenue growth from the three
months ended December 31, 2022 to the
three months ended March 31, 2023 by
$1.3 million and negatively impacted
service revenue growth from the three months ended March 31, 2022 to the three months ended
March 31, 2023 by $1.6 million. On a constant currency basis,
service revenue increased by 0.2% from the three months ended
December 31, 2022 to the three months
ended March 31, 2023 and increased by
4.0% for the three months ended March 31,
2022 to the three months ended March
31, 2023.
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 $116.1
million for the three months ended March 31, 2023; an increase of 1.0% from the
three months ended December 31, 2022
and an increase of 3.1% from the three months ended March 31, 2022.
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 $37.3 million for the three months ended
March 31, 2023; an increase of 1.1%
from the three months ended December 31,
2022 and an increase of 2.5% from the three months ended
March 31, 2022.
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 1.1% from the three
months ended March 31, 2022 to
$69.8 million for the three months
ended March 31, 2023 and decreased by
2.3% from the three months ended December
31, 2022. GAAP gross margin was 45.4% for the three months
ended March 31, 2023.
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 3.5% from the
three months ended March 31, 2022 to
$95.1 million for the three months
ended March 31, 2023 and was
unchanged from the three months ended December 31, 2022. Non-GAAP gross margin was
61.9% for the three months ended March 31,
2023.
Net cash provided by operating activities decreased by 27.5%
from the three months ended March 31,
2022 to $35.8 million for the
three months ended March 31, 2023 and
decreased by 1.4% from the three months ended December 31, 2022.
Earnings before interest, taxes, depreciation and amortization
(EBITDA), including Sprint acquisition costs of $0.4 million in Q1 of 2023 and $0.2 million in Q4 of 2022, decreased by 1.9%
from the three months ended March 31,
2022 to $56.1 million for the
three months ended March 31, 2023 and
decreased by 1.9% from the three months ended December 31, 2022. EBITDA margin, including
Sprint acquisition costs, was 36.5% for the three months ended
March 31, 2023.
Earnings before interest, taxes, depreciation and amortization
(EBITDA), excluding Sprint acquisition costs of $0.4 million in Q1 of 2023 and $0.2 million in Q4 of 2022 was $56.5 for the three months ended March 31, 2023 which was a decrease of 1.6% from
the three months ended March 31, 2022
and a decrease of 1.6% from the three months ended December 31, 2022. EBITDA margin, excluding
Sprint acquisition costs, was 36.8% for the three months ended
March 31, 2023.
Basic and net diluted income per share was $0.13 for the three months ended March 31, 2023.
Total customer connections increased by 2.7% from March 31, 2022 to 97,427 as of March 31, 2023 and increased by 0.9% from
December 31, 2022. On-net customer
connections increased by 2.0% from March 31,
2022 to 83,268 as of March 31,
2023 and increased by 0.8% from December 31, 2022. Off-net customer connections
increased by 6.7% from March 31, 2022
to 13,785 as of March 31, 2023 and
increased by 1.9% from December 31,
2022.
The number of on-net buildings increased by 125 from
March 31, 2022 to 3,190 as of
March 31, 2023 and increased by 35
from December 31, 2022.
Quarterly Dividend Increase Approved
On May 3, 2023, Cogent's Board approved a regular
quarterly dividend of $0.935 per
share payable on June 2, 2023 to
shareholders of record on May 18,
2023. This second quarter 2023 regular dividend represents
an increase of $0.01 per share, or
1.1%, from the first quarter 2023 regular dividend of $0.925 per share and an annual increase of 6.3%
from the second quarter 2022 dividend of $0.880 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
indentures and other factors deemed relevant by the Board.
Acquisition of Sprint Communications
On May 1, 2023 (the "Closing Date"), Cogent
Infrastructure, Inc., a Delaware
corporation and our direct wholly owned subsidiary, closed on its
acquisition of the U.S. long-haul fiber network (including the
non-U.S. extensions thereof) of Sprint Communications and its
subsidiaries (the "Wireline Business") in accordance with the terms
and conditions of the Membership Interest Purchase Agreement (the
"Purchase Agreement"), dated September 6,
2022, by and among Cogent, Sprint Communications LLC, a
Kansas limited liability company
("Sprint Communications") and an indirect wholly owned subsidiary
of T-Mobile US, Inc., a Delaware
corporation ("T-Mobile"), and Sprint LLC, a Delaware limited liability company and an
indirect wholly owned subsidiary of T-Mobile (the "Seller"). On the
Closing Date, Cogent purchased from the Seller all of the issued
and outstanding membership interests (the "Purchased Interests") of
Wireline Network Holdings LLC, a Delaware limited liability company that,
following an internal restructuring and divisive merger, held
Sprint Communications' assets and liabilities relating to the
Wireline Business (such transactions contemplated by the Purchase
Agreement, collectively, the "Transaction").
Purchase Price
On the Closing Date, Cogent paid
$1 to the Seller for the Purchased
Interests, subject to customary adjustments, including working
capital (the "Working Capital Adjustment"), as set forth in the
Purchase Agreement. As consideration for the Purchased Interests,
the Working Capital Adjustment (primarily related to acquired cash
and cash equivalents of $43.4 million
in order to fund the International operations of the Wireline
Business) resulted in Cogent making a payment of $61.1 million to the Seller at the consummation
of the Transaction (the "Closing"). Additionally, the Working
Capital Adjustment includes an estimated payment of $30.8 million from Seller to Cogent related to
acquired lease obligations in equal payments of 25% each in months
55 to 58 after the Closing Date.
Wavelength and Optical Transport Services
In
connection with Cogent's acquisition of the Wireline Business,
Cogent will begin to provide optical wavelength services and
optical transport services over its fiber network. Cogent intends
to sell these wavelength services to its existing customers,
customers of Sprint Communications and to new customers who require
dedicated optical transport connectivity without the capital and
ongoing expenses associated with owning and operating network
infrastructure.
IP Transit Services Agreement
On the Closing Date,
T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of
T-Mobile ("TMUSA"), entered into an agreement for IP transit
services, pursuant to which TMUSA will pay Cogent an aggregate of
$700 million, consisting of (i)
$350 million in equal monthly
installments during the first year after the Closing Date and (ii)
$350 million in equal monthly
installments over the subsequent 42 months.
Transition Services Agreement
On the Closing Date,
Cogent also entered into a transition services agreement (the
"TSA") with the Seller, pursuant to which the Seller and certain of
its affiliates will provide to Cogent, and Cogent will provide to
the Seller and certain of its affiliates, on an interim basis
following the Closing Date, certain specified services (the
"Transition Services") to ensure an orderly transition following
the separation of the Wireline Business from Sprint Communications.
The services to be provided by the Seller and its affiliates
include, among others, information technology support, back office
and finance, real estate and facilities, vendor and supply chain
management and human resources. The services to be provided by
Cogent include, among others, information technology and network
support, finance and back office and other wireless business
support. The initial cost of services provided by the Seller to
Cogent is expected to be approximately $1.7
million per month and the cost of the services provided by
Cogent to the Seller is expected to be approximately $0.1 million per month, however Cogent believes
these initial costs may fluctuate and diminish over time as each
party modifies and eventually discontinues the use of Transition
Services.
The Transition Services are generally intended to be provided
for a period of up to two years following the Closing Date,
although such period may be extended for an additional one-year
term by either party upon 30 days' prior written notice. The fees
for the Transition Services have been calculated using either a per
service monthly fee or an hourly rate for the employees allocated
to provide such services. Any third-party costs incurred in
providing the Transition Services will be passed on to the party
receiving such services at cost.
Either party to the TSA may terminate the agreement (i) with
respect to any individual service for convenience upon 30 days'
prior written notice or (ii) in its entirety if the other party has
failed to perform any of its material obligations and such failure
is not cured within 30 days. The TSA provides for customary
indemnification and limits on liability.
Other Services Provided to Seller
In addition, on the
Closing Date, Cogent entered into an agreement with TMUSA for
colocation and connectivity services, pursuant to which Cogent will
provide such services to the Seller for a per service monthly fee
plus certain third-party costs incurred in providing the services.
The initial amount of the services provided by us to the Seller is
expected to be approximately $2.7
million per month, however Cogent believes this initial
amount may fluctuate and diminish over time as Seller modifies and
eventually discontinues the use of such services.
Impact of COVID-19
Cogent continues to be impacted by
the COVID-19 pandemic and the accompanying responses by governments
around the world. Beginning with and throughout the COVID-19
pandemic, Cogent witnessed a deteriorating real estate market in
and around the buildings it serves in central business districts in
North America. As a result of the
rising vacancy levels and falling lease initiations or renewals,
Cogent experienced a slowdown in new sales to its corporate
customers, which negatively impacted its corporate revenue results.
During the three months ended March 31,
2023, Cogent slowly began to see declining vacancy rates and
rising office occupancy rates. In addition, Cogent began to see
positive trends in its corporate business. As the option to fully
or partially work from home becomes permanently established at many
companies, Cogent's corporate customers are integrating some of the
new applications that became part of the remote work environment,
which benefits Cogent's corporate business as these customers
upgrade their Internet access infrastructure to higher capacity
connections. Further, if and when companies eventually return to
the buildings in which Cogent operates, Cogent believes it will
present an opportunity for increased sales. However, the exact
timing and path of these positive trends remains uncertain, and as
the after effects of the COVID-19 pandemic linger, Cogent may
continue to see increased corporate customer turnover, fewer
upgrades of existing corporate customer configurations and fewer
new tenant opportunities, which would negatively impact Cogent's
corporate revenue growth.
Cogent continues to experience a slight slowdown in the
availability and delivery of networking equipment but Cogent
believes it can adequately manage the operation, maintenance,
upgrading and growth of its network. A worsening or prolonged
slowdown may impact Cogent's ability to expand and augment its
network.
Cogent may find it difficult to retain existing employees or to
hire new employees because Cogent has required all employees to
return to the office on a full-time basis and in the United States to receive the COVID-19
vaccine and at least one booster.
These and other risks are described in more detail in Cogent's
Annual Report on Form 10-K for the year ended December 31, 2022 and in its Quarterly Report on
Form 10-Q for the quarter ended March 31,
2023.
Conference Call and Website Information
Cogent will
host a conference call with financial analysts at 8:30 a.m. (ET) on May 4,
2023 to discuss Cogent's operating results for the first
quarter of 2023 and full year 2023. Investors and other interested
parties may access a live audio webcast of the earnings call in the
"Events" section of Cogent's website at www.cogentco.com/events. A
replay of the webcast, together with the press release, will be
available on the website following the earnings call. A
downloadable file of Cogent's "Summary of Financial and Operational
Results" and a transcript of its conference call will also be
available on Cogent's website following the conference
call.
About Cogent Communications
Cogent Communications
(NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP.
Cogent specializes in providing businesses with high-speed Internet
access, Ethernet transport, and colocation services. Cogent's
facilities-based, all-optical IP network backbone provides services
in 219 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
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
Metric ($ in 000's, except share and per share data)
– unaudited
|
|
|
|
|
|
On-Net revenue
|
$112,634
|
$111,975
|
$113,219
|
$114,949
|
$116,143
|
% Change from
previous Qtr.
|
1.7 %
|
-0.6 %
|
1.1 %
|
1.5 %
|
1.0 %
|
Off-Net revenue
|
$36,387
|
$36,282
|
$36,611
|
$36,873
|
$37,283
|
% Change from
previous Qtr.
|
0.2 %
|
-0.3 %
|
0.9 %
|
0.7 %
|
1.1 %
|
Non-Core revenue
(1)
|
$154
|
$193
|
$170
|
$157
|
$162
|
% Change from
previous Qtr.
|
-0.6 %
|
25.3 %
|
-11.9 %
|
-7.6 %
|
3.2 %
|
Service revenue – total
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
% Change from
previous Qtr.
|
1.3 %
|
-0.5 %
|
1.0 %
|
1.3 %
|
1.1 %
|
Constant currency
total revenue quarterly growth rate – sequential quarters
(6)
|
1.7 %
|
0.4 %
|
2.0 %
|
1.3 %
|
0.2 %
|
Constant currency
total revenue quarterly growth rate – year over year quarters
(6)
|
2.9 %
|
2.7 %
|
4.3 %
|
5.5 %
|
4.0 %
|
Constant currency
and excise tax impact on total revenue quarterly growth rate –
sequential quarters (6)
|
2.1 %
|
0.6 %
|
1.6 %
|
1.3 %
|
0.1 %
|
Constant currency
and excise tax impact on total revenue quarterly growth rate –
year over year quarters (6)
|
3.5 %
|
3.6 %
|
4.7 %
|
5.7 %
|
3.7 %
|
Excise Taxes
included in service revenue
|
$3,742
|
$3,448
|
$4,118
|
$4,086
|
$4,193
|
% Change from
previous Qtr.
|
-13.7 %
|
-7.9 %
|
19.4 %
|
-0.8 %
|
2.6 %
|
Network operations
expenses (2)
|
$57,305
|
$56,369
|
$57,044
|
$56,884
|
$58,489
|
% Change from
previous Qtr.
|
1.8 %
|
-1.6 %
|
1.2 %
|
-0.3 %
|
2.8 %
|
GAAP gross profit
(3)
|
$69,038
|
$68,865
|
$69,883
|
$71,444
|
$69,790
|
% Change from
previous Qtr.
|
1.2 %
|
-0.3 %
|
1.5 %
|
2.2 %
|
-2.3 %
|
GAAP gross margin
(3)
|
46.3 %
|
46.4 %
|
46.6 %
|
47.0 %
|
45.4 %
|
Non-GAAP gross
profit (4) (6)
|
$91,870
|
$92,081
|
$92,956
|
$95,095
|
$95,099
|
% Change from
previous Qtr.
|
1.0 %
|
0.2 %
|
1.0 %
|
2.3 %
|
0.0 %
|
Non-GAAP gross
margin (4) (6)
|
61.6 %
|
62.0 %
|
62.0 %
|
62.6 %
|
61.9 %
|
Selling, general and
administrative expenses (5)
|
$34,715
|
$33,624
|
$33,079
|
$37,713
|
$38,646
|
% Change from
previous Qtr.
|
3.5 %
|
-3.1 %
|
-1.6 %
|
14.0 %
|
2.5 %
|
Depreciation and
amortization expense
|
$22,688
|
$23,071
|
$22,897
|
$23,563
|
$25,160
|
% Change from
previous Qtr.
|
0.5 %
|
1.7 %
|
-0.8 %
|
2.9 %
|
6.8 %
|
Equity-based
compensation expense
|
$6,056
|
$5,907
|
$6,211
|
$6,264
|
$6,581
|
% Change from
previous Qtr.
|
0.0 %
|
-2.5 %
|
5.1 %
|
0.9 %
|
5.1 %
|
Operating
income
|
$28,784
|
$29,566
|
$28,095
|
$27,311
|
$24,312
|
% Change from
previous Qtr.
|
-20.4 %
|
2.7 %
|
-5.0 %
|
-2.8 %
|
-11.0 %
|
Interest expense
|
$14,168
|
$13,478
|
$17,948
|
$21,990
|
$19,005
|
% Change from
previous Qtr.
|
3.3 %
|
-4.9 %
|
33.2 %
|
22.5 %
|
-13.6 %
|
Non-cash change in valuation – Swap
agreement
|
$21,271
|
$7,510
|
$16,923
|
$(2,590)
|
$(1,847)
|
Net income (loss)
|
$1,137
|
$11,164
|
$(8,007)
|
$851
|
$6,148
|
Foreign exchange
gains (losses) on 2024 Euro Notes
|
$8,014
|
$23,547
|
$-
|
$-
|
$-
|
Basic net income
(loss) per common share
|
$0.02
|
$0.24
|
$(0.17)
|
$0.02
|
$0.13
|
Diluted net income
(loss) per common share
|
$0.02
|
$0.24
|
$(0.17)
|
$0.02
|
$0.13
|
Weighted average
common shares – basic
|
46,575,848
|
46,691,142
|
46,736,742
|
46,885,512
|
47,037,091
|
% Change from
previous Qtr.
|
0.3 %
|
0.2 %
|
0.1 %
|
0.3 %
|
0.3 %
|
Weighted average
common shares – diluted
|
46,929,191
|
47,029,446
|
46,736,742
|
47,196,890
|
47,381,226
|
% Change from
previous Qtr.
|
-0.1 %
|
0.2 %
|
-0.6 %
|
1.0 %
|
0.4 %
|
EBITDA
(6)
|
$57,155
|
$58,457
|
$57,873
|
$57,138
|
$56,053
|
% Change from
previous Qtr.
|
-0.4 %
|
2.3 %
|
-1.0 %
|
-1.3 %
|
-1.9 %
|
EBITDA
margin
|
38.3 %
|
39.4 %
|
38.6 %
|
37.6 %
|
36.5 %
|
Sprint acquisition
costs
|
$-
|
$-
|
$2,004
|
$244
|
$400
|
EBITDA, as adjusted for Sprint acquisition costs
(6)
|
$57,155
|
$58,457
|
$59,877
|
$57,382
|
$56,453
|
% Change from
previous Qtr.
|
-0.4 %
|
2.3 %
|
2.4 %
|
-4.2 %
|
-1.6 %
|
EBITDA, as adjusted for Sprint acquisition costs,
margin
|
38.3 %
|
39.4 %
|
39.9 %
|
37.8 %
|
36.8 %
|
Net cash provided by
operating activities
|
$49,411
|
$34,403
|
$53,570
|
$36,323
|
$35,821
|
% Change from
previous Qtr.
|
37.3 %
|
-30.4 %
|
55.7 %
|
-32.2 %
|
-1.4 %
|
Capital
expenditures
|
$18,121
|
$17,288
|
$23,971
|
$19,591
|
$23,204
|
% Change from
previous Qtr.
|
18.5 %
|
-4.6 %
|
38.7 %
|
-18.3 %
|
18.4 %
|
Principal payments
of capital (finance) lease obligations
|
$5,863
|
$5,236
|
$9,859
|
$24,514
|
$9,450
|
% Change from
previous Qtr.
|
-5.9 %
|
-10.7 %
|
88.3 %
|
148.6 %
|
-61.5 %
|
Dividends
paid
|
$41,298
|
$41,855
|
$42,729
|
$43,975
|
$45,311
|
Gross Leverage Ratio
(6)
|
4.94
|
5.22
|
5.32
|
5.39
|
5.47
|
Net Leverage Ratio
(6)
|
3.58
|
3.70
|
3.93
|
4.20
|
4.46
|
Customer Connections – end of
period
|
|
|
|
|
|
On-Net
|
81,627
|
82,277
|
82,614
|
82,620
|
83,268
|
% Change from
previous Qtr.
|
1.1 %
|
0.8 %
|
0.4 %
|
0.0 %
|
0.8 %
|
Off-Net
|
12,922
|
13,160
|
13,359
|
13,531
|
13,785
|
% Change from
previous Qtr.
|
2.0 %
|
1.8 %
|
1.5 %
|
1.3 %
|
1.9 %
|
Non-Core (1)
|
335
|
340
|
348
|
363
|
374
|
% Change from
previous Qtr.
|
0.3 %
|
1.5 %
|
2.4 %
|
4.3 %
|
3.0 %
|
Total customer
connections
|
94,884
|
95,777
|
96,321
|
96,514
|
97,427
|
% Change from
previous Qtr.
|
1.2 %
|
0.9 %
|
0.6 %
|
0.2 %
|
0.9 %
|
On-Net Buildings – end of
period
|
|
|
|
|
|
Multi-Tenant office
buildings
|
1,824
|
1,826
|
1,832
|
1,837
|
1,841
|
Carrier neutral data
center buildings
|
1,187
|
1,216
|
1,240
|
1,264
|
1,294
|
Cogent data
centers
|
54
|
53
|
54
|
54
|
55
|
Total on-net
buildings
|
3,065
|
3,095
|
3,126
|
3,155
|
3,190
|
Total carrier neutral
data center nodes
|
1,383
|
1,409
|
1,433
|
1,458
|
1,490
|
Square feet –
multi-tenant office buildings – on-net
|
992,336,259
|
993,590,499
|
995,522,774
|
1,000,044,418
|
1,001,382,577
|
Network – end
of period
|
|
|
|
|
|
Intercity route
miles
|
60,869
|
61,024
|
61,065
|
61,292
|
61,300
|
Metro route
miles
|
16,614
|
16,822
|
17,477
|
17,616
|
17,826
|
Metro fiber
miles
|
40,113
|
40,529
|
42,212
|
42,491
|
42,863
|
Connected networks –
AS's
|
7,625
|
7,685
|
7,766
|
7,792
|
7,864
|
Headcount – end of
period
|
|
|
|
|
|
Sales force – quota
bearing
|
479
|
477
|
522
|
548
|
562
|
Sales force -
total
|
620
|
619
|
669
|
698
|
714
|
Total
employees
|
987
|
988
|
1,041
|
1,076
|
1,107
|
Sales rep
productivity – units per full time equivalent sales rep ("FTE") per
month
|
4.7
|
4.9
|
4.6
|
3.8
|
4.0
|
FTE – sales
reps
|
453
|
449
|
465
|
503
|
539
|
|
|
(1)
|
Consists of legacy
services of companies whose assets or businesses were acquired by
Cogent.
|
(2)
|
Network operations
expense excludes equity-based compensation expense of $144, $145,
$176, $88 and $149 in the three month periods ended March 31, 2022
through March 31, 2023, respectively. Network operations expense
includes excise taxes, including Universal Service Fund fees of
$3,742, $3,448, $4,118, $4,086 and $4,193 in the three month
periods ended March 31, 2022 through March 31, 2023,
respectively.
|
(3)
|
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.
|
(4)
|
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 believes that non-GAAP gross profit and non-GAAP gross
margin are relevant measures to provide investors. Management uses
them to measure the margin available to the company after network
service costs, in essence a measure of the efficiency of the
Company's network.
|
(5)
|
Excludes equity-based
compensation expense of $5,912, $5,762, $6,035, $6,176 and $6,432
in the three month periods ended March 31, 2022 through March 31,
2023, respectively and excludes $2,004, $244 and $400 of Sprint
acquisition costs for the three month periods ended September 30,
2022, December 31, 2022 and March 31, 2023,
respectively.
|
(6)
|
See Schedules of
Non-GAAP measures below for definitions and reconciliations to GAAP
measures.
|
Acquisition of Sprint Communications
Acquisition Related Costs
In connection with the Transaction and negotiation of the
Purchase Agreement the Company incurred $2.2
million of professional fees in the year ended December 31, 2022 and $0.4
million in the three months ended March 31, 2023.
Schedules of Non-GAAP
Measures
EBITDA, EBITDA, as adjusted for
Sprint acquisition costs, EBITDA margin and EBITDA, as adjusted for
Sprint (T-Mobile Wireline) acquisition costs, margin
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 for Sprint acquisition costs,
represents EBITDA plus costs related to the Company's acquisition
of Sprints Wireline Business. EBITDA margin is defined as EBITDA
divided by total service revenue. EBITDA, as adjusted for Sprint
acquisition costs margin is defined as EBITDA, as adjusted for
Sprint acquisition costs, divided by total service revenue.
The Company believes that EBITDA, EBITDA, as adjusted for Sprint
acquisition costs, EBITDA margin and EBITDA as adjusted for Sprint
acquisition costs margin are useful measures of its ability to
service debt, fund capital expenditures and expand its business.
The measurements are an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information. EBITDA, EBITDA, as adjusted for Sprint
acquisition costs, EBITDA margin and EBITDA as adjusted for Sprint
acquisition costs margin 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 measures 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 measures 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 for Sprint acquisition costs,
are reconciled to net cash provided by operating activities in the
table below.
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
($ in 000's) –
unaudited
|
|
|
|
|
|
Net cash provided by
operating activities
|
$49,411
|
$34,403
|
$53,570
|
$36,323
|
$35,821
|
Changes in operating
assets and liabilities
|
$(6,294)
|
$5,108
|
$(13,017)
|
$4,152
|
$1,435
|
Cash interest expense
and income tax expense
|
14,038
|
18,946
|
17,320
|
16,663
|
18,797
|
EBITDA
|
$57,155
|
$58,457
|
$57,873
|
$57,138
|
$56,053
|
PLUS: Sprint
acquisition costs
|
-
|
-
|
$2,004
|
$244
|
$400
|
EBITDA, as adjusted
for Sprint acquisition costs
|
$57,155
|
$58,457
|
$59,877
|
$57,382
|
$56,453
|
EBITDA
margin
|
38.3 %
|
39.4 %
|
38.6 %
|
37.6 %
|
36.5 %
|
EBITDA, as adjusted
for Sprint acquisition costs, margin
|
38.3 %
|
39.4 %
|
39.9 %
|
37.8 %
|
36.8 %
|
Constant currency revenue is reconciled to service revenue as
reported in the tables below.
Constant currency impact on revenue changes – sequential
periods
($ in 000's) –
unaudited
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
Service revenue, as
reported – current period
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
Impact of foreign
currencies on service revenue
|
516
|
1,350
|
1,486
|
(92)
|
(1,292)
|
Service revenue - as
adjusted for currency impact (1)
|
$149,691
|
$149,800
|
$151,486
|
$151,887
|
$152,296
|
Service revenue, as
reported – prior sequential period
|
$147,208
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
Constant currency
increase
|
$2,483
|
$625
|
$3,036
|
$1,887
|
$317
|
Constant currency
percent increase
|
1.7 %
|
0.4 %
|
2.0 %
|
1.3 %
|
0.2 %
|
|
|
(1)
|
Service revenue, as
adjusted for currency impact, is determined by translating the
service revenue for the current period at the average foreign
currency exchange rates for the prior sequential period. The
Company believes that disclosing quarterly sequential revenue
growth without the impact of foreign currencies on service revenue
is a useful measure of sequential revenue growth. Service revenue,
as adjusted for currency impact, is an integral part of the
internal reporting and planning system used by management as a
supplement to GAAP financial information.
|
Constant currency impact on revenue changes – prior year
periods
($ in 000's) –
unaudited
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
Service revenue, as
reported – current period
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
Impact of foreign
currencies on service revenue
|
1,914
|
3,417
|
4,246
|
3,371
|
1,553
|
Service revenue - as
adjusted for currency impact (2)
|
$151,089
|
$151,867
|
$154,246
|
$155,350
|
$155,141
|
Service revenue, as
reported – prior year period
|
$146,777
|
$147,879
|
$147,927
|
147,208
|
149,175
|
Constant currency
increase
|
$4,312
|
$3,988
|
$6,319
|
8,142
|
5,966
|
Constant currency
percent increase
|
2.9 %
|
2.7 %
|
4.3 %
|
5.5 %
|
4.0 %
|
|
|
(2)
|
Service revenue, as
adjusted for currency impact, is determined by translating the
service revenue for the current period at the average foreign
currency exchange rates for the comparable prior year period. The
Company believes that disclosing year over year revenue growth
without the impact of foreign currencies on service revenue is a
useful measure of revenue growth. Service revenue, as adjusted for
currency impact, is an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information.
|
Revenue on a constant currency basis and adjusted for the
impact of excise taxes is reconciled to service revenue as reported
in the tables below.
Constant currency and excise tax impact on revenue changes –
sequential periods
($ in 000's) –
unaudited
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
Service revenue, as
reported – current period
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
Impact of foreign
currencies on service revenue
|
516
|
1,350
|
1,486
|
(92)
|
(1,292)
|
Impact of excise taxes
on service revenue
|
594
|
294
|
(670)
|
32
|
(107)
|
Service revenue - as
adjusted for currency and excise taxes impact (3)
|
$150,285
|
$150,094
|
$150,816
|
$151,919
|
$152,189
|
Service revenue, as
reported – prior sequential period
|
$147,208
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
Constant currency and
excise taxes increase
|
$3,077
|
$919
|
$2,366
|
$1,919
|
$210
|
Constant currency and
excise tax percent increase
|
2.1 %
|
0.6 %
|
1.6 %
|
1.3 %
|
0.1 %
|
|
|
(3)
|
Service revenue, as
adjusted for currency impact and the impact of excise taxes, is
determined by translating the service revenue for the current
period at the average foreign currency exchange rates for the prior
sequential period and adjusting for the changes in excise taxes
recorded as revenue between the periods presented. The Company
believes that disclosing quarterly sequential revenue growth
without the impact of foreign currencies and excise taxes on
service revenue is a useful measure of sequential revenue growth.
Service revenue, as adjusted for the impact of foreign currency and
excise taxes, is an integral part of the internal reporting and
planning system used by management as a supplement to GAAP
financial information.
|
Constant currency and excise tax impact on revenue changes –
prior year periods
($ in 000's) –
unaudited
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
Service revenue, as
reported – current period
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
Impact of foreign
currencies on service revenue
|
1,914
|
3,417
|
4,246
|
3,371
|
1,553
|
Impact of excise taxes
on service revenue
|
786
|
1,363
|
695
|
250
|
(451)
|
Service revenue - as
adjusted for currency and excise taxes impact (4)
|
$151,875
|
$153,230
|
$154,941
|
$155,600
|
$154,690
|
Service revenue, as
reported – prior year period
|
$146,777
|
$147,879
|
$147,927
|
$147,208
|
$149,175
|
Constant currency and
excise taxes increase
|
$5,098
|
$5,351
|
$7,014
|
$8,392
|
$5,515
|
Constant currency and
excise tax percent increase
|
3.5 %
|
3.6 %
|
4.7 %
|
5.7 %
|
3.7 %
|
|
|
(4)
|
Service revenue, as
adjusted for currency impact and the impact of excise taxes, is
determined by translating the service revenue for the current
period at the average foreign currency exchange rates for the prior
year period and adjusting for the changes in excise taxes recorded
as revenue between the periods presented. The Company believes that
disclosing quarterly sequential revenue growth without the impact
of foreign currencies and excise taxes on service revenue is a
useful measure of sequential revenue growth. Service revenue, as
adjusted for the impact of foreign currency and excise taxes, is an
integral part of the internal reporting and planning system used by
management as a supplement to GAAP financial
information.
|
Non-GAAP gross profit and Non-GAAP gross margin
Non-GAAP gross profit and Non-GAAP gross margin are
reconciled to GAAP gross profit and GAAP gross margin in the table
below.
|
Q1
2022
|
Q2
2022
|
Q3
2022
|
Q4
2022
|
Q1
2023
|
($ in 000's) –
unaudited
|
|
|
|
|
|
Service revenue
total
|
$149,175
|
$148,450
|
$150,000
|
$151,979
|
$153,588
|
Minus - Network
operations expense including equity-based
compensation and including depreciation and amortization
expense
|
80,137
|
79,585
|
80,117
|
80,535
|
83,798
|
GAAP Gross Profit
(1)
|
$69,038
|
$68,865
|
$69,883
|
$71,444
|
$69,790
|
Plus -
Equity-based compensation – network operations expense
|
144
|
145
|
176
|
88
|
149
|
Plus – Depreciation and
amortization expense
|
22,688
|
23,071
|
22,897
|
$23,563
|
$25,160
|
Non-GAAP Gross
Profit (2)
|
$91,870
|
$92,081
|
$92,956
|
$95,095
|
$95,099
|
GAAP Gross Margin
(1)
|
46.3 %
|
46.4 %
|
46.6 %
|
47.0 %
|
45.4 %
|
Non-GAAP Gross
Margin (2)
|
61.6 %
|
62.0 %
|
62.0 %
|
62.6 %
|
61.9 %
|
|
|
(1)
|
GAAP gross profit is
defined as total service revenue less network operations expense,
depreciation and amortization and equity-based compensation
included in network operations expense. GAAP gross margin is
defined as GAAP gross profit divided by total service
revenue.
|
(2)
|
Non-GAAP gross profit
represents service revenue less network operations expense,
excluding equity-based compensation and amounts shown separately
(depreciation and amortization expense). Non-GAAP gross margin is
defined as non-GAAP gross profit divided by total service revenue.
Management believes that non-GAAP gross profit and non-GAAP gross
margin are relevant measures to provide to investors, as they are
measures that management uses to measure the margin and amount
available to the Company after network service costs, in essence
these are measures of the efficiency of the Company's
network.
|
Gross and Net Leverage Ratios
Gross leverage ratio is defined as total debt divided by the
trailing last 12 months EBITDA, as adjusted for Sprint acquisition
costs. Net leverage ratio is defined as total net debt (total debt
minus cash and cash equivalents) divided by the trailing last 12
months EBITDA, as adjusted for Sprint acquisition costs. Cogent's
gross leverage ratio and net leverage ratio are shown below.
($ in 000's) –
unaudited
|
As of March 31,
2023
|
As of December 31,
2022
|
Cash and cash
equivalents & restricted cash
|
$234,422
|
$275,912
|
Debt
|
|
|
Capital (finance)
leases – current portion
|
19,782
|
17,182
|
Capital (finance)
leases – long term
|
300,600
|
287,044
|
Senior Secured 2026
Notes
|
500,000
|
500,000
|
Senior Unsecured 2027
Notes
|
450,000
|
450,000
|
Total debt
|
1,270,382
|
1,254,226
|
Total net
debt
|
1,035,960
|
978,314
|
Trailing 12 months
EBITDA, as adjusted for Sprint acquisition costs
|
232,169
|
232,871
|
Gross leverage
ratio
|
5.47
|
5.39
|
Net leverage
ratio
|
4.46
|
4.20
|
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 MARCH 31, 2023
AND DECEMBER 31, 2022
(IN THOUSANDS,
EXCEPT SHARE DATA)
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
184,140
|
|
$
|
223,783
|
Restricted
cash
|
|
|
50,282
|
|
|
52,129
|
Accounts receivable,
net of allowance for credit losses of $2,675 and $2,303,
respectively
|
|
|
45,172
|
|
|
44,123
|
Prepaid expenses and
other current assets
|
|
|
49,203
|
|
|
45,878
|
Total current
assets
|
|
|
328,797
|
|
|
365,913
|
Property and
equipment:
|
|
|
|
|
|
|
Property and
equipment
|
|
|
1,769,171
|
|
|
1,714,906
|
Accumulated
depreciation and amortization
|
|
|
(1,197,136)
|
|
|
(1,170,476)
|
Total property and
equipment, net
|
|
|
572,035
|
|
|
544,430
|
Right-of-use leased
assets
|
|
|
79,430
|
|
|
81,601
|
Deposits and other
assets
|
|
|
18,150
|
|
|
18,238
|
Total assets
|
|
$
|
998,412
|
|
$
|
1,010,182
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
18,501
|
|
$
|
27,208
|
Accrued and other
current liabilities
|
|
|
76,770
|
|
|
63,889
|
Current maturities,
operating lease liabilities
|
|
|
12,369
|
|
|
12,005
|
Finance lease
obligations, current maturities
|
|
|
19,782
|
|
|
17,182
|
Total current
liabilities
|
|
|
127,422
|
|
|
120,284
|
Senior secured 2026
notes, net of unamortized debt costs of $840 and
$905, respectively, and discount of
$1,118 and $1,203, respectively
|
|
|
498,042
|
|
|
497,892
|
Senior unsecured
2027 notes, net of unamortized debt costs of $1,116
and $1,173, respectively, and
discount of $2,338 and $2,456,
respectively
|
|
|
446,546
|
|
|
446,371
|
Operating lease
liabilities, net of current maturities
|
|
|
91,922
|
|
|
94,587
|
Finance lease
obligations, net of current maturities
|
|
|
300,600
|
|
|
287,044
|
Other long-term
liabilities
|
|
|
82,427
|
|
|
82,636
|
Total
liabilities
|
|
|
1,546,959
|
|
|
1,528,814
|
Commitments and
contingencies:
|
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
|
|
|
Common stock, $0.001
par value; 75,000,000 shares authorized; 48,296,882 and 48,013,330
shares issued and
outstanding, respectively
|
|
|
48
|
|
|
48
|
Additional paid-in
capital
|
|
|
582,524
|
|
|
575,064
|
Accumulated other
comprehensive loss
|
|
|
(17,368)
|
|
|
(19,156)
|
Accumulated
deficit
|
|
|
(1,113,751)
|
|
|
(1,074,588)
|
Total stockholders'
deficit
|
|
|
(548,547)
|
|
|
(518,632)
|
Total liabilities
and stockholders' deficit
|
|
$
|
998,412
|
|
$
|
1,010,182
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
FOR THE THREE MONTHS
ENDED MARCH 31, 2023 AND MARCH 31, 2022
(IN THOUSANDS,
EXCEPT SHARE AND PER SHARE DATA)
|
|
|
|
Three Months
Ended
March 31,
2023
|
|
Three Months
Ended
March 31, 2022
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Service
revenue
|
|
$
|
153,588
|
|
$
|
149,175
|
Operating
expenses:
|
|
|
|
|
|
|
Network operations
(including $149 and $144 of equity-based compensation expense,
respectively,
exclusive of depreciation and amortization shown
separately below)
|
|
|
58,638
|
|
|
57,449
|
Selling, general, and
administrative (including $6,432 and $5,912 of equity-based
compensation
expense, respectively)
|
|
|
45,078
|
|
|
40,627
|
Acquisition costs –
Sprint
|
|
|
400
|
|
|
—
|
Depreciation and
amortization
|
|
|
25,160
|
|
|
22,688
|
Total operating
expenses
|
|
|
129,276
|
|
|
120,764
|
Gains on lease
terminations
|
|
|
—
|
|
|
373
|
Operating
income
|
|
|
24,312
|
|
|
28,784
|
Interest
expense
|
|
|
(19,005)
|
|
|
(14,168)
|
Change in valuation
- interest rate swap agreement
|
|
|
1,847
|
|
|
(21,271)
|
Unrealized foreign
exchange gain on 2024 Euro Notes
|
|
|
—
|
|
|
8,014
|
Interest income and
other, net
|
|
|
3,498
|
|
|
319
|
Income before income
taxes
|
|
|
10,652
|
|
|
1,678
|
Income tax
expense
|
|
|
(4,504)
|
|
|
(541)
|
Net
income
|
|
$
|
6,148
|
|
$
|
1,137
|
|
|
|
|
|
|
|
Comprehensive income
(loss):
|
|
|
|
|
|
|
Net income
|
|
$
|
6,148
|
|
$
|
1,137
|
Foreign currency
translation adjustment
|
|
|
1,788
|
|
|
(2,165)
|
Comprehensive income
(loss)
|
|
$
|
7,936
|
|
$
|
(1,028)
|
|
|
|
|
|
|
|
Net income per
common share:
|
|
|
|
|
|
|
Basic and diluted
net income per common share
|
|
$
|
0.13
|
|
$
|
0.02
|
Dividends declared
per common share
|
|
$
|
0.925
|
|
$
|
0.855
|
|
|
|
|
|
|
|
Weighted-average
common shares - basic
|
|
|
47,037,091
|
|
|
46,575,848
|
|
|
|
|
|
|
|
Weighted-average
common shares - diluted
|
|
|
47,381,226
|
|
|
46,929,191
|
COGENT
COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31, 2023 AND MARCH 31, 2022
(IN
THOUSANDS)
|
|
|
|
Three Months
Ended
March 31,
2023
|
|
Three
Months
Ended
March 31, 2022
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
6,148
|
|
$
|
1,137
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
25,160
|
|
|
22,688
|
Amortization of debt
discount and premium
|
|
|
324
|
|
|
417
|
Equity-based
compensation expense (net of amounts capitalized)
|
|
|
6,581
|
|
|
6,056
|
Gains – lease
transactions
|
|
|
(615)
|
|
|
(373)
|
Gains - equipment
transactions and other, net
|
|
|
—
|
|
|
525
|
Unrealized foreign
currency exchange gain on 2024 Euro Notes
|
|
|
—
|
|
|
(8,014)
|
Deferred income
taxes
|
|
|
890
|
|
|
(58)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(860)
|
|
|
76
|
Prepaid expenses and
other current assets
|
|
|
(2,919)
|
|
|
(2,953)
|
Change in valuation -
interest rate swap agreement
|
|
|
(1,847)
|
|
|
21,271
|
Accounts payable,
accrued liabilities and other long-term liabilities
|
|
|
2,923
|
|
|
10,046
|
Deposits and other
assets
|
|
|
36
|
|
|
(1,407)
|
Net cash provided by
operating activities
|
|
|
35,821
|
|
|
49,411
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
|
(23,204)
|
|
|
(18,121)
|
Net cash used in
investing activities
|
|
|
(23,204)
|
|
|
(18,121)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(45,311)
|
|
|
(41,298)
|
Proceeds from exercises
of stock options
|
|
|
145
|
|
|
204
|
Principal payments on
installment payment agreement
|
|
|
—
|
|
|
(571)
|
Principal payments of
finance lease obligations
|
|
|
(9,450)
|
|
|
(5,863)
|
Net cash used in
financing activities
|
|
|
(54,616)
|
|
|
(47,528)
|
Effect of exchange
rates changes on cash
|
|
|
510
|
|
|
(615)
|
Net decrease in
cash, cash equivalents and restricted cash
|
|
|
(41,489)
|
|
|
(16,853)
|
Cash, cash
equivalents and restricted cash, beginning of period
|
|
|
275,912
|
|
|
328,624
|
Cash, cash
equivalents and restricted cash, end of period
|
|
$
|
234,423
|
|
$
|
311,771
|
|
|
|
|
|
|
|
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 our acquisition of Sprint Communications, including our
difficulties integrating our business with the acquired Sprint
Communications business, which may result in the combined company
not operating as effectively or efficiently as expected; transition
services required to support the acquired Sprint Communications
business and the related costs continuing for a longer period that
expected,; transition related costs associated with the
acquisition; the COVID-19 pandemic and the related government
policies; future economic instability in the global economy,
including the risk of economic recession, recent bank failure and
liquidity concerns at certain other banks 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; our ability to make payments on our
indebtedness as they become due and outcomes in litigation, risks
associated with variable interest rates under our interest rate
swap agreement, 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, 2022 and our Form 10-Q for the
quarter ended March 31, 2023. 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.