Cogent Communications Reports Second Quarter 2022 Results and Increases its Regular Quarterly Dividend on its Common Stock by $0.025

About this update from Cogent Communications Holdings, Inc.

Financial and Business Highlights Cogent approved an increase of $0.025 per share to its regular quarterly dividend for a total of $0.905 per share for Q3 2022 as compared to $0.880 per share for Q2 2022 – Cogent's fortieth consecutive quarterly dividend increase. The Q3 2022 $0.905 dividend per share represents an annual increase of 12.4% from the dividend per share of $0.805 for Q3 2021. Service revenue decreased from Q1 2022 to Q2 2022 by 0.5% and increased from Q2 2021 to Q2 2022 by 0.4%. Service revenue, on a constant currency basis, increased from Q1 2022 to Q2 2022 by 0.4% and increased from Q2 2021 to Q2 2022 by 2.7%. Service revenue, on a constant currency basis and adjusted for the impact of excise tax revenues, increased from Q1 2022 to Q2 2022 by 0.6% and increased from Q2 2021 to Q2 2022 by 3.6%. EBITDA margin increased by 110 basis points from Q1 2022 to 39.4% for Q2 2022 and increased by 70 basis points from Q2 2021 to Q2 2022. EBITDA increased by 2.3% from Q1 2022 to $58.5 million for Q2 2022 and increased by 2.2% from Q2 2021 to Q2 2022. Net cash provided by operating activities was $34.4 million for Q2 2022, $49.4 million for Q1 2022 and $39.7 million for Q2 2021. Included in net cash from operating activities for Q2 2022 are interest payments on Cogent note obligations totaling $16.8 million . In June 2022 Cogent extinguished its 2024 €350.0 million Euro Notes at a Euro to USD rate of $1.06 (originally issued at a Euro to USD rate of $1.13 ) with the proceeds from the issuance of its $450.0 million 2027 Notes Sales rep productivity – units per full time equivalent sales rep per month - increased from 4.7 for Q1 2022 to 4.9 for Q2 2022. WASHINGTON , Aug. 4, 2022 /PRNewswire/ -- Cogent Communications Holdings, Inc. (NASDAQ: CCOI) ("Cogent") today announced service revenue of $148.5 million for the three months ended June 30, 2022 , a decrease of 0.5% from the three months ended March 31, 2022 and an increase of 0.4% from the three months ended June 30, 2021 . Foreign exchange rates negatively impacted service revenue growth from the three months ended March 31, 2022 to the three months ended June 30, 2022 by $1.4 million and negatively impacted service revenue growth from the three months ended June 30, 2021 to the three months ended June 30, 2022 by $3.4 million . On a constant currency basis, service revenue increased by 0.4% from the three months ended March 31, 2022 to the three months ended June 30, 2022 and increased by 2.7% from the three months ended June 30, 2021 to the three months ended June 30, 2022 . The impact of excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense, negatively impacted service revenue growth from the three months ended March 31, 2022 to the three months ended June 30, 2022 by $0.4 million and negatively impacted service revenue growth from the three months ended June 30, 2021 to the three months ended June 30, 2022 by $1.4 million . On a constant currency basis, and adjusting for the impact of changes in excise tax revenue, service revenue increased by 0.6% from the three months ended March 31, 2022 to the three months ended June 30, 2022 and increased by 3.6% from the three months ended June 30, 2021 to the three months ended June 30, 2022 . 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 $112.0 million for the three months ended June 30, 2022 , a decrease of 0.6% from the three months ended March 31, 2022 and an increase of 0.8% from the three months ended June 30, 2021 . 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 $36.3 million for the three months ended June 30, 2022 ; a decrease of 0.3% from the three months ended March 31, 2022 and a decrease of 1.1% from the three months ended June 30, 2021 . 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 decreased by 1.1% from the three months ended June 30, 2021 to $68.9 million for the three months ended June 30, 2022 and decreased by 0.3% from the three months ended March 31, 2022 . GAAP gross margin was 46.4% for the three months ended June 30, 2022 , 47.1% for the three months ended June 30, 2021 and 46.3% for the three months ended March 31, 2022 . 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 0.3% from the three months ended June 30, 2021 to $92.1 million for the three months ended June 30, 2022 and increased by 0.2% from the three months ended March 31, 2022 . Non-GAAP gross margin was 62.0% for the three months ended June 30, 2022 , 62.1% for the three months ended June 30, 2021 and 61.6% for the three months ended March 31, 2022 . Excise taxes, including Universal Service Fund fees, recorded on a gross basis and included in service revenue and cost of network operations expense were $3.4 million for the three months ended June 30, 2022 , $4.8 million for the three months ended June 30, 2021 and $3.7 million for the three months ended March 31, 2022 . Net cash provided by operating activities decreased by 13.4% from the three months ended June 30, 2021 to $34.4 million for the three months ended June 30, 2022 and decreased by 30.4% from the three months ended March 31, 2022 . Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 2.2% from the three months ended June 30, 2021 to $58.5 million for the three months ended June 30, 2022 and increased by 2.3% from the three months ended March 31, 2022 . EBITDA margin was 39.4% for the three months ended June 30, 2022 , 38.7% for the three months ended June 30, 2021 and 38.3% for the three months ended March 31, 2022 . Basic net and diluted income (loss) per share was $0.24 for the three months ended June 30, 2022 , $(0.05) for the three months ended June 30, 2021 and $0.02 for the three months ended March 31, 2022 . Foreign exchange gains (losses) on Cogent's 2024 Senior Euro Unsecured Notes were $23.5 million for the three months ended June 30, 2022 , $(5.3) million for the three months ended June 30, 2021 and $8.0 million for the three months ended March 31, 2022 . Total customer connections increased by 4.3% from June 30, 2021 to 95,777 as of June 30, 2022 and increased by 0.9% from March 31, 2022 . On-net customer connections increased by 4.0% from June 30, 2021 to 82,277 as of June 30, 2022 and increased by 0.8% from March 31, 2022 . Off-net customer connections increased by 6.2% from June 30, 2021 to 13,160 as of June 30, 2022 and increased by 1.8% from March 31, 2022 . The number of on-net buildings increased by 120 from June 30, 2021 to 3,095 as of June 30, 2022 and increased by 30 from March 31, 2022 . Quarterly Dividend Increase Approved On August 4, 2022 , Cogent's Board approved a regular quarterly dividend of $0.905 per share payable on August 31, 2022 to shareholders of record on August 18, 2022 . This third quarter 2022 regular dividend represents an increase of $0.025 per share, or 2.8%, from the second quarter 2022 regular dividend of $0.880 per share and an annual increase of 12.4% from the third quarter 2021 dividend of $0.805 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. Impact of COVID-19 Cogent continues to be impacted by the COVID-19 pandemic and the accompanying responses by governments around the world. The recent spread of variants 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. Cogent has experienced 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 our ability to expand and augment our network. Most Cogent employees worldwide returned to its offices on a full-time basis in the first quarter of 2022. Cogent is implementing measures to protect its workforce, but it can provide no assurance that these measures will be sufficient. Cogent's decisions to require its employees to return to its offices on a full-time basis and to implement a COVID-19 vaccine mandate, where legally permitted, may impede its ability to retain existing employees or attract new employees. 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 find that the impact of the pandemic on its vendors and their respective workforces may slow the delivery of services from these vendors to Cogent. 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, 2021 and in its Quarterly Report on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 . Conference Call and Website Information Cogent will host a conference call with financial analysts at 4:30 p.m. (ET) on August 4, 2022 to discuss Cogent's operating results for the second quarter of 2022 and to discuss Cogent's expectations for full year 2022. 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 217 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 [email protected] . COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES Summary of Financial and Operational Results Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Metric ($ in 000's, except share and per share data) – unaudited On-Net revenue $109,947 $111,041 $111,099 $110,749 $112,634 $111,975 % Change from previous Qtr. 2.6 % 1.0 % 0.1 % -0.3 % 1.7 % -0.6 % Off-Net revenue $36,723 $36,699 $36,656 $36,304 $36,387 $36,282 % Change from previous Qtr. 0.1 % -0.1 % -0.1 % -1.0 % 0.2 % -0.3 % Non-Core revenue (1) $107 $139 $172 $155 $154 $193 % Change from previous Qtr. -10.8 % 29.9 % 23.7 % -9.9 % -0.6 % 25.3 % Service revenue – total $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 % Change from previous Qtr. 2.0 % 0.8 % 0.0 % -0.5 % 1.3 % -0.5 % Constant currency total revenue quarterly growth rate– sequential quarters (6) 1.7 % 0.6 % 0.5 % 0.1 % 1.7 % 0.4 % Constant currency total revenue quarterly growth rate – year over year quarters (6) 2.3 % 2.8 % 3.6 % 2.9 % 2.9 % 2.7 % Constant currency and excise tax impact on total revenue quarterly growth rate – sequential quarters (6) 1.4 % 0.5 % 0.5 % 0.4 % 2.1 % 0.6 % Constant currency and excisetax impact on total revenue quarterlygrowth rate – year over year quarters (6) 1.8 % 1.7 % 2.9 % 2.8 % 3.5 % 3.6 % Excise Taxes included inservice revenue $4,528 $4,811 $4,813 $4,336 $3,742 $3,448 % Change from previous Qtr. 9.3 % 6.3 % 0.0 % -9.9 % -13.7 % -7.9 % Network operations expenses (2) $55,016 $56,044 $56,482 $56,272 $57,305 $56,369 % Change from previous Qtr. 0.9 % 1.9 % 0.8 % -0.4 % 1.8 % -1.6 % GAAP gross profit (3) $67,715 $69,603 $68,673 $68,223 $69,038 $68,865 % Change from previous Qtr. 1.6 % 2.8 % -1.3 % -0.7 % 1.2 % -0.3 % GAAP gross margin (3) 46.1 % 47.1 % 46.4 % 46.3 % 46.3 % 46.4 % Non-GAAP gross profit (4) (6) $91,761 $91,835 $91,445 $90,936 $91,870 $92,081 % Change from previous Qtr. 2.7 % 0.1 % -0.4 % -0.6 % 1.0 % 0.2 % Non-GAAP gross margin (4) (6) 62.5 % 62.1 % 61.8 % 61.8 % 61.6 % 62.0 % Selling, general and administrative expenses (5) $36,211 $34,654 $33,692 $33,526 $34,715 $33,624 % Change from previous Qtr. 7.4 % -4.3 % -2.8 % -0.5 % 3.5 % -3.1 % Depreciation andamortization expense $21,970 $22,096 $22,609 $22,567 $22,688 $23,071 % Change from previous Qtr. -2.2 % 0.6 % 2.3 % -0.2 % 0.5 % 1.7 % Equity-based compensation expense $7,307 $6,874 $6,588 $6,053 $6,056 $5,907 % Change from previous Qtr. 25.0 % -5.9 % -4.2 % -8.1 % 0.0 % -2.5 % Operating income $26,291 $28,211 $28,556 $36,165 $28,784 $29,566 % Change from previous Qtr. -4.0 % 7.3 % 1.2 % 26.6 % -20.4 % 2.7 % Interest expense $15,836 $14,236 $14,273 $13,714 $14,168 $13,478 % Change from previous Qtr. -1.1 % -10.1 % 0.3 % -3.9 % 3.3 % -4.9 % Non-cash change in valuation – Swap agreement $3,076 $5,939 $21,271 $7,510 % Change from previous Qtr. 93.1 % 258.2 % -64.7 % Net income (loss) $18,851 $(2,493) $13,320 $18,507 $1,137 $11,164 Foreign exchange gains(losses) on 2024 Euro Notes $18,870 $(5,280) $10,169 $8,763 $8,014 $23,547 Basic net income (loss) per common share $0.41 $(0.05) $0.29 $0.40 $0.02 $0.24 Diluted net income (loss) per common share $0.41 $(0.05) $0.28 $0.39 $0.02 $0.24 Weighted average common shares – basic 46,067,096 46,229,603 46,293,524 46,420,168 46,575,848 46,691,142 % Change from previous Qtr. 0.4 % 0.4 % 0.1 % 0.3 % 0.3 % 0.2 % Weighted average common shares – diluted 46,507,258 46,229,603 46,866,929 46,992,639 46,929,191 47,029,446 % Change from previous Qtr. 1.3 % -0.6 % 1.4 % 0.3 % -0.1 % 0.2 % EBITDA (6) $55,550 $57,181 $57,753 $57,410 $57,155 $58,457 % Change from previous Qtr. -0.2 % 2.9 % 1.0 % -0.6 % -0.4 % 2.3 % EBITDA margin 37.8 % 38.7 % 39.0 % 39.0 % 38.3 % 39.4 % Gains on asset related transactions $18 $- $- $- $- $- EBITDA, as adjusted (6) $55,568 $57,181 $57,753 $57,410 $57,155 $58,457 % Change from previous Qtr. -0.2 % 2.9 % 1.0 % -0.6 % -0.4 % 2.3 % EBITDA, as adjusted, margin 37.9 % 38.7 % 39.0 % 39.0 % 38.3 % 39.4 % Net cash provided by operating activities $47,106 $39,749 $47,418 $35,984 $49,411 $34,403 % Change from previous Qtr. 25.4 % -15.6 % 19.3 % -24.1 % 37.3 % -30.4 % Capital expenditures $15,444 $17,217 $21,959 $15,296 $18,121 $17,288 % Change from previous Qtr. -2.6 % 11.5 % 27.5 % -30.3 % 18.5 % -4.6 % Principal payments of capital (finance) lease obligations $5,744 $6,192 $4,890 $6,228 $5,863 $5,236 % Change from previous Qtr. 24.9 % 7.8 % -21.0 % 27.4 % -5.9 % -10.7 % Dividends paid $36,081 $37,001 $37,654 $39,552 $41,298 $41,855 Purchases of common stock $- $- $- $- $- $- Gross Leverage Ratio 4.39 5.13 5.07 5.02 4.94 5.22 Net Leverage Ratio 3.31 3.45 3.50 3.58 3.58 3.70 Customer Connections – end of period On-Net 78,389 79,146 80,162 80,723 81,627 82,277 % Change from previous Qtr. 1.4 % 1.0 % 1.3 % 0.7 % 1.1 % 0.8 % Off-Net 12,216 12,386 12,495 12,669 12,922 13,160 % Change from previous Qtr. 2.1 % 1.4 % 0.9 % 1.4 % 2.0 % 1.8 % Non-Core (1) 320 336 334 334 335 340 % Change from previous Qtr. -1.5 % 5.0 % -0.6 % - % 0.3 % 1.5 % Total customer connections 90,925 91,868 92,991 93,726 94,884 95,777 % Change from previous Qtr. 1.5 % 1.0 % 1.2 % 0.8 % 1.2 % 0.9 % On-Net Buildings – end of period Multi-Tenant office buildings 1,796 1,802 1,816 1,817 1,824 1,826 Carrier neutral data center buildings 1,089 1,119 1,138 1,164 1,187 1,216 Cogent data centers 54 54 54 54 54 53 Total on-net buildings 2,939 2,975 3,008 3,035 3,065 3,095 Total carrier neutral data center nodes 1,274 1,309 1,332 1,359 1,383 1,409 Square feet – multi-tenant office buildings – on-net 978,095,164 979,876,141 984,753,702 986,941,224 992,336,259 993,590,499 Network – end of period Intercity route miles 58,761 59,741 59,741 60,676 60,869 61,024 Metro route miles 15,596 15,742 15,979 16,338 16,614 16,822 Metro fiber miles 38,058 38,351 38,825 39,559 40,113 40,529 Connected networks – AS's 7,471 7,530 7,597 7,569 7,625 7,685 Headcount – end of period Sales force – quota bearing 547 565 516 490 479 477 Sales force - total 693 710 662 633 620 619 Total employees 1,066 1,087 1,031 1,001 987 988 Sales rep productivity – units per full time equivalent sales rep ("FTE") per month 4.3 4.5 4.3 4.2 4.7 4.9 FTE – sales reps 522 511 521 467 453 449 (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 $2,076 , $136 , $163 , $146 , $144 and $145 in the three month periods ended March 31, 2021 through June 30, 2022 , respectively. Network operations expense includes excise taxes, including Universal Service Fund fees of $4,528 , $4,811 , $4,813 , $4,336 , $3,742 and $3,448 in the three month periods ended March 31, 2021 through June 30, 2022 , 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 $5,231 , $6,738 , $6,425 , $5,907 , $5,912 and $5,762 in the three month periods ended March 31, 2021 through June 30, 2022 , respectively. (6) See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures. Schedules of Non-GAAP Measures EBITDA, EBITDA, as adjusted, EBITDA margin and EBITDA, as adjusted, 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, represents EBITDA plus net gains (losses) on asset related transactions. EBITDA margin is defined as EBITDA divided by total service revenue. EBITDA, as adjusted, margin is defined as EBITDA, as adjusted, divided by total service revenue. The Company believes that EBITDA, EBITDA, as adjusted, EBITDA margin and EBITDA as adjusted 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, EBITDA margin and EBITDA, as adjusted, 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, are reconciled to net cash provided by operating activities in the table below. Q1 2021 Q2 2021 Q32021 Q42021 Q12022 Q22022 ($ in 000's) – unaudited Net cash provided by operating activities $47,106 $39,749 $47,418 $35,984 $49,411 $34,403 Changes in operating assets and liabilities $(9,060) $2,352 $(3,191) $7,607 $(6,294) $5,108 Cash interest expense and income tax expense 17,504 15,080 13,526 13,819 14,038 18,946 EBITDA $55,550 $57,181 $57,753 $57,410 $57,155 $58,457 PLUS: Gains on asset related transactions 18 - - - - - EBITDA, as adjusted $55,568 $57,181 $57,753 $57,410 $57,155 $58,457 EBITDA margin 37.8 % 38.7 % 39.0 % 39.0 % 38.3 % 39.4 % EBITDA, as adjusted, margin 37.9 % 38.7 % 39.0 % 39.0 % 38.3 % 39.4 % Constant currency revenue is reconciled to service revenue as reported in the tables below.Constant currency impact on revenue changes – sequential periods ($ in 000's) – unaudited Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q12022 Q22022 Service revenue, as reported – current period $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 Impact of foreign currencies on service revenue (447) (150) 709 808 516 1,350 Service revenue - as adjusted for currency impact (1) $146,330 $147,729 $148,636 $148,016 $149,691 $149,800 Service revenue, as reported – prior sequential period $143,901 $146,777 $147,879 $147,927 $147,208 $149,175 Constant currency increase $2,429 $952 $757 $89 $2,483 $625 Constant currency percent increase 1.7 % 0.6 % 0.5 % 0.1 % 1.7 % 0.4 % (1) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. Constant currency impact on revenue changes – prior year periods ($ in 000's) – unaudited Q1 2021 Q2 2021 Q3 2021 Q42021 Q1 2022 Q22022 Service revenue, as reported – current period $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 Impact of foreign currencies on service revenue (2,608) (2,965) (555) 916 1,914 3,417 Service revenue - as adjusted for currency impact (2) $144,169 $144,914 $147,372 $148,124 $151,089 $151,867 Service revenue, as reported – prior year period $140,915 $140,990 $142,302 $143,901 $146,777 $147,879 Constant currency increase $3,254 $3,924 $5,070 $4,223 $4,312 $3,988 Constant currency percent increase 2.3 % 2.8 % 3.6 % 2.9 % 2.9 % 2.7 % (2) Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. Revenue on a constant currency basis and adjusted for the impact of excise taxes is reconciled to service revenue as reported in the tables below. Constant currency and excise tax impact on revenue changes – sequential periods ($ in 000's) – unaudited Q12021 Q22021 Q32021 Q42021 Q12022 Q22022 Service revenue, as reported – current period $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 Impact of foreign currencies on service revenue (447) (150) 709 808 516 1,350 Impact of excise taxes on service revenue (384) (283) (2) 477 594 294 Service revenue - as adjusted for currency and excise taxes impact (3) $145,946 $147,446 $148,634 $148,493 $150,285 $150,094 Service revenue, as reported – prior sequential period $143,901 $146,777 $147,879 $147,927 $147,208 $149,175 Constant currency and excise taxes increase $2,045 $669 $755 $566 $3,077 $919 Constant currency and excise tax percent increase 1.4 % 0.5 % 0.5 % 0.4 % 2.1 % 0.6 % (3) Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. Constant currency and excise tax impact on revenue changes – prior year periods ($ in 000's) – unaudited Q12021 Q22021 Q32021 Q42021 Q1 2022 Q2 2022 Service revenue, as reported – current period $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 Impact of foreign currencies on service revenue (2,608) (2,965) (555) 916 1,914 3,417 Impact of excise taxes on service revenue (785) (1,513) (911) (192) 786 1,363 Service revenue - as adjusted for currency and excise taxes impact (4) $143,384 $143,401 $146,461 $147,932 $151,875 $153,230 Service revenue, as reported – prior year period $140,915 $140,990 $142,302 $143,901 $146,777 $147,879 Constant currency and excise taxes increase $2,469 $2,411 $4,159 $4,031 $5,098 $5,351 Constant currency and excise tax percent increase 1.8 % 1.7 % 2.9 % 2.8 % 3.5 % 3.6 % (4) Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior year period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. Non-GAAP gross profit and Non-GAAP gross margin Non-GAAP gross profit and Non-GAAP gross margin are reconciled to GAAP gross profit and GAAP gross margin in the table below. Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 ($ in 000's) – unaudited Service revenue total $146,777 $147,879 $147,927 $147,208 $149,175 $148,450 Minus - Network operations expense including equity-basedcompensation and including depreciation and amortization expense 79,062 78,276 79,254 78,985 80,137 79,585 GAAP Gross Profit (1) $67,715 $69,603 $68,673 $68,223 $69,038 $68,865 Plus - Equity-based compensation – network operations expense 2,076 136 163 146 144 145 Plus – Depreciation and amortization expense 21,970 22,096 22,609 22,567 22,688 23,071 Non-GAAP Gross Profit (2) $91,761 $91,835 $91,445 $90,936 $91,870 $92,081 GAAP Gross Margin (1) 46.1 % 47.1 % 46.4 % 46.3 % 46.3 % 46.4 % Non-GAAP Gross Margin (2) 62.5 % 62.1 % 61.8 % 61.8 % 61.6 % 62.0 % (1) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. (2) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant measures to provide to investors, as they are measures that management uses to measure the margin and amount available to the Company after network service costs, in essence these are measures of the efficiency of the Company's network. Gross and Net Leverage Ratios Gross leverage ratio is defined as total debt divided by the trailing last 12 months EBITDA, as adjusted. Net leverage ratio is defined as total net debt (total debt minus cash and cash equivalents) divided by the trailing last 12 months EBITDA, as adjusted. Cogent's gross leverage ratio and net leverage ratio are shown below. ($ in 000's) – unaudited As of March 31, 2022 As of June 30, 2022 Cash and cash equivalents & restricted cash $311,771 $349,847 Debt Capital (finance) leases – current portion 17,147 17,562 Capital (finance) leases – long term 228,102 236,652 Senior Secured 2022 Notes - - Senior Secured 2026 Notes 500,000 500,000 Senior Unsecured Euro 2024 Notes 389,019 - Senior Unsecured 2027 Notes - 450,000 Note payable 219 - Total debt 1,134,487 1,204,214 Total net debt 822,716 854,367 Trailing 12 months EBITDA, as adjusted 229,499 230,775 Gross leverage ratio 4.94 5.22 Net leverage ratio 3.58 3.70 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, 2022 AND DECEMBER 31, 2021 (IN THOUSANDS, EXCEPT SHARE DATA) June 30 , 2022 December 31 , 2021 (Unaudited) Assets Current assets: Cash and cash equivalents $ 312,051 $ 319,609 Restricted cash 37,796 9,015 Accounts receivable, net of allowance for credit losses of $1,717 and $1,510 , respectively 44,568 41,938 Prepaid expenses and other current assets 43,054 39,015 Total current assets 437,469 409,577 Property and equipment, net 461,381 457,880 Right-of-use leased assets 98,576 101,687 Deposits and other assets 17,158 15,413 Total assets $ 1,014,584 $ 984,557 Liabilities and stockholders' deficit Current liabilities: Accounts payable $ 14,823 $ 11,923 Accrued and other current liabilities 52,322 39,057 Installment payment agreement, current portion, net of discount of $6 — 785 Current maturities, operating lease liabilities 12,172 12,197 Current maturities, finance lease obligations 17,562 17,048 Total current liabilities 96,879 81,010 Senior unsecured 2027 notes, net of unamortized debt costs of $1,283 and net of discount of $2,686 446,031 — Senior secured 2026 notes, net of unamortized debt costs of $1,032 and $1,156 , respectively, and net of discounts of $1,371 and $1,536 , respectively 497,597 497,308 Senior unsecured 2024 Euro notes, net of unamortized debt costs of $2,121 and net of discount of $772 — 394,112 Operating lease liabilities, net of current maturities 110,735 111,794 Finance lease obligations, net of current maturities 236,652 228,822 Other long-term liabilities 66,871 44,609 Total liabilities 1,454,765 1,357,655 Commitments and contingencies: Stockholders' deficit: Common stock, $0.001 par value; 75,000,000 shares authorized; 48,003,724 and 47,674,189 shares issued and outstanding, respectively 48 48 Additional paid-in capital 561,161 547,734 Accumulated other comprehensive loss — foreign currency translation (20,661) (11,003) Accumulated deficit (980,729) (909,877) Total stockholders' deficit (440,181) (373,098) Total liabilities and stockholders' deficit $ 1,014,584 $ 984,557 COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 (Unaudited) (Unaudited) Service revenue $ 148,450 $ 147,879 Operating expenses: Network operations (including $145 and $136 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) 56,514 56,180 Selling, general, and administrative (including $5,762 and $6,738 of equity-based compensation expense, respectively) 39,386 41,392 Depreciation and amortization 23,071 22,096 Total operating expenses 118,971 119,668 Gains on lease transactions 87 — Operating income 29,566 28,211 Interest expense (13,478) (14,236) Change in valuation – interest rate swap (7,510) — Foreign exchange gain (loss) - 2024 Euro Notes 23,547 (5,280) Loss on debt extinguishment and redemption – 2024 Euro Notes (11,885) — Loss on debt extinguishment and redemption – 2022 Notes — (10,830) Interest income and other, net (522) 64 Income (loss) before income taxes 19,718 (2,071) Income tax expense (8,554) (422) Net income (loss) $ 11,164 $ (2,493) Comprehensive income (loss): Net income (loss) $ 11,164 $ (2,493) Foreign currency translation adjustment (7,493) 1,776 Comprehensive income (loss) $ 3,671 $ (717) Net income (loss) per common share: Basic net income (loss) per common share $ 0.24 $ (0.05) Diluted net income (loss) per common share $ 0.24 $ (0.05) Dividends declared per common share $ 0.88 $ 0.78 Weighted-average common shares - basic 46,691,142 46,229,603 Weighted-average common shares - diluted 47,029,446 46,229,603 COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 (Unaudited) (Unaudited) Service revenue $ 297,622 $ 294,656 Operating expenses: Network operations (including $289 and $2,212 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below) 113,963 113,272 Selling, general, and administrative (including $11,674 and $11,969 of equity-based compensation expense, respectively) 80,013 82,834 Depreciation and amortization 45,762 44,065 Total operating expenses 239,738 240,171 Gains on equipment transactions 460 18 Operating income 58,344 54,503 Interest expense (27,648) (30,071) Change in valuation – interest rate swap (28,781) — Foreign exchange gain - 2024 Euro Notes 31,561 13,590 Loss on debt extinguishment and redemption- 2024 Euro Notes (11,885) — Loss on debt extinguishment and redemption- 2022 Notes — (14,698) Interest income and other, net (195) 807 Income before income taxes 21,396 24,131 Income tax expense (9,095) (7,773) Net income $ 12,301 $ 16,358 Comprehensive income: Net income $ 12,301 $ 16,358 Foreign currency translation adjustment (9,658) (3,434) Comprehensive income $ 2,643 $ 12,924 Net income per common share: Basic net income per common share $ 0.26 $ 0.35 Diluted net income per common share $ 0.26 $ 0.35 Dividends declared per common share $ 1.735 $ 1.535 Weighted-average common shares - basic 46,705,088 46,227,528 Weighted-average common shares - diluted 47,050,911 46,744,070 COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021 (IN THOUSANDS) Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 (Unaudited) (Unaudited) Cash flows from operating activities: Net income (loss) $ 11,164 $ (2,493) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 23,071 22,096 Amortization of debt costs, discounts and premiums 412 453 Equity-based compensation expense (net of amounts capitalized) 5,907 6,874 Loss on debt extinguishment and redemption – 2024 Euro Notes 11,885 — Loss on debt extinguishment and redemption – 2022 Notes — 10,830 Foreign exchange (gain) loss – 2024 Euro Notes (23,547) 5,280 Gains - equipment transactions and other, net 1,155 (129) Deferred income taxes 3,196 (939) Changes in operating assets and liabilities: Accounts receivable (3,605) (2,330) Prepaid expenses and other current assets (2,197) (130) Accounts payable, accrued liabilities and other long-term liabilities 5,701 852 Deposits and other assets 1,261 (615) Net cash provided by operating activities 34,403 39,749 Cash flows from investing activities: Purchases of property and equipment (17,288) (17,217) Net cash used in investing activities (17,288) (17,217) Cash flows from financing activities: Dividends paid (41,855) (37,001) Redemption and extinguishment - 2024 Euro Notes (375,354) — Redemption and extinguishment - 2022 Notes — (339,638) Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $1,290 446,010 — Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317 — 496,933 Principal payments on installment payment agreement (219) (1,969) Principal payments of finance lease obligations (5,236) (6,192) Proceeds from exercises of stock options 130 660 Net cash provided by financing activities 23,476 112,793 Effect of exchange rates changes on cash (2,515) 658 Net increase in cash, cash equivalents and restricted cash 38,076 135,983 Cash, cash equivalents and restricted cash, beginning of period 311,771 237,980 Cash, cash equivalents and restricted cash, end of period $ 349,847 $ 373,963 COGENT COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021 (IN THOUSANDS) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 12,301 $ 16,358 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45,762 44,065 Amortization of debt costs, discounts and premiums 829 894 Equity-based compensation expense (net of amounts capitalized) 11,963 14,181 Loss on debt extinguishment and redemption – 2024 Euro Notes 11,885 — Loss on debt extinguishment and redemption – 2022 Notes — 14,698 Foreign exchange gains – 2024 Euro Notes (31,561) (13,590) Gains - equipment transactions and other, net 1,308 242 Deferred income taxes 3,138 3,558 Changes in operating assets and liabilities: Accounts receivable (3,529) 90 Prepaid expenses and other current assets (5,150) 2,696 Accounts payable, accrued liabilities and other long-term liabilities 37,014 3,804 Deposits and other assets (146) (141) Net cash provided by operating activities 83,814 86,855 Cash flows from investing activities: Purchases of property and equipment (35,409) (32,661) Net cash used in investing activities (35,409) (32,661) Cash flows from financing activities: Dividends paid (83,153) (73,082) Redemption and extinguishment - 2024 Euro Notes (375,354) — Redemption and extinguishment - 2022 Notes — (459,317) Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $1,290 446,010 — Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $1,317 — 496,933 Principal payments on installment payment agreement (790) (4,347) Principal payments of finance lease obligations (11,099) (11,936) Proceeds from exercises of stock options 334 875 Net cash used in financing activities (24,052) (50,874) Effect of exchange rates changes on cash (3,130) (658) Net increase in cash, cash equivalents and restricted cash 21,223 2,662 Cash, cash equivalents and restricted cash, beginning of period 328,624 371,301 Cash, cash equivalents and restricted cash, end of period $ 349,847 $ 373,963 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, 2021 and our Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 . Cogent undertakes no duty to update any forward-looking statement or any information contained in this press release or in other public disclosures at any time. View original content to download multimedia: https://www.prnewswire.com/news-releases/cogent-communications-reports-second-quarter-2022-results-and-increases-its-regular-quarterly-dividend-on-its-common-stock-by-0-025--301600283.html SOURCE Cogent Communications Holdings, Inc.

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