Cogent Communications Reports Fourth Quarter and Full Year 2024 Results and Increases its Regular Quarterly Dividend on its Common Stock

WASHINGTON, Feb. 27, 2025

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 $128.8 million for the three months ended December 31, 2024, a decrease of 5.7% from the three months ended September 30, 2024 and a decrease of 6.7% from the three months ended December 31, 2023. On-net revenue was $544.6 million for the year ended December 31, 2024; an increase of 6.2% over the year ended December 31, 2023.

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 $113.2 million for the three months ended December 31, 2024, an increase of 1.7% from the three months ended September 30, 2024 and a decrease of 8.5% from the three months ended December 31, 2023. Off-net revenue was $454.1 million for the year ended December 31, 2024; an increase of 15.4% over the year ended December 31, 2023.

Wavelength revenue was $7.0 million for the three months ended December 31, 2024, an increase of 31.8% from the three months ended September 30, 2024 and an increase of 124.1% from the three months ended December 31, 2023. Wavelength revenue was $19.2 million for the year ended December 31, 2024; an increase of 239.6% over the year ended December 31, 2023.

Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.  Non-core revenue was $3.4 million for the three months ended December 31, 2024, $4.1 million for the three months ended September 30, 2024 and was $7.3 million for the three months ended December 31, 2023.  Non-core revenue was $18.2 million for the year ended December 31, 2024; a decrease of 37.0% over the year ended December 31, 2023.

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 0.3% from the three months ended December 31, 2023 to $29.8 million for the three months ended December 31, 2024 and increased by 203.4% from the three months ended September 30, 2024. GAAP gross profit decreased by 41.5% from the year ended December 31, 2023 to $96.3 million for the year ended December 31, 2024.

GAAP gross margin was 11.8% for the three months ended December 31, 2024, 3.8% for the three months ended September 30, 2024, 10.9% for the three months ended December 31, 2023, 17.5% for the year ended December 31, 2023 and 9.3% for the year ended December 31, 2024.

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 decreased by 0.3% from the three months ended December 31, 2023 to $97.6 million for the three months ended December 31, 2024 and increased by 1.5% from the three months ended September 30, 2024. Non-GAAP gross profit decreased by 0.5% from the year ended December 31, 2023 to $395.9 million for the year ended December 31, 2024.

Non-GAAP gross margin was 38.7% for the three months ended December 31, 2024, 37.4% for the three months ended September 30, 2024, 36.0% for the three months ended December 31, 2023, 42.3% for the year ended December 31, 2023 and 38.2% for the year ended December 31, 2024.

Net cash provided by operating activities was $14.5 million for the three months ended December 31, 2024.  Net cash used in operating activities was $20.2 million for the three months ended September 30, 2024 and was $48.7 million for the three months ended December 31, 2023. Net cash provided by operating activities was $17.3 million for the year ended December 31, 2023 and net cash used in operating activities was $8.6 million for the year ended December 31, 2024.

Total Sprint acquisition costs were $17.0 million for the three months ended December 31, 2023, $18.5 million for the year ended December 31, 2023 and $21.4 million for the year ended December 31, 2024. 

IP Transit Services Agreement
On May 1, 2023, the closing date of the Sprint acquisition, Cogent and T-Mobile USA, Inc. ("TMUSA"), a Delaware corporation and direct subsidiary of T-Mobile US, Inc., a Delaware corporation ("T-Mobile"), entered into an agreement for IP transit services (the "IP Transit Services Agreement"), pursuant to which TMUSA will pay Cogent an aggregate of $700.0 million, consisting of (i) $350.0 million paid in equal monthly installments during the first year after the closing date of the Sprint acquisition and (ii) $350.0 million paid in equal monthly installments over the subsequent 42 months. Amounts paid under the IP Transit Services Agreement were $87.5 million, $25.0 million and $25.0 million in the three months ended December 31, 2023, September 30, 2024 and December 31, 2024, respectively. Amounts paid under the IP Transit Services Agreement were $204.2 million in the year ended December 31, 2023 and $204.2 million in the year ended December 31, 2024.

Earnings before interest, taxes, depreciation and amortization (EBITDA), was $41.9 million for the three months ended December 31, 2024, $35.9 million for the three months ended September 30, 2024 and $6.0 million for the three months ended December 31, 2023. EBITDA was $129.8 million for the year ended December 31, 2023 and $122.8 million for the year ended December 31, 2024.   

EBITDA margin, was 16.6% for the three months ended December 31, 2024, 13.9% for the three months ended September 30, 2024 and 2.2% for the three months ended December 31, 2023.  EBITDA margin was 13.8% for the year ended December 31, 2023 and 11.9% for the year ended December 31, 2024.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement, was $66.9 million for the three months ended December 31, 2024, $60.9 million for the three months ended September 30, 2024 and $110.5 million for the three months ended December 31, 2023. EBITDA, as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement was $352.5 million for the year ended December 31, 2023 and $348.4 million for the year ended December 31, 2024.   

EBITDA as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement margin, was 26.5% for the three months ended December 31, 2024, 23.7% for the three months ended September 30, 2024 and 40.6% for the three months ended December 31, 2023.  EBITDA, as adjusted, for Sprint acquisition costs and cash paid under the IP Transit Services Agreement margin was 37.5% for the year ended December 31, 2023 and 33.6% for the year ended December 31, 2024.

Basic and diluted net (loss) per share was $(0.91) for the three months ended December 31, 2024 and was $(1.33) for the three months ended September 30, 2024.  Basic net income per share was $4.23 for the three months ended December 31, 2023 and diluted net income per share was $4.17 for the three months ended December 31, 2023. Basic net income per share was $26.88 for the year ended December 31, 2023.  Diluted net income per share was $26.62 for the year ended December 31, 2023. Basic and diluted net (loss) per share was $(4.28) for the year ended December 31, 2024.

Total customer connections decreased by 10.3% from December 31, 2023 to 123,383 as of December 31, 2024 and decreased by 2.3% from September 30, 2024.  On-net customer connections decreased by 0.9% from December 31, 2023 to 87,500 as of December 31, 2024 and decreased by 0.2% from September 30, 2024. Off-net customer connections decreased by 21.0% from December 31, 2023 to 28,963 as of December 31, 2024 and decreased by 10.7% from September 30, 2024. Wavelength customer connections were 1,118 as of December 31, 2024, 1,041 as of September 30, 2024 and 661 as of December 31, 2023.  Non-core customer connections were 5,802 as of December 31, 2024, 5,217 as of September 30, 2024 and 11,975 as of December 31, 2023. 

The number of on-net buildings increased by 176 from December 31, 2023 to 3,453 as of December 31, 2024 and increased by 29 from September 30, 2024.

Optical Wave Network
Acquiring the Sprint network has also allowed Cogent to construct a wavelength network using predominantly owned fiber. This enabled Cogent to expand its product offerings to include optical wavelength services.  As of December 31, 2024, Cogent was offering optical wavelength services in 808 data centers in the United States, Mexico and Canada.

Federal Income Taxes – United States
Cogent received a US federal income tax refund of $24.2 million in 2024 for 2023 US federal income taxes paid and owed no US federal income taxes for full year 2023.  Under current law, Cogent does not expect to incur a US federal income tax liability for full year 2024.

Quarterly Dividend Increase Approved
On February 26, 2025, Cogent's Board approved a regular quarterly dividend of $1.005 per share payable on March 28, 2025 to shareholders of record on March 13, 2025. This first quarter 2025 regular dividend represents an increase of $0.01 per share, or 1.0%, from the fourth quarter 2024 regular dividend of $0.995 per share and an annual increase of 4.1% from the first quarter 2024 dividend of $0.965 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.

Tax Treatment of 2024 Dividends
Cogent paid four quarterly dividends in 2024 totaling $189.4 million, or $3.92 per share. The expected tax treatment of these dividends are generally that 100.0% are treated as a return of capital and 0.0% are generally treated as dividends for United States federal income tax purposes. While the above information includes general statements about the tax classification of dividends paid on Cogent common stock, these statements do not constitute tax advice. The taxation of corporate distributions can be complex, and stockholders are encouraged to consult their tax advisers to determine what impact the above information may have on their specific tax situation.

Continued Impact of Changing Office Occupancy Rates on Corporate Results
Cogent continues to witness lower office occupancy rates overall in the buildings it serves in central business districts in North America, largely attributable to remote work policies originally instituted during the COVID-19 pandemic. Since the end of the pandemic, and despite some improvement in certain markets, Cogent continues to see office occupancy rates that do not approach pre-2020 levels. Because of the rising vacancy levels and/or lower numbers of  lease initiations or renewals resulting in fewer tenants, Cogent has experienced a slowdown in new sales to its corporate customers, which has negatively impacted its corporate revenue results. This overall trend is not uniform throughout North America; Cogent has seen declining vacancy rates and increasing office occupancy rates in some cities, including in the three months ended December 31, 2024. Moreover, 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 were part of the remote work environment into their everyday use, which benefits Cogent's corporate business as these customers upgrade their Internet access infrastructure to higher capacity connections. These factors have helped mitigate the impact of lower office occupancy rates and during the three months ended December 31, 2024, Cogent continued to see these positive trends in its corporate business in some markets.  If and when companies eventually return to the buildings in which Cogent operates, whether existing tenants or new tenants, Cogent believes it will present an opportunity for increased sales. However, the exact timing, path and spread of these positive trends remains uncertain, office occupancy rates in some markets may not recover, and 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.

These and other risks are described in more detail in Cogent's Annual Report on Form 10-K for the years ended December 31, 2023 and December 31, 2024 and in its Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, June 30, 2024 and September 30, 2024.

Conference Call and Website Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 27, 2025 to discuss Cogent's operating results for the fourth quarter of 2024 and full year 2024.  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, optical wavelength, optical transport and colocation services. Cogent's facilities-based, all-optical IP network backbone provides services in 264 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.