Dave Schaeffer
COGENT COMMUNICATIONS HOLDINGSAbout Dave Schaeffer
Dave Schaeffer, age 68, is Cogent’s founder (1999) and has served continuously as Chairman of the Board, Chief Executive Officer and President since inception; he is not independent and holds a dual CEO + Chairman role that the Board reviews periodically . He beneficially owns approximately 4,504,038 shares (~9.0% of outstanding as of Feb 28, 2025), with 738,000 restricted shares carrying voting rights and 2,713,000 shares pledged (about 5.5% of fully diluted outstanding and ~60% of his holdings) under full‑recourse loans overseen by the Audit Committee . Performance context: 5‑year cumulative TSR reached 151.75 by Dec 31, 2024 versus 197.02 for the S&P 500 and 103.21 for the Nasdaq Telecom Index ; Cogent increased its quarterly dividend sequentially for 50 quarters to $0.995 in Q4 2024, but set a $0.02 dividend for Q4 2025, indicating a reset in capital returns policy . Operationally, 2024 integration of Sprint assets delivered ~$217 million annual cost savings ahead of schedule; wavelength services expanded to >800 data centers, IPv4 lease portfolio to ~38 million addresses; EBITDA and free cash flow are emphasized by the Board as key value levers .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Pathnet, Inc. | Chief Executive Officer | 1995–1997 | Led broadband telecom provider operations pre‑Cogent; foundational executive telecom experience |
| Pathnet, Inc. | Chairman | 1997–1999 | Oversaw strategic direction; preceded founding of Cogent |
External Roles
No other public company board roles for Schaeffer are disclosed beyond Cogent service since 1999 .
Fixed Compensation
| Element | 2024 Terms | 2024 Outcome | 2025 Terms |
|---|---|---|---|
| Base Salary | $0 (CEO receives no base salary) | $0 | $0 (unchanged) |
| Annual Cash Incentive (AWR metric) | Target $500,000; capped at $667,000; formula: $500,000 × (AWR/AWR Target); AWR Target $75,000,000 | AWR achieved $27,864,000; payout $185,760 (37.2% of target) paid in 2025 | Metrics amended to include growth in gross profit plus annualized wavelength revenue; payable in 2026 |
Performance Compensation
CEO Long‑Term Incentive (2024 Grants; vesting in 2027)
| Award Type | Shares | Grant Date Fair Value | Metric | Weighting | Performance Window | Vesting/Payout Rules |
|---|---|---|---|---|---|---|
| Time‑based RS | 84,000 | $6,337,800 | N/A | N/A | N/A | 7,000 shares vest monthly Jan–Dec 2027 |
| Performance RS | 96,000 | $6,151,200 (portion valued at $52.70; closing price $75.45) | EBITDA CAGR; Relative TSR vs Nasdaq Telecom Index | 50% EBITDA CAGR; 50% TSR | Jan 1, 2024–Dec 31, 2026 | If metric ≤0, no vest for that half; no over‑performance shares; vest Apr 1, 2027 |
CEO Long‑Term Incentive (2025 Grants; vesting in 2028)
| Award Type | Shares | Metric | Weighting | Performance Window | Vesting/Payout Rules |
|---|---|---|---|---|---|
| Time‑based RS | 84,000 | N/A | N/A | N/A | Begins vesting in 2028 |
| Performance RS | 96,000 | EBITDA CAGR; Free Cash Flow CAGR (EBITDA − capex − principal on finance leases) | 50% EBITDA CAGR; 50% FCF CAGR | Through end of 2027 | If metric ≤0, no vest for that half; no over‑performance shares; vest in 2028 |
Other Notable Award Mechanics
- 2021 CEO performance RS vesting: TSR tranche vested Jan 1, 2025; revenue and cash flow growth tranches to vest Apr 1, 2025; performance measures amended to remove “organic only” growth due to impossibility of calculation .
- 2024–2025 policy change: Emphasis shifted from TSR to free cash flow for CEO LTI; Board rationale notes TSR can be influenced by external market factors, while EBITDA/FCF better reflect operational performance and Sprint integration success .
Equity Ownership & Alignment
| Measure | Value | Notes |
|---|---|---|
| Total beneficial ownership | 4,504,038 shares; 9.0% of class (fully diluted) | Includes 738,000 restricted shares with voting rights |
| Pledged shares | 2,713,000 shares | 5.5% of fully diluted outstanding and ~60% of Schaeffer’s holdings; above policy targets (≤5% outstanding; ≤50% personal holdings) |
| 2024 insider sales | ~468,826 shares sold (Jan–Dec 2024), <11% of holdings | Committee reviewed quarterly; no forced selling risk concluded |
| Ownership guidelines | CEO must own ≥10× annual cash compensation or ≥$3 million; compliant as of Mar 1, 2025 | Directors must own 10,000 shares; compliant |
Alignment policies and controls:
- Clawback policy compliant with SEC/Nasdaq; recoverable for cash and equity incentive compensation upon restatement .
- Hedging prohibited; pledging allowed only via full‑recourse loans with Audit Committee approval; margin accounts prohibited .
Employment Terms
| Provision | Details |
|---|---|
| Employment agreement term | Extended Jan 14, 2025 through Dec 31, 2027 (retention focus during Sprint integration period) |
| Severance/change‑in‑control (equity) | CEO has double‑trigger vesting upon CIC followed by qualifying termination; immediate performance measurement at CIC; if terminated within 6 months post‑CIC without cause/for good reason, full vesting of time‑ and performance‑based RS |
| Death/disability/retirement (equity) | Death/disability: full vest of time and performance RS; Retirement: full time‑based vest; performance RS vests based on actual results at performance period end |
| Other terminations (equity) | Pro‑rata time‑based vest for months in severance period; performance RS pro‑rated based on days in severance period and actual performance at period end |
| Clawback | SEC/Nasdaq‑compliant policy for erroneously awarded compensation |
Board Governance
- Board service: Director since 1999; current Board composition is nine directors, eight independent and Schaeffer as CEO/Chair; average independent director tenure ~8.5 years (2024) and ~8.4 years (2025 nominees) .
- Dual‑role implications: Board affirms dual CEO/Chair structure given founder status and deep operational knowledge; mitigated by a strong Lead Independent Director (Marc Montagner) with defined authorities including presiding over executive sessions, agenda approval, and shareholder engagement .
- Committees (independent): Audit (Chair: Lewis Ferguson; members: Steven Brooks, Sheryl Kennedy) ; Compensation (Chair: Marc Montagner; members: Deneen Howell, Paul de Sa) ; Nominating & Corporate Governance (Chair: Blake Bath; members: Eve Howard, Lewis Ferguson; expected transition to Chair Paul de Sa post‑meeting) .
- Board operations: 7 meetings in 2024; each director attended ≥75% of Board and committee meetings; all directors attended 2024 annual meeting .
- Say‑on‑pay: 2024 vote approved with ~96% support (FOR: 40,789,535; AGAINST: 1,752,428; ABSTAIN: 324,389; 2,279,763 broker non‑votes) .
Related Party Transactions
- Headquarters lease: Office building owned by Sodium LLC (owned by Schaeffer); fixed annual rent $1.0 million plus taxes/utilities; initial term May 2015; extended Feb 2020 to May 2025 and again Mar 2025 to May 2030; cancellable by Cogent on 60 days’ notice .
- 2023 Northern Virginia leases: Thorium LLC (54,803 sf office) and Germanium LLC (1,587 sf network ops), both owned by Schaeffer; 5‑year terms beginning Apr 1, 2023; Audit Committee reviews/approves related‑party transactions .
Performance Context
| Metric | Q3 2024 | Q2 2025 | Q3 2025 |
|---|---|---|---|
| Service revenue ($mm) | $257.0 (derived from year‑over‑year context) | $246.2 | $241.9 |
| On‑net revenue ($mm) | $136.5 (YoY −0.9%) | $132.3 | $135.3 |
| Wavelength revenue ($mm) | $5.3 | $9.1 | $10.2 |
| IPv4 leasing revenue ($mm) | $11.2 | $15.3 | $17.5 |
| EBITDA ($mm) | $35.9 | $48.5 | $48.8 |
| EBITDA margin (%) | 13.9% | 19.7% | 20.2% |
| Net cash from operations ($mm) | −$20.2 | −$44.0 | $3.1 |
Additional shareholder returns:
- Dividends: Grew sequentially each quarter in 2024, reaching $0.995 in Q4 2024; Board approved $0.02 dividend for Q4 2025, signaling a change in capital return trajectory under debt indenture and Delaware law constraints .
- Buybacks: 341,818 shares repurchased in 9M 2025 for $16.7 million at $48.81 average; $100 million program extension approved Aug 6, 2025 (available $105.8 million as of Sep 30, 2025) .
Compensation Structure Analysis
- Cash vs equity mix: 2024 CEO compensation was ~98% equity with entire cash compensation performance‑based; equity vests no earlier than 36 months; reinforces long‑term alignment but increases wealth concentration risk given pledging .
- Metric shifts: CEO LTI metrics moved from TSR to EBITDA/FCF CAGR (2025) to better align with integration outcomes and financial health; 2024 awards balanced EBITDA growth and TSR with zero payout for non‑positive performance; suggests tighter pay‑for‑performance linkage .
- Award modifications: For 2020–2023 cycles, “organic only” condition removed due to calculation infeasibility; while practical, modifications to performance tests warrant monitoring for rigor dilution .
- Governance safeguards: Independent Compensation Committee with independent consultant (Compensia); clawback; no tax gross‑ups; no hedging; no option repricing without shareholder approval .
Employment & Contracts
- At‑will employment with extended term to Dec 31, 2027; severance and CIC equity treatment emphasize retention and transactional neutrality (CEO double‑trigger vs full single‑trigger for other NEOs) .
Equity Ownership & Pledging Risk Indicators
- Policy thresholds (≤5% outstanding; ≤50% holdings) exceeded as of Mar 1, 2025 (5.5% and ~60% respectively); Audit Committee judged low forced‑sale risk given full‑recourse loans, asset base, and liquidity; Schaeffer agreed not to increase loan amounts through end of 2025 and to work toward targets .
- 2024 sales of ~468,826 shares (<11% of holdings) indicate some liquidity sourcing alongside pledging management; continued quarterly oversight by Audit Committee .
Compensation Peer Group & Say‑on‑Pay
- Peer group construction (19 companies across telecom/internet/software) for 2024 decisions targeting revenue $0.585–$2.34B and market cap $0.915–$9.15B; includes names such as Calix, EchoStar, Extreme Networks, Guidewire, Nutanix, RingCentral, Viasat; data used as reference, not strict benchmarking .
- Strong support for NEO compensation in 2024 say‑on‑pay (~96% FOR) .
Investment Implications
- Alignment: Heavy equity mix and multi‑year vesting, with 2025 pivot to EBITDA/FCF CAGR, strengthen operational linkage; zero‑payout thresholds reduce windfall risk .
- Retention risk: Contract extension to 2027 and time‑based RS ladders mitigate near‑term CEO flight risk; change‑in‑control double‑trigger reduces single‑event windfalls .
- Trading signals: Elevated pledging above policy thresholds introduces potential volatility if collateral pressure emerges; 2024 insider sales and the 2025 dividend reset ($0.02) may pressure sentiment near‑term despite wavelength and IPv4 growth and EBITDA margin expansion .
- Governance: Dual CEO/Chair mitigated by robust Lead Independent Director authority and independent committees; related‑party leases are cancellable and overseen by the Audit Committee, but warrant continued monitoring .
- Execution: Sprint integration synergies (~$217M annual) and product expansion support the Board’s focus on EBITDA and free cash flow; sustained delivery on these metrics underpins future LTI vesting and capital return flexibility .