MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: You should read the following discussion and analysis together with “Item 6.
−Removed: Selected Consolidated Financial Data” and our consolidated financial statements and related notes included in this report.
+Added: You should read the following discussion and analysis together with our consolidated financial statements and related notes included in this report.
The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.
The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report.
−Removed: Factors that could cause or contribute to these differences include those discussed in “Item 1A.
−Removed: Risk Factors,” as well as those discussed elsewhere.
−Removed: You should read “Item 1A.
−Removed: Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those discussed here.
+Added: Factors that could cause or contribute to these differences include those discussed in "Item 1A.
+Added: Risk Factors,"
+Added: as well as those discussed elsewhere.
+Added: You should read "Item 1A.
+Added: Risk Factors"
+Added: and "Special Note Regarding Forward-Looking Statements."
+Added: Our actual results could differ materially from those discussed here.
Factors that could cause or contribute to these differences include, but are not limited to:
+Added: The COVID-19 pandemic and accompanying government policies worldwide;
future economic instability in the global economy, which could affect spending on Internet services;
−Removed: the impact of changing foreign exchange rates (in particular the Euro to US dollar and Canadian dollar to US dollar exchange rates) on the translation of our non-US dollar denominated revenues, expenses, assets and liabilities;
+Added: the impact of changing foreign exchange rates (in particular the Euro to US dollar and Canadian dollar to US dollar exchange rates) on the translation of our non-US dollar denominated revenues, expenses, assets and liabilities into US dollars;
legal and operational difficulties in new markets;
−Removed: the imposition of a requirement that we contribute to the United States Universal Service Fund on the basis of our Internet revenue;
+Added: 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 rules regarding data protection, cyber security and net neutrality;
7 unchanged sentences
the management of network failures and/or disruptions;
−Removed: 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, this annual report on Form 10-K.
−Removed: General Overview
−Removed: We are a leading facilities-based provider of low-cost, high-speed Internet access, private network services and data center colocation space.
−Removed: Our network is specifically designed and optimized to transmit packet routed data.
−Removed: We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America, Europe, Asia, Latin America and Australia.
−Removed: Our on-net service consists of high-speed Internet access and private network services provided at speeds ranging from 100 megabits per second to 100 gigabits per second.
−Removed: We offer our on-net services to customers located in buildings that are physically connected to our network.
−Removed: We provide on-net Internet access and private network services to corporate customers and net-centric customers.
−Removed: Our corporate customers are located in multi-tenant office buildings and in our data centers and typically include law firms, financial services firms, advertising and marketing firms and other professional services businesses.
−Removed: Our net-centric customers include bandwidth-intensive users such as other Internet access providers, telephone companies, cable television companies, web hosting companies, content delivery networks and commercial content and application service providers.
−Removed: These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers.
−Removed: Our off-net services are sold to businesses that are connected to our network primarily by means of “last mile” access service lines obtained from other carriers, primarily in the form of metropolitan Ethernet circuits.
−Removed: Our non-core services, which consist primarily of legacy services of companies whose assets or businesses we have acquired, primarily include voice services (only provided in Toronto, Canada).
−Removed: We do not actively market these non-core services, are actively discontinuing providing certain of these services and expect the service revenue associated with them to continue to decline.
−Removed: Our network is comprised of in-building riser facilities, metropolitan optical fiber networks, metropolitan traffic aggregation points and inter-city transport facilities.
−Removed: Our network is physically connected entirely through
−Removed: our facilities to 2,801 buildings in which we provide our on-net services, including 1,767 multi-tenant office buildings.
−Removed: We also provide on-net services in carrier-neutral data centers, Cogent controlled data centers and single-tenant office buildings.
−Removed: We operate 54 Cogent controlled data centers totaling over 609,000 square feet.
−Removed: Because of our integrated network architecture, we are not dependent on local telephone companies or cable companies to serve our on-net customers.
−Removed: We emphasize the sale of our on-net services because we believe we have a competitive advantage in providing these services and these services generate gross profit margins that are greater than the gross profit margins of our off-net services.
−Removed: We believe our key growth opportunity is provided by our high-capacity network, which provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs.
−Removed: Our focus is to add customers to our network in a way that maximizes its use and at the same time provides us with a profitable customer mix.
−Removed: We are responding to this opportunity by increasing our sales and marketing efforts including increasing our number of sales representatives and expanding our network to locations that we believe can be economically integrated and represent significant concentrations of Internet traffic.
−Removed: One of our keys to developing a profitable business will be to carefully match the cost of extending our network to reach new customers with the revenue expected to be generated by those customers.
−Removed: In addition, we may add customers to our network through strategic acquisitions.
−Removed: We believe some of the most important trends in our industry are the continued long-term growth in Internet traffic and a decline in Internet access prices on a per megabit basis.
−Removed: The effective price per megabit for our corporate customers is declining as the bandwidth utilization and connection size of our corporate customer connections increases.
−Removed: As Internet traffic continues to grow and prices per unit of traffic continue to decline, we believe we can continue to load our network and gain market share from less efficient network operators.
−Removed: However, continued erosion in Internet access prices will likely have a negative impact on the rate at which we can increase our revenues and our profitability.
−Removed: Our revenue may also be negatively affected if we are unable to grow our Internet traffic or if the rate of growth of Internet traffic does not offset an expected decline in pricing.
−Removed: We do not know if Internet traffic will increase or decrease, or the rate at which it will increase or decrease.
−Removed: Changes in Internet traffic will be a function of the number of Internet users, the amount of time users spend on the Internet, the applications for which the Internet is used, the bandwidth intensity of these applications and the pricing of Internet services, and other factors.
−Removed: The growth in Internet traffic has a more significant impact on our net-centric customers who represent the vast majority of the traffic on our network and who tend to consume the majority of their allocated bandwidth on their connections.
−Removed: Net-centric customers tend to purchase their service on a price per megabit basis.
−Removed: Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis.
−Removed: Over the past several years, our revenue from corporate customers has grown faster than our revenue from our net-centric customers.
−Removed: We are a facilities-based provider of Internet access and communications services.
−Removed: Facilities-based providers require significant physical assets, or network facilities, to provide their services.
−Removed: Typically when a facilities-based network services provider begins providing its services in a new jurisdiction losses are incurred for several years until economies of scale have been achieved.
−Removed: Our foreign operations are in Europe, Canada, Mexico, Asia, Latin America and Australia.
−Removed: Europe accounts for roughly 75% of our foreign operations.
−Removed: Our European operations have incurred losses and will continue to do so until our European customer base and revenues have grown enough to achieve sufficient economies of scale.
−Removed: Due to our strategic acquisitions of network assets and equipment, we believe we are well positioned to grow our revenue base.
−Removed: We continue to purchase and deploy network equipment to parts of our network to maximize the utilization of our assets and to expand and increase the capacity of our network.
−Removed: Our future capital expenditures will be based primarily on the expansion of our network and the addition of on-net buildings.
−Removed: We plan to continue to expand our network and to increase the number of on-net buildings we serve including multi-tenant office buildings, carrier neutral data centers and Cogent controlled data centers.
−Removed: Many factors can affect our ability to add buildings to our network.
−Removed: These factors include the willingness of building owners to grant us access rights, the availability of optical fiber networks to serve those buildings, the cost to connect buildings to our network and equipment availability.
+Added: our ability to make payments on our indebtedness as they become due 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, this Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.
Results of Operations
Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
−Removed: Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality of and variability of our service revenue, operating results and cash flows.
−Removed: The following summary tables present a comparison of our results of operations with respect to certain key financial measures.
−Removed: The comparisons illustrated in the tables are discussed in greater detail below.
−Removed: (in thousands)
−Removed: Service revenue
−Removed: On‑net revenues
−Removed: Off‑net revenues
−Removed: Network operations expenses(1)
−Removed: Selling, general, and administrative expenses(2)
−Removed: Depreciation and amortization expenses
−Removed: Gains on equipment transactions
−Removed: Interest expense
−Removed: Income tax expense
−Removed: (1) Includes non-cash equity-based compensation expense of $994 and $895 for 2019 and 2018, respectively.
−Removed: (2) Includes non-cash equity-based compensation expense of $17,466 and $16,813 for 2019 and 2018, respectively.
−Removed: Other Operating Data
−Removed: Average Revenue Per Unit (ARPU)
−Removed: Average price per megabit
−Removed: Customer Connections—end of period
−Removed: Service Revenue.
−Removed: Our service revenue increased 5.0% from 2018 to 2019.
−Removed: Exchange rates negatively impacted our increase in service revenue by approximately $5.3 million.
−Removed: All foreign currency comparisons herein reflect results for 2019 translated at the average foreign currency exchange rates for 2018.
−Removed: We increased our total service revenue by increasing the number of sales representatives selling our services, by expanding our network, by adding additional buildings to our network, by increasing our penetration into the buildings connected to our network and by gaining market share by offering our services at lower prices than our competitors.
−Removed: Revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, gross receipts taxes, Universal Service Fund fees and certain state regulatory fees.
−Removed: We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our consolidated statements of operations.
−Removed: The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues from 2018 to 2019 of approximately $2.4 million.
−Removed: Our net-centric customers tend to purchase their service on a price per megabit basis.
−Removed: Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis.
−Removed: Revenues from our corporate and net-centric customers represented
−Removed: 68.4% and 31.6% of total service revenue, respectively, for 2019 and represented 64.9% and 35.1% of total service revenue, respectively, for 2018.
−Removed: Revenues from corporate customers increased 10.6% to $373.7 million for 2019 from $337.8 million for 2018 primarily due to an increase in our number of our corporate customers.
−Removed: Revenues from our net-centric customers decreased by 5.4% to $172.5 million for 2019 from $182.3 million for 2018 primarily due to an increase in our number of net-centric customers being offset by a decline in our average price per megabit.
−Removed: Our revenue from our net-centric customers has declined as a percentage of our total revenue and grew at a slower rate than our corporate customer revenue because net-centric customers purchase our services based upon a price per megabit basis and our average price per megabit declined by 23.9% from 2018 to 2019.
−Removed: Additionally, the net-centric market experiences a greater level of pricing pressure than the corporate market and net-centric customers who renew their service with us expect their renewed service to be at a lower price than their current price.
−Removed: We expect that our average price per megabit will continue to decline at similar rates which would result in our corporate revenues continuing to represent a greater portion of our total revenues and our net-centric revenues continuing to grow at a lower rate than our corporate revenues.
−Removed: Additionally, the impact of foreign exchange rates has a more significant impact on our net-centric revenues.
−Removed: Our on-net revenues increased 5.9% from 2018 to 2019.
−Removed: We increased the number of our on-net customer connections by 8.4% at December 31, 2019 from December 31, 2018.
−Removed: On-net customer connections increased at a greater rate than on-net revenues primarily due to the 3.8% decline in our on-net ARPU, primarily from a decline in ARPU for our net-centric customers.
−Removed: ARPU is determined by dividing revenue for the period by the average customer connections for that period.
−Removed: Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers.
−Removed: The decline in on-net ARPU is partly attributed to volume and term based pricing discounts.
−Removed: Additionally, on-net customers who cancel their service from our installed base of customers, in general, have an ARPU that is greater than the ARPU for our new customers due to declining prices primarily for our on-net services sold to our net-centric customers.
−Removed: These trends resulted in the reduction to our on-net ARPU and a 23.9% decline in our average price per megabit for our installed base of customers.
−Removed: Our off-net revenues increased 2.7% from 2018 to 2019.
−Removed: Our off-net revenues increased as we increased the number of our off-net customer connections by 6.3% at December 31, 2019 from December 31, 2018.
−Removed: Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 5.0% decrease in our off-net ARPU.
−Removed: Network Operations Expenses.
−Removed: Network operations expenses include the costs of personnel associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis.
−Removed: Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation.
−Removed: Our network operations expenses, including non-cash equity-based compensation expense, increased 0.1% from 2018 to 2019 as we were connected to 8.0% more customer connections and we were connected to 125 more on-net buildings as of December 31, 2019 compared to December 31, 2018.
−Removed: The increase in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities, the increase in our off-net revenues and the increase in taxes recorded on a gross basis partly offset by price reductions obtained in certain of our circuit costs and fewer fiber operating leases.
−Removed: When we provide off-net services we also assume the cost of the associated tail circuits.
−Removed: Selling, General, and Administrative Expenses (“SG&A”).
−Removed: Our SG&A expenses, including non-cash equity- based compensation expense, increased 9.8% from 2018 to 2019.
−Removed: Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation and was $17.5 million for 2019 and $16.8 million for 2018.
−Removed: SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and increases in our sales efforts and an increase in our headcount.
−Removed: Our sales force headcount increased by 10.8% from 619 at December 31, 2018 to 686 at December 31, 2019 and our total headcount increased by 8.3% from 974 at December 31, 2018 to 1,055 at December 31, 2019.
−Removed: Depreciation and Amortization Expenses.
−Removed: Our depreciation and amortization expenses decreased 1.2% from 2018 to 2019.
−Removed: The decrease is primarily due to the depreciation expense associated with the increase related to
−Removed: newly deployed fixed assets being offset by the decline in depreciation expense from fully depreciated fixed assets.
−Removed: Gains on Equipment Transactions.
−Removed: We exchanged certain used network equipment and cash consideration for new network equipment resulting in gains of $1.1 million for 2019 and $1.0 million for 2018.
−Removed: The gains are based upon the excess of the estimated fair value of the new network equipment over the carrying amount of the returned used network equipment and the cash paid.
−Removed: The increase in gains from 2018 to 2019 was due to purchasing more equipment under the exchange program in 2019 than we purchased in 2018.
−Removed: Interest Expense.
−Removed: Interest expense results from interest incurred on our $445.0 million of senior secured notes, interest incurred on our $189.2 million of senior unsecured notes, interest on our installment payment agreement, interest on our finance lease obligations and interest incurred on our €135.0 million of 2024 Notes that we issued on June 25, 2019.
−Removed: Our interest expense increased by 12.5% for 2019 from 2018 primarily due to the issuance of $70.0 million of senior secured notes we issued in August 2018, the issuance of €135.0 million of senior unsecured notes we issued in June 2019 and an increase in our finance lease obligations.
−Removed: The 2024 Notes were issued at par for €135.0 million ($153.7 million) on June 25, 2019.
−Removed: The 2024 Notes were issued in Euros and are reported in our reporting currency — US Dollars.
−Removed: As of December 31, 2019 the 2024 Notes were valued at $151.4 million resulting in an unrealized gain on foreign exchange of $2.3 million in 2019.
−Removed: Income Tax Expense.
−Removed: Our income tax expense was $15.1 million for 2019 and $12.7 million for 2018.
−Removed: The increase in our income tax expense was primarily related to an increase in our income before income taxes.
−Removed: Buildings On-net.
−Removed: As of December 31, 2019 and 2018 we had a total of 2,801 and 2,676 on-net buildings connected to our network, respectively.
−Removed: Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
−Removed: Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality of and variability of our service revenue, operating results and cash flows.
+Added: In this section, we discuss the results of our operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.
+Added: For a discussion of the year ended December 31, 2019 compared to the year ended December 31, 2018, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"
+Added: in our Annual Report on Form 10-K for the year ended December 31, 2019.
+Added: Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality and variability of our service revenue, operating results and cash flows.
The following summary tables present a comparison of our results of operations with respect to certain key financial measures.
7 unchanged sentences
Depreciation and amortization expenses
−Removed: Gains on equipment transactions
+Added: Realized gain on foreign exchange – 2024 Notes
+Added: Unrealized (loss) gain on foreign exchange - 2024 Notes
+Added: Loss on debt extinguishment and redemption - 2021 Notes
Interest expense
2 unchanged sentences
(2) Includes non-cash equity-based compensation expense of $22,306 and $17,466 for 2020 and 2019, respectively.
+Added: NM - not meaningful
Other Operating Data
3 unchanged sentences
Service Revenue.
−Removed: Our service revenue increased 7.2% from 2017 to 2018.
−Removed: Exchange rates positively impacted our increase in service revenue by approximately $4.0 million.
+Added: We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our network.
+Added: We do this by investing capital to expand the geographic footprint of our network and by increasing the number of buildings that we are connected to, including carrier neutral data centers and multi-tenant office buildings.
+Added: These efforts broaden the global reach of our network and increase the size of our potential addressable market.
+Added: We also seek to grow our service revenue by investing in our sales and marketing team.
+Added: Over the last five years we have grown our quota bearing salesforce by 34% to 569 full time equivalent salespeople.
+Added: We typically sell corporate connections at similar pricing to our competitors, but our clients benefit from our significantly faster speeds, enhanced service level agreements and rapid installation times.
+Added: In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.
+Added: Our service revenue increased by 4.0% from 2019 to 2020.
+Added: Exchange rates positively impacted our increase in service revenue by $1.5 million.
All foreign currency comparisons herein reflect results for 2020 translated at the average foreign currency exchange rates for 2019.
2 unchanged sentences
We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our consolidated statements of operations.
−Removed: The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues from 2017 to 2018 of approximately $1.6 million.
−Removed: Our net-centric customers tend to purchase their service on a price per megabit basis.
−Removed: Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis.
+Added: The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues from 2019 to 2020 of $0.2 million.
+Added: Our corporate customers purchase their services on a price per connection basis.
+Added: Our net-centric customers generally purchase their services on a price per megabit basis.
Revenues from our corporate and net-centric customers represented 67.5% and 32.5% of total service revenue, respectively, for 2020 and represented 68.4% and 31.6% of total service revenue, respectively, for 2019.
−Removed: Revenues from corporate customers increased 11.8% to $337.8 million for 2018 from $302.1 million for 2017 primarily due to an increase in our number of our corporate customers.
−Removed: Revenues from our net-centric customers decreased by 0.4% to $182.3 million for 2018 from $183.1 million for 2017 primarily due to an increase in our number of net-centric customers being offset by a decline in our average price per megabit.
−Removed: Our revenue from our net-centric customers has declined as a percentage of our total revenue and grew at a slower rate than our corporate customer revenue because net-centric customers purchase our services based upon a price per megabit basis and our average price per megabit declined by 25.9% from 2017 to 2018.
−Removed: Additionally, the net-centric market experiences a greater level of pricing pressure than the corporate market and net-centric customers who renew their service with us expect their renewed service to be at a lower price than their current price.
−Removed: We expect that our average price per megabit will continue to decline at similar rates which would result in our corporate revenues continuing to represent a greater portion of our total revenues and our net-centric revenues continuing to grow at a lower rate than our corporate revenues.
−Removed: Additionally, the impact of foreign exchange rates has a more significant impact on our net-centric revenues.
−Removed: Our on-net revenues increased 8.1% from 2017 to 2018.
−Removed: We increased the number of our on-net customer connections by 12.1% at December 31, 2018 from December 31, 2017.
−Removed: On-net customer connections increased at a greater rate than on-net revenues primarily due to the 5.1% decline in our on-net ARPU, primarily from a decline in ARPU for our net-centric customers.
+Added: Revenues from corporate customers increased by 2.6% to $383.4 million for 2020 from 2019.
+Added: Revenues from our net-centric customers increased by 7.1% to $184.7 million for 2020 from 2019.
+Added: Our revenue from our corporate customers has increased as our corporate customers take advantage of our superior speeds, service levels and installation times versus our competitors.
+Added: The growing trend of customers installing second lines for redundancy and in order to supplement their VPN capabilities has also led to our growing corporate revenues.
+Added: However, in 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic.
+Added: We also witnessed a deteriorating real estate market in and around the buildings we service, with rising vacancy levels and falling lease initiations or renewals resulting in fewer sales opportunities for our salesforce.
+Added: As a result, during 2020, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth.
+Added: While we believe that demand for office space in the buildings in which we operate will remain among the strongest in our markets, we may experience increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities which would negatively impact our corporate revenue growth.
+Added: Our revenue from our net-centric customers increased primarily due to an increase in our number of net-centric customers partly offset by a decline in our average price per megabit.
+Added: Our net-centric customers purchase our services on a price per megabit basis.
+Added: The net-centric market exhibits significant pricing pressure due to the continued introduction of new technology which lowers the marginal cost of transmitting bits, and the commodity nature of the service where price is typically the only differentiating factor for these customers.
+Added: Our average price per megabit declined by 25.5% from 2019 to 2020.
+Added: We expect that our average price per megabit will continue to decline at similar rates.
+Added: The impact of foreign exchange rates has a more significant impact on our net-centric revenues.
+Added: Our on-net revenues increased by 5.7% from 2019 to 2020.
+Added: Our on-net revenues increased as we increased the number of our on-net customer connections by 3.7% at December 31, 2020 from December 31, 2019.
+Added: On-net revenues increased at a greater rate than on-net customer connections primarily due to an increase in our usage based revenues, a relatively stable on-net ARPU from 2019 to
+Added: 2020 and the positive impact of foreign exchange.
ARPU is determined by dividing revenue for the period by the average customer connections for that period.
−Removed: Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers.
−Removed: The decline in on-net ARPU is partly attributed to volume and term based pricing discounts.
−Removed: Additionally, on-net customers who cancel their service from our installed base of customers, in general, have an ARPU that is greater than the ARPU for our new customers due to declining prices primarily for our on-net services sold to our net-centric customers.
−Removed: These trends resulted in the reduction to our on-net ARPU and a 25.9% decline in our average price per megabit for our installed base of customers.
−Removed: Our off-net revenues increased 5.2% from 2017 to 2018.
−Removed: Our off-net revenues increased as we increased the number of our off-net customer connections by 10.3% at December 31, 2018 from December 31, 2017.
−Removed: Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 6.8% decrease in our off-net ARPU.
+Added: Our off-net revenues decreased by 0.5% from 2019 to 2020.
+Added: Our off-net revenues decreased as the 4.7% decrease in our off-net ARPU more than offset the 2.7% increase in the number of our off-net customer connections from December 31, 2019 to December 31, 2020.
Network Operations Expenses.
1 unchanged sentence
Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation.
−Removed: Our network operations expenses, including non-cash equity-based compensation expense, increased 4.9% from 2017 to 2018 as we were connected to 11.9% more customer connections and we were connected to 170 more on-net buildings as of December 31, 2018 compared to December 31, 2017.
−Removed: The increase in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities and the increase in our off-net revenues.
−Removed: When we provide off-net services we also assume the cost of the associated tail circuits.
+Added: Our network operations expenses, including non-cash equity-based compensation expense, decreased by 0.3% from 2019 to 2020.
+Added: The decrease in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities, offset by price reductions obtained in certain of our leased circuit costs, fewer operating leases for dark fiber and the impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020.
+Added: We adopted Leases (“ASU 2016-02”) on January 1, 2019.
+Added: When we adopted ASU 2016-02 we elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on our finance and operating leases.
+Added: As a result of accounting for this IRU renewal under ASU 2016-02, the present value of $1.8 million of quarterly maintenance and co-location fees (non-lease components) that were previously accounted for as network operations expenses prior to the second quarter of 2020, were capitalized as a finance lease liability and right-of-use leased asset totaling $34.0 million.
+Added: Amortization of the right-of-use asset is recorded as depreciation and amortization expense and the payments that are made toward the finance lease liability are recorded as a reduction of the finance lease liability and interest expense.
Selling, General, and Administrative Expenses (“SG&A”).
−Removed: Our SG&A expenses, including non-cash equity-based compensation expense, increased 4.6% from 2017 to 2018.
+Added: Our SG&A expenses, including non-cash equity-based compensation expense, increased by 7.9% from 2019 to 2020.
Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation and was $22.3 million for 2020 and $17.5 million for 2019.
−Removed: SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and increases in our sales efforts and an increase in our headcount partly offset by a $1.1 million decrease in our legal fees primarily associated with U.S.
−Removed: net neutrality and interconnection regulatory matters and by the $1.3 million reduction in commission expense from the impact of the new revenue accounting standard which requires us to capitalize certain commissions paid to our sales agents and sales employees.
+Added: SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and increases in our sales efforts and an increase in our headcount.
Our sales force headcount increased by 3.8% from 686 at December 31, 2019 to 712 at December 31, 2020 and our total headcount increased by 2.7% from 1,055 at December 31, 2019 to 1,083 at December 31, 2020.
Depreciation and Amortization Expenses .
−Removed: Our depreciation and amortization expenses increased 7.0% from 2017 to 2018.
−Removed: The increase is primarily due to the depreciation expense associated with the increase related to newly deployed fixed assets more than offsetting the decline in depreciation expense from fully depreciated fixed assets.
−Removed: Gains on Equipment Transactions.
−Removed: We exchanged certain used network equipment and cash consideration for new network equipment resulting in gains of $1.0 million for 2018 and $3.9 million for 2017.
−Removed: The gains are based upon the excess of the estimated fair value of the new network equipment over the carrying amount of the returned used network equipment and the cash paid.
−Removed: The reduction in gains from 2017 to 2018 was due to purchasing more equipment under the exchange program in 2017 than we purchased in 2018.
+Added: Our depreciation and amortization expenses increased by 4.0% from 2019 to 2020.
+Added: The increase is primarily due to the depreciation expense associated with the increase related to newly deployed fixed assets associated with our network expansion activities and the impact of the renewal of an IRU lease as discussed above.
Interest Expense.
−Removed: Interest expense results from interest incurred on our $445.0 million of senior secured notes, interest incurred on our $189.2 million of senior unsecured notes, interest on our installment payment agreement and interest on our finance lease obligations.
−Removed: Our interest expense increased by 5.3% for 2018 from 2017 primarily due to the issuance of $70.0 million of senior secured notes in August 2018 and an increase in our finance lease obligations.
+Added: Our interest expense resulted from interest incurred on our $445.0 million of senior secured notes due 2022 (“2022 Notes”), interest incurred on our $189.2 million of senior unsecured notes due 2021 (“2021 Notes") until these notes were redeemed in June 2020, interest on our installment payment agreement, interest on our finance lease obligations and interest incurred on our €350.0 million aggregate principal amount of 4.375% senior unsecured notes due 2024 (“2024 Notes”).
+Added: We issued €215.0 million of our 2024 Notes in June 2020 and €135.0 million of our 2024 Notes in June 2019.
+Added: In June 2020, we redeemed and extinguished our 2021 Notes at par value resulting in a loss on debt extinguishment and redemption of $0.6 million.
+Added: Our interest expense increased by 8.8% for 2020 from 2019 primarily due to an increase in our finance lease obligations and the issuances of our 2024 Notes, partly offset by the redemption of our 2021 Notes.
+Added: Realized Gain and Unrealized (Loss) Gain on Foreign Exchange on 2024 Notes.
+Added: Our 2024 Notes were issued in Euros and are reported in our reporting currency – US Dollars.
+Added: As of December 31, 2020, the carrying value of our 2024 Notes was $429.3 million and as of December 31, 2019, the carrying value of our 2024 Notes was $151.4 million.
+Added: In June 2020, we issued our €215.0 million 2024 Notes at a Euro to USD rate of $1.112.
+Added: We received proceeds in USD on the 2024 Notes on June 9, 2020 at a Euro to USD rate of $1.133 resulting in a realized gain on foreign exchange of $2.5 million.
+Added: Our unrealized (loss) gain on foreign exchange on our 2024 Notes from converting our 2024 Notes into USD was an unrealized loss of $(37.0) million for 2020 and an unrealized gain of $2.3 million for 2019.
+Added: We have not entered into hedges for our foreign currency obligations.
Income Tax Expense.
Our income tax expense was $4.1 million for 2020 and $15.2 million for 2019.
−Removed: The decrease in our income tax expense was primarily related to an increase in deferred income tax expense for 2017 primarily due to the impact of the Tax Cuts and Jobs Act (the "Act").
−Removed: On December 22, 2017, the President of the United States signed into law the Act.
−Removed: The Act amended the Internal Revenue Code and reduced the corporate tax rate from a maximum rate of 35% to a flat 21% rate.
−Removed: The rate reduction was effective on January 1, 2018 and may reduce our future income taxes payable once we become a cash taxpayer in the United States.
−Removed: As a result of the reduction in the corporate income tax rate and other provisions under the Act, we were required to revalue our net deferred tax asset at December 31, 2017 resulting in a reduction in our net deferred tax asset of $9.0 million and we also recorded a transition tax of $2.3 million related to our foreign operations for a total income tax expense of approximately $11.3 million, which was recorded as additional noncash income tax expense in 2017.
+Added: The reduction in our income tax expense is primarily related to a reduction in our income before income taxes.
Buildings On-net.
1 unchanged sentence
Liquidity and Capital Resources
−Removed: In assessing our short term and long term liquidity, management reviews and analyzes our current cash balances, short-term investments, accounts receivable, accounts payable, accrued liabilities, capital expenditure and operating expense commitments, and required finance lease, interest and debt payments and other obligations.
+Added: In assessing our liquidity, management reviews and analyzes our current cash balances, accounts receivable, accounts payable, accrued liabilities, capital expenditure commitments, and required finance lease and debt payments and other obligations.
+Added: As our business has grown as a result of an increasing customer base, broader geographic coverage and increased traffic, we have produced a growing level of operating cash flow.
+Added: As a result of the operating leverage of our network, our annual capital expenditures as
+Added: measured as a percentage of revenues has fallen over the last decade.
+Added: We have also had increasing success in raising capital by issuing notes and arranging financing and leases that have had a lower cost and more flexible terms.
+Added: The combination of this improved operating performance and access to capital has enhanced our financial flexibility and increased our ability to make distributions to shareholders in the form of cash dividends or through share repurchases.
+Added: Since our initial public offering, we have returned over $894 million to our shareholders through share repurchases and dividends.
+Added: We will continue to assess our capital and liquidity needs and, where appropriate, return capital to shareholders.
+Added: Over the next several years we have significant contractual and anticipated cash outlays including our indicative dividend payments on our common stock, our maturing debt obligations, interest payments on our debt obligations and our projected capital expenditure requirements in order to help execute our business plan.
+Added: Based upon our historical growth rate of our dividend, we expect that we would have to provide approximately $310 million in order to meet our quarterly dividend payments over the next two years.
+Added: Our $445.0 million of Senior Secured Notes mature in March 2022 and include annual interest payments of $23.9 million until maturity.
+Added: Our €350 million of Senior Unsecured Notes mature in June 2024 and include annual interest payments €15.3 million until maturity.
+Added: Our €350 million of Senior Unsecured Notes are denominated in Euros and expose us to potentially unfavorable adverse movements in foreign currency rate changes.
+Added: Our overseas operations provides us access to Euros, however these amounts may be insufficient to fund our obligations under our Senior Unsecured Notes.
+Added: Additionally, we have not entered into forward exchange contracts related to our foreign currency exposure.
+Added: Any future acquisitions or other significant unplanned costs or cash requirements in excess of amounts we currently hold may require that we raise additional funds through the issuance of debt or equity.
+Added: We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all.
+Added: Insufficient funds may require us to delay or scale back the number of buildings and markets that we add to our network, reduce our planned increase in our sales and marketing efforts, or require us to otherwise alter our business plan or take other actions that could have a material adverse effect on our business, results of operations and financial condition.
+Added: If issuing equity securities raises additional funds, substantial dilution to existing stockholders may result.
+Added: We may need to or elect to refinance all or a portion of our indebtedness at or before maturity and we cannot provide assurances that we will be able to refinance any such indebtedness on commercially reasonable terms or at all.
+Added: In addition, we may elect to secure additional capital in the future, at acceptable terms, to improve our liquidity or fund acquisitions or for general corporate purposes.
+Added: In addition, in an effort to reduce future cash interest payments as well as future amounts due at maturity or to extend debt maturities, we may, from time to time, issue new debt, enter into debt for debt, or cash transactions to purchase our outstanding debt securities in the open market or through privately negotiated transactions.
+Added: We will evaluate any such transactions in light of the existing market conditions.
+Added: The amounts involved in any such transaction, individually or in the aggregate, may be material.
+Added: We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.
+Added: Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
+Added: The amounts involved may be material.
+Added: In light of the economic uncertainties associated with the COVID-19 pandemic, our executive officers and Board have continued to carefully monitor our liquidity and cash requirements.
+Added: Based on current circumstances, we plan to continue our current dividend policy.
+Added: Given uncertainties regarding the duration of the pandemic and timing for economic recovery, we will continue to monitor our capital spending.
+Added: As we do each year, we will continue to monitor our future sources and uses of cash, and anticipate that we will make adjustments to our capital allocation strategies when, as and if determined by our Board of Directors.
+Added: Impact of COVID-19 on Our Liquidity and Operating Performance
+Added: In late March 2020, we adopted a mandatory work-from-home policy through which we required all employees to work from home and follow shelter in place guidelines issued by state and local authorities.
+Added: We believe we have been able to continue to operate effectively with the use of laptops, remote connectivity and the continued support of our critical support employees.
+Added: Further, we severely curtailed all business travel and adopted new safety procedures for our on-site technical personnel and customers accessing our data centers.
+Added: While we are contemplating a voluntary return to in-office presence for a small number of our offices, we expect to continue to have the vast majority of our workforce to work remotely for the foreseeable future.
+Added: We believe the policies followed by our workforce and the support provided by our IT and other groups has enabled our employees to continue to perform tasks and activities that are essential for the operation of our network, our sales and marketing efforts and other support functions.
+Added: We experienced some delays with respect to the installation of new services in March and April of 2020 when certain multi-tenant office buildings were closed to our personnel.
+Added: We worked with local authorities and building owners to categorize our employees as essential workers who need priority access to buildings.
+Added: We believe that our disruption in access to buildings was effectively mitigated throughout our second and third quarters.
+Added: In April and May 2020, we waived late fees for customers who were unable to pay their bills due to the pandemic.
+Added: We have not encountered any material change in the payment profile of our customers or seen any significant increase in customer turnover since the beginning of the pandemic.
+Added: There can be no assurance that we will continue to experience normal operations as economic
+Added: dislocations may adversely affect our customers and may lead to higher customer turnover, bad debt expense and lower revenue and profitability.
+Added: We continue to operate with a high level of liquidity and as of December 31, 2020 we had cash and cash equivalents of approximately $371.3 million.
+Added: We have recently experienced certain corporate customers taking a more cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic.
+Added: We also have witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals.
+Added: Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce.
+Added: As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth in 2020.
+Added: While we believe that demand for office space in the buildings in which we operate will remain among the strongest in our markets, we may experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities.
+Added: These trends may negatively impact our revenue growth, cash flows and profitability.
+Added: Shortly after COVID-19 began its rapid spread around the world, domestic and worldwide capital markets ceased operating for a short period.
+Added: While worldwide capital markets have remained unstable or unpredictable since then, particularly for non-investment grade issuers, legislative bodies and reserve banks have taken various actions in response to the pandemic that have impacted the capital markets, and we expect that these efforts may continue.
+Added: In June 2020, we issued an additional €215 million of our 4.375% Senior Unsecured Notes due 2024.
+Added: The COVID-19 pandemic has not impacted our credit rating to date, nor do we believe that it has materially changed our cost of capital.
+Added: We believe we are able to timely service our debt obligations and will not require any concessions to do so.
+Added: We believe we will have access to additional capital from a variety of sources and the public capital markets for debt and equity.
The following table sets forth our consolidated cash flows.
3 unchanged sentences
Net cash used in investing activities
−Removed: Net cash provided by (used in) financing activities
+Added: Net cash (used in) provided by financing activities
Effect of exchange rates on cash
−Removed: Net increase (decrease) in cash and cash equivalents during the year
+Added: Net (decrease) increase in cash and cash equivalents during the year
Net Cash Provided By Operating Activities.
2 unchanged sentences
Our changes in cash provided by operating activities are primarily due to changes in our operating profit and changes in our interest payments.
−Removed: Cash provided by operating activities for 2019, 2018 and 2017 includes interest payments on our note obligations of $38.0 million, $32.7 million and $30.8 million, respectively.
+Added: Cash provided by operating activities for 2020, 2019 and 2018 included interest payments on our note obligations of $48.8 million, $38.0 million and $32.7 million, respectively.
Net Cash Used In Investing Activities.
3 unchanged sentences
In 2020, 2019 and 2018 we obtained $5.8 million, $11.3 million and $9.9 million, respectively, of network equipment and software in non-cash exchanges for notes payable under an installment payment agreement.
−Removed: Net Cash Provided By (Used In) Financing Activities.
−Removed: Our primary uses of cash for financing activities are for dividend payments, stock purchases and principal payments under our finance lease obligations.
−Removed: Amounts paid under our stock buyback program were $6.6 million for 2018 and $1.8 million for 2017.
−Removed: There were no stock purchases for 2019.
+Added: Net Cash (Used In) Provided By Financing Activities.
+Added: Our primary uses of cash for financing activities are for dividend payments, stock purchases and principal payments under our debt and finance lease obligations.
During 2020, 2019 and 2018 we paid $129.4 million, $112.6 million and $97.9 million, respectively, for our quarterly dividend payments.
Our quarterly dividend payments have increased due to regular quarterly increases in our quarterly dividend per share amounts.
+Added: Amounts paid under our stock buyback program were $4.5 million for 2020 and $6.6 million for 2018.
+Added: There were no stock purchases during 2019.
Principal payments under our finance lease obligations were $24.0 million, $9.1 million and $10.3 million for 2020, 2019 and 2018, respectively, and are impacted by the timing and extent of our network expansion activities.
−Removed: Our financing activities also include proceeds from and repayments of our debt offerings.
−Removed: In June 2019 we received net proceeds of $152.1 million from the issuance of our €135.0 million of 2024 Notes.
−Removed: In August 2018 we received net proceeds of $69.9 million from the issuance of our $70.0 million of senior secured notes.
Total installment payment agreement principal payments were $10.5 million, $10.0 million and $9.4 million for 2020, 2019 and 2018, respectively.
−Removed: Our total indebtedness, at par and excluding operating lease liabilities, at December 31, 2019 was $967.9 million.
−Removed: Our total indebtedness at December 31, 2019 includes $169.8 million of finance lease obligations for dark fiber primarily under 15-20 year IRUs.
−Removed: Our total cash and cash equivalents were $399.4 million at December 31, 2019.
+Added: Our financing activities also include proceeds from and repayments of our debt offerings.
+Added: In June 2020, we received net proceeds of $240.3 million from the issuance of €215.0 million of our 2024 Notes and we redeemed $189.2 million of our 2021 Notes at par value, thereby extinguishing the remaining principal amount owed.
+Added: In June 2019 we received net proceeds of $152.1 million from the issuance of €135.0 million of our 2024 Notes.
+Added: In August 2018 we received net proceeds of $69.9 million from the issuance of $70.0 million of our 2022 Notes.
+Added: Our total cash and cash equivalents at December 31, 2020 were $371.3 million.
+Added: We believe this level of liquidity reduces our exposure to refinancing risk, potential underperformance of the business or other unforeseen challenges and enhances our ability to pursue acquisitions or operating opportunities.
+Added: We intend upon holding levels of cash and cash equivalents sufficient to maintain our ability to fund operations, refinance indebtedness and make dividend payments to our shareholders.
+Added: Our total indebtedness at December 31, 2020, at par value, was $1.1 billion.
+Added: Our total indebtedness at December 31, 2020 includes $219.1 million of finance lease obligations for dark fiber under long-term IRU agreements.
On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc.
(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.
−Removed: Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
+Added: Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Exchange Act.
Senior unsecured notes—€350.0 million
−Removed: On June 25, 2019, Group completed an offering of €135.0 million aggregate principal amount of 4.375% senior unsecured notes due on June 30, 2024 (the “2024 Notes”).
+Added: In June 2019, Group completed an offering of €135.0 million aggregate principal amount of 2024 Notes.
+Added: In June 2020, Group completed an offering of €215.0 million aggregate principal amount of 2024 Notes.
The 2024 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and mature on June 30, 2024.
1 unchanged sentence
Holdings provided a guarantee of the 2024 Notes but Holdings is not subject to the covenants under the indenture.
−Removed: Senior unsecured notes—$189.2 million
−Removed: Group is obligor on our $189.2 million (originally $200.0 million) of 5.625% senior unsecured notes due 2021 (the “2021 Notes”).
−Removed: The 2021 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and mature on April 15, 2021.
−Removed: Interest accrues at 5.625% and is paid semi-annually in arrears on April 15 and October 15 of each year.
−Removed: Holdings provided a guarantee of the 2021 Notes but Holdings is not subject to the covenants under the indenture.
−Removed: In the second quarter of 2016, we paid $10.9 million for the purchase of $10.8 million of par value and accrued interest on our 2021 Notes reducing the principal amount to $189.2 million.
Senior secured notes—$445.0 million
6 unchanged sentences
Limitations under the indentures
−Removed: The indentures governing the 2024 Notes, 2022 Notes and 2021 Notes, among other things, limits our ability to incur indebtedness;
+Added: The indentures governing the 2024 Notes and 2022 Notes, among other things, limits our ability to incur indebtedness;
to pay dividends or make other distributions;
4 unchanged sentences
and to enter into certain transactions with its affiliates.
−Removed: Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if our consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes and 2021 Notes.
−Removed: Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if our consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes and 2021 Notes.
+Added: Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if our consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes.
+Added: Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if our consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes.
The indentures prohibit certain payments, such as dividends and stock purchases, when our consolidated leverage ratio, as defined by the indentures, is greater than 4.25.
2 unchanged sentences
Our consolidated leverage ratio was above 4.25 as of December 31, 2020.
−Removed: As of December 31, 2019, a total of $110.3 million (primarily held by Holdings in cash and cash equivalents) was permitted for investment payments including dividends and stock purchases.
+Added: As of December 31, 2020, a total of $94.0 million was permitted for investment payments including dividends and stock purchases.
Summarized Financial Information of Holdings
12 unchanged sentences
Our Board of Directors has approved through December 31, 2021, purchases of our common stock under a buyback program (the “Buyback Program”).
−Removed: We purchased 0.1 million shares of our common stock for $6.6 million during the year ended December 31, 2018 and 0.1 million shares of our common stock for $1.8 million during the year ended December 31, 2017.
+Added: We purchased 79,056 shares of our common stock for $4.5 million during the year ended December 31, 2020 and 147,995 shares of our common stock for $6.6 million during the year ended December 31, 2018.
There were no purchases of common stock during the year ended December 31, 2019.
11 unchanged sentences
See Note 4 to our consolidated financial statements for additional discussion of limitations on distributions.
−Removed: Contractual Obligations and Commitments
−Removed: The following table summarizes our contractual cash obligations and other commercial commitments as of December 31, 2019.
−Removed: Payments due by period
−Removed: (in thousands)
−Removed: Finance lease obligations(2)
−Removed: Operating leases, colocation and data center obligations(3)
−Removed: Unconditional purchase obligations(4)
−Removed: Total contractual cash obligations
−Removed: (1) These amounts include interest and principal payment obligations on our €135.0 million of 2024 Notes through the maturity date of June 30, 2024, interest and principal payments on our $445.0 million of 2022 Notes through the maturity date of March 1, 2022, interest and principal payments on our $189.2 million of 2021 Notes through the maturity date of April 15, 2021 and $12.5 million due under an installment payment agreement with a vendor.
−Removed: (2) The amounts include principal and interest payments under our finance lease obligations.
−Removed: Our finance lease obligations were incurred in connection with IRUs for inter-city and intra-city dark fiber underlying substantial portions of our network.
−Removed: These finance leases are presented on our balance sheet at the net present value of the future minimum lease payments, or $169.8 million at December 31, 2019.
−Removed: These leases generally have initial terms of 15 to 20 years.
−Removed: (3) These amounts include amounts due under our facilities, operating leases, colocation obligations and carrier neutral data center obligations.
−Removed: Certain of these operating lease liabilities are presented on our balance sheet at the net present value of the future minimum lease payments, or $96.8 million at December 31, 2019.
−Removed: (4) These amounts include amounts due under unconditional purchase obligations including dark fiber IRU operating and finance lease agreements entered into but not delivered and accepted prior to December 31, 2019.
Future Capital Requirements
7 unchanged sentences
In addition, in an effort to reduce future cash interest payments as well as future amounts due at maturity or to extend debt maturities, we may, from time to time, issue new debt, enter into debt for debt, or cash transactions to purchase our outstanding debt securities in the open market or through privately negotiated transactions.
−Removed: We will evaluate any such transactions in light of
−Removed: the existing market conditions.
+Added: We will evaluate any such transactions in light of the existing market conditions.
The amounts involved in any such transaction, individually or in the aggregate, may be material.
11 unchanged sentences
The accounting policies we believe to be most critical to understanding our financial results and condition or that require complex, significant and subjective management judgments are discussed below.
−Removed: Revenue recognition
−Removed: Our service offerings consist of on-net and off-net telecommunications services.
−Removed: Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears.
−Removed: Amounts billed are due upon receipt and contract lengths range from month to month to 60 months.
−Removed: We satisfy our performance obligations to provide services to customers over time as the services are rendered.
−Removed: Revenue is recognized when a customer obtains the promised service.
−Removed: The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these services.
−Removed: To achieve this core principle, we follow the following five steps:
−Removed: 1) Identification of the contract, or contracts with a customer
−Removed: 2) Identification of the performance obligations in the contract
−Removed: 3) Determination of the transaction price
−Removed: 4) Allocation of the transaction price to the performance obligations in the contract
−Removed: 5) Recognition of revenue when, or as, we satisfy a performance obligation
−Removed: Installation fees for contracts with terms longer than month-to-month are recognized over the contract term.
−Removed: Installation fees associated with month-to-month contracts are recognized over the estimated average customer life.
−Removed: To the extent a customer contract is terminated prior to its contractual end the customer is subject to termination fees.
−Removed: We vigorously seek payment of these amounts.
−Removed: We recognize revenue for these amounts as they are collected.
−Removed: Revenue recognition standards include guidance relating to taxes or surcharges assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, gross receipts taxes, excise taxes, Universal Service Fund fees and certain state regulatory fees.
−Removed: Such charges may be presented gross or net based upon our accounting policy election.
−Removed: We record certain excise taxes and surcharges on a gross basis and includes them in our service revenue and cost of network operations.
Finance Lease Obligations
We record assets and liabilities under finance leases at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease.
−Removed: We establish the number of renewal option periods used in determining the lease term, if any, based upon our assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty on us in such amount that renewal appears to be reasonably assured.
+Added: We establish the number of renewal option periods used in determining the lease term, if any, based upon our assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty on us in such amount that renewal appears to be reasonably certain.
Useful lives are determined based on historical usage with consideration given to technological changes and trends in the industry that could impact the asset utilization.
1 unchanged sentence
We determine the incremental borrowing rate for each lease using our current borrowing rate adjusted for various factors including the level of collateralization and term to align with the term of the lease.
−Removed: Recent Accounting Pronouncements
−Removed: Recent Accounting Pronouncements—to be Adopted
−Removed: In June 2016, the FASB issued No.
−Removed: 2016-13, “Financial Instruments—Credit Losses:
−Removed: Measurement of Credit Losses on Financial Instruments.
−Removed: ” This guidance is intended to introduce a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses.
−Removed: This new standard is effective for annual and interim reporting periods beginning after December 15, 2019 and early adoption is permitted.
−Removed: We do not believe that the adoption of ASU No.
−Removed: 2016-13 will have a material impact on or financial statements or disclosures.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.