COGENT COMMUNICATIONS HOLDINGS, INC. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks. These risks, which include interest rate risk and foreign currency exchange risk, arise in the normal course of business rather than from trading activities. Interest Rate Risk Our cash flow exposure due to changes in interest rates related to our debt is limited as our note obligations have fixed interest rates. The fair value of our note obligations may increase or decrease for various reasons, including fluctuations in the market price of our common stock, fluctuations in market interest rates and fluctuations in general economic conditions. A decline in interest rates in the future will not generally benefit us with respect to our fixed rate debt due to the terms and conditions of the indentures relating to that debt that would require us to repurchase the debt at specified premiums if redeemed early. Our interest income is sensitive to changes in the general level of interest rates. However, based upon the nature and current level of our investments, which consist of cash and cash equivalents, we believe that there is no material interest rate exposure related to our investments. Foreign Currency Exchange Risk Our operations outside of the United States and our 2024 Notes expose us to potentially unfavorable adverse movements in foreign currency rate changes. We have not entered into forward exchange contracts related to our foreign currency exposure. While we record financial results and assets and liabilities from our international operations in the functional currency, which is generally the local currency, these results are reflected in our consolidated financial statements in US dollars. Therefore, our reported results are exposed to fluctuations in the exchange rates between the US dollar and the local currencies, in particular the Euro and the Canadian dollar. In addition, we may fund certain cash flow requirements of our international operations including the interest and principal payment obligations, while due in Euros, on our 2024 notes in US dollars. Accordingly, in the event that the local currencies strengthen versus the US dollar to a greater extent than planned, the revenues, expenses and cash flow requirements associated with our international operations may be significantly higher in US-dollar terms than planned. During the year ended December 31, 2020, our foreign activities accounted for 23% of our consolidated revenue. A 1% change in foreign exchange rates would impact our consolidated annual revenue by approximately $1.1 million. A 1% change in foreign exchange rates as of December 31, 2020 would impact the reported value of our 2024 Notes by approximately $4.3 million. Changes in foreign currency rates could adversely and materially affect our operating results and cash flow. ​ 32 Table of Contents