FINANCIAL STATEMENTS
−Removed: COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
+Added: COGENT COMMUNICATIONS HOLDINGS, INC.
+Added: AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
−Removed: AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
+Added: AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(IN THOUSANDS, EXCEPT SHARE DATA)
−Removed: September 30,
Current assets:
10 unchanged sentences
Accrued and other current liabilities
−Removed: Installment payment agreement, current portion, net of discounts of $ 245 and $ 350 , respectively
+Added: Senior secured 2022 Notes, net of unamortized debt costs of $ 733 and including premium of $ 430
+Added: Installment payment agreement, current portion, net of discount of $ 80 and $ 136 , respectively
Current maturities, operating lease liabilities
1 unchanged sentence
Total current liabilities
−Removed: Senior secured 2022 notes, net of unamortized debt costs of $ 1,267 and $ 1,897 , respectively and including premiums of $ 656 and $ 985 , respectively
−Removed: Senior unsecured 2024 Euro notes, net of unamortized debt costs of $ 3,166 and $ 1,410 , respectively and net of discounts of $ 1,164 and $ 0 , respectively
−Removed: Senior unsecured 2021 notes, net of unamortized debt costs of $ 857
+Added: Senior unsecured 2024 Euro Notes, net of unamortized debt costs of $ 2,751 and $ 2,961 , respectively, and net of discount of $ 1,020 and $ 1,142 , respectively
+Added: Senior secured 2022 Notes, net of unamortized debt costs of $ 1,052 and including premium of $ 544
Operating lease liabilities, net of current maturities
13 unchanged sentences
The accompanying notes are an integral part of these condensed consolidated balance sheets.
−Removed: COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
−Removed: CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
−Removed: FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
−Removed: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: Service revenue
−Removed: Operating expenses:
−Removed: Network operations (including $ 346 and $ 282 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)
−Removed: Selling, general, and administrative (including $ 6,176 and $ 4,515 of equity-based compensation expense, respectively)
−Removed: Depreciation and amortization
−Removed: Total operating expenses
−Removed: Loss on finance leases amendment
−Removed: Gains on equipment transactions
−Removed: Operating income
−Removed: Interest expense
−Removed: Unrealized foreign exchange (loss) gain on 2024 Euro Notes
−Removed: Interest income and other, net
−Removed: (Loss) income before income taxes
−Removed: Income tax benefit (provision)
−Removed: Net (loss) income
−Removed: Comprehensive income:
−Removed: Net (loss) income
−Removed: Foreign currency translation adjustment
−Removed: Comprehensive income
−Removed: Net (loss) income per common share:
−Removed: Basic net (loss) income per common share
−Removed: Diluted net (loss) income per common share
−Removed: Dividends declared per common share
−Removed: Weighted-average common shares - basic
−Removed: Weighted-average common shares - diluted
−Removed: The accompanying notes are an integral part of these condensed consolidated statements.
−Removed: COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
+Added: COGENT COMMUNICATIONS HOLDINGS, INC.
+Added: AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
−Removed: FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
+Added: FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
−Removed: September 30, 2020
−Removed: September 30, 2019
+Added: March 31, 2021
+Added: March 31, 2020
Service revenue
4 unchanged sentences
Total operating expenses
−Removed: Loss on finance lease amendments
Gains on equipment transactions
1 unchanged sentence
Interest expense
−Removed: Realized foreign exchange gain on issuance of 2024 Euro Notes
−Removed: Unrealized (loss) gain on foreign exchange on 2024 Euro Notes
+Added: Unrealized foreign exchange gain on 2024 Euro Notes
+Added: Loss on debt extinguishment and repurchase - 2022 Notes
Interest income and other, net
−Removed: Loss on debt extinguishment and redemption- 2021 Notes
Income before income taxes
4 unchanged sentences
Net income per common share:
−Removed: Basic net income per common share
−Removed: Diluted net income per common share
+Added: Basic and diluted net income per common share
Dividends declared per common share
2 unchanged sentences
The accompanying notes are an integral part of these condensed consolidated statements.
−Removed: COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES
+Added: COGENT COMMUNICATIONS HOLDINGS, INC.
+Added: AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019
+Added: FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(IN THOUSANDS)
−Removed: September 30, 2020
−Removed: September 30, 2019
+Added: March 31, 2021
+Added: March 31, 2020
Cash flows from operating activities:
1 unchanged sentence
Depreciation and amortization
−Removed: Amortization of debt costs, discounts and premiums
+Added: Amortization of debt discount and premium
Equity-based compensation expense (net of amounts capitalized)
−Removed: Loss on debt extinguishment and redemption – 2021 Notes
−Removed: Unrealized losses (gains) on foreign exchange
−Removed: Realized foreign exchange gain on issuance of 2024 Notes
Gains - equipment transactions and other, net
+Added: Unrealized foreign currency exchange gain on 2024 Euro Notes
+Added: Loss on extinguishment of 2022 Notes
Deferred income taxes
10 unchanged sentences
Dividends paid
−Removed: Purchases of common stock
−Removed: Redemption and extinguishment of 2021 Notes
−Removed: Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of $ 2,137 and $ 1,556 , respectively
+Added: Repurchase and extinguishment of 2022 Notes
+Added: Proceeds from exercises of stock options
Principal payments on installment payment agreement
Principal payments of finance lease obligations
−Removed: Proceeds from exercises of stock options
−Removed: Net cash (used in) provided by financing activities
+Added: Net cash used in financing activities
Effect of exchange rates changes on cash
−Removed: Net (decrease) increase in cash and cash equivalents
+Added: Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
−Removed: Supplemental disclosure of non-cash investing and financing activities:
+Added: Supplemental disclosure of non-cash financing activities:
Non-cash component of network equipment obtained in exchange transactions
1 unchanged sentence
Finance lease obligations incurred
−Removed: Fair value of equipment acquired in leases
The accompanying notes are an integral part of these condensed consolidated statements.
1 unchanged sentence
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Description of the business and recent developments:
+Added: Description of the business:
Reorganization and merger
5 unchanged sentences
and its subsidiaries.
−Removed: Group and its subsidiaries represent the operating subsidiaries of Cogent and the vast majority of Cogent's assets, contractual arrangements, and operations are executed by Group and its subsidiaries.
+Added: Cogent Communications, Inc.
+Added: is wholly owned by Group and the vast majority of Group's assets, contractual arrangements, and operations are executed by Cogent Communications, Inc.
+Added: and its subsidiaries.
Description of business
−Removed: We are a 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 switched data.
−Removed: We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa.
−Removed: We are a Delaware corporation and we are headquartered in Washington, DC.
−Removed: We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises.
−Removed: We offer our on-net services to customers located in buildings that are physically connected to our network.
−Removed: As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service.
−Removed: Our on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.
−Removed: We provide our on-net Internet access and private network services to our corporate and net-centric customers.
−Removed: Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses.
−Removed: Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users.
+Added: The Company is a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space.
+Added: The Company’s network is specifically designed and optimized to transmit packet switched data.
+Added: The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 48 countries across North America, Europe, Asia, South America, Australia and Africa.
+Added: The Company is a Delaware corporation and is headquartered in Washington, DC.
+Added: The Company offers on-net Internet access services exclusively through its own facilities, which run from its network to its customers’ premises.
+Added: The Company offers its on-net services to customers located in buildings that are physically connected to its network.
+Added: As a result, the Company is not dependent on local telephone companies or cable TV companies to serve its customers for its on-net Internet access and private network service.
+Added: The Company’s on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 megabits per second to 100 gigabits per second.
+Added: The Company provides its on-net Internet access and private network services to its corporate and net-centric customers.
+Added: The Company’s corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.
+Added: The Company’s net-centric customers include bandwidth-intensive users that leverage its network to either deliver content to end users or to provide access to residential or commercial internet users.
Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.
−Removed: Access customers include over 7,200 access networks comprised of other Internet access providers, telephone companies, and cable television companies that collectively provide internet access to a substantial number of broadband subscribers across the world.
−Removed: These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers.
−Removed: We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.
−Removed: In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network.
−Removed: We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.
−Removed: We also provide certain non-core services that resulted from acquisitions.
−Removed: We continue to support but do not actively sell these non-core services.
+Added: Access customers include access networks comprised of other Internet Service Providers (“ISPs”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world.
+Added: These net-centric customers generally receive the Company’s services in carrier neutral colocation facilities and in the Company’s own data centers.
+Added: The Company operates data centers throughout North America and Europe that allow its customers to collocate their equipment and access the Company’s network.
+Added: In addition to providing on-net services, the Company provides Internet access and private network services to customers that are not located in buildings directly connected to its network.
+Added: The Company provides these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to the Company’s network.
+Added: The Company also provides certain non-core services that resulted from acquisitions.
+Added: The Company continues to support but does not actively sell these non-core services.
Basis of presentation
2 unchanged sentences
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.
−Removed: generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.
+Added: generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations.
The operating results for interim periods are not necessarily indicative of the operating results for the entire year.
3 unchanged sentences
Use of estimates
−Removed: The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
+Added: The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from these estimates.
Financial instruments
−Removed: At September 30, 2020, the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses approximated fair value because of the short-term nature of these instruments.
+Added: At March 31, 2021 the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments.
The Company measures its cash equivalents at amortized cost, which approximates fair value based upon quoted market prices (Level 1).
−Removed: Based upon recent trading prices (Level 2— market approach) at September 30, 2020 the fair value of the Company’s $ 445.0 million senior secured notes was $ 455.0 million and the fair value of the Company’s € 350.0 million Euro ($ 410.4 million USD) senior unsecured notes was $ 416.5 million.
+Added: Based upon recent trading prices (Level 2— market approach) at March 31, 2021 the fair value of the Company’s remaining $ 329.1 million senior secured notes due in 2022 (“2022 Notes”) was $ 337.3 million and the fair value of the Company’s € 350.0 million ($ 410.5 million) senior unsecured notes due in 2024 (“2024 Notes”) was $ 419.7 million.
Gross receipts taxes, universal service fund and other surcharges
1 unchanged sentence
Such charges may be presented gross or net based upon the Company’s accounting policy election.
−Removed: The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and costs of network operations.
−Removed: Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $ 3.9 million and $ 4.0 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 10.9 million and $ 10.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.
+Added: The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenue and network operations expense.
+Added: Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $ 4.5 million and $ 3.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively.
Basic and diluted net income per common share
5 unchanged sentences
Three Months Ended
−Removed: Nine Months Ended
−Removed: Nine Months Ended
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: September 30, 2020
−Removed: September 30, 2019
+Added: March 31, 2021
+Added: March 31, 2020
Weighted average common shares - basic
3 unchanged sentences
The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding:
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: September 30, 2020
−Removed: September 30, 2019
+Added: March 31, 2021
+Added: March 31, 2020
Unvested shares of restricted common stock
2 unchanged sentences
Stockholders’ Deficit
−Removed: The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts):
−Removed: Comprehensive
−Removed: Stockholders’
−Removed: Income (Loss)
−Removed: Equity (Deficit)
−Removed: Balance at June 30, 2020
−Removed: Forfeitures of shares granted to employees
−Removed: Equity-based compensation
−Removed: Foreign currency translation
−Removed: Issuances of common stock
−Removed: Exercises of options
−Removed: Common stock purchases and retirement
−Removed: Dividends paid
−Removed: Balance at September 30, 2020
−Removed: Comprehensive
−Removed: Stockholders’
−Removed: Income (Loss)
−Removed: Equity (Deficit)
−Removed: Balance at June 30, 2019
−Removed: Forfeitures of shares granted to employees
−Removed: Equity-based compensation
−Removed: Foreign currency translation
−Removed: Issuances of common stock
−Removed: Exercises of options
−Removed: Dividends paid
−Removed: Balance at September 30, 2019
+Added: The following details the changes in stockholders’ deficit for the three months ended March 31, 2021 and March 31, 2020 (in thousands except share amounts):
Comprehensive
8 unchanged sentences
Exercises of options
−Removed: Common stock purchases and retirement
Dividends paid
−Removed: Balance at September 30, 2020
+Added: Balance at March 31, 2021
Comprehensive
9 unchanged sentences
Dividends paid
−Removed: Balance at September 30, 2019
+Added: Balance at March 31, 2020
Revenue recognition
1 unchanged sentence
2014-09, Revenue from Contracts with Customers (“ASC 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.
−Removed: Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term.
−Removed: The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month.
−Removed: The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606.
+Added: Under ASC 606 the Company recognizes installation fees for contracts with terms longer than month-to-month over the contract term.
+Added: The Company believes that for contracts with terms longer than month-to-month the installation fee does not give rise to a material right as defined by ASC 606.
+Added: The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the installation fee represents a material right as defined by ASC 606.
The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions.
13 unchanged sentences
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
+Added: 5) Recognition of revenue when, or as, the Company satisfies its performance obligations
Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above.
To the extent a customer contract is terminated prior to its contractual end the customer is subject to termination fees.
−Removed: The Company vigorously seeks payment of these amounts.
−Removed: The Company recognizes revenue for these amounts as they are collected.
−Removed: Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2020 was $ 1.6 million and during the three months ended September 30, 2019 was $ 1.7 million.
−Removed: Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $ 3.9 million and during the nine months ended September 30, 2019 was $ 5.1 million.
−Removed: Amortization expense for contract costs was $ 4.2 million for the three months ended September 30, 2020 and $ 4.3 million for the three months ended September 30, 2019.
−Removed: Amortization expense for contract costs was $ 12.6 million for the nine months ended September 30, 2020 and $ 13.0 million for the nine months ended September 30, 2019.
−Removed: Recent Accounting Pronouncements— Adopted
+Added: The Company vigorously seeks payment of these termination fees.
+Added: The Company recognizes revenue for termination fees as they are collected.
+Added: Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended March 31, 2021 was $ 1.8 million and during the three months ended March 31, 2020 was $ 1.6 million.
+Added: Amortization expense for contract costs was $ 4.6 million for the three months ended March 31, 2021 and $ 4.2 million for the three months ended March 31, 2020.
In February 2016, the FASB issued ASU No.
7 unchanged sentences
The Company has made an accounting policy election to not apply the recognition requirements of ASU 2016-02 to its short-term leases - leases with a term of one year or less.
−Removed: The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: Finance lease cost
−Removed: Amortization of right-of-use assets
−Removed: Interest expense on finance lease liabilities
−Removed: Operating lease cost
−Removed: Total lease costs
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: Finance lease cost
+Added: The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and nonlease components on its finance and operating leases.
+Added: March 31, 2021
+Added: March 31, 2020
+Added: Finance lease costs
Amortization of right-of-use assets
20 unchanged sentences
The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term.
+Added: The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease.
+Added: The determination of the Company's incremental borrowing rate requires judgment.
Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets.
−Removed: As of September 30, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $ 20.7 million in future payments to be paid over periods of up to 20 years .
+Added: As of March 31, 2021, the Company had committed to additional dark fiber IRU lease agreements totaling $ 25.4 million in future payments to be paid over periods of up to 20 years .
These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months.
The future minimum payments (principal and interest) under these finance leases are as follows (in thousands):
−Removed: For the twelve months ending September 30,
+Added: For the twelve months ending March 31,
Total minimum finance lease obligations
4 unchanged sentences
Operating leases
−Removed: The Company leases office space and certain data center facilities under operating leases.
+Added: The Company leases office space and data center facilities under operating leases.
In certain cases the Company also enters into short-term operating leases for dark fiber.
2 unchanged sentences
The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments.
−Removed: The determination of the Company’s incremental borrowing rate requires judgment.
The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease.
+Added: The determination of the Company’s incremental borrowing rate requires judgment.
Certain of the Company’s leases include options to extend or terminate the lease.
1 unchanged sentence
The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company.
−Removed: Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments are recorded as an operating lease liability and a right-of-use leased asset.
−Removed: Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset.
+Added: Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments is recorded as an operating lease liability and a right-of-use leased asset.
+Added: Lease incentives and deferred rent liabilities for facilities operating leases are presented with, and netted against, the right-of-use leased asset.
Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.
The future minimum payments under these operating lease agreements are as follows (in thousands):
−Removed: For the twelve months ending September 30,
+Added: For the twelve months ending March 31,
Total minimum operating lease obligations
3 unchanged sentences
Lease obligations, net of current maturities
−Removed: Adopted accounting pronouncements
+Added: Allowance for credit losses
Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No.
11 unchanged sentences
Charged Against
−Removed: September 30,
Allowance for credit losses (deducted from accounts receivable)
−Removed: Three months ending September 30, 2020
−Removed: Current-period
−Removed: Provision for
−Removed: Expected Credit
−Removed: Charged Against
−Removed: September 30,
−Removed: Allowance for credit losses (deducted from accounts receivable)
−Removed: Nine months ending September 30, 2020
−Removed: Net bad debt expense for the three months ended September 30, 2020 was $ 0.8 million which is net of bad debt recoveries of $ 0.4 million.
−Removed: Net bad debt expense for the nine months ended September 30, 2020 was $ 3.2 million which is net of bad debt recoveries of $ 0.8 million.
+Added: Three months ending March 31, 2021
+Added: Three months ending March 31, 2020
+Added: Net bad debt expense for the three months ended March 31, 2021 was $ 0.8 million which is net of bad debt recoveries of $ 1.2 million.
+Added: Net bad debt expense for the three months ended March 31, 2020 was $ 1.1 million which is net of bad debt recoveries of $ 0.2 million.
Property and equipment:
−Removed: Depreciation and amortization expense related to property and equipment and finance leases was $ 21.6 million and $ 20.0 million for the three months ended September 30, 2020, and 2019 respectively, and $ 61.0 million and $ 60.2 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $ 3.0 million and $ 2.7 million for the three months ended
−Removed: September 30, 2020 and 2019, respectively, and $ 8.9 million and $ 8.0 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: Exchange agreement
−Removed: In the three and nine months ended September 30, 2020 and 2019, the Company exchanged certain used network equipment and cash consideration for new network equipment.
−Removed: The fair value of the equipment received was estimated to be $ 0.2 million and $ 0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.1 million and $ 2.6 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: After considering the cash component the transactions resulted in gains of $ 0.1 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.3 million and $ 0.8 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3).
+Added: Depreciation and amortization expense related to property and equipment and finance leases was $ 22.0 million and $ 19.5 million for the three months ended March 31, 2021 and 2020, respectively.
+Added: The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $ 3.2 million and $ 2.9 million for the three months ended March 31, 2021 and 2020, respectively.
Installment payment agreement
−Removed: In March 2015, the Company entered into an installment payment agreement (“IPA”) with a vendor.
−Removed: Under the IPA the Company was allowed to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term until July 2020 when additional borrowings under the IPA expired.
−Removed: There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term.
−Removed: As of September 30, 2020, and December 31, 2019 there was $ 10.4 million and $ 12.5 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment.
+Added: The Company has entered into an installment payment agreement (“IPA”) with a vendor.
+Added: Under the IPA the Company was able to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term.
+Added: There were no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term until July 2020 when additional borrowings under the IPA expired.
+Added: As of March 31, 2021 and December 31, 2020 there was $ 5.3 million and $ 7.7 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment.
The Company recorded the assets purchased and the net present value of the note obligation utilizing an imputed interest rate.
−Removed: The resulting discount was $ 0.3 million and $ 0.4 million as of September 30, 2020 and December 31, 2019, respectively, and is being amortized over the note term using the effective interest rate method.
+Added: The resulting discounts totaling $ 0.1 million and $ 0.1 million as of March 31, 2021 and December 31, 2020, respectively, are being amortized over the note term using the effective interest rate method.
Long-term debt:
−Removed: The Company has $ 445.0 million of senior secured notes (the "2022 Notes") and € 350.0 million ($ 410.4 million USD as of September 30, 2020) of senior unsecured notes (the "2024 Notes") outstanding.
−Removed: The 2022 Notes are due on March 1, 2022 and bear interest at a rate of 5.375 % per year.
−Removed: Interest on the 2022 Notes is paid semi-annually on March 1 and September 1.
−Removed: The 2024 Notes are due on June 30, 2024 and bear interest at a rate of 4.375 % per year.
−Removed: Interest on the 2024 Notes is paid semi-annually on June 30 and December 30.
−Removed: 2024 Notes issuances
−Removed: In June 2020, Group completed an offering of € 215.0 million aggregate principal amount of 4.375 % senior unsecured notes.
−Removed: The net proceeds from the June 2020 offering, after deducting offering expenses, were $ 240.3 million.
−Removed: In June 2019, Group completed an offering of € 135.0 million aggregate principal amount of 4.375 % senior unsecured notes.
−Removed: The net proceeds from the June 2019 offering, after deducting offering expenses, were $ 152.1 million.
−Removed: The Company expects to use the proceeds from these offerings for general corporate purposes, to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.
−Removed: The 2024 Notes bear interest at a rate of 4.375 % per annum.
−Removed: Interest began to accrue on the 2024 Notes issued in June 2020, on June 4, 2020 and interest began to accrue on the 2024 Notes issued in June 2019 on June 25, 2019.
−Removed: Interest is paid semi-annually in arrears on June 30 and December 30 of each year.
−Removed: Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024.
−Removed: The June 2020 issuance of € 215.0 million 2024 Notes were issued at a discount of 99.5 % for € 213.9 million Euros ($ 240.0 million USD) on June 3, 2020 at a Euro to USD rate of $ 1.112 .
−Removed: The discount is amortized to interest expense to the maturity date under the effective interest rate method.
−Removed: The Company received proceeds in USD on the June 2020 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.
−Removed: The June 2019 issuance of 2024 Notes were issued at par for € 135.0 million on June 25, 2019.
−Removed: The issuances of the 2024 Notes were in Euros and are reported in the Company’s reporting currency – US Dollars.
−Removed: As of September 30, 2020 the carrying value of our 2024 Notes was $ 410.4 million.
−Removed: The unrealized (loss) gain on foreign exchange on the Company’s 2024 Notes from converting the 2024 Notes into USD was $( 17.3 ) million for the three months ended September 30, 2020 and $ 6.2 million for the three months ended September 30, 2019 and was $( 17.8 ) million for the nine months ended September 30, 2020 and was $ 6.3 million for the nine months ended September 30, 2019.
−Removed: Debt extinguishment and redemption 2021 Notes
−Removed: In June 2020, Group redeemed its 5.625 % senior unsecured notes due in 2021 (the "2021 Notes") with the proceeds from its June 2020 issuance of € 215.0 million 2024 Notes.
−Removed: The Company redeemed the entire outstanding amount of the 2021 Notes at a redemption price of 100.00 % of the $ 189.2 million principal amount plus $ 1.6 million of accrued interest.
−Removed: As a result of this transaction the Company incurred a loss on debt extinguishment and redemption of $ 0.6 million from the amortization of the remaining unamortized notes cost and certain transaction expenses.
Limitations under the indentures
−Removed: The indentures governing the 2024 Notes and 2022 Notes among other things, limit the Company’s ability to incur indebtedness;
+Added: The indentures governing the Company's 2024 Notes and 2022 Notes, among other things, limit the Company’s ability to incur indebtedness;
to pay dividends or make other distributions;
8 unchanged sentences
A certain amount of such unrestricted payments is permitted notwithstanding this prohibition.
−Removed: The unrestricted payment amount may be increased by the Company’s consolidated cash flow, as defined in the indentures, as long as the Company’s consolidated leverage ratio is less than 4.25 .
−Removed: The Company’s consolidated leverage ratio was above 4.25 as of September 30, 2020.
−Removed: As of September 30, 2020, a total of $ 132.6 million was permitted for investment payments including dividends and stock purchases.
+Added: The unrestricted payment amount may be increased by the Company’s accumulated consolidated cash flow, as defined in the indentures, as long as the Company’s consolidated leverage ratio is less than 4.25 .
+Added: The Company’s consolidated leverage ratio was above 4.25 as of March 31, 2021.
+Added: As of March 31, 2021, a total of $ 57.9 million was unrestricted and permitted for investment payments including dividends and stock purchases.
+Added: Debt extinguishment and repurchase of 2022 Notes
+Added: In March 2021, Group repurchased $ 115.9 million of its 2022 Notes at a price of 103.2 % of the principal amount plus $ 0.4 million of accrued interest.
+Added: As a result of this transaction, the Company incurred a loss on debt extinguishment and redemption of $ 3.9 million from the premium payment above par value, the amortization of the remaining unamortized notes cost and certain transaction expenses.
+Added: On April 6, 2021 Group issued a notice of conditional partial redemption for $ 45.0 million of its 2022 Notes.
+Added: Subject to the satisfaction of conditions precedent stated therein, Group will redeem the $ 45.0 million of 2022 Notes on May 6, 2021.
+Added: The notes will be redeemed at par plus the “make-whole amount” as defined in the 2022 Notes indenture of $ 41.41533 per $1,000 aggregate principal amount plus accrued interest up to the redemption date of $ 9.70486 per aggregate principal amount.
+Added: Following this $ 45.0 million redemption there will be $ 284.1 million of 2022 Notes remaining.
Commitments and contingencies :
3 unchanged sentences
The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.
−Removed: The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $ 3.3 million in excess of the amount accrued at September 30, 2020.
−Removed: The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $ 9.0 million for Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015.
+Added: The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $ 3.4 million in excess of the amount accrued at March 31, 2021.
+Added: The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $ 9 million for the Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015.
The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability.
6 unchanged sentences
Income taxes:
−Removed: The components of (loss) income before income taxes consist of the following (in thousands):
+Added: The components of income before income taxes consist of the following (in thousands):
Three Months Ended
Three Months Ended
−Removed: Nine Months Ended
−Removed: Nine Months Ended
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: September 30, 2020
−Removed: September 30, 2019
−Removed: Common stock buyback program stock option and award plan:
+Added: March 31, 2021
+Added: March 31, 2020
+Added: Common stock buyback program and stock options and award plan:
The Company’s Board of Directors has approved purchases of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2021.
−Removed: At September 30, 2020, there was approximately $ 34.6 million remaining for purchases under the Buyback Program.
−Removed: In the three and nine months ended September 30, 2020 the Company purchased 4,567 shares of its common stock for $ 0.3 million.
−Removed: There were no purchases of common stock during the three and nine months ended September 30, 2019.
−Removed: Subsequent to September 30, 2020 the Company purchased 53,516 shares of its common stock for $ 3.1 million under the Buyback Program.
−Removed: In the first quarter of 2020 the Company granted 319,750 shares of common stock to its executive employees and directors valued at $ 23.7 million.
−Removed: Included in this first quarter grant were 94,050 performance shares that vest subject to certain Company performance conditions and 35,000 performance shares granted to the Company’s CEO that are subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index.
−Removed: In the second quarter of 2020 the Company granted 135,280 shares of common stock to its employees and directors valued at $ 10.6 million.
−Removed: Shares granted to the Company’s directors vest upon grant and the shares granted to the Company’s employees that are not subject to performance conditions generally vest over periods ending in December 2023.
+Added: At March 31, 2021, there was approximately $ 30.4 million remaining for purchases under the Buyback Program.
+Added: There were no purchases of common stock during the three months ended March 31, 2021 and three months ended March 31, 2020.
+Added: During the three months ended March 31, 2021 the Company granted 323,700 shares of common stock to its executive employees and directors valued at $ 19.5 million that primarily vest over periods ending in December 2024.
+Added: The vesting of 129,000 of these shares is subject to certain performance conditions.
+Added: Of the 129,000 total performance shares granted, the vesting of up to 35,000 performance shares granted to the Company’s CEO is subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index.
Dividends on common stock:
−Removed: On November 4, 2020, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.73 per common share.
−Removed: This estimated $ 33.5 million dividend payment is expected to be paid on December 4, 2020.
+Added: On April 28, 2021, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.78 per common share.
+Added: This estimated $ 35.9 million dividend payment is expected to be made on May 28, 2021.
The payment of any future dividends and any other returns of capital, including stock buybacks will be at the discretion of the Company’s Board of Directors and may be reduced, eliminated or increased and will be dependent upon the Company’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under the Company’s debt indentures and other factors deemed relevant by the Company’s Board of Directors.
5 unchanged sentences
The fixed annual rent for the headquarters building is $ 1.0 million per year plus an allocation of taxes and utilities.
−Removed: The lease began in May 2015 and the original lease term was for five years which was cancellable by the Company upon 60 days ’ notice.
+Added: The lease began in May 2015 and the lease term was for five years .
In February 2020 the lease term was extended to May 2025.
+Added: The lease is cancellable by the Company at no cost upon 60 days' notice.
The Company’s audit committee reviews and approves all transactions with related parties.
−Removed: The Company paid $ 0.5 million and $ 0.3 million in the three months ended September 30, 2020 and 2019, respectively, and $ 1.3 million and $ 1.2 million in the nine months ended September 30, 2020 and 2019, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.
+Added: The Company paid $ 0.4 million and $ 0.4 million in the three months ended March 31, 2021 and 2020, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.
Segment information:
1 unchanged sentence
The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands):
−Removed: Three months Ended September 30, 2020
−Removed: North America
−Removed: South America
−Removed: Three months Ended September 30, 2019
−Removed: North America
−Removed: South America
−Removed: Nine months Ended September 30, 2020
+Added: Three months Ended March 31, 2021
North America
−Removed: South America
−Removed: Nine months Ended September 30, 2019
+Added: Latin America
+Added: Three months Ended March 31, 2020
North America
−Removed: South America
−Removed: September 30,
+Added: Latin America
Long-lived assets, net
2 unchanged sentences
The majority of North American revenue consists of services delivered within the United States.
−Removed: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
−Removed: You should read the following discussion and analysis together with our condensed consolidated financial statements and related notes included in this report.
−Removed: The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.
−Removed: 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: Our actual results could differ materially from those discussed here.
−Removed: Factors that could cause or contribute to these differences include, but are not limited to:
−Removed: The COVID-19 pandemic and accompanying government policies worldwide;
−Removed: 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 into US dollars;
−Removed: legal and operational difficulties in new markets;
−Removed: the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue;
−Removed: changes in government policy and/or regulation, including rules regarding data protection, cyber security and net neutrality;
−Removed: increasing competition leading to lower prices for our services;
−Removed: our ability to attract new customers and to increase and maintain the volume of traffic on our network;
−Removed: the ability to maintain our Internet peering arrangements on favorable terms;
−Removed: our ability to renew our long-term leases of optical fiber that comprise our network;
−Removed: our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment;
−Removed: the dependence of our network on the quality and dependability of third-party fiber providers;
−Removed: our ability to retain certain customers that comprise a significant portion of our revenue base;
−Removed: the management of network failures and/or disruptions;
−Removed: 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, our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and our Annual Report on Form 10-K for the year ended December 31, 2019.
−Removed: General Overview
−Removed: We are a 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 switched data.
−Removed: We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa.
−Removed: We are a Delaware corporation and we are headquartered in Washington, DC.
−Removed: We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises.
−Removed: We offer our on-net services to customers located in buildings that are physically connected to our network.
−Removed: As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service.
−Removed: Our on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.
−Removed: We provide our on-net Internet access and private network services to our corporate and net-centric customers.
−Removed: Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses.
−Removed: Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users.
−Removed: Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.
−Removed: Our access customers include over 7,200 access networks comprised of other Internet access providers, telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world.
−Removed: These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers.
−Removed: We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.
−Removed: In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network.
−Removed: We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.
−Removed: We also provide certain non-core services that resulted from acquisitions.
−Removed: We continue to support but do not actively sell these non-core services.
−Removed: Competitive Advantages
−Removed: We believe we address many of the data communications needs of small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations by offering them high-quality, high- speed Internet access and private network services at attractive prices.
−Removed: We believe that our organization has the following competitive advantages:
−Removed: Low Cost of Operation.
−Removed: We have made a series of choices around our network design, operating strategy and product offering designed to provide us with a lower cost of operation.
−Removed: Our single network design allows us to avoid many of the costs that our competitors who operate, circuit-switched, TDM and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols.
−Removed: Utilizing only one network protocol enables us to benefit from the continued rapid improvement in price and performance of our key network equipment and creates scale advantages in the installation and maintenance of that equipment.
−Removed: We have acquired optical fiber from the excess inventory of existing networks which reduces the capital intensity and operating costs of our intercity and metro networks.
−Removed: Our streamlined set of products reduces our service delivery costs in terms of customer and product support and the investment required to train our sales representatives.
−Removed: We believe that our low cost of operation gives us greater pricing flexibility and a significant advantage in a competitive environment characterized by falling Internet access prices.
−Removed: Greater Control and Superior Delivery.
−Removed: Our on-net service does not rely on circuits that must be provisioned by a third party carrier.
−Removed: In on-net multi-tenant office buildings we provide our customers the entire network, including the “last mile” and the in-building wiring connecting to our customer’s suite.
−Removed: In carrier neutral data centers we are collocated with our customers so only a connection within the data center, known as a cross connect, is required to provide our services.
−Removed: The structure of our on-net service provides us more control over our service, quality and pricing.
−Removed: It also allows us to provision services more quickly and efficiently than provisioning services on a third-party carrier network.
−Removed: High Quality, Reliable Service.
−Removed: We are able to offer high-quality Internet service due to our network design and composition.
−Removed: We believe that we deliver a high level of technical performance because our network is optimized for packet switched traffic.
−Removed: Its design increases the speed and throughput of our network and reduces the number of data packets dropped during transmission compared to traditional circuit-switched networks.
−Removed: We believe that our network is more reliable and carries traffic at lower cost than networks built as overlays to traditional circuit-switched, or TDM networks.
−Removed: Large Addressable Market.
−Removed: We have systematically evaluated and chosen our network extensions to buildings, data centers and markets based upon a rigorous set of criteria to evaluate the economic opportunity of network locations.
−Removed: Additional factors relevant to our pursuit of new buildings include the willingness of building owners to grant us access rights, the availability of optical fiber networks to serve those buildings, the costs to connect buildings to our network and equipment availability.
−Removed: Our network is connected to 2,884 total buildings.
−Removed: These buildings include 1,783 large multi-tenant office buildings (totaling 968.4 million square feet of office space) in major North American cities where we offer our services to a diverse set of high-quality, low churn corporate customers within close physical proximity of each other.
−Removed: These buildings also include 1,047 carrier neutral colocation and unique data center buildings in North America, Europe, Asia , South America and Africa where our net-centric customers directly interconnect with our network.
−Removed: In our multi-tenant office buildings and carrier neutral data centers we connect to a total of 3,148 unique points-of-presence.
−Removed: In our 1,047 carrier neutral data centers we connect to 1,225 points-of-presence as certain carrier neutral data center buildings include multiple data centers.
−Removed: We also operate 54 data centers across the United States and in Europe which comprise over 606,000 square feet of floor space and are directly connected to our network.
−Removed: We believe that these network points of presence strategically position our network to attract high levels of Internet traffic, and maximize our revenue opportunities and profitability.
−Removed: Balanced, High Traffic Network.
−Removed: Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic.
−Removed: We currently serve over 7,200 access networks including numerous large and small content providers and over 47,700 corporate customer connections.
−Removed: As a result of these growing bases of customers who distribute (content providers) and receive (access networks) content on our network, we believe that the majority of all the traffic on our network originates and terminates on our network.
−Removed: This control of traffic increases our reliability, speed of delivery and enhances our margins.
−Removed: The breadth of our network, extensive size of our customer base, and volume of our traffic enables us to be one of a handful of Tier One networks that are interconnected on a settlement free basis.
−Removed: This peering status broadens our geographic delivery capability and materially reduces our network costs.
−Removed: Proven and Experienced Management Team.
−Removed: Our senior management team is composed of seasoned executives with extensive expertise in the telecommunications industry as well as knowledge of the markets in which we operate.
−Removed: The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been
−Removed: working together at the Company for several years.
−Removed: Several members of the senior management team have been working together at the Company since 2000.
−Removed: Our senior management team has designed and built our network and during our formative years led the integration of network assets we acquired through 13 significant acquisitions and managed the expansion and growth of our business.
−Removed: We intend to become the leading provider of high-quality, high-speed Internet access and private network services and to continue to improve our profitability and cash flow.
−Removed: The principal elements of our strategy include:
−Removed: Grow our Corporate Customer Base.
−Removed: Our on-net corporate customers are typically small to medium sized businesses connected to our network in one of our 1,783 multi-tenant office buildings, totaling 968.4 million square feet of office space, or are connected to our network in one of our 1,047 carrier neutral data centers.
−Removed: We generally sell two types of services to our corporate customers:
−Removed: dedicated internet access and private network services.
−Removed: We typically sell dedicated internet access at the same price per connection as our competitors but our clients benefit from our significantly faster speeds and rapid installation times.
−Removed: These customers are increasingly integrating data centers into their IT infrastructure in order to take advantage of the safety, security and redundancy that is offered by locating company processing power, storage and software at a data center.
−Removed: An important part of this new infrastructure is a high speed, dedicated internet connection from the corporate premises to the data center and the Internet and from one corporate premises to another corporate premises.
−Removed: We believe that the importance of data centers will increasingly lead tenants to reconfigure their communications infrastructure to include dedicated internet access across their locations.
−Removed: Increase our Share of the Net-centric Market.
−Removed: We are currently a leading provider of high speed internet access to a variety of content providers and over 7,200 access networks across the world.
−Removed: We expect that we will continue to grow our share of the net-centric market as a result of the geographic breadth and depth of our network, which offers service in 47 countries and access to over 200 metro markets, a dedicated net-centric salesforce of over 200 professionals located in offices around the world, and a competitive pricing strategy designed to gain market share.
−Removed: We intend to further load our high capacity network to respond to the growing demand for high speed internet access generated by bandwidth-intensive applications such as OTT media services, online gaming, video, Internet of Things (IoT), voice over IP (VOIP), remote data storage, and other services.
−Removed: We expect that we will continue to grow our shares of these segments by broadening our geographic reach and by continuing to offer our high-speed and high-capacity services at competitive prices.
−Removed: Pursue On-Net Customer Growth.
−Removed: Our high-capacity network provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs.
−Removed: We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more multi-tenant office buildings and carrier neutral data centers to our network.
−Removed: We emphasize our on-net services because our on-net services generate greater profit margins and we have more control over service levels, quality, pricing and our on-net services are provisioned in considerably less time than our off-net services.
−Removed: Our fiber network connects directly to our on-net customers’ premises and we pay no local access (“last mile”) charges to other carriers to provide our on-net services.
−Removed: Grow and Improve our Sales Efforts.
−Removed: A critical factor in our success has been our growing investment and focus on our sales and marketing efforts.
−Removed: Over the past five years we have increased the size of our quota bearing salesforce by 39% from 363 to 597.
−Removed: We seek to pair this growth in the size our salesforce with a consistent level of productivity as measured by the number of connections sold per salesperson per month, taking into account adjustments to the changing mix of products sold as measured by monthly connections sold by salesperson per month.
−Removed: In order to gain market share in our targeted businesses, we expect to continue to increase our sales efforts including increasing the number of sales representatives, implementing strategies to optimize sales productivity and expanding our on-net addressable market by adding service locations to our network.
−Removed: Selectively Pursue Acquisition Opportunities.
−Removed: In addition to adding customers through our sales and marketing efforts, we will continue to seek out acquisition opportunities that increase our customer base, allowing us to take advantage of the unused capacity on our network and to add revenues with minimal incremental costs.
−Removed: We may pursue acquisition opportunities that we believe expand our footprint, and generate positive cash flow.
−Removed: These acquisition opportunities may include off-net as well as on-net customers and complementary businesses including those offering over the top applications such as VOIP.
−Removed: We may also make opportunistic acquisitions of network assets.
−Removed: Given our record of successful asset integration, we believe we can continue to successfully integrate new businesses as they are acquired.
−Removed: We are very selective in reviewing acquisition opportunities and have not completed an acquisition in over a decade.
−Removed: Results of Operations
−Removed: Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019
−Removed: The following summary table presents a comparison of our results of operations with respect to certain key financial measures.
−Removed: The comparisons illustrated in the table are discussed in greater detail below.
−Removed: Three months ended
−Removed: September 30,
−Removed: (in thousands)
−Removed: Service revenue
−Removed: On-net revenue
−Removed: Off-net revenue
−Removed: Network operations expenses (1)
−Removed: Selling, general, and administrative expenses (2)
−Removed: Depreciation and amortization expenses
−Removed: Interest expense
−Removed: Unrealized (loss) gain on 2024 Notes
−Removed: Income tax benefit (provision)
−Removed: (1) Includes equity-based compensation expenses of $346 and $282 in the three months ended September 30, 2020 and 2019, respectively.
−Removed: (2) Includes equity-based compensation expenses of $6,176 and $4,515 in the three months ended September 30, 2020 and 2019, respectively.
−Removed: NM – not meaningful
−Removed: Three months ended
−Removed: September 30,
−Removed: (in thousands)
−Removed: Other Operating Data
−Removed: Average Revenue Per Unit (ARPU)
−Removed: Average Price per Megabit — installed base
−Removed: Customer Connections—end of period
−Removed: Service Revenue.
−Removed: We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our network.
−Removed: 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.
−Removed: These efforts broaden the global reach of our network and increases the size of our potential addressable market.
−Removed: We also seek to grow our service revenue by investing in our sales and marketing team.
−Removed: Over the last five years we have grown our quota bearing salesforce by 39% to 597 full time equivalent salespeople.
−Removed: We typically sell corporate connections at similar pricing to our competitors but our clients benefit from significantly faster speeds, enhanced Service Level Agreements and rapid installation times.
−Removed: In the net-centric market we offer comparable services in terms of capacity but typically at significantly lower prices.
−Removed: Our service revenue increased 3.9% for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: The impact of exchange rates resulted in an increase in revenues for the three months ended September 30, 2020 of approximately $1.1 million.
−Removed: All foreign currency comparisons herein reflect our third quarter 2020 results translated at the average foreign currency exchange rates for the third quarter of 2019.
−Removed: We increased our total service revenue by increasing the number of sales representatives selling our services, expanding our network, adding additional buildings to our network, 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 a decrease in our revenues for the three months ended September 30, 2020 from the three months ended September 30, 2019 of approximately $0.1 million.
−Removed: Our corporate customers purchase their services on a price per connection basis.
−Removed: Our net-centric customers purchase their services on a price per megabit basis.
−Removed: Revenues from our corporate and net-centric customers represented 67.3% and 32.7% of total service revenue, respectively, for the three months ended September 30, 2020 and represented 69.0% and 31.0% of total service revenue, respectively, for the three months ended September 30, 2019.
−Removed: Revenues from corporate customers increased 1.3% to $95.7 million for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: Revenues from our net-centric customers increased by 9.6% to $46.6 million for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to an increase in our number of net-centric customers partly offset by a decline in our average price per megabit.
−Removed: 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.
−Removed: 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.
−Removed: However, in the three months ended September 30, 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.
−Removed: 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.
−Removed: Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce.
−Removed: As a result, during the three months ended September 30, 2020, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth.
−Removed: 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.
−Removed: Our net-centric customers purchase our services based upon a price per megabit basis.
−Removed: 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.
−Removed: Our average price per megabit declined by 26.5% from the three months ended September 30, 2019 to the three months ended September 30, 2020.
−Removed: We expect that our average price per megabit for the net-centric market will continue to decline at similar rates.
−Removed: The impact of foreign exchange rates has a more significant impact on our net-centric revenues.
−Removed: Our on-net revenues increased 5.7% for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: We increased the number of our on-net customer connections by 3.3% at September 30, 2020 from September 30, 2019.
−Removed: Our on-net ARPU increased by 1.6% from the three months ended September 30, 2019 to the three months ended September 30, 2020.
−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 declined by 26.5% from the three months ended September 30, 2019 to the three months ended September 30, 2020.
−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: Our off-net revenues decreased by 0.9% for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: We increased the number of our off-net customer connections by 3.0% at September 30, 2020 from September 30, 2019.
−Removed: Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 4.5% 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, decreased 1.3% for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: We were connected to 3.3% more customer connections and we were connected to 113, or 4.1%, more on-net buildings as of September 30, 2020 compared to
−Removed: September 30, 2019.
−Removed: 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 circuit costs, fewer operating leases for fiber and the impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020.
−Removed: Under the accounting for the IRU lease renewal, the future minimum lease payments were capitalized as a finance lease and right-of-use leased asset totaling $34.0 million.
−Removed: The $1.8 million of quarterly maintenance and co-location fees under the IRU agreement were previously accounted for as network operations expenses.
−Removed: Selling, General, and Administrative (“SG&A”) Expenses.
−Removed: Our SG&A expenses, including non-cash equity-based compensation expense, increased by 10.4% for the three months ended September 30, 2020 from the three months ended September 30, 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 $6.2 million for the three months ended September 30, 2020 and $4.5 million for the three months ended September 30, 2019.
−Removed: SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and the increase in our sales efforts.
−Removed: Our total sales force headcount increased from 667 at September 30, 2019 to 740 at September 30, 2020, our quota bearing sales force increased from 530 at September 30, 2019 to 597 at September 30, 2020 and our total headcount increased from 1,036 at September 30, 2019 to 1,110 at September 30, 2020.
−Removed: Depreciation and Amortization Expenses.
−Removed: Our depreciation and amortization expense increased by 8.1% for the three months ended September 30, 2020 from the three months ended September 30, 2019.
−Removed: The increase is primarily due to an increase in our deployed fixed assets.
−Removed: Interest Expense.
−Removed: Our interest expense resulted from interest incurred on our $445.0 million of senior secured notes (“2022 Notes”), interest incurred on our $189.2 million of senior unsecured notes (“2021 Notes") until redeemed in June 2020, interest on our installment payment agreement, interest on our finance lease obligations and interest on our €350.0 million ($410.4 million) aggregate principal amount of 4.375% senior unsecured notes (“2024 Notes’).
−Removed: We issued €215.0 million of our 2024 Notes in June 2020 and €135.0 million of our 2024 Notes in June 2019.
−Removed: In June 2020 we redeemed and extinguished our 2021 Notes at par value.
−Removed: Our interest expense increased by 3.7% for the three months ended September 30, 2020 from the three months ended September 30, 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.
−Removed: Unrealized (Loss) Gain on 2024 Notes.
−Removed: In June 2020, we completed an offering of our €215.0 million principal amount of 2024 Notes.
−Removed: In June 2019, we completed an offering of our €135.0 million principal amount of our 2024 Notes.
−Removed: Our 2024 Notes were issued in Euros and are reported in our reporting currency – US Dollars.
−Removed: As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million.
−Removed: Our unrealized (loss) gain on foreign exchange on our 2024 Notes from converting our 2024 Notes into USD was $(17.3) million for the three months ended September 30, 2020 and $6.2 million for the three months ended September 30, 2019.
−Removed: We do not enter into hedges for our foreign currency obligations.
−Removed: Income Tax Benefit (Provision).
−Removed: Our income tax benefit (provision) was $1.6 million for the three months ended September 30, 2020 and ($5.3) million for the three months ended September 30, 2019.
−Removed: The change in our income tax benefit (provision) is primarily related due to changes in our income before income taxes including the change in the unrealized (loss) gain on foreign exchange on our 2024 Notes.
−Removed: Buildings On-net.
−Removed: As of September 30, 2020 and 2019, we had a total of 2,884 and 2,771 on-net buildings connected to our network, respectively.
−Removed: The increase in on-net buildings was a result of our disciplined network expansion program.
−Removed: We anticipate adding a similar number of buildings to our network for the next several years.
−Removed: Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019
−Removed: The following summary table presents a comparison of our results of operations with respect to certain key financial measures.
−Removed: The comparisons illustrated in the table are discussed in greater detail below.
−Removed: Nine months ended
−Removed: September 30,
−Removed: (in thousands)
−Removed: Service revenue
−Removed: On-net revenue
−Removed: Off-net revenue
−Removed: Network operations expenses (1)
−Removed: Selling, general, and administrative expenses (2)
−Removed: Depreciation and amortization expenses
−Removed: Loss on debt extinguishment and redemption
−Removed: Interest expense
−Removed: Realized gain on foreign exchange – 2024 Notes
−Removed: Unrealized (loss) gain on 2024 Notes
−Removed: Income tax provision
−Removed: Includes equity-based compensation expenses of $903 and $688 in the nine months ended September 30, 2020 and 2019, respectively.
−Removed: Includes equity-based compensation expenses of $16,776 and $12,832 in the nine months ended September 30, 2020 and 2019, respectively.
−Removed: NM – not meaningful
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: Other Operating Data
−Removed: Average Revenue Per Unit (ARPU)
−Removed: Average Price per Megabit — installed base
−Removed: Customer Connections—end of period
−Removed: Service Revenue.
−Removed: Our service revenue increased 4.5% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019.
−Removed: The impact of exchange rates resulted in a decrease in revenues for the nine months ended September 30, 2020 of approximately $0.3 million.
−Removed: All foreign currency comparisons herein reflect our results for the nine months ended September 30, 2020 translated at the average foreign currency exchange rates for the nine months ended September 30, 2019.
−Removed: We increased our total service revenue by increasing the number of sales representatives selling our services, expanding our network, adding additional buildings to our network, 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 in our revenues for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 of approximately $0.4 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 68.3% and 31.7% of total service revenue, respectively, for the
−Removed: nine months ended September 30, 2020 and represented 68.2% and 31.8% of total service revenue, respectively, for the nine months ended September 30, 2019.
−Removed: Revenues from corporate customers increased 4.6% to $289.7 million for the nine months ended September 30, 2020 from the nine months ended September 30, 2019.
−Removed: 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.
−Removed: 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.
−Removed: However, primarily during the third quarter of 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.
−Removed: 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.
−Removed: Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce.
−Removed: As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth for the nine months ended September 30, 2019.
−Removed: 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.
−Removed: Revenues from our net-centric customers increased by 4.3% to $134.5 million for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to an increase in our number of net-centric customers, being partially offset by a decline in our average price per megabit and the impact of foreign exchange rates.
−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 24.4% from the nine months ended September 30, 2019 to the nine months ended September 30, 2020.
−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.
−Removed: The impact of foreign exchange rates has a more significant impact on our net-centric revenues.
−Removed: Our on-net revenues increased 6.2% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019.
−Removed: We increased the number of our on-net customer connections by 3.3% at September 30, 2020 from September 30, 2019.
−Removed: Our on-net ARPU increased by 0.4% from the nine months ended September 30, 2019 to the nine months ended September 30, 2020.
−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: 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 a 24.4% decline in our average price per megabit for our installed base of customers.
−Removed: Our off-net revenues were $111.5 million for the nine months ended September 30, 2020 and $111.5 million for the nine months ended September 30, 2019.
−Removed: We increased the number of our off-net customer connections by 3.0% at September 30, 2020 from September 30, 2019.
−Removed: Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 4.4% 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 0.3% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019.
−Removed: We incurred the cost of being connected to 3.3% more customer connections and 113, or 4.1%, more on-net buildings as of September 30, 2020 compared to September 30, 2019 that was partially offset by price reductions in certain circuit costs and fewer operating leases for fiber and the impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020.
−Removed: Under the accounting for the IRU lease renewal, the future minimum lease payments were capitalized as a finance lease and right-of-use leased asset totaling $34.0 million.
−Removed: The $1.8 million of quarterly maintenance and co-location fees under the IRU agreement were previously accounted for as network operations expenses.
−Removed: Selling, General, and Administrative (“SG&A”) Expenses.
−Removed: Our SG&A expenses, including non-cash equity-based compensation expense, increased by 8.0% for the nine months ended September 30, 2020 from the nine months ended September 30,
−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 $16.8 million for the nine months ended September 30, 2020 and $12.8 million for the nine months ended September 30, 2019.
−Removed: SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and the increase in our sales efforts.
−Removed: Our sales force headcount increased from 667 at September 30, 2019 to 740 at September 30, 2020, our quota bearing sales force increased from 530 at September 30, 2019 to 597 at September 30, 2020 and our total headcount increased from 1,036 at September 30, 2019 to 1,110 at September 30, 2020.
−Removed: Depreciation and Amortization Expenses.
−Removed: Our depreciation and amortization expense increased by 1.3% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019.
−Removed: The increase is primarily due to an increase in our deployed fixed assets.
−Removed: Interest Expense and Loss on Debt Extinguishment & Redemption.
−Removed: Our interest expense resulted from interest incurred on our $445.0 million of senior secured notes (“2022 Notes”), interest incurred on our $189.2 million of senior unsecured notes (“2021 Notes ") until redeemed in June 2020, interest on our installment payment agreement, interest on our finance lease obligations and interest on our €350.0 million ($410.4 million) aggregate principal amount of 4.375% senior unsecured notes (“2024 Notes’).
−Removed: We issued €215.0 million of our 2024 Notes in June 2020 and €135.0 million of our 2024 Notes in June 2019.
−Removed: We redeemed our 2021 Notes in June 2020 at par value resulting in a loss on debt extinguishment of $0.6 million in the nine months ended September 30, 2020.
−Removed: Our interest expense increased by 10.0% for the nine months ended September 30, 2020 from the nine months ended September 30, 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.
−Removed: Realized Gain and Unrealized Gain (Loss) on Foreign Exchange – 2024 Notes .
−Removed: In June 2020, we completed an offering of our €215.0 million principal amount of 2024 Notes.
−Removed: In June 2019, we completed an offering of our €135.0 million principal amount of 2024 Notes.
−Removed: In June 2020 our €215.0 million 2024 Notes were issued at a Euro to USD rate of $1.112.
−Removed: 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.
−Removed: Our 2024 Notes were issued in Euros and are reported in our reporting currency – US Dollars.
−Removed: As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million.
−Removed: Our unrealized (loss) gain on foreign exchange on our 2024 Notes from converting our 2024 Notes into USD was $(17.8) million for the nine months ended September 30, 2020 and $6.3 million for the nine months ended September 30, 2019.
−Removed: We do not enter into hedges for our foreign currency obligations.
−Removed: Income Tax Provision .
−Removed: Our income tax provision was $4.7 million for the nine months ended September 30, 2020 and $11.9 million for the nine months ended September 30, 2019.
−Removed: The change in our income tax provision is primarily related to changes in our income before income taxes including the change in the unrealized (loss) gain on foreign exchange on our 2024 Notes.
−Removed: Buildings On-net.
−Removed: As of September 30, 2020 and 2019, we had a total of 2,884 and 2,771 on-net buildings connected to our network, respectively.
−Removed: The increase in on-net buildings was a result of our disciplined network expansion program.
−Removed: We anticipate adding a similar number of buildings to our network for the next several years.
−Removed: Liquidity and Capital Resources
−Removed: 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.
−Removed: As a result of the operating leverage of our network, our annual capital expenditures as measured as a percentage of revenues has fallen over the last decade.
−Removed: 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.
−Removed: 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.
−Removed: Since our initial public offering, we have returned over $858 million to shareholders through share repurchases and dividends.
−Removed: We intend on continuing to assess our capital and liquidity needs and where appropriate return capital to shareholders.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The amounts involved may be material.
−Removed: 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.
−Removed: Based on current circumstances, we plan to continue our current dividend policy.
−Removed: Given uncertainties regarding the duration of the pandemic and timing for economic recovery, we will continue to monitor our capital spending.
−Removed: 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.
−Removed: Impact of COVID-19 on Our Liquidity and Operating Performance
−Removed: 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.
−Removed: 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.
−Removed: Further, we severely curtailed all business travel and adopted new safety procedures for our on-site technical personnel and customers accessing our data centers.
−Removed: 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.
−Removed: 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.
−Removed: We experienced some delays with respect to the installation of new services in March 2020 when certain multi-tenant office buildings were closed to our personnel.
−Removed: We worked with local authorities and building owners to categorize our employees as essential workers who need priority access to buildings.
−Removed: We believe that our disruption in access to buildings was effectively mitigated throughout our second and third quarters.
−Removed: In April and May 2020, we waived late fees for customers who were unable to pay their bills due to the pandemic.
−Removed: 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.
−Removed: There can be no assurance that we will continue to experience normal operations as economic dislocations may adversely affect our customers and may lead to higher customer turnover, bad debt expense and lower revenue and profitability.
−Removed: We continue to operate with a high level of liquidity and as of September 30, 2020 we had cash and cash equivalents of approximately $394.8 million.
−Removed: During the three months ended September 30, 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.
−Removed: We witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals.
−Removed: Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce.
−Removed: As a result, during the three months ended September 30, 2020, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth.
−Removed: 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.
−Removed: These trends may negatively impact our revenue growth, cash flows and profitability.
−Removed: Shortly after COVID-19 began its rapid spread around the world, domestic and worldwide capital markets ceased operating for a short period.
−Removed: While they 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.
−Removed: In June 2020, we issued an additional €215 million of our 4.375% Senior Notes due 2024.
−Removed: 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.
−Removed: We believe we are able to timely service our debt obligations and will not require any concessions to do so.
−Removed: We believe we will have access to additional capital from a variety of sources and the public capital markets for debt and equity.
−Removed: The following table sets forth our consolidated cash flows.
−Removed: Nine months ended
−Removed: September 30,
−Removed: (in thousands)
−Removed: Net cash provided by operating activities
−Removed: Net cash used in investing activities
−Removed: Net cash (used in) provided by financing activities
−Removed: Effect of exchange rates changes on cash
−Removed: Net (decrease) increase in cash and cash equivalents
−Removed: Net Cash Provided by Operating Activities.
−Removed: Our primary sources of operating cash are receipts from our customers who are billed on a monthly basis for our services.
−Removed: Our primary uses of operating cash are payments made to our vendors, employees and interest payments made to our finance lease vendors and our note holders.
−Removed: Our changes in cash provided by operating activities are primarily due to changes in our operating profit.
−Removed: Cash provided by operating activities for the nine months ended September 30, 2020 and 2019 includes interest payments on our note obligations of $32.5 million and $29.2 million, respectively.
−Removed: Net Cash Used In Investing Activities.
−Removed: Our primary use of cash for investing activities is for purchases of property and equipment.
−Removed: Purchases of property and equipment were $40.1 million and $37.1 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: The changes in purchases of property and equipment are primarily due to the timing and scope of our network expansion activities including geographic expansion and adding buildings to our network.
−Removed: Net Cash (Used in) Provided by Financing Activities.
−Removed: Our primary uses of cash for financing activities are for principal payments under our finance lease obligations, debt obligations, and our installment payment agreement, purchases of our common stock and dividend payments.
−Removed: Principal payments under our finance lease obligations were $19.4 million and $7.0 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: Principal payments under our installment payment agreement were $7.9 million and $7.3 million for the nine months ended September 30, 2020 and 2019, respectively.
−Removed: During the nine months ended September 30, 2020 and 2019 we paid $95.0 million and $82.9 million, respectively, for our quarterly dividend payments.
−Removed: In June 2019 we completed an offering of €135.0 million of our 2024 Notes.
−Removed: The net proceeds from the offering, after deducting offering expenses, were $152.1 million.
−Removed: In June 2020 we completed an offering of €215.0 million of our 2024 Notes.
−Removed: The net proceeds from the offering, after deducting offering expenses, were $240.3 million.
−Removed: In June 2020 we redeemed our $189.2 million of our 2021 Notes at par value.
−Removed: Cash Position and Indebtedness
−Removed: Our total cash and cash equivalents at September 30, 2020 were $393.3 million.
−Removed: 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.
−Removed: 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.
−Removed: Our total indebtedness at September 30, 2020, at par value, was $1.1 billion.
−Removed: Our total indebtedness at September 30, 2020 includes $212.9 million of finance lease obligations for dark fiber under long term IRU agreements.
−Removed: Summarized Financial Information of Holdings
−Removed: Holdings is not a restricted subsidiary as defined under the indentures governing our 2022 Notes and 2024 Notes.
−Removed: Holdings is a guarantor under these notes.
−Removed: Under the indentures we are required to disclose financial information of Holdings including its assets,
−Removed: liabilities and its operating results (“Holdings Financial Information”).
−Removed: The Holdings Financial Information as of and for the nine months ended September 30, 2020 is detailed below (in thousands).
−Removed: September 30, 2020
−Removed: Cash and cash equivalents
−Removed: Accrued interest receivable
−Removed: Investment from subsidiaries
−Removed: Accumulated deficit
−Removed: September 30, 2020
−Removed: Equity-based compensation expense
−Removed: Interest income
−Removed: Common Stock Buyback Program
−Removed: Our Board of Directors has approved purchases of our common stock under a buyback program (the “Buyback Program”).
−Removed: In the three and nine months ended September 30, 2020 we purchased 4,567 shares of our common stock for $0.3 million.
−Removed: There were no purchases of our common stock in the three and nine months ended September 30, 2019.
−Removed: As of September 30, 2020, there was a total of $34.6 million available under the Buyback Program which is authorized to continue through December 31, 2021.
−Removed: Subsequent to September 30, 2020 we purchased 53,516 shares of common stock for $3.1 million under the Buyback Program.
−Removed: Dividends on Common Stock and Return of Capital Program
−Removed: Dividends are recorded as a reduction to retained earnings.
−Removed: On November 4, 2020, our Board of Directors approved the payment of our quarterly dividend of $0.73 per common share.
−Removed: This estimated $33.5 million dividend payment is expected to be paid on December 4, 2020.
−Removed: The payment of any future dividends and any other returns of capital, including stock buybacks, will be at the discretion of our Board of Directors and may be reduced, eliminated or increased and will be dependent upon our financial position, results of operations, available cash, cash flow, capital requirements, limitations under our debt indentures and other factors deemed relevant by the our Board of Directors.
−Removed: We are a Delaware corporation and under the General Corporate Law of the State of Delaware distributions may be restricted including a restriction that distributions, including stock purchases and dividends, do not result in an impairment of a corporation’s capital, as defined under Delaware Law.
−Removed: The indentures governing our notes limit our ability to return cash to our stockholders.
−Removed: See Note 3 of our interim condensed consolidated financial statements for additional discussion of limitations on distributions.
−Removed: Contractual Obligations and Commitments
−Removed: There have been no material changes to our contractual obligations and commitments included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2019 except as follows.
−Removed: In June 2020, Group completed an offering of €215.0 million principal amount of our 2024 Notes at 99.5% of par value.
−Removed: The net proceeds from the offering, after deducting offering expenses, were $240.3 million.
−Removed: We expect to use the remaining proceeds, after repayment of our 2021 Notes, for general corporate purposes including the repurchase of our common stock or for special or recurring
−Removed: dividends to our stockholders.
−Removed: The 2024 Notes bear interest at a rate of 4.375% per annum.
−Removed: Interest on the 2024 Notes is paid semi-annually in arrears on June 30 and December 30 of each year.
−Removed: Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024.
−Removed: In June 2020, Group redeemed its 2021 Notes with the proceeds from its June 2020 issuance of its 2024 Notes.
−Removed: Group redeemed its 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount thereof plus $1.6 million of accrued interest.
−Removed: As a result of this transaction we incurred a loss on debt extinguishment and redemption of $0.6 million resulting from the amortization of the remaining unamortized notes cost plus certain transaction expenses.
−Removed: In July 2020 we entered into an agreement to purchase network equipment for a three-year period ending in July 2023.
−Removed: Under the agreement we are required to purchase $35.0 million of network equipment exclusively from the vendor per year.
−Removed: Future Capital Requirements
−Removed: We believe that our cash on hand and cash generated from our operating activities will be adequate to meet our working capital, capital expenditure, debt service, dividend payments and other cash requirements for the next twelve months if we execute our business plan.
−Removed: 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.
−Removed: We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all.
−Removed: 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.
−Removed: If issuing equity securities raises additional funds, substantial dilution to existing stockholders may result.
−Removed: 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.
−Removed: 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.
−Removed: 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 the existing market conditions.
−Removed: The amounts involved in any such transaction, individually or in the aggregate, may be material.
−Removed: Off-Balance Sheet Arrangements
−Removed: We do not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
−Removed: In addition, we do not engage in trading activities involving non-exchange traded contracts.
−Removed: As such, we are not materially exposed to any financing, liquidity, market or credit risks that could arise if we had engaged in these relationships.
−Removed: Critical Accounting Policies and Significant Estimates
−Removed: Management believes that as of September 30, 2020, there have been no material changes to our critical accounting policies and significant estimates from those listed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2019.
−Removed: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: Management believes that as of September 30, 2020, there have been no material changes to our exposures to market risk from those disclosed in Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” of our annual report on Form 10-K for the year ended December 31, 2019.
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.