What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 140 added, 110 removed, 421 unchanged (37% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2022 AND DECEMBER 31, 2021

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets:

30 unchanged sentences

Accumulated deficit

( 1,031,465 )

Total stockholders’ deficit

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1 unchanged sentence

Three Months Ended

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Service revenue

2 unchanged sentences

Selling, general, and administrative (including $ 6,035 and $ 6,425 of equity-based compensation expense, respectively)

Acquisition costs – Sprint (T-Mobile Wireline) (Note 1)

Depreciation and amortization

Total operating expenses

Gains on lease transactions

Losses on lease transactions

Operating income

1 unchanged sentence

Change in valuation – interest rate swap

Foreign exchange gain (loss) – 2024 Euro Notes

Loss on debt extinguishment and redemption – 2024 Euro Notes

Loss on debt extinguishment and redemption – 2022 Notes

Foreign exchange gain – 2024 Euro Notes

Interest income and other expenses, net

Income (loss) before income taxes

Income before income taxes

Income tax expense

Net income (loss)

Comprehensive income (loss):

Net income (loss)

Net (loss) income

Comprehensive (loss) income:

Net (loss) income

Foreign currency translation adjustment

Comprehensive income (loss)

Net income (loss) per common share:

Basic net income (loss) per common share

Diluted net income (loss) per common share

Comprehensive (loss) income

Net (loss) income per common share:

Basic net (loss) income per common share

Diluted net (loss) income per common share

Dividends declared per common share

4 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Service revenue

2 unchanged sentences

Selling, general, and administrative (including $ 17,709 and $ 18,394 of equity-based compensation expense, respectively)

Acquisition costs – Sprint (T-Mobile Wireline) (Note 1)

Depreciation and amortization

Total operating expenses

Gains on equipment transactions

(Losses) gains on lease terminations and equipment transactions

Operating income

7 unchanged sentences

Income tax expense

Comprehensive income:

Comprehensive (loss) income:

Foreign currency translation adjustment

Comprehensive income

Comprehensive (loss) income

Net income per common share:

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

(IN THOUSANDS)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Cash flows from operating activities:

6 unchanged sentences

Gains on foreign exchange – 2024 Euro Notes

Gains - equipment transactions and other, net

(Losses) gains - equipment transactions and other, net

Deferred income taxes

2 unchanged sentences

Prepaid expenses and other current assets

Change in valuation – interest rate swap agreement

Accounts payable, accrued liabilities and other long-term liabilities

15 unchanged sentences

Effect of exchange rates changes on cash

Net increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

1 unchanged sentence

Supplemental disclosure of non-cash investing and financing activities:

Fair value of equipment acquired in lease

Fair value of equipment acquired in leases

Finance lease obligations incurred

6 unchanged sentences

On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings” or the “Company”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, Inc.

and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc.

and its subsidiaries.

Cogent Communications, Inc.

11 unchanged sentences

The Company provides its on-net Internet access and private network services to its corporate and net-centric customers.

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.

The Company’s corporate customers are located in multi-tenant office buildings (“MTOBs”) 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.

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.

7 unchanged sentences

The Company continues to support but does not actively sell these non-core services.

In connection with the Company’s Sprint acquisition (discussed below), the Company will begin to provide optical wavelength services over the Company’s fiber network.

The Company will sell these wavelength services to its existing customers, Sprint customers and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

Acquisition of Sprint Communications

On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a wholly owned subsidiary of Holdings, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and a direct wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which Holdings will acquire the U.S.

long-haul fiber network (including the non-U.S.

extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”).

The Purchase Agreement provides that, upon the terms and conditions set forth therein, Holdings will purchase from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of a Delaware limited liability company that holds Sprints’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The parties have agreed to a $ 1 purchase price in consideration for the Purchased Interests, subject to customary adjustments set forth in the Purchase Agreement.

In addition, at the consummation of the Transaction (the “Closing”), a T-Mobile affiliate will enter into an agreement for IP transit services, pursuant to which T-Mobile will pay Holdings an aggregate of $ 700 million, consisting of (i) $ 350 million in equal monthly installments during the first year after the Closing and (ii) $ 350 million in equal monthly installments over the subsequent 42 months.

The Purchase Agreement includes customary representations, warranties, indemnities and covenants, including regarding the conduct of the Wireline Business prior to the Closing.

In addition, the Closing is subject to customary closing conditions, including as to the receipt of certain required regulatory approvals and consents.

Subject to the satisfaction or waiver of certain conditions and the other terms and conditions of the Purchase Agreement, the Transaction is expected to close in the second half of 2023.

The Purchase Agreement contains certain termination rights for the Buyer and Seller, including that, subject to certain limitations, either the Buyer or the Seller may terminate the Purchase Agreement if the Transaction is not consummated by September 6, 2023, subject to two automatic six-month extensions if certain regulatory approvals have not been obtained.

The Purchase Agreement also provides that each party may specifically enforce the other party’s obligations under the Purchase Agreement.

Holdings has agreed to guarantee the obligations of the Buyer under the Purchase Agreement pursuant to the terms of a Guaranty, dated as of September 6, 2022, by and between Holdings and the Seller (the “Parent Guaranty”).

The Parent Guaranty contains customary representations, warranties and covenants of Holdings and the Seller.

Acquisition Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement the Company incurred $ 2.0 million of professional fees in the three months ended September 30, 2022.

Basis of presentation

11 unchanged sentences

Financial instruments

At June 30, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments.

At September 30, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents, restricted cash, 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 and restricted cash at amortized cost, which approximates fair value based upon quoted market prices (Level 1).

Based upon recent trading prices (Level 2—market approach) at June 30, 2022 the fair value of the Company’s $ 450.0 million senior unsecured notes due 2027 was $ 430.9 million, the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 453.8 million, and the estimated liability fair value of the Company’s interest rate swap agreement was $ 37.8 million.

Based upon recent trading prices (Level 2—market approach) at September 30, 2022 the fair value of the Company’s $ 450.0 million senior unsecured notes due 2027 was $ 426.4 million, the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 438.8 million, and the estimated liability fair value of the Company’s interest rate swap agreement was $ 54.7 million.

Gross receipts taxes, universal service fund and other surcharges

2 unchanged sentences

The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and network operations expense.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $ 3.4 million and $ 4.8 million for the three months ended June 30, 2022 and 2021, respectively, and $ 7.2 million and $ 9.3 million for the six months ended June 30, 2022 and 2021, respectively.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $ 4.1 million and $ 4.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 11.3 million and $ 14.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Basic and diluted net income per common share

3 unchanged sentences

The following details the determination of diluted weighted average shares:

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Weighted average common shares - basic

3 unchanged sentences

The following details unvested shares of restricted common stock as well as anti-dilutive stock options and restricted stock awards outstanding:

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Unvested shares of restricted common stock

2 unchanged sentences

Stockholders’ Deficit

The following details the changes in stockholders’ deficit for the three and six months ended June 30, 2022 and June 30, 2021 (in thousands except share amounts):

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2022 and September 30, 2021 (in thousands except share amounts):

Comprehensive

2 unchanged sentences

Equity (Deficit)

Balance at March 31, 2022

Balance at June 30, 2022

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at June 30, 2022

Balance at September 30, 2022

( 1,031,465 )

Comprehensive

2 unchanged sentences

Equity (Deficit)

Balance at March 31, 2021

Balance at June 30, 2021

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at June 30, 2021

Balance at September 30, 2021

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Comprehensive

9 unchanged sentences

Dividends paid

Balance at June 30, 2022

Balance at September 30, 2022

( 1,031,465 )

Comprehensive

9 unchanged sentences

Dividends paid

Balance at June 30, 2021

Balance at September 30, 2021

Revenue recognition

15 unchanged sentences

1) Identification of the contract, or contracts with a customer

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2) Identification of the performance obligations in the contract

6 unchanged sentences

The Company recognizes revenue for these amounts as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended June 30, 2022 was $ 1.9 million and during the three months ended June 30, 2021 was $ 1.8 million.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the six months ended June 30, 2022 was $ 3.4 million and during the six months ended June 30, 2021 was $ 3.1 million.

Amortization expense for contract costs was $ 4.9 million for the three months ended June 30, 2022 and $ 4.6 million for the three months ended June 30, 2021.

Amortization expense for contract costs was $ 9.7 million for the six months ended June 30, 2022 and $ 9.2 million for the six months ended June 30, 2021.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2022 was $ 1.8 million and during the three months ended September 30, 2021 was $ 1.9 million.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2022 was $ 4.4 million and during the nine months ended September 30, 2021 was $ 4.1 million.

Amortization expense for contract costs was $ 4.9 million for the three months ended September 30, 2022 and $ 4.6 million for the three months ended September 30, 2021.

Amortization expense for contract costs was $ 14.5 million for the nine months ended September 30, 2022 and $ 13.8 million for the nine months ended September 30, 2021.

In February 2016, the FASB issued ASU No.

4 unchanged sentences

The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease components on its finance and operating leases.

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Finance lease cost

3 unchanged sentences

Total lease costs

June 30, 2022

June 30, 2021

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September 30, 2022

September 30, 2021

Other lease information

19 unchanged sentences

Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets.

As of June 30, 2022, the Company had committed to additional dark fiber IRU lease agreements totaling $ 172.5 million in future payments to be paid over periods of up to 22 years .

As of September 30, 2022, the Company had committed to additional dark fiber IRU lease agreements totaling $ 120.6 million in future payments to be paid over periods of up to 22 years .

These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 24 months.

13 unchanged sentences

Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

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The future minimum payments under these operating lease and finance lease agreements are as follows (in thousands):

For the Twelve Months Ending June 30,

For the Twelve Months Ending September 30,

Total minimum lease obligations

13 unchanged sentences

Allowance for credit losses (deducted from accounts receivable)

Three months ended June 30, 2022

Three months ended June 30, 2021

Six months ended June 30, 2022

Six months ended June 30, 2021

Net bad debt expense for the three and six months ended June 30, 2022 was $ 0.7 million and $ 1.0 million, respectively, which is net of bad debt recoveries of $ 0.4 million and $ 1.0 million respectively.

Net bad debt expense for the three and six months ended June 30, 2021 was $ 0.8 million and $ 1.6 million, respectively, which is net of bad debt recoveries of $ 0.4 million and $ 1.6 million respectively.

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Net bad debt expense for the three and nine months ended September 30, 2022 was $ 0.5 million and $ 1.5 million, respectively, which is net of bad debt recoveries of $ 0.5 million and $ 1.5 million respectively.

Net bad debt expense for the three and nine months ended September 30, 2021 was $ 1.0 million and $ 2.6 million, respectively, which is net of bad debt recoveries of $ 0.3 million and $ 1.9 million, respectively.

Property and equipment:

Depreciation and amortization expense related to property and equipment and finance leases was $ 23.1 million and $ 22.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 45.8 million and $ 44.1 million for the six months ended June 30, 2022 and 2021, respectively.

The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $ 3.1 million and $ 4.2 million for the three months ended June 30, 2022 and 2021, respectively, and $ 6.3 million and $ 7.4 million for the six months ended June 30, 2022 and 2021, respectively.

Depreciation and amortization expense related to property and equipment and finance leases was $ 22.9 million and $ 22.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 68.7 million and $ 66.7 million for the nine months ended September 30, 2022 and 2021, respectively.

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 $ 3.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 9.3 million and $ 10.4 million for the nine months ended September 30, 2022 and 2021, respectively.

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Long-term debt:

As of June 30, 2022, the Company had outstanding $ 450.0 million aggregate principal amount of Senior Unsecured Notes due 2027 (the “2027 Notes”) and $ 500.0 million aggregate principal amount of Senior Secured Notes due 2026 (the “2026 Notes”).

As of September 30, 2022, the Company had outstanding $ 450.0 million aggregate principal amount of Senior Unsecured Notes due 2027 (the “2027 Notes”) and $ 500.0 million aggregate principal amount of Senior Secured Notes due 2026 (the “2026 Notes”).

The 2027 Notes were issued in June 2022, are due on June 15, 2027 and bear interest at a rate of 7.00 % per year.

14 unchanged sentences

The Company used a portion of the net proceeds from the 2027 Notes offering to redeem its 2024 Notes.

The Company expects to use the remaining net proceeds from the 2027 Notes offering for general corporate purposes, and/or to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

In connection with full redemption of its 2024 Notes, Group issued a conditional notice of full redemption to holders of the 2024 Notes, specifying June 30, 2022 as the redemption date (the “Redemption Date”).

On the issue date of the 2027 Notes, Group satisfied and discharged its obligations under the 2024 Notes by depositing with a designee of the trustee for the 2024 Notes sufficient funds to pay the principal of, the Premium (defined below) and accrued and unpaid interest on the Euro Notes to the Redemption Date – June 30, 2022.

On the 2027 Notes Closing Date, Group satisfied and discharged its obligations under the 2024 Notes by depositing with a designee of the trustee for the 2024 Notes sufficient funds to pay the principal of the Premium (defined below) and accrued and unpaid interest on the Euro Notes to the Redemption Date.

The 2024 Notes were issued in Euros and were reported in the Company’s reporting currency, US Dollars, until they were extinguished and redeemed.

The gain on foreign exchange on the Company’s 2024 Notes from converting the 2024 Notes into US Dollars was a gain of $ 23.5 million for the three months ended June 30, 2022 and a loss of $ 5.3 million for the three months ended June 30, 2021.

The gain on foreign exchange was $ 31.6 million for the six months ended June 30, 2022 and $ 13.6 million for the six months ended June 30, 2021.

Prior to the redemption of the 2024 Notes, the gain on foreign exchange on the 2024 Notes from converting the 2024 Notes into US Dollars was $ 10.2 million for the three months ended September 30, 2021, $ 31.6 million for the nine months ended September 30, 2022 and $ 23.8 million for the nine months ended September 30, 2021.

Unless earlier redeemed or repurchased, the 2027 Notes will mature on June 15, 2027.

4 unchanged sentences

As a result of these transactions, the Company incurred a loss on debt extinguishment and redemption of $ 11.9 million.

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Issuance of the 2026 Notes and redemption of 2022 Notes

15 unchanged sentences

On the 2026 Notes Closing Date, Group used the net proceeds from the offering of its 2026 Notes to fully satisfy and discharge its remaining obligations under its 2022 Notes.

As a result of these transactions, the Company incurred an additional loss on debt extinguishment and redemption of $ 10.8 million

from the payment of $ 11.5 million of interest on the 2022 Notes through December 1, 2021 and the amortization of the remaining unamortized notes costs and debt premium.

As a result of these transactions, the Company incurred an additional loss on debt extinguishment and redemption of $ 10.8 million from the payment of $ 11.5 million of interest on the 2022 Notes through December 1, 2021 and the amortization of the remaining unamortized notes costs and debt premium.

Limitations under the Indentures

9 unchanged sentences

Under the Indentures, the Company can pay dividends, make other distributions, make certain investments and make other restricted payments under certain circumstances, including if, after giving pro forma effect to such restricted payment, the Company could still incur $ 1 of indebtedness, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is 2.0 to 1.0 or greater).

The Company’s consolidated leverage ratio was below 6.0 , the Company’s consolidated secured leverage ratio was below 4.0 and the Company’s fixed charge coverage ratio was above 2.0 as of June 30, 2022.

As of June 30, 2022, a total of $ 286.5 million was unrestricted and permitted for restricted payments including dividends and stock purchases.

As of September 30, 2022, a total of $ 207.4 million was unrestricted and permitted for restricted payments including dividends and stock purchases.

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Interest rate swap agreement

As of June 30, 2022, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

As of September 30, 2022, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

The critical terms of the Swap Agreement match the terms of the 2026 Notes, including the notional amount and the optional redemption date on February 1, 2026.

4 unchanged sentences

The values that the Company reports for the Swap Agreement as of each reporting date are recognized as “change in valuation – interest rate swap” with the corresponding amounts included in assets or liabilities in the Company’s consolidated balance sheets.

As of June 30, 2022 the fair value of the Swap Agreement was a net liability of $ 37.8 million of which $ 9.7 million is presented with accrued and other current liabilities and $ 28.1 million is presented with other long-term liabilities.

The Company recorded an unrealized loss related to the Swap Agreement of $ 7.5 million and $ 28.8 million in the three months and six months ended June 30, 2022, respectively.

As of September 30, 2022 the fair value of the Swap Agreement was a net liability of $ 54.7 million of which $ 12.1 million is presented with accrued and other current liabilities and $ 42.6 million is presented with other long-term liabilities.

The Company recorded an unrealized loss related to the Swap Agreement of $ 16.9 million and $ 45.7 million in the three and nine months ended September 30, 2022, respectively.

The Company recorded an unrealized loss related to the Swap Agreement of $ 3.1 million and $ 3.1 million in the three and nine months ended September 30, 2021, respectively.

The Company has made a $ 57.2 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 48.5 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value in excess of $ 48.5 million.

As of June 30, 2022, $ 37.8 million of the deposit was restricted and $ 10.7 million was unrestricted.

If the fair value of the Swap Agreement exceeds a net liability of $ 57.2 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

As of September 30, 2022, $ 54.7 million of the deposit was restricted and $ 2.4 million was unrestricted.

Under the Swap Agreement, the Company pays the counterparty a semi-annual payment based upon overnight SOFR plus a contractual interest rate spread, and the counterparty pays the Company a semi-annual fixed 3.50 % interest payment.

The settlement payment is made each November and May until the Swap Agreement expires in February 2026.

Under the first Swap Agreement settlement payment the Company received a payment of $ 0.6 million from the counterparty for a net cash savings of $ 0.6 million for the period from August 9, 2021 (the Swap Agreement inception date) to October 31, 2021.

Under the first Swap Agreement settlement in November 2021, the Company received a payment of $ 0.6 million from the counterparty for a net cash savings of $ 0.6 million for the period from August 9, 2021 (the Swap Agreement inception date) to October 31, 2021.

Under the settlement payment made in May 2022, the Company received a payment of $ 1.2 million from the counterparty for a net cash savings of $ 1.2 million for the period from November 1, 2021 to April 30, 2022.

Under the settlement payment made in November 2022, the Company made a payment of $ 3.4 million to the counterparty for a net cash interest cost of $ 3.4 million for the period from May 1, 2022 to October 31, 2022.

Commitments and contingencies :

1 unchanged sentence

In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other

amount, the Company accrues at the low end of the range.

Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range.

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.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible to result in a loss of up to $ 3.7 million in excess of the amount accrued at June 30, 2022.

The Company is also engaged in litigation in Virginia in which a former provider of transoceanic capacity to the Company is seeking approximately $ 0.6 million for alleged unpaid fees and the Company’s early termination of the arrangement.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible to result in a loss of up to $ 3.8 million in excess of the amount accrued at September 30, 2022.

The Company was engaged in litigation in Virginia in which a former provider of transoceanic capacity to the Company was seeking approximately $ 0.6 million for alleged unpaid fees and the Company’s early termination of the arrangement.

The complaint was filed in December 2021 in the Circuit Court of Fairfax County, Virginia.

The Company is contesting its obligation to pay these amounts.

The trial took place in July 2022, and in August 2022, the Circuit Court issued an order requiring the Company to pay approximately $ 0.4 million in damages, inclusive of attorneys’ fees.

The Company paid a final payment of approximately $ 0.4 million, reflecting accumulated interest and additional attorneys’ fees, in October 2022.

In the ordinary course of business the Company is involved in other legal activities and claims.

3 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

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Income taxes:

The components of income (loss) before income taxes consist of the following (in thousands):

The components of (loss) income before income taxes consist of the following (in thousands):

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Common stock buyback program:

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, 2023.

At June 30, 2022, there was approximately $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock during the three or six months ended June 30, 2022 and the three or six months ended June 30, 2021.

At September 30, 2022, there was approximately $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock during the three or nine months ended September 30, 2022 and the three or nine months ended September 30, 2021.

Dividends on common stock:

On August 4, 2022, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.905 per common share.

This estimated $ 42.3 million dividend payment is expected to be made on August 31, 2022.

On November 2, 2022, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.915 per common share.

This estimated $ 42.8 million dividend payment is expected to be made on December 2, 2022.

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.

2 unchanged sentences

Related party transactions:

Office leases

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer.

3 unchanged sentences

The Company’s audit committee reviews and approves all transactions with related parties.

The Company paid $ 0.3 million and $ 0.5 million in the three months ended June 30, 2022 and 2021, respectively, and $ 0.9 million and $ 0.8 million in the six months ended June 30, 2022 and 2021, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.

The Company paid $ 0.5 million and $ 0.5 million in the three months ended September 30, 2022 and 2021, respectively, and $ 1.4 million and $ 1.3 million in the nine months ended September 30, 2022 and 2021, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.

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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):

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

North America

Latin America

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

North America

Latin America

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

North America

Latin America

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

North America

Latin America

September 30,

Long lived assets, net

2 unchanged sentences

The majority of North American revenue consists of services delivered within the United States.

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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.

What changed 10-Q

Item 1. Financial Statements