COGENT COMMUNICATIONS HOLDINGS, INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ ​ ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) ​ 50 Consolidated Balance Sheets as of December 31, 2023 and 2022 ​ 52 Consolidated Statements of Comprehensive Income for Each of the Three Years Ended December 31, 2023 ​ 53 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for Each of the Three Years Ended December 31, 2023 ​ 54 Consolidated Statements of Cash Flows for Each of the Three Years Ended December 31, 2023 ​ 55 Notes to Consolidated Financial Statements ​ 56 ​ ​ Page 49 of 90 Table of Contents Report of Ernst & Young LLP, Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Cogent Communications Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cogent Communications Holdings, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Page 50 of 90 Table of Contents ​ ​ ​ ​ ​ Determining the purchase price for the acquisition of Sprint Description of the Matter ​ As discussed in Note 1 to the consolidated financial statements, on May 1, 2023, the Company acquired Sprint Communications and Subsidiaries (“Sprint Wireline”), for a purchase price of $1, subject to working capital adjustments, from T-Mobile US, Inc. (the “Seller”). Contemporaneously with the completion of the acquisition of Sprint Wireline, the Company entered into an agreement to provide IP Transit services to the Seller (the “Agreement”). Determining the purchase price for the transaction was complex due to the fact that the accounting for the Agreement required judgment to determine if the stated contract price represented consideration for services to be delivered and did not represent revenue from a contract with a customer, because the Agreement was entered into contemporaneously with the acquisition of Sprint Wireline. How We Addressed the Matter in Our Audit ​ We tested the Company's controls over its accounting for the Agreement, including the evaluation of key terms and determination regarding the commercial substance of the Agreement. To test the Company’s accounting for the Agreement we evaluated the applicable guidance, which included evaluating the commercial substance of the Agreement. We involved subject matter resources to assist in the evaluation of the Agreement. ​ ​ Valuation of certain property & equipment assets for the acquisition of Sprint Description of the Matter ​ As discussed in Note 1 to the consolidated financial statements, on May 1, 2023, the Company acquired the Sprint Communications Subsidiaries (“Sprint Wireline”), for a purchase price of $1, subject to working capital adjustments, from T-Mobile US, Inc. (the “Seller”). The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of Sprint Wireline was complex due to the estimation uncertainty in determining the $369.2 million fair value of the acquired optical fiber assets. The estimation uncertainty was primarily due to the lack of active market data and the wide range of possible values that could be used by market participants. The significant assumptions used to estimate the value of these assets included the replacement cost per mile of fiber and a factor to reflect the orderly liquidation value. These assumptions are inherently subjective and market participants could have differing views on these assumptions, which could result in a materially different fair value of the optical fiber. How We Addressed the Matter in Our Audit ​ We tested the Company's controls over its accounting for acquisitions, including controls over management’s review of the significant assumptions described above. To test the estimated fair value of the optical fiber assets, we performed audit procedures that included, among others, testing the significant assumptions used in the model. For example, we compared the replacement cost per mile estimated by management to data obtained from third party sources. We involved our internal valuation specialists to assist with the evaluation of these assumptions. ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 2002 Tysons, VA February 29, 2024 ​ Page 51 of 90 Table of Contents COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023 AND 2022 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 75,092 ​ $ 223,783 Restricted cash ​ ​ 38,689 ​ ​ 52,129 Accounts receivable, net of allowance for credit losses of $ 3,677 and $ 2,303 , respectively ​ 135,475 ​ ​ 44,123 Due from T-Mobile, IP Transit Services Agreement, current portion, net of discount of $ 24,898 ​ ​ 179,269 ​ ​ — Due from T-Mobile, Transition Services Agreement ​ ​ 4,514 ​ ​ — Prepaid expenses and other current assets ​ 80,588 ​ ​ 45,878 Total current assets ​ 513,627 ​ ​ 365,913 Property and equipment: ​ ​ ​ ​ ​ ​ Property and equipment ​ 2,947,376 ​ ​ 1,714,906 Accumulated depreciation and amortization ​ ( 1,409,559 ) ​ ​ ( 1,170,476 ) Total property and equipment, net ​ 1,537,817 ​ ​ 544,430 Right-of-use leased assets ​ ​ 361,587 ​ ​ 81,601 Intangible assets, net ​ ​ 472,815 ​ ​ — Due from T-Mobile, IP Transit Services Agreement, net of discount of $ 27,916 ​ ​ 263,750 ​ ​ — Due from T-Mobile, Purchase Agreement, net of discount of $ 13,725 ​ ​ 38,585 ​ ​ — Deposits and other assets ​ 23,438 ​ ​ 18,238 Total assets ​ $ 3,211,619 ​ $ 1,010,182 Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 48,356 ​ $ 27,208 Accrued and other current liabilities ​ 120,523 ​ ​ 63,889 Due to T-Mobile – Transition Services Agreement ​ ​ 66,908 ​ ​ — Due to T-Mobile – Purchase Agreement ​ ​ 4,981 ​ ​ — Current maturities, operating lease liabilities ​ ​ 67,962 ​ ​ 12,005 Finance lease obligations, current maturities ​ 64,594 ​ ​ 17,182 Total current liabilities ​ 373,324 ​ ​ 120,284 Senior secured 2026 notes, net of unamortized debt costs of $ 645 and $ 905 , respectively, and discount of $ 857 and $ 1,203 , respectively ​ ​ 498,498 ​ ​ 497,892 Senior unsecured 2027 notes, net of unamortized debt costs of $ 941 and $ 1,173 , respectively, and discount of $ 1,970 and $ 2,456 , respectively ​ 447,088 ​ ​ 446,371 Operating lease liabilities, net of current maturities ​ ​ 330,095 ​ ​ 94,587 Finance lease obligations, net of current maturities ​ 419,921 ​ ​ 287,044 Deferred income tax liabilities ​ ​ 471,498 ​ ​ 47,646 Other long-term liabilities ​ 61,639 ​ ​ 34,990 Total liabilities ​ 2,602,063 ​ ​ 1,528,814 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ Common stock, $ 0.001 par value; 75,000,000 shares authorized; 48,608,569 and 48,013,330 shares issued and outstanding , respectively ​ 49 ​ ​ 48 Additional paid-in capital ​ 606,755 ​ ​ 575,064 Accumulated other comprehensive loss ​ ( 14,385 ) ​ ​ ( 19,156 ) Accumulated earnings (deficit) ​ 17,137 ​ ​ ( 1,074,588 ) Total stockholders’ equity (deficit) ​ 609,556 ​ ​ ( 518,632 ) Total liabilities and stockholders’ equity (deficit) ​ $ 3,211,619 ​ $ 1,010,182 ​ The accompanying notes are an integral part of these consolidated balance sheets. ​ Page 52 of 90 Table of Contents COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2023 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Service revenue ​ $ 940,922 ​ $ 599,604 ​ $ 589,797 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Network operations (including $ 1,069 , $ 553 and $ 2,521 of equity-based compensation expense, respectively), exclusive of amounts shown separately ​ 544,232 ​ ​ 228,154 ​ ​ 226,337 Selling, general, and administrative (including $ 25,855 , $ 23,886 and $ 24,301 of equity-based compensation expense, respectively) ​ 275,318 ​ ​ 163,021 ​ ​ 162,380 Acquisition costs – Sprint Business ​ ​ 18,492 ​ ​ 2,248 ​ ​ — Depreciation and amortization ​ 232,209 ​ ​ 92,222 ​ ​ 89,240 Total operating expenses ​ 1,070,251 ​ ​ 485,645 ​ ​ 477,957 Gain on lease terminations and other ​ — ​ — ​ 7,393 Operating (loss) income ​ ​ ( 129,329 ) ​ ​ 113,959 ​ ​ 119,233 Interest expense ​ ( 106,783 ) ​ ​ ( 67,584 ) ​ ​ ( 58,059 ) Change in valuation – interest rate swap ​ ​ 13,439 ​ ​ ( 43,113 ) ​ ​ ( 9,015 ) Foreign exchange gain on 2024 Notes ​ ​ — ​ ​ 31,561 ​ ​ 32,522 Loss on debt extinguishment and redemption – 2022 Notes ​ ​ — ​ ​ — ​ ​ ( 14,698 ) Loss on debt extinguishment and redemption – 2024 Notes ​ ​ — ​ ​ ( 11,885 ) ​ ​ — Gain on bargain purchase – Sprint Business ​ ​ 1,406,435 ​ ​ — ​ ​ — Interest income – IP Transit Services Agreement ​ ​ 26,796 ​ ​ — ​ ​ — Interest income – Purchase Agreement ​ ​ 1,889 ​ ​ — ​ ​ — Interest income and other ​ ​ 7,030 ​ ​ 3,438 ​ ​ 1,437 Income before income taxes ​ 1,219,477 ​ ​ 26,376 ​ ​ 71,420 Income tax benefit (expense) ​ 53,964 ​ ​ ( 21,230 ) ​ ​ ( 23,235 ) Net income ​ $ 1,273,441 ​ $ 5,146 ​ $ 48,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 1,273,441 ​ $ 5,146 ​ $ 48,185 Foreign currency translation adjustment ​ 4,772 ​ ​ ( 8,153 ) ​ ​ ( 9,697 ) Comprehensive income (loss) ​ $ 1,278,213 ​ $ ( 3,007 ) ​ $ 38,488 Basic net income per common share ​ $ 26.88 ​ $ 0.11 ​ $ 1.04 Diluted net income per common share ​ $ 26.62 ​ $ 0.11 ​ $ 1.03 Dividends declared per common share ​ $ 3.760 ​ $ 3.555 ​ $ 3.170 Weighted-average common shares-basic ​ ​ 47,373,361 ​ ​ 46,875,992 ​ ​ 46,419,180 Weighted-average common shares -diluted ​ 47,837,512 ​ ​ 47,207,298 ​ ​ 46,963,920 ​ The accompanying notes are an integral part of these consolidated statements. ​ Page 53 of 90 Table of Contents COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2023 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholder’s ​ Shares Amount Capital Loss Earnings (Deficit) Equity (Deficit) Balance at December 31, 2020 47,214,077 ​ $ 47 ​ $ 515,867 ​ $ ( 1,306 ) ​ $ ( 807,774 ) ​ $ ( 293,166 ) Forfeitures of shares granted to employees ( 47,436 ) ​ — ​ — ​ — ​ — ​ — Equity-based compensation — ​ — ​ 30,044 ​ — ​ — ​ 30,044 Foreign currency translation — ​ — ​ — ​ ( 9,697 ) ​ — ​ ( 9,697 ) Issuances of common stock 471,080 ​ 1 ​ — ​ — ​ — ​ 1 Exercises of options 36,468 ​ — ​ 1,823 ​ — ​ — ​ 1,823 Dividends paid — ​ — ​ — ​ — ​ ( 150,288 ) ​ ( 150,288 ) Net income — ​ — ​ — ​ — ​ 48,185 ​ 48,185 Balance at December 31, 2021 47,674,189 ​ $ 48 ​ $ 547,734 ​ $ ( 11,003 ) ​ $ ( 909,877 ) ​ $ ( 373,098 ) Forfeitures of shares granted to employees ( 77,079 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity-based compensation — ​ ​ — ​ ​ 26,716 ​ ​ — ​ ​ — ​ ​ 26,716 Foreign currency translation — ​ ​ — ​ ​ — ​ ​ ( 8,153 ) ​ ​ — ​ ​ ( 8,153 ) Issuances of common stock 401,036 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Exercises of options 15,184 ​ ​ — ​ ​ 614 ​ ​ — ​ ​ — ​ ​ 614 Dividends paid ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 169,857 ) ​ ​ ( 169,857 ) Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,146 ​ ​ 5,146 Balance at December 31, 2022 48,013,330 ​ $ 48 ​ $ 575,064 ​ $ ( 19,156 ) ​ $ ( 1,074,588 ) ​ $ ( 518,632 ) Forfeitures of shares granted to employees ( 63,890 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity-based compensation — ​ ​ — ​ ​ 30,464 ​ ​ — ​ ​ — ​ ​ 30,464 Foreign currency translation — ​ ​ — ​ ​ — ​ ​ 4,771 ​ ​ — ​ ​ 4,771 Issuances of common stock 634,056 ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1 Exercises of options 25,073 ​ ​ — ​ ​ 1,227 ​ ​ — ​ ​ — ​ ​ 1,227 Dividends paid — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 181,716 ) ​ ​ ( 181,716 ) Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,273,441 ​ ​ 1,273,441 Balance at December 31, 2023 ​ 48,608,569 ​ $ 49 ​ $ 606,755 ​ $ ( 14,385 ) ​ $ 17,137 ​ $ 609,556 ​ ​ Page 54 of 90 Table of Contents COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2023 (IN THOUSANDS) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 1,273,441 ​ $ 5,146 ​ $ 48,185 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 232,209 ​ ​ 92,222 ​ ​ 89,240 Amortization of debt discounts and premium ​ 1,323 ​ ​ 1,464 ​ ​ 1,759 Amortization of discounts, due from T-Mobile, IP Transit Services & Purchase Agreements ​ ​ ( 28,685 ) ​ ​ — ​ ​ — Equity-based compensation expense (net of amounts capitalized) ​ 26,924 ​ ​ 24,439 ​ ​ 26,822 Gain on bargain purchase – Sprint Business ​ ​ ( 1,406,435 ) ​ ​ — ​ ​ — Foreign currency exchange gain on 2024 Notes ​ ​ — ​ ​ ( 31,561 ) ​ ​ ( 32,522 ) Loss on extinguishment & redemption of 2024 notes ​ ​ — ​ ​ 11,885 ​ ​ — Loss on extinguishment & redemption of 2022 notes ​ ​ — ​ ​ — ​ ​ 14,698 Gain – lease termination ​ ​ — ​ ​ — ​ ​ ( 7,375 ) Gains—equipment transactions and other, net ​ ​ 212 ​ ​ 372 ​ ​ 69 Deferred income taxes ​ ​ ( 69,582 ) ​ ​ 16,539 ​ ​ 18,159 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 51,002 ) ​ ​ ( 2,838 ) ​ ​ 1,385 Prepaid expenses and other current assets ​ ( 11,001 ) ​ ​ ( 7,427 ) ​ ​ ( 17 ) Change in valuation – interest rate swap agreement ​ ​ ( 13,439 ) ​ ​ 43,113 ​ ​ 9,015 Due to T-Mobile – Transition Services Agreement ​ ​ 66,908 ​ ​ — ​ ​ — Due from T-Mobile – Transition Services Agreement ​ ​ ( 4,514 ) ​ ​ — ​ ​ — Deposits and other assets ​ ( 1,548 ) ​ ​ ( 282 ) ​ ​ ( 12 ) Unfavorable lease liabilities ​ ​ ( 26,511 ) ​ ​ — ​ ​ — Accounts payable, accrued liabilities and other long-term liabilities ​ ​ 29,045 ​ ​ 20,635 ​ ​ 851 Net cash provided by operating activities ​ 17,345 ​ ​ 173,707 ​ ​ 170,257 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash receipts - IP Transit Services Agreement – T-Mobile ​ ​ 204,167 ​ ​ — ​ ​ — Acquisition of Sprint Business, net of $ 47.1 million of cash acquired ​ ​ 2,191 ​ ​ — ​ ​ — Purchases of property and equipment ​ ( 129,632 ) ​ ​ ( 78,971 ) ​ ​ ( 69,916 ) Net cash provided by (used in) investing activities ​ 76,726 ​ ​ ( 78,971 ) ​ ​ ( 69,916 ) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net proceeds from issuance of 2027 Notes, net of debt costs of $ 1,290 ​ ​ — ​ ​ 446,010 ​ ​ — Net proceeds from issuance of 2026 Notes, net of debt costs of $ 1,317 ​ ​ — ​ ​ — ​ ​ 496,933 Redemption and extinguishment of 2024 Notes ​ ​ — ​ ​ ( 375,354 ) ​ ​ — Redemption and extinguishment of 2022 Notes ​ ​ — ​ ​ — ​ ​ ( 459,317 ) Dividends paid ​ ( 181,716 ) ​ ​ ( 169,857 ) ​ ( 150,288 ) Principal payments of finance lease obligations ​ ​ ( 77,362 ) ​ ​ ( 45,472 ) ​ ​ ( 23,054 ) Principal payments of installment payment agreement ​ ​ — ​ ​ ( 790 ) ​ ​ ( 6,922 ) Proceeds from exercises of common stock options ​ ​ 1,227 ​ ​ 614 ​ ​ 1,823 Net cash used in financing activities ​ ( 257,851 ) ​ ​ ( 144,849 ) ​ ​ ( 140,825 ) Effect of exchange rate changes on cash ​ 1,649 ​ ​ ( 2,599 ) ​ ​ ( 2,193 ) Net decrease in cash and cash equivalents & restricted cash ​ ( 162,131 ) ​ ( 52,712 ) ​ ​ ( 42,677 ) Cash and cash equivalents & restricted cash, beginning of year ​ 275,912 ​ ​ 328,624 ​ ​ 371,301 Cash and cash equivalents & restricted cash, end of year ​ $ 113,781 ​ $ 275,912 ​ $ 328,624 Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 104,698 ​ $ 66,479 ​ $ 59,497 Cash paid for income taxes ​ ​ 35,291 ​ ​ 7,156 ​ ​ 4,452 Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance lease obligations incurred ​ ​ 232,468 ​ ​ 107,875 ​ ​ 50,831 Fair value of equipment acquired in leases ​ ​ 141 ​ ​ 1,969 ​ ​ — ​ ​ ​ ​ Page 55 of 90 Table of Contents COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of the business and summary of significant accounting policies: Reorganization and merger 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” 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”). Cogent Communications, Inc. is wholly owned by Group and the vast majority of Group’s assets, contractual arrangements, and operations are executed by Cogent Communications, Inc. and its subsidiaries. Description of business The Company is a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space and power. The Company’s network is specifically designed and optimized to transmit packet routed data. The Company delivers its services primarily to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 54 countries across North America, Europe, South America, Oceania and Africa. The Company is a Delaware corporation and is headquartered in Washington, DC. The Company offers on-net Internet access services exclusively through its own facilities, which run from its network to its customers’ premises. The Company offers its on-net services to customers located in buildings that are physically connected to its network. 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 services. 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 400 gigabits per second. The Company provides its on-net Internet access and private network services to its corporate, net-centric and enterprise customers. The Company’s corporate customers are located in multi-tenant office buildings that 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 either to deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. The Company’s net-centric customers include access networks comprised of other Internet Service 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. These net-centric customers generally receive the Company’s services in carrier neutral colocation facilities and in the Company’s own data centers. The Company operates data centers throughout North America and Europe that allow its customers to collocate their equipment and access the Company’s network. 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. 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. The Company also provides certain non-core services that resulted from acquisitions, including the acquisition of Sprint Communications (as discussed below). The Company continues to support but does not actively sell these non-core services. In connection with the Company’s acquisition of Sprint Communications (as discussed below), the Company began to provide optical wavelength services and optical transport services over its fiber network. The Company is selling these wavelength services to its existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure. Additionally, the Sprint Business customers include a number of companies larger than the Company’s historical customer base. In connection with the acquisition of Sprint Communications, the Company expanded selling services to these larger “Enterprise” customers. Page 56 of 90 Table of Contents Recently Adopted Accounting Standards In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Revenue from Contracts with Customers (Topic 606), as if the acquirer had originated the contracts at the date of the business combination. ASU 2021-08 is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2021-08 in connection with its acquisition of Sprint Communications (as discussed below), at which time it became applicable to the Company and was applied in the accounting for the acquisition. The adoption did not have a material impact on the provisional opening balance sheet recorded and there was no retrospective impact to the Company’s consolidated financial statements as a result of the adoption. Acquisition of Sprint Communications On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a direct wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) 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 an indirect wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which the Company acquired the U.S. long-haul fiber network (including the non-U.S. extensions thereof) of Sprint Communications and its subsidiaries (the “Sprint Business”). The Purchase Agreement provides that, upon the terms and conditions set forth therein, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”). The Purchase Agreement includes customary representations, warranties, indemnities and covenants, including regarding the conduct of the Sprint Business prior to the closing of the Transaction (the “Closing”). In addition, the Closing was subject to customary closing conditions, including as to the receipt of certain required regulatory approvals and consents, all of which have been received. The Company 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 the Company and the Seller (the “Parent Guaranty”). The Parent Guaranty contains customary representations, warranties and covenants of the Company and the Seller. The Company believes it is in a unique position to monetize the Sprint Business and its network and management expects to achieve significant cost reduction synergies and revenue synergies from the Transaction. Revenue and pre-tax loss for the Sprint Business included in the Company’s condensed consolidated statements of comprehensive income for the year ended December 31, 2023 were $ 283.3 million and $ 234.5 million, respectively. Purchase Price The Transaction closed on May 1, 2023 (the “Closing Date”). On the Closing Date, the Buyer consummated the Transaction pursuant to the terms of the Purchase Agreement, providing a purchase price of $ 1 payable to the Seller for the Purchased Interests, subject to customary adjustments, including working capital (the “Working Capital Adjustment”), as set forth in the Purchase Agreement. As consideration for the Purchased Interests, the Working Capital Adjustment (primarily related to acquired cash and cash equivalents of an estimated $ 43.4 million at the Closing Date in order to fund the international operations of the Sprint Business) resulted in the Buyer making a payment to the Seller of $ 61.1 million on the Closing Date. During the third quarter of 2023, an additional Working Capital Adjustment of $ 5.0 million was accrued due to the Seller. The Purchase Agreement also includes an estimated payment of $ 52.3 million from Seller to Buyer related to acquired short-term lease obligations (the “Short-term Lease Payment”). The Short-term Lease Payment will be paid from the Seller to the Company in four equal payments in months 55 to 58 after the Closing Date. The Short-term Lease Payment was recorded at its present value resulting in a discount of $ 15.6 million. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors. The determination of the discount rate requires some judgment. The amortization of the discount resulted in interest income of $ 1.9 million for the year ended December 31, 2023. The Seller is disputing approximately $ 24.2 million of the Short-term Lease Payment amount. The Purchase Agreement also includes reimbursement from Seller to Buyer for qualifying severance expenses incurred, which were $ 16.2 million in 2023. A final determination of the Working Capital Adjustment and the Short-term Lease Payment is expected by the end of the first quarter of 2024. Page 57 of 90 Table of Contents IP Transit Services Agreement On the Closing Date, Cogent Communications, Inc. and T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of T-Mobile (“TMUSA”), entered into an agreement for IP transit services (“IP Transit Services Agreement”), pursuant to which TMUSA will pay an affiliate of the Company an aggregate of $ 700.0 million, consisting of (i) $ 350.0 million in equal monthly installments of $ 29.2 million per month during the first year after the Closing Date and (ii) $ 350.0 million in equal monthly installments of $ 8.3 million per month over the subsequent 42 months. During the year ended December 31, 2023, TMUSA paid the Company $ 204.2 million under the IP Transit Agreement. The Company accounted for the Transaction as a business combination under ASC Topic 805 Business Combinations (“ASC 805”). The Company evaluated what elements are part of the business combination and the consideration exchanged to complete the acquisition. Under ASC 805, the Company has concluded that the $ 700.0 million of payments to be made represent consideration received from T-Mobile to complete the acquisition of a distressed business. The Company also evaluated whether the IP Transit Services Agreement was in the scope of ASU No. 2014-09 Revenue from Contracts with Customers (“ASC 606”). The Company has concluded that T-Mobile did not represent a “customer” as defined by ASC 606, the stated contract price did not represent consideration for services to be delivered, and the transaction did not satisfy the definition of revenue, which excluded this arrangement from the scope of ASC 606. As a result, and considering statements made by T-Mobile, the IP Transit Services Agreement was recorded in connection with the Transaction at its discounted present value resulting in a discount of $ 79.6 million. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors. The determination of the discount rate requires some judgment. The amortization of the discount resulted in interest income of $ 26.8 million for the year ended December 31, 2023. Transition Services Agreement On the Closing Date, the Buyer entered into a transition services agreement (the “TSA”) with the Seller, pursuant to which the Seller will provide to the Buyer, and the Buyer will provide to the Seller on an interim basis following the Closing Date, certain specified services (the “Transition Services”) to ensure an orderly transition following the separation of the Sprint Business from Sprint Communications. The services to be provided by the Seller to the Buyer include, among others, information technology support, back office and finance, real estate and facilities, vendor and supply chain management, the payment and processing of vendor invoices for the Company and human resources. The services to be provided by the Buyer to the Seller include, among others, information technology and network support, finance and back office and other wireless business support. The Transition Services are generally intended to be provided for a period of up to two years following the Closing Date, although such period may be extended for an additional one-year term by either party upon 30 days ’ prior written notice. The fees for the Transition Services are calculated using either a per service monthly fee or an hourly rate for the employees allocated to provide such services. Any third-party costs incurred in providing the Transition Services are passed on to the party receiving such services at cost for the two-year period. Amounts paid for the Sprint Business by T-Mobile are reimbursed at cost. Either party to the TSA may terminate the agreement (i) with respect to any individual service in full for convenience upon 30 days ’ prior written notice for certain services and reduced for other services after a 90-day period. The TSA may be terminated in its entirety if the other party has failed to perform any of its material obligations and such failure is not cured within 30 days. The TSA provides for customary indemnification and limits on liability. Amounts billed under the TSA are due 30 days from receipt of the related invoice. During the year ended December 31, 2023 the Company was billed $ 284.1 million as due to the Seller under the TSA, respectively, primarily for reimbursement at cost of payments to vendors of the Sprint Business. During the year ended December 31, 2023 the Company paid $ 217.2 million to the Seller under the TSA. As of December 31, 2023, the Company owed $ 66.9 million to the Seller and the Seller owed $ 4.5 million to the Buyer under the TSA agreement. The amounts due to the Seller are primarily reimbursements for payments to Sprint Business vendors paid by the Seller for the Company until these vendors are fully transitioned to the Company. The amounts due from the Seller are primarily reimbursements for severance costs related to Sprint Business employees and services provided by the Company for the Seller. Other Services Provided to Seller In addition, on the Closing Date, the Buyer and TMUSA entered into a commercial agreement (“Commercial Agreement”) for colocation and connectivity services, pursuant to which the Company will provide such services to TMUSA for a per service monthly fee plus certain third-party costs incurred in providing the services. During the year ended December 31, 2023, the Company recorded $ 23.9 million from TMUSA as service revenue under the Commercial Agreement. As of December 31, 2023, TMUSA owed $ 1.6 million to the Company under the Commercial Agreement. These amounts are included in accounts receivable. Page 58 of 90 Table of Contents Acquisition-Related Costs In connection with the Transaction and negotiation of the Purchase Agreement, the Company has incurred professional fees and $ 16.2 million of reimbursed severance costs, in the year ended December 31, 2023, with such professional fees and reimbursed severance costs totaling $ 18.5 million and $ 2.2 million for the years ended December 31, 2023 and 2022, respectively. Consideration The acquisition-date fair value of consideration to be received from the Transaction totaled $ 607.2 million and comprised of the following: ​ ​ ​ ​ ​ (In thousands) May 1, 2023 Estimated working capital payments made to the Seller, net of severance reimbursements (a) ​ $ 49,865 Estimated Purchase Agreement payment to be received from the Seller, net of discount of $ 15,614 (b) ​ 36,696 Amounts due from the Seller – IP Transit Services Agreement, net of discount of $ 79,610 (c) ​ 620,390 Total to be received from the Seller ​ 657,086 Total net consideration to be received from the Seller (d) ​ 607,221 (a) Includes $ 61.1 million paid to the Seller on the Closing Date and an accrual of $ 5.0 million due to the Seller. During the third quarter of 2023, the Working Capital Adjustment was increased by $ 1.5 million. Includes an offsetting $ 16.2 million in severance reimbursement payments received from the Seller recorded as a measurement period adjustment during the fourth quarter. A final determination of the Working Capital Adjustment is expected by the end of the first quarter of 2024. (b) Under the Purchase Agreement, 50 % of the assumed short-term operating lease liabilities totaling $ 52.3 million is to be paid to the Company from the Seller in four equal installments in months 55 - 58 from the Closing Date and is recorded at its present value resulting in a discount of $ 15.6 million. During the third quarter of 2023, the Short-term Lease Payment was reduced by $ 4.8 million. A final determination of the Short-term Lease Payment is expected by the end of the first quarter of 2024. (c) The IP Transit Services Agreement payments totaling $ 700.0 million are recorded at their present value resulting in a discount of $ 79.6 million. The $ 700.0 million is to be paid to the Company from the Seller in equal monthly payments of $ 29.2 million in months 1-12 and $ 8.3 million in months 13-54. (d) Cash consideration was $ 1 Fair Value of Assets Acquired and Liabilities Assumed and Gain on Bargain Purchase The Company accounted for the Transaction as a business combination under ASC 805. Under ASC 805, the identifiable assets acquired and liabilities assumed were recorded at their fair values as of the Closing Date. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions. For the fair values of the assets acquired and liabilities assumed, the Company used the cost, income and market approaches, including market participant assumptions. The fair value of the identifiable assets acquired (including amounts due under the IP Transit Services Agreement) were in excess of the liabilities assumed and the net consideration to be paid resulting in a gain on bargain purchase of $ 1.4 billion. During the third quarter of 2023, the Company recorded a measurement period adjustment to reclassify $ 24.9 million from right-of-use leased assets (net of related unfavorable lease liability amount) to finance lease assets (presented within property and equipment) and a measurement period adjustment to reclassify $ 160.9 million from operating lease liabilities to finance lease liability. During the fourth quarter of 2023, the Company recorded the following measurement period adjustments resulting in an increase to the gain on bargain purchase of $ 254.0 million. Excluding the impact to the bargain purchase gain, the corresponding impact from these adjustments to the condensed consolidated statements of comprehensive loss for the three-month period ended September 30, 2023 and for the period from May 1, 2023 to December 31, 2023 was not material. ● An intangible asset totaling $ 458.0 million for acquired IPv4 addresses. This asset was recorded once management determined both the quantity of IPv4 addresses for which title was transferred and the valuation approach. Because of the novel nature of this asset and that the Transaction has resulted in a material bargain purchase gain, management recorded the asset after appropriate consideration of the valuation approach, in the context of a distressed business. Page 59 of 90 Table of Contents ● A reduction to an intangible asset, acquired customer relationships, totaling $ 41.0 million from revisions to certain assumptions. ● A reduction to acquired owned property totaling $ 86.4 million from revisions to certain assumptions. ● Severance reimbursement payments received from the Seller Includes totaling $ 16.2 million recorded as a measurement period adjustment during the fourth quarter. ● Other less significant adjustments. ● An increase to the net deferred tax liability totaling $ 89.5 million from the impact of the adjustments noted above. The Transaction is considered an asset purchase for income tax purposes. The tax basis of the acquired business is the consideration paid ($ 1 ) plus the tax basis of certain liabilities assumed, with adjustments for cash acquired in excess of the purchase price. Deferred income taxes are recorded based upon the difference between the book and tax basis of the acquired assets and assumed liabilities at the Company’s marginal effective income tax rate on the Closing Date. The following table summarizes the fair values for each major class of assets acquired and liabilities assumed at the Closing Date. The Company retained the services of certified valuation specialists to assist with assigning values to certain acquired assets and assumed liabilities. The amounts presented are provisional and are subject to change as the Company refines the estimates and inputs used in the calculations of the assets acquired and liabilities assumed. The Company believes that estimates that are potentially subject to change include the valuations of IPv4 addresses, property and equipment, right-of-use leased assets, operating lease liabilities and the related income tax effects from such estimate revisions. ​ ​ ​ ​ ​ ​ May 1, 2023 Assets ​ Current assets: ​ Cash and cash equivalents ​ $ 47,074 Accounts receivable ​ 39,948 Prepaid expenses and other current assets ​ 22,777 Total current assets ​ 109,799 Total property and equipment ​ 965,715 Right-of-use leased assets ​ 311,022 Intangible assets ​ 474,000 Deposits and other assets ​ 7,521 Total assets ​ $ 1,868,057 Liabilities ​ Current liabilities: ​ Accounts payable ​ $ 13,313 Accrued and other current liabilities ​ 36,628 Current maturities, operating lease liabilities ​ 74,562 Current maturities, finance lease liabilities ​ 39,559 Total current liabilities ​ 164,062 Operating lease liabilities, net of current maturities ​ 251,573 Finance lease liabilities, net of current maturities ​ 121,342 Deferred income tax liabilities ​ 496,500 Other long-term liabilities ​ 35,366 Total liabilities ​ 1,068,843 Fair value of net assets acquired ​ $ 799,214 Gain on bargain purchase ​ Fair value of net assets acquired ​ $ 799,214 Total net consideration to be received from the Seller, net of discounts - see table above ​ 607,221 Gain on bargain purchase ​ $ 1,406,435 ​ Page 60 of 90 Table of Contents Acquired Property & Equipment The Company acquired property and equipment of $ 965.7 million. This is primarily comprised of the legacy Sprint network and consists of optical fiber, related equipment, and owned real estate which were valued using a combination of the cost and market approaches. Management intends to operate the acquired business; however, management valued these assets using factors which represent an orderly liquidation value, to approximate the highest and best use of assets acquired in a distressed business. The estimated fair value of the optical fiber on the Transaction date is $ 369.2 million. The valuation requires the estimation of the total replacement cost per mile of fiber and a factor to reflect the orderly liquidation value. There is not active market data for these assumptions and these assumptions are inherently subjective. Market participants could have differing views on these assumptions, which could result in a materially different fair value of the optical fiber. Acquired Leases The Company acquired a portfolio of lease arrangements for the lease of dark fiber, rights-of-way and facilities. In accordance with ASC 805 and ASC 842, the acquired leases are accounted for as if the leases are new at the acquisition date however, the Company will retain the lease classification from the Seller. The Company followed its historical policies with respect to evaluating the renewal periods of the acquired leases and estimating the incremental borrowing rate. The Company also evaluated the leases for unfavorable terms and recorded an adjustment for unfavorable market terms of $ 151.1 million, was valued using the income approach, and which is presented net of the corresponding right of use assets. Acquired Intangible Assets Intangible assets acquired include $ 458.0 million of IPv4 address intangible assets and $ 16.0 million of acquired customer relationships. The fair value measurement of the IPv4 addresses was based on recent auction prices and a factor to incorporate the uncertainty for how the market for IPv4 addresses will function in the future. The Company believes that these IPv4 addresses have an indefinite useful live and are not being amortized. The Company evaluates these assets for impairment on the first day of the fourth quarter. There was no impairment recorded during the period from May 1, 2023 through December 31, 2023. The acquired customer relationships have an estimated useful life of nine years and the estimated fair value was determined using a market based income approach. Amortization expense for the year ended December 31, 2023 was $ 1.3 million. Future amortization expense of the customer relationships is $ 1.8 million per year for eight years . Acquired Asset Retirement Obligations In connection with the Transaction, the Company assumed $ 32.0 million of asset retirement obligations primarily related to restoration obligations for acquired leases which was valued using the income approach. The obligations and corresponding asset retirement assets are being accreted and amortized over approximately four years . Accretion of the asset retirement obligations (recorded as an increase to network operations expenses) and amortization of the asset retirement assets (recorded as depreciation and amortization expenses) for the year ended December 31, 2023 were $ 1.7 million and $ 5.1 million, respectively. In accordance with ASC 410, the Company has not recorded an asset retirement obligation related to the removal of the acquired optical fiber because a settlement date for which to remove the fiber is indeterminable and therefore a reasonable estimation of fair value cannot be made. Reassessment of Bargain Purchase Gain Because the fair value of the identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred, the Company recorded a material bargain purchase gain. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed in accordance with ASC 805-30-25-4 and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. Page 61 of 90 Table of Contents Pro Forma Information The following unaudited pro forma financial information gives effect to the Transaction as if it had been completed on January 1, 2022. The pro forma adjustments are based on historically reported transactions by the respective companies. The pro forma results do not include anticipated synergies or other expected benefits of the acquisition. The pro forma results for the year ended December 31, 2023 include the historical results of the Sprint Business through April 30, 2023 and the combined results of the Company and the Sprint Business for the eight months ended December 31, 2023. The unaudited pro forma information is based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma financial information. The purchase adjustments are preliminary and subject to change as additional analyses are performed and finalized. The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the Transaction actually occurred on January 1, 2022, nor do they purport to project the future consolidated results of operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ​ Year ​ ​ Ended ​ Ended (In thousands) (unaudited) December 31, 2023 December 31, 2022 Service revenue ​ $ 1,121,680 ​ $ 1,170,904 Operating loss from continuing operations ​ ( 304,931 ) ​ ( 713,576 ) Net income ​ 1,108,873 ​ 596,762 ​ The pro forma results for the year ended December 31, 2022 include estimates for the gain on bargain purchase related to the Transaction of $ 1.4 billion, interest income from the amortization of the discount recorded under the IP Transit Services Agreement of $ 36.2 million, a net increase to historical depreciation expense based on the fair value of property and equipment and the impact of the finance lease adjustment discussed above, of $ 58.0 million, amortization expense related to the customer relationship intangible assets of $ 1.8 million, the elimination of amounts charged from the parent company to the Sprint Business as autonomous entity expense adjustments of $ 45.7 million, amortization of unfavorable lease liabilities of $ 3.0 million, a reduction to network operations expense of $ 50.4 million and an increase to interest expense of $ 10.9 million from the impact of the finance lease adjustment discussed above, and the impact to income tax expense from the pro-forma and autonomous entity adjustments of $ 17.2 million. The historical results of the Sprint Business for the year ended December 31, 2022 include a loss on impairment of $ 477.3 million and a gain on the sale of IP addresses of $ 120.8 million. The pro forma results for the year ended December 31, 2023 include the gain on bargain purchase related to the Transaction of $ 1.4 billion, interest income from the amortization of the discount recorded under the IP Transit Services Agreement of $ 14.7 million, a net increase to historical depreciation expense based on the fair value of property and equipment and the impact of the finance lease adjustment discussed above of $ 28.3 million, amortization expense related to the customer relationship intangible assets of $ 0.6 million, amortization of unfavorable lease liabilities of $ 1.0 million, a reduction to network operations expense of $ 16.8 million and an increase to interest expense of $ 3.9 million from the impact of the finance lease adjustment discussed above, and the impact to income tax expense from the pro-forma adjustments of $ 0.2 million. Principles of consolidation The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of estimates 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. Actual results may differ from these estimates. Page 62 of 90 Table of Contents Allowance for credit losses The Company establishes an allowance for credit losses and other sales credit adjustments related to its trade receivables. Trade receivables are recorded at the invoiced amount and can bear interest. Allowances for sales credits are established through a reduction of revenue, while allowances for credit losses are established through a charge to selling, general, and administrative expenses as bad debt expense. The Company assesses the adequacy of these reserves by evaluating factors, such as the length of time individual receivables are past due, historical collection experience, and changes in the credit worthiness of its customers. The Company also assesses the ability of specific customers to meet their financial obligations and establishes specific allowances related to these customers. If circumstances relating to specific customers change or economic conditions change such that the Company’s past collection experience and assessment of the economic environment are no longer appropriate, the Company’s estimate of the recoverability of its trade receivables could be impacted. Accounts receivable balances are written off against the allowance for credit losses after all means of internal collection activities have been exhausted and the potential for recovery is considered remote. The Company uses third-party collection services to continue to seek collection for it’s written off accounts receivable. The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables. Based on the Company’s experience, the customer’s delinquency status is the strongest indicator of the credit quality of the underlying trade receivables, which is analyzed monthly. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current-period ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ Provision for ​ Write offs ​ Balance at ​ Beginning Expected Credit Charged Against End of Description of Period Losses Allowance Period Allowance for credit losses (deducted from accounts receivable) ​ ​ ​ ​ ​ ​ ​ ​ Year ending December 31, 2023 $ 2,303 ​ $ 10,475 ​ $ ( 9,101 ) ​ $ 3,677 Year ending December 31, 2022 $ 1,510 ​ $ 4,318 ​ $ ( 3,525 ) ​ $ 2,303 Year ending December 31, 2021 $ 1,921 ​ $ 5,595 ​ $ ( 6,006 ) ​ $ 1,510 ​ The current-period provision for expected credit losses is net of bad debt recoveries of $ 1.9 million, $ 1.9 million and $ 2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Page 63 of 90 Table of Contents Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 replaced most existing lease accounting guidance. The Company has elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease 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 reasonably certain term of its leases. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ​ ​ Year ​ ​ ​ ​ Ended ​ ​ Ended ​ ​ December 31, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance lease cost amortization of right-of-use assets ​ $ 64,698 ​ $ 28,915 ​ Interest expense on finance lease liabilities ​ ​ 34,940 ​ ​ 23,317 ​ Operating lease cost ​ ​ 92,763 ​ ​ 18,331 ​ Total lease costs ​ ​ 192,401 ​ ​ 70,563 ​ Other lease information ​ ​ ​ ​ ​ Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ Operating cash flows from finance leases ​ ​ ( 33,080 ) ​ ​ ( 23,317 ) ​ Operating cash flows from operating leases ​ ​ ( 93,924 ) ​ ​ ( 18,836 ) ​ Financing cash flows from finance leases ​ ​ ( 77,362 ) ​ ​ ( 45,472 ) ​ Right-of-use assets obtained in exchange for new finance lease liabilities ​ ​ 232,468 ​ ​ 107,875 ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ ​ 13,682 ​ ​ 11,168 ​ Weighted-average remaining lease term — finance leases (in years) ​ ​ 11.5 ​ ​ 13.5 ​ Weighted-average remaining lease term — operating leases (in years) ​ ​ 12.2 ​ ​ 16.6 ​ Weighted average discount rate — finance leases ​ ​ 7.6 % ​ 8.6 % Weighted average discount rate — operating leases ​ ​ 8.1 % ​ 5.4 % ​ Finance leases—fiber lease agreements The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of-use agreements (“IRUs”). These IRUs typically have initial terms of 15 - 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. 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. The determination of the Company’s incremental borrowing rate requires some judgment. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of December 31, 2023, the Company had committed to additional dark fiber IRU lease agreements totaling $ 242.8 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. Page 64 of 90 Table of Contents Operating leases The Company leases office space, rights-of-way, dark fiber and certain data center facilities under operating leases. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. 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. The determination of the Company’s incremental borrowing rate requires some 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. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. 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. 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. 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 and finance lease agreements are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Finance For the twelve months ending December 31, ​ Leases ​ Leases 2024 $ 79,272 ​ $ 100,357 2025 ​ ​ 62,443 ​ ​ 95,370 2026 ​ ​ 57,600 ​ ​ 91,955 2027 ​ ​ 51,511 ​ ​ 41,469 2028 ​ ​ 48,154 ​ ​ 40,198 Thereafter ​ ​ 328,298 ​ ​ 382,361 Total minimum lease obligations ​ ​ 627,278 ​ ​ 751,710 Less—amounts representing interest ​ ​ ( 229,221 ) ​ ​ ( 267,195 ) Present value of minimum lease obligations ​ ​ 398,057 ​ ​ 484,515 Current maturities ​ ​ ( 67,962 ) ​ ​ ( 64,594 ) Lease obligations, net of current maturities ​ $ 330,095 ​ $ 419,921 ​ Revenue recognition The Company recognizes revenue under ASU No. 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. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. 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. 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. Management assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. These contract costs were $ 24.3 million as of December 31, 2023 and were $ 23.7 million as of December 31, 2022. The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months . The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration Page 65 of 90 Table of Contents from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. To achieve this core principle, the Company follows the following five steps: 1) Identification of the contract, or contracts with a customer; 2) Identification of the performance obligations in the contract; 3) Determination of the transaction price; 4) Allocation of the transaction price to the performance obligations in the contract; and 5) Recognition of revenue when, or as, the Company satisfies a performance obligation. 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. The Company vigorously seeks payment of termination fees. The Company recognizes revenue for termination fees as they are collected. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the years ended December 31, 2023, 2022 and 2021 was $ 4.9 million, $ 5.0 million and $ 4.6 million, respectively. Amortization expense for contract costs for the years ended December 31, 2023, 2022 and 2021 was $ 19.3 million, $ 19.4 million and $ 18.4 million, respectively. Gross receipts taxes, universal service fund and other surcharges Revenue recognition standards include guidance relating to taxes or surcharges assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, gross receipts taxes, excise taxes, Universal Service Fund fees and certain state regulatory fees. Such charges may be presented gross or net based upon the Company’s accounting policy election. The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $ 50.2 million, $ 15.4 million, and $ 18.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. Network operations Network operations expenses include the costs of personnel and related operating expenses associated with service delivery, network management, and customer support, network facilities costs, fiber and equipment maintenance fees, leased circuit costs, access fees paid to building owners and certain excise taxes and surcharges recorded on a gross basis. The Company estimates its accruals for any disputed leased circuit obligations based upon the nature and age of the dispute. Network operations costs are impacted by the timing and amounts of disputed circuit costs. The Company generally records these disputed amounts when billed by the vendor and reverses these amounts when the vendor credit has been received or the dispute has otherwise been resolved. The Company does not allocate depreciation and amortization expense to its network operations expense. Foreign currency translation adjustment and comprehensive income The consolidated financial statements of the Company’s non-US operations are translated into US dollars using the period-end foreign currency exchange rates for assets and liabilities and the average foreign currency exchange rates for revenues and expenses. Gains and losses on translation of the accounts are accumulated and reported as a component of other comprehensive income in stockholders’ equity. The Company’s only components of “other comprehensive income” are currency translation adjustments for all periods presented. The Company considers the majority of its investments in its foreign subsidiaries to be long-term in nature. The Company’s foreign exchange transaction gains (losses) are included within interest income and other on the consolidated statements of comprehensive income. Financial instruments The Company considers all highly liquid investments with an original maturity of three months or less at purchase to be cash equivalents. The Company determines the appropriate classification of its investments at the time of purchase and evaluates such designation at each balance sheet date. Page 66 of 90 Table of Contents At December 31, 2023 and December 31, 2022, 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 December 31, 2023, the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 477.5 million, the fair value of the Company’s $ 450.0 million senior unsecured notes due 2027 was $ 451.1 million and the estimated fair value of the Company’s Swap Agreement was $ 38.7 million. Restricted cash and interest rate swap agreement Restricted cash represents amounts held in segregated bank accounts by our clearing broker as margin in support of our Swap Agreement, as discussed in Note 4, and was $ 38.7 million as of December 31, 2023. Additional cash may be further restricted to maintain our interest rate swap instrument as interest rates fluctuate and margin requirements change. The Company does not use derivative financial instruments for trading purposes. Concentrations of credit risk The Company’s assets that are exposed to credit risk consist of its cash and cash equivalents, other assets and accounts receivable. As of December 31, 2023 and 2022, the Company’s cash equivalents were invested in demand deposit accounts, overnight investments and money market funds. The Company places its cash equivalents in instruments that meet high-quality credit standards as specified in the Company’s investment policy guidelines. Accounts receivable are due from customers located in major metropolitan areas in the United States, Europe, Canada, Mexico, South America, Oceania and Africa. Receivables from the Company’s net-centric (wholesale) customers are generally subject to a higher degree of credit risk than the Company’s corporate customers. The Company relies upon a limited number of equipment vendors for the majority of its network equipment and is also dependent upon many third-party fiber providers for providing its services to its customers. Property and equipment Property and equipment are recorded at cost and depreciated once deployed using the straight-line method over the estimated useful lives of the assets. Useful lives are determined based on historical usage with consideration given to technological changes and trends in the industry that could impact the asset utilization. System infrastructure costs include the capitalized compensation costs of employees directly involved with construction activities and costs incurred by third-party contractors. Assets and liabilities under finance leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements include costs associated with building improvements and customer installation costs. The Company determines the number of renewal option periods, if any, included in the lease term for purposes of amortizing leasehold improvements and the lease term of its finance leases based upon its assessment at the inception of the lease for which the failure to renew the lease imposes a penalty on the Company in such amount that a renewal appears to be reasonably assured. Expenditures for maintenance and repairs are expensed as incurred. Depreciation and amortization periods are as follows: ​ ​ ​ ​ Type of asset Depreciation or amortization period Indefeasible rights of use (IRUs) Shorter of useful life or the IRU lease agreement; generally 15 to 20 years Network equipment 2 to 8 years Leasehold improvements Shorter of lease term, including reasonably assured renewal periods, or useful life Software 5 years Owned buildings 16 to 40 years Office and other equipment 2 to 7 years Asset retirement obligations ​ 4 years System infrastructure 2 to 14 years ​ Page 67 of 90 Table of Contents Long-lived assets The Company’s long-lived assets include property and equipment. These long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is determined by comparing the carrying value of these long-lived assets to management’s probability weighted estimate of the future undiscounted cash flows expected to result from the use of the assets. In the event an impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset, which would be determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash flows, appraisals, or other pricing models. In the event there are changes in the planned use of the Company’s long-term assets or the Company’s expected future undiscounted cash flows are reduced significantly, the Company’s assessment of its ability to recover the carrying value of these assets could change. Equity-based compensation The Company recognizes compensation expense for its share-based payments granted to its employees based on their grant date fair values with the expense being recognized on a straight-line basis over the requisite service period. The Company begins recording equity-based compensation expense related to performance awards when it is considered probable that the performance conditions will be met and for market-based awards compensation cost is recognized if the service condition is satisfied even if the market condition is not satisfied. Equity-based compensation expense is recognized in the statements of comprehensive income in a manner consistent with the classification of the employee’s salary and other compensation. Income taxes The Company’s deferred tax assets or liabilities are computed based upon the differences between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based upon the changes in the assets or liability from period to period. At each balance sheet date, the Company assesses the likelihood that it will be able to realize its deferred tax assets. Valuation allowances are established when management determines that it is “more likely than not” that some portion or all of the deferred tax asset may not be realized. The Company considers all available positive and negative evidence in assessing the need for a valuation allowance including its historical operating results, ongoing tax planning, and forecasts of future taxable income, on a jurisdiction by jurisdiction basis. The Company reduces its valuation allowance if the Company concludes that it is “more likely than not” that it would be able to realize its deferred tax assets. Management determines whether a tax position is more likely than not to be sustained upon examination based on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured to determine the amount of benefit to be recognized in the financial statements. The Company adjusts its estimated liabilities for uncertain tax positions periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of its income tax expense. Basic and diluted net income per common share Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common stock equivalents. Shares of restricted stock are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. Page 68 of 90 Table of Contents The following details the determination of the diluted weighted average shares: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ Year Ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2023 2022 2021 Weighted average common shares—basic ​ 47,373,361 46,875,992 ​ 46,419,180 Dilutive effect of stock options ​ 15,380 16,064 ​ 34,007 Dilutive effect of restricted stock ​ 448,771 315,242 ​ 510,733 Weighted average common shares—diluted ​ 47,837,512 47,207,298 ​ 46,963,920 ​ The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, ​ ​ 2023 ​ 2022 ​ 2021 Unvested shares of restricted common stock ​ 1,261,623 ​ 1,164,021 ​ 1,253,321 Anti-dilutive options for common stock ​ 118,985 ​ 105,556 ​ 45,809 Anti-dilutive shares of restricted common stock ​ 11,365 ​ 541,608 ​ 86,619 ​ ​ 2. Property and equipment: Property and equipment consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Owned assets: ​ ​ ​ ​ ​ ​ Network equipment ​ $ 983,996 ​ $ 673,479 Leasehold improvements ​ 297,785 ​ ​ 263,861 System infrastructure ​ 607,060 ​ ​ 171,694 Software ​ 12,747 ​ ​ 11,277 Office and other equipment ​ 26,656 ​ ​ 22,071 Buildings and improvements ​ 146,402 ​ ​ 6,140 Land ​ 135,877 ​ ​ 101 Asset retirement obligations ​ ​ 34,951 ​ ​ — ​ ​ 2,245,474 ​ ​ 1,148,623 Less—Accumulated depreciation and amortization ​ ( 1,124,385 ) ​ ​ ( 949,277 ) ​ ​ 1,121,089 ​ ​ 199,346 Assets under finance leases: ​ ​ ​ ​ ​ ​ IRUs ​ 701,902 ​ ​ 566,283 Less—Accumulated depreciation and amortization ​ ( 285,174 ) ​ ​ ( 221,199 ) ​ ​ 416,728 ​ ​ 345,084 Property and equipment, net ​ $ 1,537,817 ​ $ 544,430 ​ Depreciation and amortization expense related to property and equipment and finance leases was $229.9 million, $ 92.2 million and $ 89.2 million, for the years ended December 31, 2023, 2022 and 2021, respectively. The Company capitalizes the compensation cost of employees directly involved with its construction activities. In the years ended December 31, 2023, 2022 and 2021, the Company capitalized compensation costs of $ 35.5 million, $ 12.6 million and $ 13.4 million, respectively. These amounts are included in system infrastructure costs. Page 69 of 90 Table of Contents 3. Accrued and other liabilities: Accrued and other current liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Operating accruals ​ $ 31,254 ​ $ 19,488 Interest rate swap agreement - current portion ​ ​ 21,568 ​ ​ 20,267 Deferred revenue—current portion ​ 6,549 ​ ​ 4,911 Payroll and benefits ​ 13,696 ​ ​ 11,880 Taxes—non-income based ​ 41,820 ​ ​ 2,687 Interest ​ 5,636 ​ ​ 4,656 Total ​ $ 120,523 ​ $ 63,889 ​ ​ 4. Long-term debt: As of December 31, 2023, 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. Interest on the 2027 Notes is paid semi-annually on June 15 and December 15 of each year. The 2026 Notes were issued in May 2021, are due on May 1, 2026 and bear interest at a rate of 3.50 % per year. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year. In June 2022, the Company redeemed and extinguished its € 350.0 million aggregate principal amount of Senior Unsecured Euro Notes due 2024 (the “2024 Notes”). The 2024 Notes were due on June 30, 2024 and bore interest at a rate of 4.375 % per year. Interest on the 2024 Notes was paid semi-annually on June 30 and December 30 of each year. Issuance of 2027 Notes and redemption of 2024 Notes On June 22, 2022 (the “2027 Notes Closing Date”), Group completed its offering of $ 450.0 million aggregate principal amount of its 2027 Notes for issuance in a private placement not registered under the Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in compliance with Regulation S under the Securities Act. The 2027 Notes were issued pursuant to, and are governed by, an indenture (the “2027 Notes Indenture”), dated the 2027 Notes Closing Date by and among Group, Holdings, the other guarantors named therein and the trustee. The 2027 Notes are jointly and severally guaranteed on a senior unsecured basis by each of the Company’s existing and future material domestic subsidiaries, subject to certain exceptions, and by the Company. Under certain circumstances, the Guarantors may be released from these Guarantees without the consent of the holders of the 2027 Notes. The net proceeds from the 2027 Notes offering were $ 446.0 million after deducting the $ 2.7 million discount and $ 1.3 million of offering expenses. 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 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. Prior to the redemption of the 2024 Notes, the gains on foreign exchange on the 2024 Notes from converting Euros into US dollars were $ 31.6 million and $ 32.5 million for 2022 and 2021, respectively. Unless earlier redeemed or repurchased, the 2027 Notes will mature on June 15, 2027. Group may redeem some or all of the 2027 Notes at any time prior to June 15, 2024 at a price equal to 100 % of the principal amount of the 2027 Notes, plus a “make-whole” premium, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, or may redeem up to 40.0 % of the 2027 Notes using proceeds of certain equity offerings completed prior to June 15, 2024 at 107.0 % of the principal amount plus accrued and unpaid interest, if any. Thereafter, Group may redeem the 2027 Notes, in whole or in part, at a redemption price ranging from 103.5 % of the aggregate principal amount of the 2027 Notes redeemed to par (depending on the year), in each case, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any. Page 70 of 90 Table of Contents On the Redemption Date, Group redeemed its € 350.0 million of 2024 Notes at a price of 101.094 % (€ 353.8 million or $ 375.2 million) of the principal amount (the “Premium”) plus € 7.7 million ($ 8.1 million) of interest paid through June 30, 2022, the Redemption Date where the Premium reduced to 101.094 %, for a total payment of € 361.5 million ($ 383.4 million). Group entered into a short-term USD to Euro forward purchase agreement to mitigate the risk of foreign currency fluctuations. As a result of these transactions, the Company incurred a loss on debt extinguishment and redemption of $ 11.9 million. On the Redemption Date the 2024 Notes were valued at $ 365.8 million, resulting in a gain on foreign exchange of $ 31.6 million for the year ended December 31, 2022. Issuance of the 2026 Notes and redemption of 2022 Notes On May 7, 2021 (the “2026 Notes Closing Date”), Group completed an offering of $ 500.0 million aggregate principal amount of its 2026 Notes for issuance in a private placement exempt from registration under the Securities Act. The 2026 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in compliance with Regulation S under the Securities Act. The 2026 Notes were issued pursuant to, and are governed by, an indenture (the “2026 Notes Indenture”), dated the 2026 Notes Closing Date by and among Group, Holdings, the other guarantors named therein, the trustee and the collateral agent. The 2026 Notes are guaranteed on a senior secured basis, jointly and severally, by Group’s material domestic subsidiaries, subject to certain exceptions (the “Subsidiary Guarantors”). In addition, the 2026 Notes are guaranteed on a senior unsecured basis by Holdings (together with the Subsidiary Guarantors, the “Guarantors”). Under certain circumstances, the Guarantors may be released from these guarantees without the consent of the holders of the 2026 Notes. The net proceeds from the 2026 Notes offering were $ 496.9 million after deducting the $ 1.8 million discount and $ 1.3 million of offering expenses. Unless earlier redeemed or repurchased, the 2026 Notes will mature on May 1, 2026. Group may redeem some or all of the 2026 Notes at any time prior to February 1, 2026 at a price equal to 100 % of the principal amount of the 2026 Notes, plus a “make-whole” premium as set forth in the 2026 Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. Thereafter, Group may redeem the 2026 Notes, in whole or in part, at a price equal to 100 % of the principal amount of the 2026 Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In March 2021, Group redeemed $ 115.9 million aggregate principal amount of its 5.375 % Senior Secured Notes due 2022 (the “2022 Notes”) at an average price of 103.2 % of the principal amount plus $ 0.4 million of accrued and unpaid interest. 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. In May 2021, Group redeemed $ 45.0 million aggregate principal amount of its 2022 Notes at par plus the “make-whole amount” as defined in the 2022 Notes indenture of $ 1.9 million ($ 41.41533 per $1,000 aggregate principal amount) plus accrued interest to, but excluding, the redemption date of $ 0.4 million ($ 9.70486 per aggregate principal amount). Following the $ 115.9 million and the $ 45.0 million redemptions there was $ 284.1 million aggregate principal amount of 2022 Notes remaining. 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. Senior unsecured notes - €350.0 million 2024 Notes In June 2019, Group completed an offering of € 135.0 million of 2024 Notes. The net proceeds from the June 2019 offering, after deducting offering expenses, were $ 152.1 million. In June 2020, Group completed an offering of € 215.0 million of 2024 Notes. The net proceeds from the June 2020 offering, after deducting offering expenses, was $ 240.3 million. The 2024 Notes were guaranteed (the “Guarantees”) on a senior unsecured basis, jointly and severally, by the Company’s material domestic subsidiaries, subject to certain exceptions, and by the Company (collectively, the “Guarantors”). Under certain circumstances, the Guarantors could be released from these Guarantees without the consent of the holders of the 2024 Notes. The 2024 Notes bore interest at a rate of 4.375 % per annum and was paid semi-annually in arrears on June 30 and December 30 of each year. The 2024 Notes were scheduled to mature on June 30, 2024. The 2024 Notes were issued in Euros and were reported in the Company’s reporting currency — US dollars. As of December 31, 2020, the Company’s € 350.0 million of 2024 Notes were valued at $ 429.3 million. As of December 31, 2021, the 2024 Notes were valued at $ 397.0 million, resulting in a gain on foreign exchange of $ 32.5 million for the year ended December 31, 2021. In June 2022, Group redeemed the 2024 Notes, as noted above. Page 71 of 90 Table of Contents Senior secured notes - $445.0 million 2022 Notes In February 2015, Group issued $ 250.0 million of 2022 Notes. In December 2016, the Company issued an additional $ 125.0 million par value of its 2022 Notes at a premium of 100.375 % of par value. In August 2018, the Company issued an additional $ 70.0 million par value of its 2022 Notes at a premium of 101.75 % of par value. The 2022 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and were scheduled to mature on March 1, 2022. Interest accrued at 5.375 % and was paid semi-annually in arrears on March 1 and September 1 of each year. The 2022 Notes were redeemable prior to December 1, 2021 (three months prior to the maturity date of the Notes) in whole or from time to time in part, at a redemption price equal to the sum of (1) 100 % of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date, and (2) a make-whole premium, if any. The make-whole premium is the excess of (1) the net present value, on the redemption date, of the principal being redeemed or paid and the amount of interest (exclusive of interest accrued to the date of redemption) that would have been payable if such redemption had not been made, over (2) the aggregate principal amount of the notes being redeemed or paid. Net present value shall be determined by discounting, on a semi-annual basis, such principal and interest at the reinvestment rate (as determined in the indenture governing the 2022 Notes) from the respective dates on which such principal and interest would have been payable if such redemption had not been made. In May 2021, Group redeemed the 2022 Notes, as noted above. Limitations under the indentures The 2027 Notes Indenture and the 2026 Notes Indenture (the “Indentures”), among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; to consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates. There are certain exceptions to the limitations on the Company’s ability to incur indebtedness under the Indentures, including IRU agreements incurred in the normal course of business and any additional indebtedness if the Company’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or the Company’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater. The Company can also incur unlimited liens (which can be used, together with capacity under the debt covenant, to incur additional secured indebtedness) if the Company’s consolidated secured leverage ratio, as defined in the Indentures, is less than 4.0 to 1.0 . 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). As of December 31, 2023, 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 December 31, 2023, a total of $ 511.3 million (inclusive of a $ 250.0 general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases. The aggregate future contractual maturities of long-term debt were as follows as of December 31, 2023 (in thousands): ​ ​ ​ ​ ​ For the year ending December 31, ​ ​ 2024 ​ $ — 2025 ​ — 2026 ​ 500,000 2027 ​ 450,000 2028 ​ — Thereafter ​ — Total ​ $ 950,000 ​ ​ Interest rate swap agreement As of December 31, 2023, 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. The Company did not elect hedge accounting for the Swap Agreement. The Swap Agreement is recorded at its fair value at each reporting period, and the Company incurs gains and losses due to changes in Page 72 of 90 Table of Contents market interest rates. By entering into the Swap Agreement, the Company has assumed the risk associated with variable interest rates. Changes in interest rates affect the valuation of the Swap Agreement that the Company recognizes in its consolidated statements of comprehensive income. 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 December 31, 2023 the fair value of the Swap Agreement was a net liability of $ 38.7 million of which $ 21.6 million is presented with accrued and other current liabilities and $ 17.1 million is presented with other long-term liabilities. As of December 31, 2022 the fair value of the Swap Agreement was a net liability of $ 52.1 million of which $ 20.3 million is presented with accrued and other current liabilities and $ 31.9 million is presented with other long-term liabilities. In the years ended December 31, 2023, 2022 and 2021, the Company recorded gains (losses) related to the Swap Agreement of $ 13.4 million, ($ 43.1 ) million and ($ 9.0 ) million, respectively. The Company has made a $ 38.8 million deposit with the counterparty to the Swap Agreement. If the fair value of the Swap Agreement exceeds a net liability of $ 38.8 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value. As of December 31, 2023, $ 38.7 million of the deposit was restricted and $ 0.1 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 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. Under the settlement payment made in May 2023, the Company made a payment of $ 9.5 million to the counterparty for a net cash interest cost of $ 9.5 million for the period from November 1, 2022 to April 30, 2023. Under the settlement payment made in November 2023, the Company made a payment of $ 12.0 million to the counterparty for a net cash interest cost of $ 12.0 million for the period from May 1, 2023 to October 31, 2023. ​ 5. Income taxes: The components of income before income taxes consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Domestic ​ $ 1,217,084 ​ $ 34,784 ​ $ 73,753 Foreign ​ 2,393 ​ ​ ( 8,408 ) ​ ​ ( 2,333 ) Total income before income taxes ​ $ 1,219,477 ​ $ 26,376 ​ $ 71,420 ​ The income tax expense is comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ ( 3,638 ) ​ $ — ​ $ — State ​ ( 11,868 ) ​ ( 4,195 ) ​ ( 3,116 ) Foreign ​ ( 203 ) ​ ( 496 ) ​ ( 1,833 ) Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ 53,393 ​ ( 16,299 ) ​ ( 17,959 ) State ​ 16,086 ​ ( 143 ) ​ ( 2,348 ) Foreign ​ 194 ​ ( 97 ) ​ 2,021 Total income tax benefit (expense) ​ $ 53,964 ​ $ ( 21,230 ) ​ $ ( 23,235 ) ​ Page 73 of 90 Table of Contents Our consolidated temporary differences comprising our net deferred tax assets are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Deferred Tax Assets: ​ ​ ​ ​ ​ ​ Net operating loss carry-forwards ​ $ 244,306 ​ $ 226,625 Interest expense limitation ​ 34,828 ​ ​ 12,331 Accrued liabilities and other ​ ​ 12,055 ​ ​ 9,972 Operating leases ​ ​ 107,563 ​ ​ 32,769 Total gross deferred tax assets ​ 398,752 ​ ​ 281,697 Valuation allowance ​ ​ ( 136,533 ) ​ ​ ( 140,895 ) ​ ​ ​ 262,219 ​ ​ 140,802 Deferred Tax Liabilities: ​ ​ ​ ​ ​ ​ Property & equipment ​ 295,630 ​ ​ 61,761 Intangibles ​ 118,727 ​ ​ — Deferred consideration – IP Transit Services Agreement ​ ​ 114,844 ​ ​ — Investment in foreign subsidiaries ​ ​ 100,081 ​ ​ 96,977 Right-of-use assets ​ ​ 104,435 ​ ​ 29,710 Gross deferred tax liabilities ​ 733,717 ​ ​ 188,448 Net deferred tax liabilities ​ $ 471,498 ​ $ 47,646 ​ The acquisition of Sprint was an asset acquisition for tax purposes. The Company recorded a net, deferred tax liability of $ 494 million which represents the difference in book basis and tax basis of the assets acquired and liabilities assumed. The Seller indemnified the Company for historical tax exposures and the estimated indemnification asset is not material. At each balance sheet date, the Company assesses the likelihood that it will be able to realize its deferred tax assets. The Company considers all available positive and negative evidence in assessing the need for a valuation allowance. The Company maintains a full valuation allowance against certain of its deferred tax assets consisting primarily of net operating loss carryforwards related to its foreign operations in Europe, South America, Oceania and Africa. As of December 31, 2023, the Company has combined net operating loss carry-forwards of $ 1.0 billion. This amount includes federal net operating loss carry-forwards in the United States of $ 23.5 million, net operating loss carry-forwards related to its European operations of $ 960.4 million and $ 19.5 million related to its other international operations. Section 382 of the Internal Revenue Code in the United States limits the utilization of net operating losses when ownership changes, as defined by that section, occur. The Company has performed an analysis of its Section 382 ownership changes and has determined that the utilization of certain of its net operating loss carryforwards in the United States is limited based on the annual Section 382 limitation and remaining carryforward period. Of the net operating losses available at December 31, 2023 in the United States $ 19.2 million are limited for use under Section 382. Net operating loss carryforwards outside of the United States totaling $ 979.9 million are not subject to limitations similar to Section 382. The net operating loss carryforwards in the United States will expire, if unused, in 2025. The net operating loss carry-forwards related to the Company’s European operations include $ 820.0 million that do not expire and $ 140.4 million that expire between 2024 and 2038. The Company has not provided for United States deferred income taxes or foreign withholding taxes on its undistributed earnings for certain non-US subsidiaries earnings or cumulative translation adjustments because these earnings and adjustments are intended to be permanently reinvested in operations outside the United States. It is not practical to determine the amount of the unrecognized deferred tax liability on such undistributed earnings or cumulative translation adjustments. In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not be sustained upon examination. If the Company determines that the tax position is not more likely than not to be sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized when the tax position is settled. The Company does not have a material liability for uncertain tax positions at December 31, 2023 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months ended December 31, 2024, however, actual changes in the liability for uncertain tax positions could be different than currently expected. If recognized, changes in the Company’s total unrecognized tax benefits would impact the Company’s effective income tax rate. Page 74 of 90 Table of Contents The Company or one of its subsidiaries files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. The Company is subject to US federal tax and state tax examinations for years 2005 to 2023. The Company is subject to tax examinations in its foreign jurisdictions generally for years 2005 to 2023. The following is a reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Federal income tax expense at statutory rates ​ $ ( 256,086 ) ​ $ ( 5,537 ) ​ $ ( 14,999 ) Effect of: ​ ​ ​ ​ ​ ​ ​ ​ ​ State income taxes, net of federal benefit ​ 3,722 ​ ​ ( 1,700 ) ​ ​ ( 4,123 ) Impact of foreign operations ​ 868 ​ ​ ( 651 ) ​ ​ 715 Non-deductible expenses ​ ( 2,783 ) ​ ​ ( 2,679 ) ​ ​ ( 1,365 ) Bargain purchase gain - Sprint Business acquisition ​ ​ 295,351 ​ ​ — ​ ​ — Tax effect of TCJA from foreign earnings ​ ( 490 ) ​ ​ ( 360 ) ​ ​ ( 389 ) Changes in valuation allowance ​ 13,382 ​ ​ ( 10,303 ) ​ ​ ( 3,074 ) Income tax benefit (expense) ​ $ 53,964 ​ $ ( 21,230 ) ​ $ ( 23,235 ) ​ ​ 6. Commitments and contingencies: Current and potential litigation 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. 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 $ 4.1 million in excess of the amount accrued at December 31, 2023. In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company’s financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material. Network equipment sites and data center facilities The Company enters into service agreements related to network equipment sites and for data center facilities. Future minimum annual payments under these arrangements are as follows (in thousands): ​ ​ ​ ​ ​ For the year ending December 31, ​ ​ 2024 ​ $ 38,572 2025 ​ 18,713 2026 ​ 15,169 2027 ​ ​ 5,745 2028 ​ 2,262 Thereafter ​ 496 ​ ​ $ 80,957 ​ Expenses related to these arrangements were $ 29.1 million in 2023, $ 21.8 million in 2022 and $ 22.0 million in 2021. Short - term lease expense was $ 9.8 million for 2023. Page 75 of 90 Table of Contents Unconditional purchase obligations Unconditional purchase obligations for equipment and services totaled $ 62.8 million at December 31, 2023. As of December 31, 2023, the Company had also committed to additional dark fiber IRU finance and operating lease agreements totaling $ 242.8 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 2024. Future minimum payments under these dark fiber IRU obligations are $ 28.9 million, $ 12.7 million, $ 11.0 million, $ 11.0 million and $ 11.0 million for the years ending December 31, 2024 to December 31, 2028, respectively, and $ 168.2 million, thereafter. Defined contribution plan The Company sponsors a 401(k) defined contribution plan that provides for a Company matching payment. The Company matching payments were paid in cash and were $ 2.3 million for 2023, $ 0.9 million for 2022 and $ 0.9 million for 2021. ​ 7. Stockholders’ equity: Authorized shares The Company has 75.0 million shares of authorized $ 0.001 par value common stock and 10,000 authorized but unissued shares of $ 0.001 par value preferred stock. The holders of common stock are entitled to one vote per common share and, subject to any rights of any series of preferred stock, dividends may be declared and paid on the common stock when determined by the Company’s Board of Directors. Common stock buybacks The Company’s Board of Directors has approved $ 50.0 million for purchases of the Company’s common stock under a buyback program (the “Buyback Program”). At December 31, 2023, there was $ 30.4 million remaining for purchases under the Buyback Program.There were no purchases of common stock in 2023, 2022 or 2021. Dividends on common stock Dividends are recorded as a reduction to retained earnings. Dividends on unvested restricted shares of common stock are paid as the awards vest. 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. The Company is 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. The indentures governing the Company’s notes limit the Company’s ability to return cash to its stockholders. Page 76 of 90 Table of Contents 8. Stock option and award plan: Incentive award plan The Company grants restricted stock and options for common stock under its award plan, as amended (the “Award Plan”). Stock options granted under the Award Plan generally vest over a four-year period and have a term of ten years . Grants of shares of restricted stock granted under the Award Plan generally vest over periods ranging from three to four years . Compensation expense for all awards is recognized on a straight-line basis over the service period. Awards with graded vesting terms that are subject only to service conditions are recognized on a straight-line basis. Certain option and share grants provide for accelerated vesting if there is a change in control, as defined. For grants of restricted stock, when an employee terminates prior to full vesting the employee retains their vested shares and the employees’ unvested shares are returned to the Award Plan. For grants of options for common stock, when an employee terminates prior to full vesting, the employee may elect to exercise their vested options for a period of ninety days and any unvested options are returned to the Award Plan. Shares issued to satisfy awards are provided from the Company’s authorized shares. The vesting of certain shares granted to the Company’s executives is subject to certain performance conditions determined by the Company’s Board of Directors. The vesting of certain 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, the Company’s growth rate in revenue and the Company’s growth rate in cash flow from operating activities, with each portion of the CEO’s performance-based equity award subject to a cap and no shares earned if performance with respect to a target is less than zero. The accounting for equity-based compensation expense requires the Company to make estimates and judgments that affect its financial statements. These estimates for stock options include the following. Expected Dividend Yield—The Company uses an expected dividend yield based upon expected annual dividends and the Company’s stock price. Expected Volatility—The Company uses its historical volatility for a period commensurate with the expected term of the option. Risk-Free Interest Rate—The Company uses the zero coupon US Treasury rate during the quarter having a term that most closely resembles the expected term of the option. Expected Term of the Option—The Company estimates the expected life of the option term by analyzing historical stock option exercises. Forfeiture Rates—The Company estimates its forfeiture rate based on historical data with further consideration given to the class of employees to whom the options or shares were granted. The weighted-average per share grant date fair value of options was $ 12.81 in 2023, $ 10.73 in 2022 and $ 12.22 in 2021. The following assumptions were used for determining the fair value of options granted in the three years ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ Black-Scholes Assumptions 2023 2022 2021 Dividend yield 5.8 % 5.9 % 4.6 % Expected volatility 33.4 % 33.1 % 33.4 % Risk-free interest rate 3.8 % 3.0 % 0.6 % Expected life of the option term (in years) 4.1 ​ 4.1 ​ 4.2 ​ ​ Page 77 of 90 Table of Contents Stock option activity under the Company’s Award Plan during the year ended December 31, 2023, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted-Average ​ Options Exercise Price Outstanding at December 31, 2022 167,991 ​ $ 58.85 Granted 105,508 ​ $ 64.90 Cancelled and expired ( 49,651 ) ​ $ 64.19 Exercised—intrinsic value $ 0.5 million; cash received $ 1.2 million ( 25,073 ) ​ $ 48.94 Outstanding at December 31, 2023—$ 2.8 million intrinsic value and 7.6 years weighted-average remaining contractual term 198,775 ​ $ 61.97 Exercisable at December 31, 2023—$ 1.6 million intrinsic value and 6.1 years weighted-average remaining contractual term 96,351 ​ $ 59.64 Expected to vest—$ 2.5 million intrinsic value and 7.3 years weighted-average remaining contractual term 167,894 ​ $ 61.59 ​ A summary of the Company’s non-vested restricted stock awards as of December 31, 2023 and the changes during the year ended December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Grant Date Non-vested awards Shares Fair Value Non-vested at December 31, 2022 1,164,021 ​ $ 66.22 Granted 634,056 ​ $ 60.05 Vested ( 472,564 ) ​ $ 66.84 Forfeited ( 63,890 ) ​ $ 66.01 Non-vested at December 31, 2023 1,261,623 ​ $ 62.89 ​ The weighted average per share grant date fair value of restricted stock granted was $ 60.05 in 2023 ( 0.6 million shares), $ 66.08 in 2022 ( 0.4 million shares) and $ 64.59 in 2021 ( 0.5 million shares). The fair value was determined using the quoted market price of the Company’s common stock on the date of grant. Valuations were obtained to determine the fair value for the 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ December 31, Additional Award Plan Information – Related to Stock Options & Restricted Stock (thousands) 2023 2022 2021 Equity-based compensation expense ​ $ 26,924 ​ $ 24,439 ​ $ 26,822 Income tax benefit related to stock options and restricted stock ​ 3,307 ​ 2,489 ​ 6,314 Capitalized compensation expense related to stock options and restricted stock ​ 3,541 ​ 2,277 ​ 3,222 Intrinsic value of stock options exercised ​ 456 ​ 305 ​ 881 Fair value of shares of restricted stock vested ​ 30,113 ​ 25,792 ​ 35,749 ​ As of December 31, 2023, there was $ 38.1 million of total unrecognized compensation cost related to non-vested equity-based compensation awards. That cost is expected to be recognized over a weighted average period of 2.0 years. ​ 9. Related party transactions: The Audit Committee of the Company’s Board of Directors (the “Audit Committee”) reviews and approves all transactions with related parties. The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer, David Schaeffer. The fixed annual rent for the headquarters building is $ 1.0 million per year plus an allocation of taxes and utilities. 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. The lease is cancellable at no cost by the Company upon 60 days ’ notice. On January 6, 2023, the Company entered into two lease agreements (the “New Leases”), one with Thorium LLC (‘Thorium”) and one with Germanium LLC (“Germanium”), entities owned by the Company’s Chief Executive Officer, David Schaeffer.The first of the New Leases is with Thorium for 54,803 square feet of office space, which serves as office space for the Company replacing a Page 78 of 90 Table of Contents portion of its office space in the Northern Virginia area (“Office Lease”). The second of the New Leases is with Germanium LLC for 1,587 square feet of technical space which serves as network operations space for the Company (“Network Operations Lease”). The term for each of the New Leases is five years beginning on April 1, 2023. Both of the New Leases are cancellable by the Company without penalty upon 60 days written notice. The Company took occupancy of the office space and network operations space in April 2023. The amount of fixed annual rent during the term of the Office Lease is $ 1.2 million, and the Company is responsible for paying its proportionate share of the building’s operating expenses that exceed a 2023 base year. The amount of fixed annual rent for the Network Operations Lease is $ 34,914 , and the Company is also responsible for paying its metered utility costs and a proportionate share of the building’s other operating expenses that exceed a 2023 base year. On July 25, 2023 the Company entered into a Second Amendment to the lease agreement (the “Amendment”), with Germanium which amends the Network Operations Lease to lease an additional 7,369 square feet on the first floor of the building, beginning on August 1, 2023, in connection with the planned expansion of the technical space. This includes 4,987 square feet for an auditorium suitable for training and 2,382 square feet for the data center in the building. The amended Network Operations Lease remains cancellable by the Company without penalty upon 60 days written notice. The Amendment provides for $ 162,118 of additional fixed annual rent during the term of the Network Operations Lease, plus a proportionate share of real estate taxes and operating expenses and separately metered utilities expense. The Company paid $ 2.8 million in 2023, $ 1.7 million in 2022 and $ 1.7 million in 2021 for rent and related costs (including taxes and utilities) for this lease for these leases. ​ 10. Geographic information: Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing the Company’s performance. The Company has one operating segment. Revenues are attributed to regions based on where the services are provided. Below are the Company’s service revenues and long lived assets by geographic region (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 On-net Off-net Non-core Total North America ​ $ 406,866 ​ $ 367,210 ​ $ 28,614 ​ $ 802,690 Europe ​ ​ 88,310 ​ ​ 19,913 ​ ​ 147 ​ ​ 108,370 Oceania ​ 15,769 ​ ​ 5,587 ​ ​ 71 ​ ​ 21,427 South America ​ ​ 6,957 ​ ​ 684 ​ ​ 8 ​ ​ 7,649 Africa ​ ​ 687 ​ ​ 99 ​ ​ — ​ ​ 786 Total ​ $ 518,589 ​ $ 393,493 ​ $ 28,840 ​ $ 940,922 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022 On-net Off-net Non-core Total North America ​ $ 350,256 ​ $ 128,486 ​ $ 619 ​ $ 479,361 Europe ​ 82,451 ​ ​ 16,144 ​ ​ 49 ​ ​ 98,644 Oceania ​ 13,689 ​ ​ 1,271 ​ ​ 3 ​ ​ 14,963 South America ​ ​ 5,656 ​ ​ 174 ​ ​ 2 ​ ​ 5,832 Africa ​ ​ 727 ​ ​ 77 ​ ​ — ​ ​ 804 Total ​ $ 452,779 ​ $ 146,152 ​ $ 673 ​ $ 599,604 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 On-net Off-net Non-core Total North America ​ $ 340,107 ​ $ 127,383 ​ $ 502 ​ $ 467,992 Europe ​ 87,929 ​ ​ 17,729 ​ ​ 72 ​ ​ 105,730 Oceania ​ 10,197 ​ ​ 1,094 ​ ​ 1 ​ ​ 11,292 South America ​ ​ 4,102 ​ ​ 173 ​ ​ 1 ​ ​ 4,276 Africa ​ ​ 503 ​ ​ 4 ​ ​ — ​ ​ 507 Total ​ $ 442,838 ​ $ 146,383 ​ $ 576 ​ $ 589,797 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2023 2022 Long lived assets, net ​ ​ ​ ​ ​ ​ North America ​ $ 1,959,704 ​ $ 397,434 Europe and other ​ 163,034 ​ ​ 147,005 Total ​ $ 2,122,738 ​ $ 544,439 ​ Page 79 of 90 Table of Contents ​ 11. Quarterly financial information (unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ June 30, ​ September 30, ​ December 31, ​ 2023 2023 2023 2023 ​ ​ (in thousands, except share and per share amounts) Service revenue ​ $ 153,588 ​ $ 239,806 ​ $ 275,429 ​ $ 272,099 Network operations, including equity-based compensation expense ​ 58,638 ​ 137,502 ​ 173,594 ​ 174,550 Operating income (loss) ​ 24,312 ​ ( 34,604 ) ​ ( 50,558 ) ​ ( 68,478 ) Net income (loss) (1) ​ 6,148 ​ 1,123,863 ​ ( 56,723 ) ​ 200,153 Net income (loss) per common share - basic ​ 0.13 ​ 23.84 ​ ( 1.20 ) ​ 4.23 Net income (loss) per common share - diluted ​ 0.13 ​ 23.65 ​ ( 1.20 ) ​ 4.17 Weighted-average number of common shares—basic ​ ​ 47,037,091 ​ ​ 47,137,822 ​ ​ 47,227,338 ​ ​ 47,353,291 Weighted-average number of common shares—diluted ​ 47,381,226 ​ 47,526,207 ​ 47,227,338 ​ 48,037,841 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ March 31, ​ June 30, ​ September 30, ​ December 31, ​ 2022 2022 2022 2022 ​ ​ (in thousands, except share and per share amounts) Service revenue ​ $ 149,175 ​ $ 148,450 ​ $ 150,000 ​ $ 151,979 Network operations, including equity-based compensation expense ​ 57,449 ​ 56,514 ​ 57,220 ​ 56,972 Operating income ​ 28,784 ​ 29,566 ​ 28,095 ​ 27,311 Net income ( loss) (2) ​ 1,137 ​ 11,164 ​ ( 8,007 ) ​ 851 Net income (loss) per common share - basic ​ ​ 0.02 ​ 0.24 ​ ( 0.17 ) ​ 0.02 Net income (loss) per common share - diluted ​ 0.02 ​ 0.24 ​ ( 0.17 ) ​ 0.02 Weighted-average number of common shares—basic ​ ​ 46,575,848 ​ ​ 46,691,142 ​ ​ 46,736,742 ​ ​ 46,885,512 Weighted-average number of common shares—diluted ​ ​ 46,929,191 ​ 47,029,446 ​ 46,736,742 ​ 47,196,890 (1) Included in net income for the three months ended June 30, 2023, September 30, 2023 and December 31, 2023 are gains (losses) on the bargain purchase of the Sprint Business of $ 1.2 billon, ( $ 3.3 )million, and $ 254.0 million, respectively. Included in net income (loss) for the three months ended March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023 are non - cash (charges) benefits from changes in the valuation of the Swap Agreement of $ 1.8 million, ( $ 1.3 ) million, ( $ 4.8 ) million and $ 17.7 million, respectively. (2) Included in net income for the three months ended March 31, 2022 and June 30, 2022, are unrealized gains on foreign exchange on the 2024 Notes of $ 8.0 million and $ 23.5 million, respectively. Included in net income (loss) for the three months ended June 30, 2022, is a loss on debt extinguishment and redemption on the 2024 Notes of $ 11.9 million. Included in net income (loss) for the three months ended March 31, 2022, June 30, 2022, September 30, 2022 and December 31, 2022 are non-cash charges (benefit) from changes in the valuation of the Swap Agreement of $ 21.3 million, $ 7.5 million, $ 16.9 million and ( $ 2.6 ) million, respectively. ​ 12. Subsequent Events: Dividend On February 28, 2024, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.965 per common share. The dividend for the first quarter of 2024 will be paid to holders of record on March 15, 2024. This estimated $ 45.7 million dividend payment is expected to be made on April 9, 2024. ​ ​ Page 80 of 90 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.