What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 206 added, 289 removed, 452 unchanged (52% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets:

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Accounts receivable, net of allowance for credit losses of $ 5,588 and $ 3,677 , respectively

Due from T-Mobile, IP Transit Services Agreement, current portion, net of discount of $ 29,029

Due from T-Mobile, IP Transit Services Agreement, current portion, net of discount of $ 21,878 and $ 24,898 , respectively

Due from T-Mobile, Transition Services Agreement

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Right-of-use leased assets

Intangible assets, net

IPV4 intangible assets

Other intangible assets, net

Deposits and other assets

Due from T-Mobile, IP Transit Services Agreement, net of discount of $ 32,613

Due from T-Mobile, Purchase Agreement, net of discount of $ 14,444

Liabilities and stockholders’ (deficit) equity

Due from T-Mobile, IP Transit Services Agreement, net of discount of $ 23,606 and $ 27,916 , respectively

Due from T-Mobile, Purchase Agreement, net of discount of $ 6,982 and $ 13,725 , respectively

Liabilities and stockholders’ equity

Current liabilities:

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Accrued and other current liabilities

Accrued dividend payable

Due to T-Mobile – Transition Services Agreement

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Commitments and contingencies:

Stockholders’ equity (deficit):

Stockholders’ equity:

Common stock, $ 0.001 par value;

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Accumulated other comprehensive loss

Accumulated deficit

( 1,074,588 )

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

Accumulated (deficit) earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these condensed consolidated balance sheets.

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

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Three Months Ended

September 30, 2023

September 30, 2022

Service revenue

Operating expenses:

Network operations (including $ 370 and $ 176 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)

Selling, general, and administrative (including $ 7,041 and $ 6,035 of equity-based compensation expense, respectively)

Acquisition costs – Sprint Business

Depreciation and amortization

Total operating expenses

Loss on lease transactions

Operating (loss) income

Interest expense

Loss on bargain purchase – Sprint Business

Change in valuation – interest rate swap agreement

Interest income – IP Transit Services Agreement

Interest income – Purchase Agreement

Interest income and other, net

Income before income taxes

Income tax benefit (expense)

Comprehensive loss:

Foreign currency translation adjustment

Comprehensive loss

Net loss per common share:

Basic net loss per common share

Diluted net loss per common share

Dividends declared per common share

Weighted-average common shares - basic

Weighted-average common shares - diluted

The accompanying notes are an integral part of these condensed consolidated statements.

COGENT COMMUNICATIONS HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Nine Months Ended

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Service revenue

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Total operating expenses

Gains on lease terminations

Operating (loss) income

Interest expense

Gain on bargain purchase – Sprint Business

Reduction to gain on bargain purchase – Sprint Business

Change in valuation – interest rate swap agreement

Foreign exchange gain on 2024 Euro Notes

Loss on debt extinguishment and redemption- 2024 Euro Notes

Interest income – IP Transit Services Agreement

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Income tax benefit (expense)

Comprehensive income (loss):

Net (loss) income

Comprehensive (loss) income:

Net (loss) income

Foreign currency translation adjustment

Comprehensive income (loss)

Net income per common share:

Basic net income per common share

Diluted net income per common share

Comprehensive (loss) income

Net (loss) income per common share:

Basic net (loss) income per common share

Diluted net (loss) income per common share

Dividends declared per common share

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND MARCH 31, 2023

(IN THOUSANDS)

Nine Months Ended

September 30, 2023

September 30, 2022

Three Months Ended

March 31, 2024

March 31, 2023

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt discount and premium

Amortization of debt discounts

Amortization of discounts, due from T-Mobile, IP Transit Services & Purchase Agreements

Equity-based compensation expense (net of amounts capitalized)

Gain on bargain purchase – Sprint Business

( 1,152,386 )

Gains - equipment transactions and other, net

Loss on debt extinguishment and redemption – 2024 Euro Notes

Foreign currency exchange gain on 2024 Euro Notes

Reduction to gain on bargain purchase – Sprint Business

Gains – lease transactions

Deferred income taxes

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Cash flows from investing activities:

Cash receipts - IP Transit Agreement – T-Mobile

Acquisition of Sprint Business, net of $ 47.1 million of cash acquired

Cash receipts - IP Transit Services Agreement – T-Mobile

Acquisition of Sprint Business – severance reimbursement

Purchases of property and equipment

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Dividends paid

Redemption and extinguishment – 2024 Euro Notes

Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $ 1,290

Proceeds from exercises of stock options

Principal payments on installment payment agreement

Principal payments of finance lease obligations

1 unchanged sentence

Effect of exchange rates changes on cash

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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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”) 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.

On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, LLC (formerly Cogent Communications Group, Inc.) (“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

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

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

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

References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, LLC (formerly Cogent Communications Group, Inc.) and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc.

and its subsidiaries.

Cogent Communications, Inc.

is wholly owned by Group and the vast majority of the Company’s assets, contractual arrangements, and operations are executed by Sprint Communications Company LP and Cogent Communications, Inc.

Cogent Communications, LLC (formerly Cogent Communications, Inc.) is wholly owned by Group, Sprint Communications Company LP is indirectly wholly owned by Holdings, and the vast majority of the Company’s assets, contractual arrangements, and operations are executed by Sprint Communications Company LP and Cogent Communications, LLC.

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 switched data.

The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 54 countries across North America, Europe, South America, Oceania and Africa.

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.

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Content delivery customers include over the top media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.

Access 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.

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.

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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.

Additionally, the Sprint Business (as defined below) 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.

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 our 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.

On September 6, 2022, Cogent Infrastructure, LLC (formerly 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.

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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 loss for the three-month period ended September 30, 2023 were $ 113.0 million and $ 82.1 million, respectively.

Revenue and pre-tax loss for the Sprint Business included in the Company's condensed consolidated statements of comprehensive income for the nine-month period ended September 30, 2023 were $ 191.0 million and $ 141.6 million, respectively.

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

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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.

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”).

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 $ 28.1 million ($ 19.8 million net of discount) 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.

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The determination of the discount rate requires some judgment.

The amortization of the discount resulted in interest income of $ 0.7 million and $ 1.2 million for the three and nine months ended September 30, 2023, respectively.

The Seller is disputing approximately $ 24.2 million of the Short-term Lease

Payment amount that was accounted for by the Seller as a service agreement and not as a finance lease.

As of September 30, 2023, the Company reclassified $ 160.9 million of a lease liability at the Closing Date previously recorded as an operating lease to a finance lease.

A final determination of the Working Capital Adjustment and the Short-term Lease Payment is expected by the end of 2023.

During the third quarter of 2023, the Short - term Lease Payment was reduced by $ 4.8 million and in the first quarter of 2024 the Short - term Lease Payment was reduced by an additional $ 17.0 million, net of discount of $ 7.2 million.

Including the cumulative impact of the first quarter 2024 adjustment, the amortization of the discount resulted in interest expense of $ 0.5 million for the three months ended March 31, 2024.

The Purchase Agreement also includes reimbursement from Seller to Buyer for qualifying severance expenses incurred, which were $ 4.3 million in the three months ended March 31, 2024 and $ 16.2 million in the year ended December 31, 2023.

The final determination of the Working Capital Adjustment and the Short-term Lease Payment was completed in April 2024 and the Company paid the Seller $ 5.0 million for the remaining Working Capital Adjustment.

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 three and nine months ended TMUSA paid the Company $ 87.5 million and $ 116.7 million, respectively, under the IP Transit Agreement.

On October 3, 2023 an additional $ 29.2 million payment was received.

On November 2, 2023, an additional $ 29.2 million payment was received.

On the Closing Date, Cogent Communications, LLC (formerly 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 three months ended March 31, 2024, TMUSA paid the Company $ 87.5 million under the IP Transit Services Agreement.

The Company accounted for the Transaction as a business combination under ASC Topic 805 Business Combinations (“ASC 805”).

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The determination of the discount rate requires some judgment.

The amortization of the discount resulted in interest income of $ 10.3 million and $ 18.0 million for the three and nine months ended September 30, 2023, respectively.

The amortization of the discount resulted in interest income of $ 7.3 million for the three months ended March 31, 2024.

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 Seller to the Buyer include, among others, information technology support, back office and finance, real estate and facilities, vendor and supply chain management, including 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.

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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 and at cost plus 20 percent, if the TSA is extended.

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.

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Amounts billed under the TSA are due 30 days from receipt of the related invoice.

During the three and nine months ended September 30, 2023 the Company was billed $ 101.2 million and $ 218.0 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 three and nine months ended September 30, 2023 the Company paid $ 153.1 million to the Seller under the TSA.

As of September 30, 2023, the Company owed $ 69.6 million to the Seller and the Seller owed $ 16.8 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.

During the three months ended March 31, 2024, the Company was billed $ 16.7 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 three months ended March 31, 2024, the Company paid $ 78.5 million to the Seller under the TSA that included payments for amounts billed in 2023.

As of March 31, 2024, the Company owed $ 5.8 million to the Seller and the Seller owed $ 3.2 million to the Company under the TSA.

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 three and nine months ended September 30, 2023 the Company recorded $ 8.0 million and $ 15.3 million, respectively from TMUSA as service revenue under the Commercial Agreement.

As of September 30, 2023, TMUSA owed $ 3.2 million to the Company under the Commercial Agreement.

In addition, on the Closing Date, the Buyer and TMUSA entered into a commercial agreement (the “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 three months ended March 31, 2024, the Company recorded $ 3.2 million from TMUSA as service revenue under the Commercial Agreement.

As of March 31, 2024, TMUSA owed $ 20.0 million to the Company under the Commercial Agreement.

These amounts are included in accounts receivable.

Acquisition-Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement, the Company has incurred a total of $ 3.7 million in professional fees, including $ 0.4 million and $ 1.5 million incurred in the three and nine months ended September 30, 2023, respectively.

In connection with the Transaction and negotiation of the Purchase Agreement, the Company has incurred a total of $ 9.2 million of professional fees and other acquisition related costs and $ 20.6 million of reimbursed severance costs.

For the three months ended March 31, 2024, such professional fees and other acquisition related costs and reimbursed severance costs were $ 4.7 million and $ 4.3 million, respectively.

For the three months ended March 31, 2023 such professional fees were $ 0.4 million.

Consideration

During the three months ended September 30, 2023, the Company updated its Working Capital Adjustment resulting in an additional $ 1.5 million due to the Seller and updated its Short-term Lease Payment resulting in a decrease of $ 5.0 million due from the Seller.

The revised acquisition-date fair value of consideration to be received from the Transaction totaled $ 591.0 million and comprised of the following:

The acquisition-date fair value of consideration to be received from the Transaction totaled $ 594.6 million and comprised of the following:

(In thousands)

Estimated working capital payments made to the Seller (a)

Estimated working capital payments made to the Seller, net of severance reimbursements (a)

Estimated Purchase Agreement payment to be received from the Seller, net of discount of $ 8,392 (b)

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Total net consideration to be received from the Seller (d)

(a) Includes $ 61.1 million paid to the Seller on the Closing Date and an accrual of $ 5.0 million due to the Seller that was paid in April 2024.

Additionally, includes an offsetting $ 20.6 million in total severance reimbursement payments received from the Seller recorded as measurement period adjustments during the fourth quarter of 2023 ($ 16.2 million) and $ 4.3 million recorded as a measurement period adjustment during the first quarter of 2024.

(b) Under the Purchase Agreement, 50 % of the assumed short-term operating lease liabilities totaling $ 28.1 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 $ 8.4 million.

During the first quarter of 2024, the Working Capital Adjustment was adjusted by $ 17.0 million, net of discount of $ 7.2 million to reflect the conclusion of the determination of amounts due from the Seller from the Short - term Lease Payment.

(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

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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, 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.

The corresponding adjustment to the condensed consolidated statement of comprehensive loss for the three-month and nine-month periods ended September 30, 2023 was not material.

During the first quarter of 2024, the Company recorded a measurement period adjustment resulting in a reduction to the gain on bargain purchase of $ 5.5 million which includes;

● A reduction to the Short-term Lease Receivable of $ 24.2 million ( $ 17.0 million net of discount).

● Additional reimbursed severance costs of $ 4.3 million

● An increase to unfavorable lease liabilities of $ 6.0 million

● A reduction to accrued liabilities of $ 11.3 million;

● A reduction to deferred income tax liabilities resulting from the adjustments noted above of $ 1.9 million

The Transaction is considered an asset purchase for income tax purposes.

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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.

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The following table summarizes the fair values for each major class of assets acquired and liabilities assumed at the Closing Date.

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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 additional reimbursable severance costs and modification to the effective income tax rate.

Current assets:

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Right-of-use leased assets

Intangible assets

IPV4 intangible assets

Other intangible assets

Deposits and other assets

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Fair value of net assets acquired

Total net consideration to be received from the Seller, net of discounts (b) (c) (d)

Total net consideration to be received from the Seller, net of discounts - see table above

Gain on bargain purchase

(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.

A final determination of the Working Capital Adjustment is expected by the end of 2023.

IP Transit Services Agreement

(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 2023.

(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

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Intangible Assets

Intangible assets include $ 57.0 million of acquired customer relationships with an estimated useful life of nine years and were determined using the income approach.

This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820:

Fair Value Measurement .

The key assumptions in applying the income approach include the discount rate, projected revenue from existing customers, customer attrition rate and projected capital and operating expenditures.

Amortization expense for the three and nine months ended September 30, 2023 was $ 1.6 million and $ 2.6 million, respectively.

Future amortization expense of the customer relationships is $ 6.3 million per year for nine years .

Asset Retirement Obligations

In connection with the Transaction, the Company assumed $ 35.0 million of asset retirement obligations related to restoration obligations for acquired leases.

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 that 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 was $ 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 $ 157.2 million that was valued using the income approach.

Unfavorable lease liabilities are 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 March 31, 2024.

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 three months ended March 31, 2024 was $ 0.4 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 that 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 three months ended September 30, 2023 were $ 0.7 million and $ 2.1 million, respectively.

Accretion of the asset retirement obligations and amortization of the asset retirement assets for the nine months ended September 30, 2023 were $ 1.1 million and $ 3.5 million, respectively.

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 three months ended March 31, 2024 were $ 0.6 million and $ 1.9 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 11 of 45

Pro Forma Information

2 unchanged sentences

The pro forma results do not include anticipated synergies or other expected benefits of the acquisition.

The pro forma results for the nine months ended September 30, 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 five months ended September 30, 2023.

The unaudited pro forma information is based upon available information and certain assumptions that the Company believes are reasonable under the circumstances.

2 unchanged sentences

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, 2023, nor do they purport to project the future consolidated results of operations.

(In thousands)

September 30, 2023

September 30, 2022

(In thousands) (unaudited)

March 31, 2023

Service revenue

Operating loss from continuing operations

The pro forma results for the nine months ended September 30, 2022 include estimates for the gain on bargain purchase related to the Transaction of $ 1.2 billion, interest income from the amortization of the discount recorded under the IP Transit Services Agreement of $ 29.4 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 $ 35.4 million, amortization expense related to the customer relationship intangible assets of $ 4.8 million, the elimination of amounts charged from the parent company to the Sprint Business as autonomous entity expense adjustments of $ 24.9 million, amortization of unfavorable lease liabilities of $ 29.1 million, a reduction to network operations expense of $ 37.8 million and an increase to interest expense of $ 8.4 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 $ 19.0 million.

The historical results of the Sprint Business for the nine months ended September 30, 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 nine months ended September 30, 2023 include the gain on bargain purchase related to the Transaction of $ 1.2 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 $ 29.5 million, amortization expense related to the customer relationship intangible assets of $ 2.1 million, amortization of unfavorable lease liabilities of $ 12.9 million, a reduction to network operations expense of $ 16.8

Page 12 of 48

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 $ 2.3 million.

The pro forma results for the three months ended March 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 $ 11.3 million,

● A net increase to historical depreciation expense based on the fair value of property and equipment and the impact of a finance lease of $ 20.5 million,

● Amortization expense related to the customer relationship intangible assets of $ 0.4 million,

● Amortization of unfavorable lease liabilities of $ 1.4 million,

● An increase to interest expense of $ 3.0 million and a reduction to network operations expense of $ 12.6 million from the impact of a finance lease adjustment;

● The impact to income tax expense from the pro-forma adjustments of $ 0.3 million.

Basis of presentation

5 unchanged sentences

While the Company believes that the disclosures are adequate to not make the information misleading, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in its annual report on Form 10-K for the year ended December 31, 2023.

Certain prior year amounts have been reclassified to conform to current year presentation.

The accompanying unaudited condensed consolidated financial statements include all wholly owned subsidiaries.

All inter-company accounts and activity have been eliminated.

Page 12 of 45

Use of estimates

2 unchanged sentences

Financial instruments

At September 30, 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.

At March 31, 2024 and December 31, 2023, 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 September 30, 2023, the fair value of the Company’s $ 450.0 million aggregate principal amount of 7.00 % Senior Unsecured Notes due 2027 (the “2027 Notes”) was $ 427.5 million, the fair value of the Company’s $ 500.0 million aggregate principal amount of 3.50 % Senior Secured Notes due 2026 (the “2026 Notes”) was $ 460.0 million and the estimated liability fair value of the Company’s interest rate swap agreement was $ 56.4 million.

Based upon recent trading prices (Level 2—market approach) at March 31, 2024, the fair value of the Company’s $ 450.0 million aggregate principal amount of 7.00 % Senior Unsecured Notes due 2027 (the “2027 Notes”) was $ 446.6 million, the fair value of the Company’s $ 500.0 million aggregate principal amount of 3.50 % Senior Secured Notes due 2026 (the “2026 Notes”) was $ 475.0 million and the estimated liability fair value of the Company’s interest rate swap agreement was $ 44.8 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 3 and was $ 57.6 million as of September 30, 2023.

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 3 and was $ 44.8 million as of March 31, 2024.

Additional cash may be further restricted to maintain our Swap Agreement as interest rates fluctuate and margin requirements change.

4 unchanged sentences

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

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and costs of network operations) were $ 14.6 million and $ 4.1 million for the three months ended September 30, 2023 and September 30, 2022, respectively, and $ 29.8 million and $ 11.3 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Page 13 of 48

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $ 20.5 million and $ 4.2 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

Basic and diluted net income per common share

3 unchanged sentences

The following details the determination of diluted weighted-average shares:

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Weighted-average common shares - basic

2 unchanged sentences

Weighted-average common shares - diluted

Page 13 of 45

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

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Unvested shares of restricted common stock

1 unchanged sentence

Anti-dilutive shares of restricted common stock

Page 14 of 48

Stockholders’ (Deficit) Equity

The following details the changes in stockholders’ (deficit) equity for the three and nine months ended September 30, 2023 and September 30, 2022, respectively (in thousands except share data):

Comprehensive

Stockholders’

Income (Loss)

Equity (Deficit)

Balance at June 30, 2022

Forfeitures of shares granted to employees

Equity-based compensation

Foreign currency translation

Issuances of common stock

Exercises of options

Dividends paid

Balance at September 30, 2022

( 1,031,465 )

Comprehensive

Stockholders’

Income (Loss)

Equity (Deficit)

Balance at June 30, 2023

Forfeitures of shares granted to employees

Equity-based compensation

Foreign currency translation

Issuances of common stock

Exercises of options

Dividends paid

Balance at September 30, 2023

The following details the changes in stockholders’ (deficit) equity for the three and three months ended March 31, 2024 and March 31, 2023, respectively (in thousands except share data):

Comprehensive

1 unchanged sentence

Income (Loss)

Equity (Deficit)

Balance at December 31, 2022

( 1,074,588 )

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at September 30, 2022

Balance at March 31, 2023

( 1,113,751 )

Page 15 of 48

Comprehensive

3 unchanged sentences

Balance at December 31, 2023

( 1,074,588 )

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at September 30, 2023

Balance at March 31, 2024

Revenue recognition

6 unchanged sentences

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.

Page 14 of 45

The Company’s service offerings consist primarily of on-net and off-net telecommunications services.

11 unchanged sentences

5) Recognition of revenue when, or as, the Company satisfies its performance obligations

Page 16 of 48

Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above.

2 unchanged sentences

The Company recognizes revenue for termination fees as they are collected.

Deferred revenue recognized and contract cost amortization were as follows:

(in thousands)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Service revenue recognized from balance at beginning of period

7 unchanged sentences

(Amounts in thousands)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Finance lease cost

3 unchanged sentences

Total lease costs

September 30, 2023

September 30, 2022

Page 15 of 45

March 31, 2024

March 31, 2023

Other lease information (amounts in thousands)

9 unchanged sentences

Weighted-average discount rate — operating leases

Page 17 of 48

Finance leases—fiber lease agreements

5 unchanged sentences

The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term.

The implicit rates within the Company’s operating leases are generally not determinable and the Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including the level of collateralization and term to align with the term of the lease.

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 September 30, 2023, the Company had committed to additional dark fiber IRU lease agreements totaling $ 167.0 million in future payments to be paid over periods of up to 20 years .

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

As of March 31, 2024, the Company had committed to additional dark fiber IRU lease agreements totaling $ 267.9 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.

Operating leases

The Company leases office space and certain data center facilities under operating leases.

In certain cases, the Company also enters into short-term operating leases for dark fiber.

The Company leases office space, rights-of-way 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.

9 unchanged sentences

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

Page 16 of 45

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

For the Twelve Months Ending September 30,

For the Twelve Months Ending March 31,

Total minimum lease obligations

3 unchanged sentences

Lease obligations, net of current maturities

Page 18 of 48

Unfavorable lease liabilities

In connection with the Transaction, the Company recorded $ 157.2 million of unfavorable lease liabilities for leases with terms greater than current market rates.

The liability is classified with the corresponding right-of-use lease assets and is being amortized into the condensed consolidated statement of comprehensive income in the same line items as the activity for the corresponding right-of-use lease assets.

For the three and nine months ended September 30, 2023 the Company amortized $ 9.7 million and $ 16.2 million, respectively, as a reduction to network operations expenses.

The liability is classified with the corresponding right-of-use lease assets and is being amortized into the condensed consolidated statement of comprehensive (loss) income in the same line items as the activity for the corresponding right-of-use lease assets.

For the three months ended March 31, 2024 the Company amortized $ 2.4 million as a reduction to network operations expenses and $ 8.9 million as a reduction to depreciation expense.

Allowance for credit losses

8 unchanged sentences

Allowance for credit losses (deducted from accounts receivable) (in thousands)

Three months ended September 30, 2023

Three months ended September 30, 2022

Nine months ended September 30, 2023

Nine months ended September 30, 2022

Three months ended March 31, 2024

Three months ended March 31, 2023

(in thousands)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Net bad debt expense (a)

March 31, 2024

March 31, 2023

Net bad debt expense

Bad debt recoveries

(a) Net bad debt expense related to the Wireless Business to reestablish an allowance for credit losses was $ 3.0 million for both the three and nine months ended September 30, 2023.

Under ASC 805, accounts receivable are recorded at their book value representing the fair value of accounts receivable at the acquisition date.

Page 17 of 45

Property and equipment:

Depreciation and amortization expense related to property and equipment and finance leases and capitalized compensation costs of employees directly involved with construction activities were as follows (in thousands):

(in thousands)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Depreciation and amortization expense

Capitalized compensation cost

Page 19 of 48

Long-term debt:

As of September 30, 2023, the Company had outstanding $ 450.0 million aggregate principal amount of 2027 Notes and $ 500.0 million aggregate principal amount of 2026 Notes.

As of March 31, 2024, the Company had outstanding $ 450.0 million aggregate principal amount of 2027 Notes and $ 500.0 million aggregate principal amount of 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.

2 unchanged sentences

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.

Limitations under the indentures

9 unchanged sentences

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

As of September 30, 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 September 30, 2023, a total of $ 461.8 million (inclusive of a $ 250.0 million general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases.

As of March 31, 2024, 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 March 31, 2024, a total of $ 460.1 million (inclusive of a $ 250.0 million general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases.

Interest rate swap agreement

As of September 30, 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.

As of March 31, 2024, 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.

2 unchanged sentences

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 September 30, 2023, the fair value of the Swap Agreement was a net liability of $ 56.4 million, of which $ 23.9 million is presented with accrued and other current liabilities and $ 32.5 million is presented with other long-term liabilities.

Changes in interest rates affect the valuation of the Swap Agreement that the Company recognizes in its consolidated statements of comprehensive (loss) income.

As of March 31, 2024, the fair value of the Swap Agreement was a net liability of $ 44.8 million, of which $ 23.2 million is presented with accrued and other current liabilities and $ 21.6 million is presented with other long-term liabilities.

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.

In the three months ended September 30, 2023 and 2022, the Company recorded unrealized losses related to the Swap Agreement of $ 4.8 million and $ 16.9 million, respectively, and in the nine months ended September 30, 2023 and 2022, the Company recorded unrealized losses related to the Swap Agreement of $ 4.3 million and $ 45.7 million, respectively.

In the three months ended March 31, 2024 and three months ended March 31, 2023, the Company recorded an unrealized (loss) gain related

Page 18 of 45

to the Swap Agreement of ($ 6.2 ) million and $ 1.8 million, respectively.

The Company has made a $ 45.8 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 45.8 million, the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

As of September 30, 2023, $ 56.4 million of the deposit was restricted and $ 1.2 million was unrestricted.

As of November 6, 2023, the fair value of the Swap Agreement was reduced to $ 43.8 million.

Page 20 of 48

As of March 31, 2024, $ 44.8 million of the deposit was restricted and $ 1.0 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 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.

Under the settlement payment made in May 2024, the Company made a payment of $ 12.1 million to the counterparty for a net cash interest cost of $ 12.1 million for the period from November 1, 2023 to April 30, 2024.

Commitments and contingencies :

3 unchanged sentences

The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $ 4.0 million in excess of the amount accrued at September 30, 2023.

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 March 31, 2024.

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

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Common stock buyback program and stock options and award plan:

The Company’s Board of Directors has approved purchases of shares of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2024.

As of September 30, 2024, there was $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock in the three months or the nine months ended September 30, 2023 and 2022.

During the three months ended March 31, 2023, the Company granted 258,762 shares of restricted stock primarily to its executive employees valued at $ 16.0 million that primarily vest over periods ending in December 2026.

The vesting of 104,850 of these shares is subject to certain performance conditions.

Of the total performance shares granted, the vesting of up to 29,334 performance shares granted to the Company’s CEO is subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index.

In connection with the Transaction, the Company granted 308,782 shares of restricted stock to former employees of the Sprint Business and to its employees valued at $ 19.5 million and that generally vest over a 2 - 3 year period.

As of March 31, 2024, there was $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock in the three months ended March 31, 2024 or 2023.

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In May 2023, the Company’s stockholders approved an increase of available shares for issuance under its 2017 Incentive Award Plan of 1.2 million shares.

Dividends on common stock:

On November 1, 2023, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.955 per common share.

This estimated $ 45.1 million dividend payment is expected to be made on December 8, 2023.

On February 28, 2024, our Board of Directors approved the payment of our first quarter 2024 dividend of $ 0.965 per share of common stock to holders of record as of March 15, 2024.

This $ 45.8 million dividend payment was paid on April 9, 2024 and is accrued on our condensed consolidated balance sheet as of March 31, 2024.

On May 8, 2024, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.975 per share of common stock.

This estimated $ 46.3 million dividend payment is expected to be paid on June 7, 2024.

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.

3 unchanged sentences

Office leases

The Audit Committee of the Company's Board of Directors (the "Audit Committee") reviews and approves all transactions with related parties.

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.

2 unchanged sentences

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.

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 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 April 1, 2023 (or an actual later date of occupancy).

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.

6 unchanged sentences

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 $ 0.9 million and $ 0.5 million in the three months ended September 30, 2023 and 2022, respectively, and $ 2.1 million and $ 1.4 million in the three and nine months ended September 30, 2023 and 2022, respectively, for rent and related costs (including taxes and utilities) for these leases.

The Company paid $ 0.8 million during the three months ended March 31, 2024 and $ 0.4 million during the three months ended March 31, 2023 for rent and related costs (including taxes and utilities) for these leases.

Page 20 of 45

2 unchanged sentences

The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands):

Three Months Ended September 30, 2023

North America

South America

Three Months Ended September 30, 2022

North America

South America

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

North America

South America

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

North America

South America

September 30,

Long-lived assets, net

2 unchanged sentences

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

Subsequent events:

On May 2, 2024, Cogent IPv4 LLC, a special-purpose, bankruptcy remote, indirect wholly owned subsidiary of the Company (the “Securitization Issuer”), completed a financing transaction pursuant to which it issued $ 206.0 million aggregate principal amount of secured Internet Protocol version 4 (“IPv4”) address revenue notes (the “Securitization”), consisting of 7.924 % Series 2024-1, Class A-2 term notes with a term ending in May 2029, in an offering exempt from registration under the Securities Act of 1933, as amended.

In connection with the consummation of the Securitization, the Company:

transferred or assigned to Group, the co-issuer of the Company’s existing senior notes, or its subsidiaries (a) certain IPv4 addresses (which IPv4 addresses are not included as collateral for the Securitization) held by the Company’s direct subsidiary, Cogent Infrastructure, LLC (formerly Cogent Infrastructure, Inc.) (“Cogent Infrastructure”), or its subsidiaries, (b) certain customer contracts that are unrelated to the Securitization and (c) the equity interests of Cogent Infrastructure’s indirect subsidiary, Sprint Solutions Wireline LLC, including all liabilities and obligations associated therewith;

Page 21 of 45

entered into (a) leases on behalf of Cogent Infrastructure or its subsidiaries, as lessor, and Group or its subsidiaries, as lessee, for the use of certain premises held by Cogent Infrastructure of its subsidiaries, and (b) a dark fiber indefeasible right of use agreement in favor of Cogent Group or its subsidiaries for the use of certain fiber optic routes owned by Cogent Infrastructure or its subsidiaries;

prior to the transfer of the equity of the Securitization Issuer from Group or its subsidiaries, transferred or assigned to the Securitization Issuer (a) certain IPv4 addresses held by Cogent Group or its subsidiaries and (b) any related customer contracts;

transferred the equity of the Securitization Issuer from Group or one of its subsidiaries to Cogent Infrastructure or one of its subsidiaries;

following the transfer of the equity of the Securitization Issuer to Cogent Infrastructure or one of its subsidiaries, transferred or assigned to the Securitization Issuer (a) certain IPv4 addresses held by Cogent Infrastructure or its subsidiaries and (b) any related customer contracts;

in each case, in amounts of substantially equivalent value and delivered by the Company to Group or Cogent Infrastructure, as applicable, as a contribution to capital.

For the avoidance of doubt, following the consummation of the foregoing, the Securitization Issuer became an indirect subsidiary of Cogent Infrastructure and holds the IPv4 addresses contributed to it by Group, Cogent Infrastructure and/or their respective subsidiaries in connection with the foregoing.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements