What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 188 added, 175 removed, 612 unchanged (37% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2024 AND DECEMBER 31, 2023

AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets:

48 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1 unchanged sentence

Three Months Ended

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

Service revenue

5 unchanged sentences

Total operating expenses

Gain on lease termination

Operating loss

4 unchanged sentences

Interest income and other, net

(Loss) income before income taxes

Loss before income taxes

Income tax benefit

Net (loss) income

Comprehensive (loss) income:

Net (loss) income

Comprehensive loss:

Foreign currency translation adjustment

Comprehensive (loss) income

Net (loss) income per common share:

Basic net (loss) income per common share

Diluted net (loss) income per common share

Comprehensive loss

Net loss per common share:

Basic net loss per common share

Diluted net loss per common share

Dividends declared per common share

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Six Months Ended

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

Service revenue

29 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(IN THOUSANDS)

Six Months Ended

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

Cash flows from operating activities:

14 unchanged sentences

Due from T-Mobile – Transition Services Agreement

Unfavorable lease liabilities

Accounts payable, accrued liabilities and other long-term liabilities

5 unchanged sentences

Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

12 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Fair value of equipment acquired in leases

Finance lease obligations incurred

10 unchanged sentences

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 is a facilities-based provider of low-cost, high-speed Internet access, private network services, optical wavelength and optical transport services and data center colocation space and power.

The Company’s network is specifically designed and optimized to transmit packet routed data.

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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.

In connection with the Company’s acquisition of Sprint Communications, the Company began to provide optical wavelength services and optical transport services over a network that is generally independent of the Company’s legacy IP 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.

9 unchanged sentences

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 both the three- and six-month periods ended June 30, 2023 were $ 78.0 million and $ 65.6 million, respectively.

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 (loss) income for the nine-month period ended September 30, 2023 were $ 191.0 million and $ 141.6 million, respectively.

Purchase Price

3 unchanged sentences

During the third quarter of 2023, an additional Working Capital Adjustment of $ 5.0 million was accrued due to the Seller.

Short-term leases

The Purchase Agreement also provides for an estimated payment of $ 28.1 million ($ 19.8 million net of discount) from Seller to the Buyer related to acquired short-term lease obligations (the “Short-term Lease Payment”).

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

Short-term lease payment

The Purchase Agreement also provides for an estimated payment of $ 28.1 million ($ 19.8 million net of discount) from the Seller to the Buyer related to acquired short-term operating 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 final determination of the Short - term Lease Payment was completed in April 2024.

The Short-term Lease Payment was recorded at its present value resulting in a discount of $ 8.4 million.

2 unchanged sentences

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 income (expense) of $ 0.4 and $ 0.5 million for the three months ended June 30, 2024 and 2023, respectively and ($ 0.1 ) and $ 0.5 million for the six months ended June 30, 2024 and 2023, respectively.

Including the cumulative impact of the first quarter 2024 adjustment, the amortization of the discount resulted in interest income of

$ 0.4 and $ 0.7 million for the three months ended September 30, 2024 and 2023, respectively and $ 0.3 and $ 1.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Severance reimbursement

The Purchase Agreement also provides for reimbursement from the Seller to the Buyer for qualifying severance expenses incurred.

Total qualifying severance expenses were $ 28.6 million of which $ 8.0 million and $ 12.3 million were recorded in the three and six months ended June 30, 2024, respectively.

No reimbursement amounts were recorded in the three and six months ended June 30, 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.

Total qualifying severance expenses were $ 28.6 million of which $ 12.3 million were recorded in the nine months ended September 30, 2024.

No reimbursement amounts were recorded in the three and nine months ended September 30, 2023 or in the three months ended September 30, 2024.

IP Transit Services Agreement

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.

Under the IP Transit Services Agreement., TMUSA paid the Company $ 66.7 million and $ 29.2 million, during the three months ended June 30, 2024 and 2023, respectively, and $ 154.2 million and $ 29.2 million during six months ended June 30, 2024 and 2023, respectively.

Under the IP Transit Services Agreement., TMUSA paid the Company $ 25.0 million and $ 87.5 million, during the three months ended September 30, 2024 and 2023, respectively, and $ 179.2 million and $ 116.7 million during the nine months ended September 30, 2024 and 2023, respectively.

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.

1 unchanged sentence

The determination of the discount rate requires some judgment.

The amortization of the discount resulted in interest income of $ 5.9 million and $ 7.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 13.3 million and $ 7.7 million for the six months ended June 30, 2024 and 2023, respectively.

The amortization of the discount resulted in interest income of $ 5.4 million and $ 10.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 18.7 million and $ 18.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Transition Services Agreement

6 unchanged sentences

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.

Either party to the TSA may terminate the agreement 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.

3 unchanged sentences

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.

During the three and six months ended June 30, 2024, the Company was billed $ 6.7 million and $ 23.3 million as due to the Seller under the TSA, respectively.

During the three and six months ended June 30, 2023, the Company was billed $ 116.8 million and $ 116.8 million as due to the Seller under the TSA, respectively.

During the three and six months ended June 30, 2024, the Company paid the Seller $ 9.8 million and $ 88.2 million, respectively, under the TSA.

There were no amounts paid under the TSA for the three and six months ended June 30, 2023 since no payments were due until July 2023.

As of June 30, 2024, the Company owed $ 2.3 million to the Seller and the Seller owed $ 3.9 million to the Company under the TSA.

During the three and nine months ended September 30, 2024, the Company was billed $ 3.0 million and $ 26.3 million as due to the Seller under the TSA, respectively.

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.

During the three and nine months ended September 30, 2024, the Company paid the Seller $ 3.7 million and $ 91.9 million, respectively, under the TSA.

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, 2024, the Company owed

$ 1.6 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 Company under the TSA.

Other Services Provided to Seller

Other Services Provided to the Seller

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.

Under the Commercial Agreement, the Company recorded revenue of $ 5.9 million and $ 7.3 million during the three months ended June 30, 2024 and 2023, respectively, and $ 9.1 million and $ 7.3 million during the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, and December 31, 2023, TMUSA owed $ 7.3 million and $ 1.6 million, respectively, to the Company under the Commercial Agreement.

These amounts are included in accounts receivable.

Under the Commercial Agreement, the Company recorded revenue of $ 5.9 million and $ 8.0 million during the three months ended September 30, 2024 and 2023, respectively, and $ 13.2 million and $ 15.3 million during the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, and December 31, 2023, TMUSA owed $ 4.1 million and $ 1.6 million, respectively, to the Company under the Commercial Agreement.

These amounts are recorded in accounts receivable.

Acquisition-Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement, the Company incurred professional fees and other acquisition related costs, including $ 12.4 million and $ 0.7 million incurred in the three months ended June 30, 2024 and 2023, respectively, and $ 21.4 million and $ 1.1 million incurred in the six months ended June 30, 2024 and 2023, respectively.

In connection with the Transaction and negotiation of the Purchase Agreement, the Company incurred a total of $ 13.6 million of professional fees and other acquisition related costs (not including severance costs) since the acquisition date.

Acquisition related costs were $ 0.4 million for the three months ended September 30, 2023 and $ 21.4 million and $ 1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

There were no acquisition related costs in the three months ended September 30, 2024.

Consideration

6 unchanged sentences

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

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

(a) Includes $ 61.1 million paid to the Seller on the Closing Date and $ 5.0 million paid in April 2024.

Additionally, includes an offsetting $ 28.6 million in total severance reimbursement payments received from the Seller recorded as measurement period adjustments of

$ 16.2 million during the fourth quarter of 2023,

● $ 16.2 million during the three months ended December 31, 2023,

● $ 4.3 million during the three months ended March 31, 2024, and

● $ 8.0 million during the three months ended June 30, 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 net of discount, was adjusted by $ 17.0 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.

(b) Under the Purchase Agreement, 50.0 % of the assumed short-term operating lease liabilities totaling $ 28.1 million are to be paid to the Company from the Seller in four equal installments in months 55 - 58 from the Closing Date and was recorded at their present value resulting in a discount of $ 8.4 million.

During the three months ended March 31, 2024, the Working Capital Adjustment net of discount, was adjusted by $ 17.0 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 were 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.

10 unchanged sentences

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.

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 included;

During the three months ended March 31, 2024, the Company recorded a measurement period adjustment resulting in a reduction to the gain on bargain purchase of $ 5.5 million which included;

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

3 unchanged sentences

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

During the second quarter of 2024, the Company recorded measurement period adjustments resulting in an increase to the gain on bargain purchase of $ 27.7 million including

During the three months ended June 30, 2024, the Company recorded measurement period adjustments resulting in an increase to the gain on bargain purchase of $ 27.7 million which included;

● Additional reimbursed severance costs of $ 8.0 million, and

31 unchanged sentences

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 that were valued using a combination of the cost and market approaches.

This is primarily comprised of the legacy Sprint network and consists of optical fiber, related equipment, and owned real estate that were valued using a combination of cost and market approaches.

Management intends to operate the acquired business;

6 unchanged sentences

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.

In accordance with ASC 805 and ASC Topic 842 Leases , 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.

7 unchanged sentences

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 June 30, 2024.

There was no impairment recorded during the period from May 1, 2023 through September 30, 2024.

During the fourth quarter of 2023, the Company recorded a reduction to acquired customer relationships, totaling $ 41.0 million from revisions to certain assumptions.

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 was $ 0.4 and $ 1.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 0.9 million and $ 1.1 million for the six months ended June 30, 2024 and 2023, respectively.

Amortization expense was $ 0.4 and $ 1.6 million for the three months ended September 30, 2024 and 2023, respectively, and $ 1.3 million and $ 2.6 million for the nine months ended September 30, 2024 and 2023, respectively.

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

1 unchanged sentence

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 is recorded as an increase to network operations expenses and amortization of the asset retirement assets is recorded as depreciation and amortization expenses, as shown in the table below.

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.

(in thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Depreciation and amortization expense

Network operations expense

Reassessment of Bargain Purchase Gain

5 unchanged sentences

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

The pro forma results for the six months ended June 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 two months ended June 30, 2023.

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.

Actual results may differ materially from the assumptions within the accompanying unaudited pro forma financial information.

The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what

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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.

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)

June 30, 2023

September 30, 2023

Service revenue

Operating loss from continuing operations

The pro forma results for the six months ended June 30, 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 a finance lease adjustment 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 a finance lease adjustment and the impact to income tax expense from the pro-forma adjustments of $ 2.3 million.

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

● The gain on bargain purchase related to the Transaction of $ 1.4 billion,

● Interest income from the amortization of the discount recorded under the IP Transit Services Agreement of $ 14.7 million,

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● A net increase to historical depreciation expense based on the fair value of property and equipment and the impact of a finance lease adjustment of $ 29.5 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 a finance lease adjustment, and

● The impact to income tax expense from the pro-forma adjustments of $ 2.9 million.

Basis of presentation

12 unchanged sentences

Financial instruments

At June 30, 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.

At September 30, 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 June 30, 2024,

Based upon recent trading prices (Level 2—market approach) at September 30, 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 $ 455.6 million,

● The fair value of the Company’s $ 300.0 million aggregate principal amount of 7.00 % Senior Unsecured Mirror Notes due 2027 (the “2027 Mirror Notes”) was $ 303.8 million,

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● 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 $ 482.5 million,

1 unchanged sentence

● The fair value of the Company’s interest rate swap agreement was $ 29.9 million.

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Restricted cash and interest rate swap agreement

Restricted cash includes 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 $ 35.5 million as of June 30, 2024.

Additional restricted cash related to the IPv4 Notes, as discussed in Note 3, was $ 6.3 million as of June 30, 2024.

Additional cash may be further restricted to maintain our Swap Agreement as interest rates fluctuate and margin requirements change and under the provisions of our IPv4 Note indenture.

Restricted cash includes amounts held in segregated bank accounts by the Company’s clearing broker as margin in support of the Company’s Swap Agreement as discussed in Note 3 and was $ 29.9 million as of September 30, 2024.

Additional restricted cash related to the IPv4 Notes, as discussed in Note 3, was $ 7.0 million as of September 30, 2024.

Additional cash may be further restricted to maintain the Company’s Swap Agreement as interest rates fluctuate and margin requirements change and under the provisions of the Company’s IPv4 Note indenture.

The Company does not use derivative financial instruments for trading purposes.

3 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 network operations expense) were $ 19.2 million and $ 11.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 39.7 million and $ 15.2 million for the six months ended June 30, 2024 and 2023, respectively.

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.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $ 19.8 million and $ 14.6 million for the three months ended September 30, 2024 and 2023, respectively, and $ 59.5 million and $ 29.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Basic and diluted net (loss) income per common share

Basic earnings (loss) 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.

1 unchanged sentence

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

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Weighted-average common shares - basic

3 unchanged sentences

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

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Unvested shares of restricted common stock

3 unchanged sentences

Stockholders’ (Deficit) Equity

The following details the changes in stockholders’ (deficit) equity for the three and six months ended June 30, 2023 and June 30, 2024, respectively (in thousands except share data):

The following details the changes in stockholders’ (deficit) equity for the three and nine months ended September 30, 2023 and September 30, 2024, respectively (in thousands except share data):

Comprehensive

1 unchanged sentence

(Deficit) Equity

Balance at March 31, 2023

( 1,113,751 )

Balance at June 30, 2023

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at June 30, 2023

Balance at September 30, 2023

Comprehensive

Stockholders’

Balance at March 31, 2024

Balance at June 30, 2024

Forfeitures of shares granted to employees

3 unchanged sentences

Exercises of options

Common stock purchases & retirement

Dividends paid

Balance at June 30, 2024

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Balance at September 30, 2024

Comprehensive

9 unchanged sentences

Dividends paid

Balance at June 30, 2023

Balance at September 30, 2023

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Comprehensive

8 unchanged sentences

Dividends paid

Balance at June 30, 2024

Balance at September 30, 2024

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.

Fees billed in connection with customer installations are recorded as deferred revenue.

5 unchanged sentences

(in thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Service revenue recognized from deferred revenue balance at beginning of period

Amortization expense for contract costs

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Lessor Accounting

The Company is a lessor for leases of owned dark fiber acquired in connection with the Transaction, that have contract terms that are accounted for as operating leases.

These transactions are generally structured as indefeasible - right - of use agreements (“IRUs”), which are the exclusive right to use specified fibers for a specified term, typically 20 - 25 years .

Cash consideration received on transfers of dark fiber, including upfront installation fees, is recognized on a straight - line basis to service revenue over the term of the agreement.

Lease income is included in service revenue in the condensed consolidated statements of comprehensive (loss) income.

In February 2016, the FASB issued ASU No.

4 unchanged sentences

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

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(Amounts in thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Finance lease cost

3 unchanged sentences

Total lease costs

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

Other lease information (amounts in thousands)

10 unchanged sentences

Operating leases and finance leases

The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs”).

The Company has entered into lease agreements with numerous providers of dark fiber under IRUs.

These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term.

2 unchanged sentences

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.

As of June 30, 2024, the Company had committed to additional IRU agreements totaling $ 301.4 million in future payments to be paid over periods of up to 20 years .

As of September 30, 2024, the Company had committed to additional IRU agreements totaling $ 302.2 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.

1 unchanged sentence

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

For the Twelve Months Ending June 30,

For the Twelve Months Ending September 30,

Total minimum lease obligations

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Unfavorable lease liabilities

During the three months ended September 30, 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 a finance lease liability.

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 (loss) income in the same line items as the activity for the corresponding right-of-use lease assets.

Amortization totaling $ 1.4 million and $ 6.5 million for the three months ended June 30, 2024 and 2023, respectively and $ 3.8 million and $ 6.5 million for the six months ended June 30, 2024 and 2023, respectively was recorded as a reduction to network operations expense.

Amortization totaling $ 9.0 million and $ 18.0 million for the three and six months ended June 30, 2024, respectively, was recorded as a reduction to depreciation expense.

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.

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

Amortization totaling $ 1.4 million and $ 9.7 million for the three months ended September 30, 2024 and 2023, respectively, and $ 5.2 million and $ 16.2 million for the nine months ended September 30, 2024 and 2023, respectively was recorded as a reduction to network operations expense.

Amortization totaling $ 10.8 million and $ 28.7 million for the three and nine months ended September 30, 2024, respectively, was recorded as a reduction to depreciation expense.

Allowance for credit losses

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

Three months ended June 30, 2024

Three months ended June 30, 2023

Six months ended June 30, 2024

Six months ended June 30, 2023

Three months ended September 30, 2024

Three months ended September 30, 2023

Nine months ended September 30, 2024

Nine months ended September 30, 2023

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(in thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Net bad debt expense (1)

Bad debt recoveries

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(1) Net bad debt expense related to the Sprint Business to establish an allowance for credit losses was $ 3.0 million for the nine months ended September 30, 2023.

Under ASC 805, accounts receivable are recorded at fair value at the acquisition date.

Property and equipment:

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(in thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Depreciation and amortization expense

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The Company is continuing to use the related IRU asset.

Change in Estimated Useful Life - Owned Fiber

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis.

This review indicated that the actual lives of owned fiber acquired as part of the Sprint acquisition were longer than the estimated useful lives used for depreciation purposes in the Company’s financial statements.

As a result, effective July 1, 2024, the Company changed its estimates of the useful lives of its owned fiber to better reflect the estimated periods during which these assets will remain in service.

The estimated useful lives of the owned fiber, within system infrastructure, that previously averaged 14 years were increased to an average of 40 years .

The effect of this change in estimate on the three and nine months ended September 30, 2024 was to reduce depreciation expense by $ 4.4 million, increase net income by $ 3.3 million, and increase basic and diluted earnings per share by $ 0.07 .

Long-term debt:

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persons in transactions outside the United States in compliance with Regulation S under the Securities Act.

The 2027 Mirror Notes have the same maturity date and call protection, bear interest at the same rate and otherwise have substantially the same terms as the Issuers’ 2027 Notes;

The 2027 Mirror Notes have the same maturity date and call protection, bear interest at the same rate and otherwise have substantially the same terms as the 2027 Notes;

however, the 2027 Mirror Notes are not fungible (from a trading or tax perspective) with the 2027 Notes and are a separate series of notes from the 2027 Notes.

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The 2027 Mirror Notes were issued at a price equal to 98.50 % of their face value.

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Group expects to use the remainder of the net proceeds for general corporate purposes and/or to make special or recurring dividends to the Company.

The 2027 Mirror Notes were issued pursuant to, and are governed by, an indenture, dated June 11, 2024 (the “2027 Mirror Notes Indenture”), among the Issuers, the Company, the other guarantors named therein and Wilmington Trust, National Association, as trustee.

The 2027 Mirror Notes are jointly and severally guaranteed (the “Guarantees”) on a senior unsecured basis by each of Group’s existing and future material domestic subsidiaries (other than the Co-Issuer), subject to certain exceptions (collectively, the “Subsidiary Guarantors”), and by the Company (together with the Subsidiary Guarantors, the “Guarantors”).

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The 2027 Mirror Notes and the Guarantees are the Issuers’ and the Guarantors’ senior unsecured obligations.

The 2027 Mirror Notes and the Guarantees are effectively subordinated to all of the Issuers’ and the Guarantors’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and are structurally subordinated to all indebtedness and other liabilities of subsidiaries that are not Guarantors.

Without giving effect to collateral arrangements, the 2027 Mirror Notes and the Guarantees rank pari passu in right of payment with all of the Issuers’ and the Guarantors’ existing and future senior indebtedness, including the Issuers’ 2026 Notes and the 2027 Notes.

The 2027 Mirror Notes and the Guarantees rank contractually senior in right of payment to all of the Issuers’ and the Guarantors’ subordinated indebtedness and are structurally subordinated to any existing and future indebtedness and other liabilities of the Issuers’ non-guarantor subsidiaries.

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The 2027 Mirror Notes bear interest at a rate of 7.00 % per annum.

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Additionally, if Group or any of its restricted subsidiaries sells assets and does not apply the proceeds from such sale in a certain manner or certain other events have not occurred, under certain circumstances, the Issuers will be required to use the net proceeds to make an offer to purchase the 2027 Mirror Notes at an offer price in cash equal to 100 % of the principal amount of the 2027 Mirror Notes, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

In connection with any offer to purchase all or any of the 2027 Mirror Notes (including a change of control offer, asset sale offer or any tender offer), if holders of no less than 90 % of the aggregate principal amount of the outstanding 2027 Mirror Notes validly tender their 2027 Mirror Notes, the Issuers or a third party is entitled to redeem any remaining 2027 Mirror Notes at the price paid to each holder.

In connection with any offer to purchase all or any of the 2027 Mirror Notes (including a change of control offer, asset sale offer or any tender offer), if holders of no less than 90 % of the aggregate principal amount of the outstanding 2027 Mirror Notes validly tender their 2027 Mirror Notes, the Issuers or a third party are entitled to redeem any remaining 2027 Mirror Notes at the price paid to each holder.

The 2027 Mirror Notes Indenture includes covenants that restrict Group and its restricted subsidiaries’ (including the Co-Issuer’s) ability to, among other things;

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Upon suspension of the covenants, the Guarantees will be released until such time as the covenants are no longer suspended.

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The principal amount of the 2027 Mirror Notes would become immediately due and payable upon the occurrence of certain bankruptcy or insolvency events involving Group, the Co-Issuer or certain of Group’s subsidiaries, and may be declared immediately due and payable by the 2027 Notes Trustee or the holders of at least 25 % of the aggregate principal amount of the then-outstanding 2027 Mirror Notes upon the occurrence of certain events of default under the 2027 Mirror Notes Indenture.

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The IPv4 Notes were issued pursuant to an indenture, dated as of May 2, 2024 (the “IPv4 Base Indenture”), as supplemented by the Series 2024-1 Supplement thereto, dated as of May 2, 2024 (the “Series 2024-1 Supplement”), in each case entered into by and between the IPv4 Issuer and Wilmington Trust, National Association, as the trustee for the IPv4 Notes (the “IPv4 Trustee”).

The IPv4 Base Indenture allows the IPv4 Issuer to issue additional series of notes subject to certain conditions set forth therein, and the IPv4

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Base Indenture, together with the Series 2024-1 Supplement, and any other series supplements to the IPv4 Base Indenture, is referred to herein as the “IPv4 Indenture.”

The IPv4 Base Indenture allows the IPv4 Issuer to issue additional series of notes subject to certain conditions set forth therein, and the IPv4 Base Indenture, together with the Series 2024-1 Supplement, and any other series supplements to the IPv4 Base Indenture, is referred to herein as the “IPv4 Indenture.”

The IPv4 Notes were issued as part of a securitization transaction, pursuant to which certain IPv4 addresses, customer IPv4 address leases, customer accounts receivable and other IPv4 address assets (collectively, “IPv4 Address Assets”) were contributed to the IPv4 Issuer and are included as collateral for the IPv4 Notes.

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Cogent Communications LLC (in such capacity, the “Manager”) performs certain monthly services related to the IPv4 Address Assets and IPv4 Notes including billing customers, collecting amounts paid by customers, forwarding payments to the IPv4 Trustee related to the IPv4 Assets and other administrative services.

Amounts paid by the Manager to the IPv4 Trustee are reconciled on a monthly basis and the Trustee pays the monthly interest on the IPv4 Notes and other expenses from the accumulated customer payments on the IPv4 Assets.

Amounts paid by the Manager to the IPv4 Trustee are reconciled on a monthly basis and the IPv4 Trustee pays the monthly interest on the IPv4 Notes and other expenses from the accumulated customer payments on the IPv4 Assets.

Amounts held by the IPv4 Trustee before the monthly reconciliation is completed are considered restricted cash.

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plus (C) the post-ARD note spread of 3.400 % applicable to such IPv4 Note.

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The IPv4 Notes are obligations only of the IPv4 Issuer pursuant to the indenture (the IPv4 Indenture”), and are secured by a security interest in substantially all of the IPv4 Address Assets pursuant to the IPv4 Indenture.

The IPv4 Notes are guaranteed by Cogent IPv4 Holdco LLC, a special-purpose entity and an indirect wholly owned subsidiary of the Company, as the guarantor (in such capacity, the “IPv4 Guarantor”), pursuant to a guaranty, dated as of May 2, 2024 (the “Guaranty”) by the IPv4 Guarantor in favor of the trustee, pursuant to which the IPv4 Guarantor has granted a security interest in the equity interests of the IPv4 Issuer as collateral security for its obligations under the Guaranty.

The IPv4 Notes are guaranteed by Cogent IPv4 Holdco LLC, a special-purpose entity and an indirect wholly owned subsidiary of the Company, as the guarantor (in such capacity, the “IPv4 Guarantor”), pursuant to a guaranty, dated as of May 2, 2024 (the “Guaranty”) by the IPv4 Guarantor in favor of the IPv4 Trustee pursuant to which the IPv4 Guarantor has granted a security interest in the equity interests of the IPv4 Issuer as collateral security for its obligations under the Guaranty.

Except as described below, neither the Company nor any subsidiary of the Company, other than the IPv4 Issuer and the IPv4 Guarantor, will guarantee or in any way be liable for the obligations of the IPv4 Issuer under the IPv4 Indenture or the IPv4 Notes.

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In addition, if certain utilization thresholds are not met (i.e., the proportion of IP addresses which are leased to the total number of IP addresses owned by the IPv4 Issuer falls below certain thresholds), the IPv4 Issuer will be required to apply collections to the repayment of the IPv4 Notes and in certain circumstances, the noteholders will have the ability to direct a sale of the IP Address Assets, in whole or in part, pursuant to the terms set forth in the IPv4 Indenture.

The IPv4 Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to

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the IPv4 Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

The IPv4 Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the IPv4 Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

Limitations Under the Indentures

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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 Group’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or Group’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater.

There are certain exceptions to the limitations on the ability to incur indebtedness under the Indentures, including IRU agreements incurred in the normal course of business and any additional indebtedness if Group’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or Group’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater.

Group and its subsidiaries can also incur unlimited liens (which can be used, together with capacity under the debt covenant, to incur additional secured indebtedness) if Group’s consolidated secured leverage ratio, as defined in the Indentures, is less than 4.0 to 1.0 .

Under the Indentures, Group and its restricted subsidiaries 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, Group could still incur $ 1 of “Ratio Debt,”, 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 June 30, 2024, Group’s consolidated leverage ratio was below 6.0 , Group’s consolidated secured leverage ratio was below 4.0 and Group’s fixed charge coverage ratio was above 2.0 .

As of June 30, 2024, a total of $ 300.0 million (inclusive of a $ 250.0 million general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases.

As of September 30, 2024, Group’s consolidated leverage ratio was below 6.0 , Group’s consolidated secured leverage ratio was below 4.0 and Group’s fixed charge coverage ratio was above 2.0 .

As of September 30, 2024, a total of $ 345.6 million was unrestricted and permitted for restricted payments, including dividends and stock purchases.

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Interest Rate Swap Agreement

As of June 30, 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.

As of September 30, 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.

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

As of June 30, 2024, the fair value of the Swap Agreement was a net liability of $ 35.5 million, of which $ 22.4 million is presented with accrued and other current liabilities and $ 13.1 million is presented with other long-term liabilities.

As of September 30, 2024, the fair value of the Swap Agreement was a net liability of $ 29.9 million, of which $ 20.6 million is presented with accrued and other current liabilities and $ 9.4 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 June 30, 2024 and 2023, the Company recorded unrealized gains (losses) related to the Swap Agreement, that are included in interest expense.

The Company has made a $ 37.3 million deposit with the counterparty to the Swap Agreement.

In the three and nine months ended September 30, 2024 and 2023, the Company recorded unrealized gains (losses) related to the Swap Agreement, that are included in interest expense.

As of September 30, 2024, the Company has made a $ 31.8 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 31.8 million, the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

As of June 30, 2024, $ 35.5 million of the deposit was restricted and $ 1.8 million was unrestricted.

As of September 30, 2024, $ 29.9 million of the deposit was restricted and $ 1.9 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.

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Under the settlement for May 2023, the Company paid $ 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 for November 2023, the Company paid $ 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 for May 2024, the Company paid $ 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.

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Commitments and contingencies :

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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 $ 4.2 million in excess of the amount accrued at June 30, 2024.

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

3 unchanged sentences

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

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Income taxes:

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Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 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, 2025.

As of June 30, 2024, there was $ 22.4 million remaining for purchases under the Buyback Program.

As of September 30, 2024, there was $ 22.4 million remaining for purchases under the Buyback Program.

In June 2024, the Company purchased 153,322 shares of its common stock for $ 8.0 million at an average share price of $ 51.97 .

There were no purchases of common stock in the three months or the six months ended June 30, 2023.

There were no purchases of common stock in the three months or the nine months ended September 30, 2023 or in the three months ended September 30, 2024.

Dividends on common stock:

On August 7, 2024 , the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.985 per common share.

This estimated $ 46.8 million dividend payment is expected to be made on September 6, 2024 .

On November 6, 2024 , the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.995 per common share.

This estimated $ 47.2 million dividend payment is expected to be made on December 6, 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.

1 unchanged sentence

The Indentures limit the Company’s ability to return cash to its stockholders.

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Related party transactions:

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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 Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer and Chairman, David Schaeffer.

The fixed annual rent for the headquarters building is $ 1.0 million per year plus an allocation of taxes and utilities.

1 unchanged sentence

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 portion of its office space in the Northern Virginia area (“Office Lease”).

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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.

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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.

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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 $ 0.8 million in the three months ended June 30, 2024 and 2023, respectively, and $ 1.6 million and $ 1.2 million in the six months ended June 30, 2024 and 2023, respectively, for rent and related costs (including taxes and utilities) for these leases.

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The Company paid $ 0.8 million and $ 0.9 million in the three months ended September 30, 2024 and 2023, respectively, and $ 1.6 million and $ 2.5 million in the nine months ended September 30, 2024 and 2023, respectively, for rent and related costs (including taxes and utilities) for these leases.

Segment information:

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

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

North America

South America

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

North America

South America

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

North America

South America

Six Months Ended June 30, 2023

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Nine Months Ended September 30, 2023

North America

South America

September 30,

Long-lived assets, net

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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