What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 202 added, 283 removed, 517 unchanged (48% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

AS OF MARCH 31, 2025 AND DECEMBER 31, 2024

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets:

23 unchanged sentences

Due to T-Mobile – Transition Services Agreement

Due to T-Mobile – Purchase Agreement

Current maturities, operating lease liabilities

3 unchanged sentences

Senior unsecured 2027 notes, net of unamortized debt costs of $ 1,824 and $ 2,013 , respectively, and discounts of $ 6,395 and $ 7,053 , respectively

Secured IPv4 notes, net of debt costs of $ 7,016

Secured IPv4 notes, net of debt costs of $ 6,381 and $ 6,702 , respectively

Operating lease liabilities, net of current maturities

10 unchanged sentences

Accumulated other comprehensive loss

Accumulated (deficit) earnings

Accumulated deficit

Total stockholders’ equity

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND MARCH 31, 2024

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1 unchanged sentence

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Service revenue

7 unchanged sentences

Interest expense, including change in valuation interest rate swap agreement

Gain on bargain purchase – Sprint Business

Reduction to gain on bargain purchase – Sprint Business

Interest income – IP Transit Services Agreement

Interest income – Purchase Agreement

Interest income and other, net

Interest income (loss) – Purchase Agreement

Interest income (loss) and other, net

Loss before income taxes

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

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

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Nine Months Ended

September 30, 2024

September 30, 2023

Service revenue

Operating expenses:

Network operations (including $ 1,204 and $ 750 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)

Selling, general, and administrative (including $ 17,186 and $ 19,491 of equity-based compensation expense, respectively)

Acquisition costs – Sprint Business

Depreciation and amortization

Total operating expenses

Gain on lease termination

Operating loss

Interest expense, including change in valuation interest rate swap agreement

Gain on bargain purchase – Sprint Business

Interest income – IP Transit Services Agreement

Interest income – Purchase Agreement

Interest income and other, net

(Loss) income before income taxes

Income tax benefit

Net (loss) income

Comprehensive (loss) income:

Net (loss) income

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

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 CASH FLOWS

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

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND MARCH 31, 2024

(IN THOUSANDS)

Nine Months Ended

September 30, 2024

September 30, 2023

Three Months Ended

March 31, 2025

March 31, 2024

Cash flows from operating activities:

Net (loss) income

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

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

Depreciation and amortization

2 unchanged sentences

Equity-based compensation expense (net of amounts capitalized)

Gain on bargain purchase – Sprint Business

( 1,152,386 )

Gains – lease terminations and other, net

Reduction to gain on bargain purchase – Sprint Business

Deferred income taxes

6 unchanged sentences

Deposits and other assets

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Cash payments - IP Transit Services Agreement – T-Mobile

Acquisition of Sprint Business, net of $ 47.1 million of cash acquired in 2023

Cash receipts - IP Transit Services Agreement – T-Mobile

Acquisition of Sprint Business – severance reimbursement

Purchases of property and equipment

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Dividends paid

Purchases of common stock

Net proceeds from issuance of senior unsecured 2027 Notes - net of discount of $ 6.8 million and debt costs of $ 1.4 million

Net proceeds from issuance of secured IPv4 notes – net of debt costs of $ 7.6 million

Proceeds from exercises of stock options

Principal payments of finance lease obligations

Settlement of finance lease – at a discount

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rates changes on cash

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

Net (decrease) increase 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, 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.

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

(now Cogent Communications Group, LLC), a Delaware corporation (“Group”), 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, LLC (formerly 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, Inc.

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

and its subsidiaries.

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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 56 countries across North America, Europe, South America, Oceania and Africa.

The Company delivers its services primarily to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 57 countries across North America, Europe, Asia, South America, Oceania and Africa.

The Company is a Delaware corporation and is headquartered in Washington, DC.

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Acquisition of Sprint Communications

On September 6, 2022, Cogent Infrastructure, LLC (formerly Cogent Infrastructure, Inc.), a Delaware corporation (the “Buyer” and “Cogent Infrastructure”) 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, Inc.

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

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

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

Pursuant to the Purchase Agreement, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The Purchase Agreement includes customary representations, warranties, indemnities and covenants, including regarding the conduct of the Sprint Business prior to the closing of the Transaction (the “Closing”).

Pursuant to the Purchase Agreement, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, held Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The Purchase Agreement included customary representations, warranties, indemnities and covenants, including regarding the conduct of the Sprint Business prior to the closing of the Transaction (the “Closing”).

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

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

Purchase Price

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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 Purchase Agreement also provides for a 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.

1 unchanged sentence

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

The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors.

The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors.

The determination of the discount rate requires some judgment.

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 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 $ 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.

Including the cumulative impact of these adjustments, the amortization of the discount resulted in interest income (expense) of $ 0.4 million and ($ 0.5 ) million for the three months ended March 31, 2025 and 2024, respectively.

Severance reimbursements

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

Total qualifying severance expenses were $ 28.6 million of which $ 4.3 million were recorded in the three months ended March 31, 2024.

These severance payments ended in the second quarter of 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 $ 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.

The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors.

On the Closing Date, Cogent Communications, Inc.

(now Cogent Communications, LLC), 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 $ 25.0 million and $ 87.5 million during the three months ended March 31, 2025 and 2024, respectively.

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

The Company evaluated what elements are part of the business combination and the consideration exchanged to complete the acquisition.

Under ASC 805, the Company has concluded that the $ 700.0 million of payments to be made represent consideration received from T - Mobile to complete the acquisition of a distressed business.

The Company also evaluated whether the IP Transit Services Agreement was in the scope of ASU No.

2014 - 09 Revenue from Contracts with Customers (“ASC 606”).

The Company has concluded that T - Mobile did not represent a “customer” as defined by ASC 606, the stated contract price did not represent consideration for services to be delivered, and the transaction did not satisfy the definition of revenue, which excluded this arrangement from the scope of ASC 606.

As a result, and considering statements made by T - Mobile, the IP Transit Services Agreement was recorded in connection with the Transaction at its discounted present value resulting in a discount of $ 79.6 million.

The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors.

The determination of the discount rate requires some judgment.

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.

The amortization of the discount resulted in interest income of $ 4.7 million and $ 7.3 million during the three months ended March 31, 2025 and 2024, respectively.

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, including the payment and processing of vendor invoices for the Company and human resources services.

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.

On the Closing Date, the Buyer entered into a transition services agreement (the “TSA”) with the Seller, pursuant to which the Seller provides to the Buyer, and the Buyer provides 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 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 services.

The services provided by the Buyer to the Seller include, among others, information technology and network support, finance and back office and other wireless business support.

The Transition Services are generally intended to be provided for a period of up to two years following the Closing Date, although such period may be extended for an additional one-year term by either party upon 30 days ’ prior written notice.

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Amounts billed to the Company under the TSA are primarily for reimbursement at cost of payments to vendors of the Sprint Business 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.

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.

The amounts due from the Seller were primarily reimbursements for severance costs related to Sprint Business employees and services provided by the Company for the Seller.

During the three months ended March 31, 2025 and 2024, the Company was billed $ 0.4 million and $ 16.6 million as due to the Seller under the TSA, respectively.

During the three months ended March 31, 2025 and 2024, the Company paid $ 0.7 million and $ 78.5 million to the Seller under the TSA, respectively.

During the three months ended March 31, 2025 and 2024, the Company billed the Seller $ 15,126 and $ 0.5 million as due from the Seller under the TSA, respectively.

During the three months ended March 31, 2025 and 2024, the Seller paid the Company $ 0.1 million and $ 0.5 million under the TSA, respectively.

As of March 31, 2025, the Company owed $ 0.2 million to the Seller, and the Seller fully paid the amounts billed under the TSA.

As of December 31, 2024, the Company owed $ 0.5 million to the Seller, and the Seller owed $ 0.1 million to the Company under the TSA.

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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 $ 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.

Under the Commercial Agreement, the Company recorded revenue of $ 0.7 million and $ 3.2 million during the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, and December 31, 2024, TMUSA owed $ 0.1 million and $ 2.6 million, respectively, to the Company under the Commercial Agreement.

These amounts are recorded in accounts receivable.

1 unchanged sentence

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.

Acquisition-related costs (not including severance costs) were $ 9.0 million for the three months ended March 31, 2024.

There were no acquisition-related costs incurred in the three months ended March 31, 2025.

Consideration

The acquisition-date fair value of consideration to be received from the Transaction comprised of the following:

The acquisition-date fair value of consideration received from the Transaction comprised of the following:

(In thousands)

7 unchanged sentences

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

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

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

● $ 8.0 million during the three months ended June 30, 2024.

(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.

(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 which were 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.

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(d) Cash consideration was $ 1 .

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Fair Value of Assets Acquired and Liabilities Assumed and Gain on Bargain Purchase

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The tax basis of the acquired business is the consideration paid ($ 1 ) plus the tax basis of certain liabilities assumed, with adjustments for cash acquired in excess of the purchase price.

Deferred income taxes are recorded based upon the difference between the book and tax basis of the acquired assets and assumed liabilities at the Company’s marginal effective income tax rate on the Closing Date.

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;

Deferred income taxes were 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 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 includes;

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

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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

● Additional reimbursed severance costs of $ 8.0 million;

● An adjustment to net deferred income tax liabilities of $ 19.7 million.

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The estimated fair value of the optical fiber on the Closing 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.

The valuation required the estimation of the total replacement cost per mile of fiber and a factor to reflect the orderly liquidation value.

There is no 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.

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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 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.

In accordance with ASC 805 and ASC Topic 842 Leases , the acquired leases are accounted for as if the leases were new at the acquisition date, however, the Company retains 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.

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 a finance lease liability.

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.

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Acquired Intangible Assets

Intangible assets acquired include $ 458.0 million of IPv4 addresses 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 September 30, 2024.

Intangible assets acquired include $ 458.0 million of Internet Protocol version 4 (“ IPv4”) addresses and $ 16.0 million of acquired customer relationships.

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 $ 1.6 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 .

Amortization expense was $ 0.4 million and $ 0.4 million for the three months ended March 31, 2025 and 2024, respectively.

Future amortization expense of the customer relationships is $ 1.8 million per year for seven years .

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 the IPv4 address asset has an indefinite useful life and is not being amortized.

The Company evaluates the IPv4 address asset for impairment on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable.

In performing the impairment assessment, the Company may first evaluate qualitative factors to determine whether it is more likely than not that the fair value of the indefinite - lived intangible asset is less than its carrying amount.

Upon consideration of relevant factors, the Company concluded that it was not more - likely - than - not that impairment was present, and therefore, a quantitative impairment assessment was not required.

There was no impairment recorded during the period from May 1, 2023 through March 31, 2025.

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.

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.

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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.

Pro Forma Information

The following unaudited pro forma financial information gives effect to the Transaction as if it had been completed on January 1, 2023.

The pro forma adjustments are based on historically reported transactions by the respective companies.

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

The pro forma results for the 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 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

Service revenue

Operating loss from continuing operations

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

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Financial 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.

At March 31, 2025 and December 31, 2024, 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, 2024,

Based upon recent trading prices (Level 2—market approach) at March 31, 2025;

● 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 $ 450.0 million;

1 unchanged sentence

● 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 $ 483.8 million;

● The fair value of the Company’s $ 206.0 million aggregate principal amount of secured IPv4 notes (the “IPv4 Notes”) was $ 214.8 million, and

● The fair value of the Company’s $ 206.0 million aggregate principal amount of secured IPv4 notes (the “IPv4 Notes”) was $ 211.3 million;

● The fair value of the Company’s interest rate swap agreement was $ 22.5 million.

Page 14 of 57

Restricted cash and interest rate swap agreement

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 restricted cash related to the IPv4 Notes, as discussed in Note 3, was $ 7.7 million as of March 31, 2025.

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.

Page 13 of 47

Gross receipts taxes, universal service fund and other surcharges

2 unchanged sentences

The Company records certain excise taxes and surcharges on a gross basis and includes them in its 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 $ 19.8 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.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $ 20.2 million and $ 20.5 million for the three months ended March 31, 2025 and 2024, respectively.

Basic and diluted net loss per common share

Basic loss per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or net 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:

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

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:

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

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 nine months ended September 30, 2023 and September 30, 2024, respectively (in thousands except share data):

Comprehensive

Stockholders’

(Deficit) Equity

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

Comprehensive

Stockholders’

Balance at June 30, 2024

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, 2024

The following details the changes in stockholders’ (deficit) equity for the three months ended March 31, 2025 and 2024, respectively (in thousands except share data):

Comprehensive

Stockholders’

(Deficit) Equity

Income (Loss)

Equity (Deficit)

Balance at December 31, 2023

( 1,074,588 )

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at September 30, 2023

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Balance at March 31, 2024

Comprehensive

6 unchanged sentences

Exercises of options

Common stock purchases & retirement

Dividends paid

Balance at September 30, 2024

Balance at March 31, 2025

Revenue recognition

8 unchanged sentences

(in thousands)

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Service revenue recognized from deferred revenue balance at beginning of period

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

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In February 2016, the FASB issued ASU No.

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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.

Page 17 of 57

(Amounts in thousands)

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Finance lease cost

3 unchanged sentences

Total lease costs

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Other lease information (amounts in thousands)

13 unchanged sentences

The majority of these leases are finance leases.

The Company also leases office space, rights-of-way and certain data center facilities under operating leases.

The Company also leases office space, rights-of-way, dark fiber and certain data center facilities under operating leases.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease.

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 .

As of March 31, 2025, the Company had committed to additional IRU agreements totaling $ 170.4 million in future payments to be paid over periods of up to 20 years .

These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months.

1 unchanged sentence

The future minimum payments under 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

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Lease obligations, net of current maturities

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 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 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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Three months ended March 31, 2025

Three months ended March 31, 2024

(in thousands)

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Net bad debt expense

Bad debt recoveries

(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:

1 unchanged sentence

(in thousands)

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Depreciation and amortization expense

Capitalized compensation cost

IRU Finance Lease Termination – Discount and Gain on Lease Termination

In June 2024, the Company elected to exercise a contractual option to prepay in full at a 12.0 % discounted rate an IRU finance lease agreement (the “IRU Lease”) for $ 114.6 million.

At the payment date, the present value of the IRU finance lease liability was $ 117.9 million and the remaining 31 monthly principal payments of $ 4.2 million each totaled $ 130.2 million.

The prepayment resulted in a gain on lease termination of $ 3.3 million related to the difference between the book value of $ 117.9 million and the cash payment of $ 114.6 million.

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 .

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Long-term debt:

As of March 31, 2025, the Company had outstanding $ 300.0 million aggregate principal amount of 2027 Mirror Notes, $ 450.0 million aggregate principal amount of 2027 Notes, $ 500.0 million aggregate principal amount of 2026 Notes and $ 206.0 million aggregate principal amount of IPv4 Notes.

As discussed in Note 10, on April 11, 2025 the Company issued an additional $ 174.4 million of IPv4 notes (the “New IPv4 Notes”).

The IPv4 Notes were issued in May 2024 and bear interest at a rate of 7.924 %, with an anticipated term ending in May 2029 (such anticipated repayment date, the “ARD”).

Interest on the IPv4 Notes is paid monthly.

The 2027 Mirror Notes were issued in June 2024, are due on June 15, 2027, and bear interest at a rate of 7.00 % per year.

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

Interest on the 2027 Mirror Notes and 2027 Notes is paid semi-annually on June 15 and December 15 of each year.

The 2026 Notes were issued in May 2021, are due on May 1, 2026, and bear interest at a rate of 3.50 % per year.

Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year.

Issuance of $ 300.0 Million Principal Amount of 2027 Mirror Notes

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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.

The net proceeds from the offering were approximately $ 291.9 million after deducting the discount and offering expenses.

Group used $ 114.6 million of the net proceeds from the offering to exercise a contractual option to prepay in full in the IRU Lease noted above.

Group used $ 114.6 million of the net proceeds from the offering to exercise a contractual option to prepay in full an IRU lease, at a discount.

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.

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

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After June 15, 2024, the Issuers may redeem the 2027 Mirror Notes, in whole or in part, at a redemption price ranging from 103.5 % of the aggregate principal amount of the 2027 Mirror Notes redeemed to par (depending on the year), in each case, as set forth in the 2027 Mirror Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

15 unchanged sentences

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.

11 unchanged sentences

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.”

Page 19 of 47

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.

2 unchanged sentences

No principal payments will be due on the IPv4 Notes prior to the ARD, unless certain rapid amortization or acceleration triggers are activated.

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 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.

After the IPv4 Trustee pays the monthly interest and other IPv4 Asset related costs, including monthly fees paid to the Manager for its services, the residual cash is paid to the Company and is unrestricted.

After the IPv4 Trustee pays the monthly interest and other IPv4 Address Assets related costs, including monthly fees paid to the Manager for its services, the residual cash is paid to the Company and is unrestricted.

The legal final maturity date of the IPv4 Notes is in May of 2054 .

3 unchanged sentences

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.

2 unchanged sentences

The IPv4 Notes are subject to a series of covenants and restrictions customary for transactions of this type.

These covenants and restrictions include (i) that the IPv4 Issuer maintains a liquidity reserve account to be used to make required payments in respect of the IPv4 Notes such amount considered restricted cash, (ii) provisions relating to optional and mandatory prepayments, including specified make-whole payments in the case of certain optional prepayments of the IPv4 Notes prior to the monthly payment date in May of 2028, (iii) certain indemnification payments in the event, among other things, that the transfers of the assets pledged as collateral for the IPv4 Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.

These covenants and restrictions include (i) that the IPv4 Issuer maintains a liquidity reserve account to be used to make required payments in respect of the IPv4 Notes with such funds considered restricted cash, (ii) provisions relating to optional and mandatory prepayments, including specified make-whole payments in the case of certain optional prepayments of the IPv4 Notes prior to the monthly payment date in May of 2029, (iii) certain indemnification payments in the event, among other things, that the transfers of the assets pledged as collateral for the IPv4 Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.

As provided in the IPv4 Base Indenture, the IPv4 Notes are also subject to rapid amortization in the event of a failure to maintain a stated debt service coverage ratio as defined in the IPv4 Indenture.

2 unchanged sentences

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.

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Limitations Under the Indentures

9 unchanged sentences

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 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.

Page 23 of 57

As of March 31, 2025, 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 March 31, 2025, a total of $ 187.2 million was unrestricted and permitted for restricted payments, including dividends and stock purchases.

Interest Rate Swap Agreement

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.

As of March 31, 2025, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

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

4 unchanged sentences

The values that the Company reports for the Swap Agreement as of each reporting date are recognized as “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 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 March 31, 2025, the fair value of the Swap Agreement was a net liability of $ 22.5 million, of which $ 18.6 million is presented with accrued and other current liabilities and $ 3.9 million is presented with other long-term liabilities.

As of December 31, 2024, the fair value of the Swap Agreement was a net liability of $ 22.3 million, of which $ 18.3 million is presented with accrued and other current liabilities and $ 4.0 million is presented with other long-term liabilities.

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.

Unrealized gains (losses) related to the Swap Agreement are included in interest expense.

As of March 31, 2025, the Company has made a $ 23.6 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 23.6 million, the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

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

As of March 31, 2025, $ 22.5 million of the deposit was restricted and $ 1.1 million was unrestricted.

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

2 unchanged sentences

Under the settlement for November 2024, the Company paid $ 12.1 million to the counterparty for a net cash interest cost of $ 12.1 million for the period from May 1, 2024 to October 31, 2024.

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 :

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 to result in a loss of up to $ 4.2 million in excess of the amount accrued at September 30, 2024.

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 $ 4.4 million in excess of the amount accrued at March 31, 2025.

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.

Page 24 of 57

Income taxes:

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

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

Three Months Ended

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

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 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 nine months ended September 30, 2023 or in the three months ended September 30, 2024.

As of March 31, 2025, there was $ 22.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock in the three months ended March 31, 2025 or in the three months ended March 31, 2024.

In April 2025, the Company purchased 94,856 shares of its common stock for $ 5.0 million at an average price of $ 53.07 per share under the Buyback Program.

Dividends on common stock:

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 .

On May 7, 2025 , the Company’s Board of Directors approved the payment of a quarterly dividend of $ 1.01 per share of common stock.

This estimated $ 48.2 million dividend payment is expected to be made on June 6, 2025 .

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:

4 unchanged sentences

The lease began in May 2015, and the lease term was for five years .

In February 2020, the lease term was extended to May 2025.The lease is cancellable at no cost by the Company upon 60 days ’ notice.

On January 6, 2023, the Company entered into two lease agreements (the “New Leases”), one with Thorium LLC (“Thorium”) and one with Germanium LLC (“Germanium”), entities owned by the Company’s Chief Executive Officer.

In February 2020, the lease term was extended to May 2025 and in March 2025 the lease was extended to May 2030.

The lease is cancellable at no cost by the Company upon 60 days ’ notice.

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”).

5 unchanged sentences

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.

This includes 4,987 square feet for an auditorium suitable for training and 2,382 square feet for the data center in the building.

On July 25, 2023, the Company entered into a Second Amendment to the lease agreement with Germanium (the “Amendment”), which amended the Network Operations Lease to lease an additional 7,369 square feet on the first floor of the building, beginning on August 1, 2023, in connection with the planned expansion of the technical space.

This included 4,987 square feet for an auditorium suitable for training and 2,382 square feet for the data center in the building.

The amended Network Operations Lease remains cancellable by the Company without penalty upon 60 days written notice.

The Amendment provides for $ 162,118 of additional fixed annual rent during the term of the Network Operations Lease, plus a proportionate share of real estate taxes and operating expenses and separately metered utilities expense.

The Company paid $ 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:

The Company operates as one operating segment.

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, 2024

North America

South America

Three Months Ended September 30, 2023

North America

South America

Nine Months Ended September 30, 2024

The Company paid $ 0.8 million and $ 0.8 million in the three months ended March 31, 2025 and 2024, respectively, for rent and related costs (including taxes and utilities) for these leases.

Geographic and segment information:

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing the Company’s performance.

The Company’s Chief Executive officer and Chairman, Dave Schaeffer is the Company’s CODM.

The Company has one operating segment.

The consolidated operating segment financial information regularly reviewed by the CODM, inclusive of assets, revenue, expenses, profit or loss, and noncash items are included in the Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Balance Sheets, and Condensed Consolidated Statements of Cash Flows.

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Revenues are attributed to regions based on where the services are provided.

Below are the Company’s service revenues and long-lived assets by geographic region - including property plant and equipment and excluding intangible assets (in thousands):

Three Months Ended March 31, 2025

North America

South America

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Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

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

Issuance of $ 174.4 million new IPv4 notes

On April 11, 2025 (the “Closing Date”), the IPv4 Issuer, completed the issuance of $ 174.4 million aggregate principal amount of 6.646 % secured IPv4 address revenue notes, Series 2025-1 Class A-2 (collectively, the “New IPv4 Notes”), with an anticipated term ending in April 2030 (such anticipated repayment date, the “ARD”), in an offering exempt from registration under the Securities Act of 1933, as amended.

The net proceeds, of the New IPv4 Notes, after offering expenses were $ 170.5 million.

At the Closing Date $ 72.6 million of the $ 170.5 million net proceeds were restricted and $ 97.9 million of the net proceeds were unrestricted.

The restricted net proceeds will become available based upon improvements in the monthly leverage ratio and debt service coverage ratio (both as defined in the Base Indenture) under the aggregate $ 380.4 million of IPv4 notes ($ 206.0 million issued in May 2024 and $ 174.4 million issued in April 2025).

The New IPv4 Notes were issued pursuant to the Base Indenture, as supplemented by the Series 2025-1 Supplement thereto, dated as of the Closing Date (the “Series 2025-1 Supplement”), by and between the IPv4 Issuer and the Trustee, and as acknowledged by the Guarantor.

The Base Indenture allows the Issuer to issue additional series of notes subject to certain conditions set forth therein, and the Base Indenture, together with the Series 2024-1 Supplement thereto, dated as of May 2, 2024, and the Series 2025-1 Supplement, and any other series supplements to the Base Indenture, is referred to as the “Indenture.”

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While the New IPv4 Notes are outstanding, interest is paid on a monthly basis.

From and after the ARD, principal payments will also be required to be made on the New IPv4 Notes on a monthly basis.

No principal payments will be due on the New IPv4 Notes prior to the ARD, unless certain rapid amortization or acceleration triggers are activated.

The legal final maturity date of the New IPv4 Notes is in April of 2055 .

If the IPv4 Issuer has not repaid or refinanced any New IPv4 Note prior to the monthly payment date in April of 2030, additional interest will accrue thereon in an amount equal to the greater of (i) 5.0 % per annum and (ii) the excess amount, if any, by which the sum of the following exceeds the interest rate for such New IPv4 Note:

(A) the yield to maturity (adjusted to a “mortgage-equivalent basis” pursuant to the standards and practices of the Securities Industry and Financial Markets Association) on the ARD for such New IPv4 Note of the United States Treasury Security having a remaining term closest to 10 years;

plus (B) 5.0 %;

plus (C) the post-ARD note spread of 3.00 % applicable to such New IPv4 Note.

Collateral and guarantee

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

The New IPv4 Notes are guaranteed by the IPv4 Guarantor, pursuant to a guaranty, dated as of May 2, 2024 (the “Guaranty”) by the Guarantor in favor of the Trustee, pursuant to which the 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 Guarantor, will guarantee or in any way be liable for the obligations of the IPv4 Issuer under the Indenture or the New IPv4 Notes.

Covenants and restrictions

The New IPv4 Notes are subject to a series of covenants and restrictions customary for transactions of this type.

These covenants and restrictions include (i) that the IPv4 Issuer maintains a liquidity reserve account to be used to make required payments in respect of the New IPv4 Notes, (ii) provisions relating to optional and mandatory prepayments, including specified make-whole payments in the case of certain optional prepayments of the New IPv4 Notes prior to the monthly payment date in May of 2028, (iii) certain indemnification payments in the event, among other things, that the transfers of the assets pledged as collateral for the New IPv4 Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters.

As provided in the Base Indenture, the New IPv4 Notes are also subject to rapid amortization in the event of a failure to maintain a stated debt service coverage ratio.

A rapid amortization may be cured if the debt service coverage ratio exceeds a certain threshold for a certain period of time, upon which cure, regular amortization, if any, will resume.

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

The New 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 New 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.

Supplement to Base Indenture

In connection with the issuance of the New IPv4 Notes, the IPv4 Issuer obtained consents from noteholders representing more than 50 % of the Voting Rights (as defined in the Base Indenture) of the secured IPv4 address revenue term notes, Series 2024-1 Class A-2, to adopt amendments to the Base Indenture to, among other things, permit the IPv4 Issuer to (i) issue additional Class A Notes (as defined in the Base Indenture) (provided that the Class A Leverage Ratio (as defined in the Base Indenture) is less than or equal to 7.25 to 1.00 ) (as opposed to 6.10 to 1.00 under the Base Indenture as previously in effect), (ii) dispose of IPv4 addresses owned by the IPv4 Issuer (provided that the pro forma Leverage Ratio (as defined in the Base Indenture) is less than or equal to 7.25 to 1.00 ) (as opposed to the greater of (x) 7.10 to 1.00 and (y) the Leverage Ratio as of the date of the most recent issuance of Additional Notes (as defined in the Base Indenture) (after giving effect to the issuance of such Additional Notes) under the Base Indenture as previously in effect) and (iii) substitute new IPv4 addresses (including Non-Contributed IP Addresses (as defined in the Base Indenture)) to be owned by the IPv4 Issuer for the Contributed IP Addresses then owned by the IPv4 Issuer (provided that the pro forma Leverage Ratio is not greater than 7.25 to 1.00 ) (as opposed to 6.10 to 1.00 under the Base Indenture as previously in effect), in each case, among other applicable requirements (collectively, the “Amendments”).

Accordingly, on the Closing Date, prior to the issuance of the New IPv4 Notes, the IPv4 Issuer entered into a second amendment to the Base Indenture (the “Second Amendment”) with the Trustee giving effect to the Amendments.

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What changed 10-Q

Item 1. Financial Statements