What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 427 added, 210 removed, 355 unchanged (64% of the section changed)

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Factors that could cause or contribute to these differences include, but are not limited to:

Our acquisition of Sprint Communications (as defined below), including difficulties integrating our business with the Sprint Business, which may result in the combined company not operating as effectively and efficiently as expected;

transition services required to support the Sprint Business and the related costs continuing for a period longer than expected, government policies worldwide;

Our acquisition of Sprint Communications, (as defined below), now called Cogent Fiber, LLC, including difficulties integrating our business with the Cogent Fiber Business, which may result in the combined company not operating as effectively and efficiently as expected;

transition services required to support the Cogent Fiber Business and the related costs continuing for a period longer than expected, government policies worldwide;

vaccination and in-office requirements, delays in the delivery of network equipment or optical fiber, loss of key right-of-way agreements, future economic instability in the global economy, including the risk of economic recession and recent bank failures and liquidity concerns at certain other banks, which could affect spending on Internet services;

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

extensions thereof) of Sprint Communications and its subsidiaries (the “Sprint Business”) in accordance with the terms and conditions of the Membership Interest Purchase Agreement (the “Purchase Agreement”), dated September 6, 2022, by and among us, 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”).

On the Closing Date, we 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”).

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extensions thereof) of Sprint Communications and its subsidiaries (the “Cogent Fiber Business”) in accordance with the terms and conditions of the Membership Interest Purchase Agreement (the “Purchase Agreement”), dated September 6, 2022, by and among us, 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”).

On the Closing Date, we 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 Cogent Fiber Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

Purchase Price

On the Closing Date, we consummated the Transaction pursuant to the terms of the Purchase Agreement, providing a purchase price of $1 payable to the Seller for the Purchased Interests, subject to customary adjustments, including working capital (the “Working Capital Adjustment”), as set forth in the Purchase Agreement.

As consideration for the Purchased Interests, the Working Capital Adjustment (primarily related to acquired cash and cash equivalents of an estimated $43.4 million at the Closing Date in order to fund the international operations of the Sprint Business) resulted in us making a payment to the Seller of $61.1 million on the Closing Date.

As consideration for the Purchased Interests, the Working Capital Adjustment (primarily related to acquired cash and cash equivalents of an estimated $43.4 million at the Closing Date in order to fund the international operations of the Cogent Fiber Business) resulted in us making a payment to the Seller of $61.1 million on the Closing Date.

In April 2024, an additional Working Capital Adjustment of $5.0 million was paid to the Seller.

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Short-term Lease Payment

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IP Transit Services Agreement

On the Closing Date, we entered into an agreement for IP transit services (“IP Transit Services Agreement”), pursuant to which TMUSA will pay us 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 us $25.0 million and $87.5 million during the three months ended March 31, 2025 and 2024, respectively.

On the Closing Date, we entered into an agreement for IP transit services (“IP Transit Services Agreement”), pursuant to which T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of T-Mobile (“ TMUSA”) will pay us 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 us $25.0 million and $66.7 million during the three months ended June 30, 2025 and 2024, respectively and TMUSA paid us $50.0 million and $154.2 million during the six months ended June 30, 2025 and 2024, respectively

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

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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 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.

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Any third-party costs incurred in providing the Transition Services are passed on to the party receiving such services at cost for the two-year period.

Amounts paid for the Sprint Business by T-Mobile are reimbursed at cost.

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Amounts paid for the Cogent Fiber Business by T-Mobile are reimbursed at cost.

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.

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

Amounts billed to us under the TSA are primarily for reimbursement at cost of payments to vendors of the Sprint Business until these vendors are fully transitioned to us.

Amounts billed to us under the TSA are primarily for reimbursement at cost of payments to vendors of the Cogent Fiber Business until these vendors are fully transitioned to us.

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Severance Reimbursements

The Purchase Agreement also provided for reimbursement from the Seller to us 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.

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.

These severance payments ended in the second quarter of 2024 and all were paid in full.

Other Services Provided to the Seller

In addition, on the Closing Date, we entered into a commercial agreement (the “Commercial Agreement”) with TMUSA for colocation and connectivity services, pursuant to which we 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, we 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 us under the Commercial Agreement.

Under the Commercial Agreement, we recorded revenue of $1.1 million and $5.9 million during the three months ended June 30, 2025 and 2024, respectively and we recorded revenue of $1.8 million and $9.1 million during the six months ended June 30, 2025 and 2024, respectively.

Acquisition-Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement, we 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 (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.

Acquisition-related costs (not including severance costs) were $12.4 million for the three months ended June 30, 2024 and $21.4 million for the six months ended June 30, 2024.

There were no acquisition-related costs incurred in the three or six months ended June 30, 2025.

Competitive Advantages

We believe we address many of the data communications needs of businesses large and small, communications service providers and other bandwidth-intensive organizations by offering them high-quality, high-speed Internet access, optical transport and optical wave services, and private network services at attractive prices.

After our acquisition of the Sprint Business, we began offering services to larger enterprise customers.

After our acquisition of the Cogent Fiber Business, we began offering services to larger enterprise customers.

We believe that our organization has the following competitive advantages:

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Low Cost of Operation:

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● Our IP Network .

We have acquired a large portfolio of dark fiber leases from 377 dark fiber vendors from around the world sourced from the excess inventory of existing networks.

We have acquired a large portfolio of dark fiber leases from over 370 dark fiber vendors from around the world sourced from the excess inventory of existing networks.

The nature of this portfolio and the individual leases provide us long-term access to dark fiber at attractive rates and, in many cases, the opportunity to extend these leases for multiple terms.

On average, a modest number of our dark fiber leases come up for renewal each year.

In addition, with our acquisition of the Sprint Business, we now own a nationwide domestic fiber network (the “Sprint Network”).

Acquiring the Sprint Network allows us to capitalize on the benefits of owning network without significant upfront capital investment.

In addition, with our acquisition of the Cogent Fiber Business, we now own a nationwide domestic fiber network (the “Sprint Network”).

Acquiring the Sprint Network allows us to capitalize on the benefits of owning

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network without significant upfront capital investment.

The Sprint Network is mostly complementary to our existing leased dark fiber network, offers unique geographic routes and will allow us to reduce our reliance on leased dark fiber.

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This enables us to expand our product offerings to include optical wavelength and optical transport services.

We are selling these services to our existing customers, customers acquired with the Sprint Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

As of March 31, 2025, we offered this service in 883 data centers in the United States, Mexico and Canada.

We are selling these services to our existing customers, customers acquired with the Cogent Fiber Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

As of June 30, 2025, we offered this service in 938 wave-enabled data centers in the United States, Mexico and Canada.

We believe our wavelength service has the advantages of unique routes, ubiquitous service locations, faster provisioning times and lower prices.

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The addition of optical wave and optical transport services, our direct, VPN connection to cloud providers services and our decision to continue to support MPLS virtual private network (“VPN”) services for our acquired customers are consistent with this strategy.

Consistent with this strategy, we have pared, and continue to pare, non-core services acquired with the Sprint Business.

Consistent with this strategy, we have pared, and continue to pare, non-core services acquired with the Cogent Fiber Business.

There are significant cost advantages because of this narrow product set.

We believe that the relative size of our salesforce training, support and overhead is lower than comparable telecom providers that tend to offer a broader, one-stop shop product set to their client base.

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● Scalable Network Equipment and Hub Configurations .

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We have systematically evaluated and chosen our network extensions to buildings, data centers and markets based upon a rigorous set of criteria to evaluate the economic opportunity of network locations.

Additional factors relevant to our pursuit of new buildings include the willingness of building owners to grant us access rights, the availability of optical fiber networks to serve those buildings, the costs to connect buildings to our network and equipment availability.

Additional factors relevant to our pursuit of new buildings include the willingness of building owners to grant us access rights, the availability of optical

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fiber networks to serve those buildings, the costs to connect buildings to our network and equipment availability.

We have also begun to evaluate the sustainability of new locations by evaluating the LEED Green Rating of Buildings, the potential to source renewable energy at locations and the potential impact of climate change on a location including proximity to water and the risk of flooding.

Our network is connected to a total of 3,529 buildings that are located in 301 metropolitan markets globally.

These buildings include 1,867 large MTOBs (totaling over 1.0 billion square feet of office space) 1,668 CNDCs located in 1,453 buildings, 101 of our own Cogent data centers and 79 of our smaller Cogent edge data centers.

These buildings include;

● 1,871 large MTOBs (totaling over 1.0 billion square feet of office space);

● 1,675 CNDCs located in 1,471 buildings;

● 101 of our own Cogent data centers;

● 86 of our smaller Cogent edge data centers.

Our MTOB’s are in major North American cities where we offer our services to a diverse set of high-quality corporate customers within close physical proximity of each other.

Our CNDCs are located in North America, Europe, South America, Oceania and Africa where our net-centric customers directly interconnect with our network.

Our Cogent data centers operate across the United States and in Europe, comprise over 1.9 million square feet of floor space, offer 183 MW of power and are directly connected to our network.

Our CNDCs are located in North America, Europe, Asia, South America, Oceania and Africa where our net-centric customers directly interconnect with our network.

Our Cogent data centers, including our Cogent Edge data centers, are directly connected to our network and operate across the United States and in Europe, and comprise:

● Over 1.9 million square feet of floor space, and

● 183 MW of power.

We believe that these network points of presence strategically position our network to attract high levels of Internet traffic and maximize our revenue opportunities and profitability.

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Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic.

We currently serve 8,240 access networks as well as numerous large and small content providers and 45,295 corporate customer connections and 13,641 enterprise customer connections.

We currently serve:

● 8,085 access networks as well as numerous large and small content providers;

o 62,659 net-centric customer connections,

o 44,307 corporate customer connections, and

o 11,764 enterprise customer connections.

Because of these bases of customers who distribute (content providers) and receive (access networks) content on our network, we believe that the majority of all the traffic remains “on-net” by both originating and terminating on our network.

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This Tier 1 network peering status broadens our geographic delivery capability and materially reduces our network costs.

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Proven and Experienced Management Team .

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The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been working together at the Company for several years.

Several members of the senior management team have been working together at the Company since 2000.

Our senior management team has designed and built our network and, during our formative years, led the integration of network assets we acquired through 13 significant acquisitions prior to our acquisition of the Sprint Business and managed the expansion and growth of our business.

A number of the members of senior management who joined us as part of our acquisition of the Sprint Business have similar experience and tenure in both the telecommunications industry and at the Sprint Business.

We anticipate that our management team will successfully manage the integration of the Sprint Business into our current operations.

Several members of the senior management team have been working together at

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the Company since 2000.

Our senior management team has designed and built our network and, during our formative years, led the integration of network assets we acquired through 13 significant acquisitions prior to our acquisition of the Cogent Fiber Business and managed the expansion and growth of our business.

A number of the members of senior management who joined us as part of our acquisition of the Cogent Fiber Business have similar experience and tenure in both the telecommunications industry and at the Cogent Fiber Business.

We anticipate that our management team will successfully manage the integration of the Cogent Fiber Business into our current operations.

We intend to remain a leading provider of high-quality, high-speed Internet access and private network services and to continue to improve our profitability and cash flow.

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Expand our Business with Enterprise Customers .

With our acquisition of the Sprint Business, we acquired a number of larger enterprise customers.

While we are in the process of terminating certain non-core services to these customers at the end of their current term, we have continued to provide our core services to enterprise customers and elected to provide MPLS based VPN as well as VPLS services, a new service for the Company, as well.

With our acquisition of the Cogent Fiber Business, we acquired a number of larger enterprise customers.

While we are in the process of terminating certain non-core and unprofitable services to these customers at the end of their current term, we have continued to provide our core services to enterprise customers and elected to provide MPLS based VPN as well as VPLS services, a new service for the Company.

We have not previously focused our sales efforts on larger enterprise customers.

Since the acquisition of the Sprint Business, we have formed dedicated sales teams who are tasked with preserving existing business with and seeking new sales from enterprise customers.

Since the acquisition of the Cogent Fiber Business, we have formed dedicated sales teams who are tasked with preserving existing business with and seeking new sales from enterprise customers.

Increase our Share of the Net-Centric Market .

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● Large and dedicated salesforce – Our team of net-centric sales professionals is one of the largest salesforces in this industry segment and enables us to better serve this customer segment while also identifying new sales opportunities and gaining new business and customers;

● Wave (optical transport services) - We began offering wave (optical transport services) to our net - centric customers who require these high bandwidth dedicated point - to - point services.

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● Wavelength and optical transport services - We began offering optical wavelength and optical transport services to our net-centric customers who require these high-bandwidth dedicated point-to-point services.

Pursue On-net Customer Growth.

Our high-capacity network provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs.

We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more MTOBs and CNDCs to our network.

We intend to increase usage of our network and operational

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infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more MTOBs and CNDCs to our network.

We are also upgrading our network and operational infrastructure to provide wave and optical transport services in more of our on-net buildings.

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We continue to negotiate reduced pricing under our numerous carrier agreements that enable us to reduce our cost of off-net services, which enhances our competitive position in the marketplace.

Expand our Product Offerings to Include Wavelength - Optical Transport Services .

In connection with our acquisition of the Sprint Business, we expanded our offerings of optical wavelength - optical transport services over our fiber network.

We currently offer wavelength services in 883data centers in the United States, Mexico and Canada.

Expand our Product Offerings to Include Wavelength and Optical Transport Services .

In connection with our acquisition of the Cogent Fiber Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.

We currently offer wavelength services in 938 wave-enabled data centers in the United States, Mexico and Canada.

We believe our wavelength service has the advantages of unique routes, ubiquitous service locations, faster provisioning times and lower prices.

Expand our Data Center Footprint .

We currently operate a total of 180 Cogent data centers across the United States and Europe.

These include 101 larger Cogent “classic” data centers and 79 smaller Cogent edge data centers As part of our acquisition of the Sprint Business, we acquired multiple Sprint facilities that previously housed Sprint equipment.

We currently operate a number of Cogent data centers across the United States and Europe.

We operate a total of 187 total data centers including:

● 101 larger Cogent “classic” data centers;

● 86 smaller Cogent edge data centers.

In connection with our acquisition of the Cogent Fiber Business, we acquired multiple Sprint facilities that previously housed Sprint equipment.

We evaluated the suitability of these facilities for conversion to commercial data center space and began repurposing suitable facilities.

Repurposing these facilities included removing unused, obsolete equipment and racks, and upgrading or installing new HVAC systems, uninterruptable power supplies (“UPS”), backup generators and fire suppression systems as well as other structural changes.

By March 31, 2025, we had converted the former Sprint facilities into 52 Cogent data centers and 79 Cogent edge data centers.

In connection with this conversion process, we are decommissioning certain legacy Cogent data centers.

Repurposing these facilities included removing unused, obsolete equipment and racks, and upgrading or installing new HVAC systems, uninterruptable power supplies, backup generators and fire suppression systems as well as other structural changes.

By June 30, 2025, we had converted the former Sprint facilities into 52 Cogent data centers and 86 Cogent edge data centers.

In connection with this conversion process, we also decommissioned certain legacy Cogent data centers.

Increase our Leasing of IPv4 Address Space .

We lease IPv4 address space to our customers, both on a standalone basis and as a complement to a customer’s Internet access services with us.

We provide a small number of free IPv4 addresses to our dedicated Internet access customers as well.

We currently own approximately 38 million IPv4 addresses, of which 9.9 million were recently acquired at the closing of the Sprint Business acquisition.

We currently lease 12.9 million of our IPv4 addresses to our customers on contracts with service terms ranging from one month to five years.

We intend to continue to lease IPv4 addresses to our customers as well as explore alternatives for monetizing our IPv4 address inventory.

We also provide a small number of free IPv4 addresses to our dedicated Internet access customers.

We currently own approximately 38 million IPv4 addresses, of which 9.9 million were recently acquired at the closing of the Sprint acquisition.

We currently lease 13.2 million of our IPv4 addresses to our customers on contracts

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with service terms ranging from one month to five years.

We intend to continue to lease IPv4 addresses to our customers as well as explore alternatives for monetizing our IPv4 address inventory.

Results of Operations

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality and variability of our service revenue, operating results and cash flows.

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Depreciation and amortization expenses

Reduction to gain on bargain purchase – Sprint Business

Gain on lease termination

Gain on bargain purchase – Sprint acquisition

Interest income – IP Transit Services Agreement

Interest expense, including change in valuation interest rate swap agreement

Loss on debt extinguishment and redemption – 2026 notes

Interest expense – including change in valuation of interest rate swap agreement

Income tax benefit

(1) Includes non-cash equity-based compensation expenses of $490 and $385 in the three months ended March 31, 2025 and 2024, respectively.

(2) Includes non-cash equity-based compensation expenses of $7,523 and $6,565 in the three months ended March 31, 2025 and 2024, respectively.

(1) Includes non-cash equity-based compensation expenses of $506 and $350 in the three months ended June 30, 2025 and 2024, respectively.

(2) Includes non-cash equity-based compensation expenses of $4,158 and $3,215 in the three months ended June 30, 2025 and 2024, respectively.

NM – not meaningful

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We also seek to grow our service revenue by investing in our sales and marketing team.

We typically sell corporate connections at similar pricing to our competitors, but our customers benefit from our significantly faster speeds, greater aggregate throughput, enhanced service level agreements and rapid installation times.

We typically sell corporate connections at similar pricing to our competitors, but our corporate customers benefit from our significantly faster speeds, greater aggregate throughput, enhanced service level agreements and rapid installation times.

In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.

Our service revenue decreased by 7.2% from the three months ended March 31, 2024 to the three months ended March 31, 2025.

Exchange rates positively impacted our service revenue by $0.2 million.

All foreign currency comparisons herein reflect results for the three months ended March 31, 2025 translated at the average foreign currency exchange rates for the three months ended March 31, 2024.

Our total service revenue decreased from the cancellation of low margin and non-core customers we acquired with the Sprint Business, and a reduction in revenue under the Commercial Agreement with TMUSA, partially offset by the growth in customers from expanding our network, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and gaining market share by offering our services at lower prices than our competitors.

Our service revenue decreased by 5.5% from the three months ended June 30, 2024 to the three months ended June 30, 2025.

Exchange rates positively impacted our service revenue by $1.5 million reflecting the impact of translating our service revenue for the three months ended June 30, 2025 at the average foreign currency exchange rates for the three months ended June 30, 2024.

Our total service revenue decreased from the cancellation of low margin and non-core customers we acquired with the Cogent Fiber Business, and a reduction in revenue under the Commercial Agreement with TMUSA, partially offset by the growth in customers from expanding our network and offering wavelength services, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and gaining market share by offering our services at lower prices than our competitors.

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Revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, gross receipts taxes, Universal Service Fund fees and certain state regulatory fees.

We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our condensed consolidated statements of comprehensive income.

The impact of these taxes including the Universal Service Fund resulted in a decrease to our revenues of $0.3 million from the three months ended March 31, 2024 to the three months ended March 31, 2025.

We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our condensed consolidated statements of comprehensive loss.

The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues of $0.8 million from the three months ended June 30, 2024 to the three months ended June 30, 2025.

Three Months Ended

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Our net-centric customers generally purchase their services on a price per megabit-metered basis.

We began to serve enterprise customers in connection with our acquisition of the Sprint Business.

We began to serve enterprise customers in connection with our acquisition of the Cogent Fiber Business.

We define “enterprise” customers as large corporations (typically, Fortune 500 companies with greater than $5 billion in annual revenue) running Wide Area Networks (“WAN”) with several dozen to several hundred sites.

Our enterprise customers generally purchase our services on a price per location basis.

On the Closing Date, we acquired 17,823 corporate customer connections, 5,711 net-centric customer connections and 23,209 enterprise customer connections with the Sprint Business.

We classified the $39.5 million of May 2023 Sprint Business revenue as $20.1 million of monthly recurring revenue as enterprise revenue, $12.9 million of monthly recurring revenue as corporate revenue and $6.5 million of monthly recurring revenue as net-centric revenue.

Revenues from our corporate, net-centric and enterprise customers represented 44.8%, 37.5% and 17.7% of total service revenue, respectively, for the three months ended March 31, 2025 and represented 46.9%, 34.6% and 18.5% of total service revenue, respectively, for the three months ended March 31, 2024.

On the Closing Date, we acquired;

● 17,823 corporate customer connections,

● 5,711 net-centric customer connections and

● 23,209 enterprise customer connections with the Cogent Fiber Business.

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Our revenue from our corporate customers decreased primarily due to cancellations of low margin and non-core corporate customers acquired with the Sprint Business.

Our corporate customers take advantage of our superior speeds, greater aggregate throughput, service levels and installation times versus our competitors During the three months ended March 31, 2025, we continued to see declining vacancy rates compared to their peak during the COVID-19 pandemic and rising office occupancy rates in certain markets in which we operate continuing a trend that began following the end of the COVID-19 pandemic.

We classified the $39.5 million of May 2023 Cogent Fiber Business revenue as;

● $20.1 million of monthly recurring revenue as enterprise revenue,

● $12.9 million of monthly recurring revenue as corporate revenue and

● $6.5 million of monthly recurring revenue as net-centric revenue.

Revenues from our corporate, net-centric and enterprise customers represented 44.3%, 39.5% and 16.2% of total service revenue, respectively, for the three months ended June 30, 2025 and represented 45.9%, 35.0% and 19.1% of total service revenue, respectively, for the three months ended June 30, 2024.

Our revenue from our corporate customers decreased primarily due to cancellations of low margin and non-core corporate customers acquired with the Cogent Fiber Business.

During the three months ended June 30, 2025, we continued to see declining vacancy rates compared to their peak during the COVID-19 pandemic and rising office occupancy rates in certain markets in which we operate continuing a trend that began following the end of the COVID-19 pandemic.

Other markets, particularly those in California, Washington D.C.

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However, the exact timing and path of these positive trends remains uncertain.

Our revenue from our net-centric customers increased, primarily due to growth in network traffic from our legacy net-centric customers partly offset by a reduction in revenue under the Commercial Agreement with TMUSA and from net-centric customers acquired with the Sprint Business.

Our revenue from our net-centric customers increased, primarily due to growth in network traffic from our legacy net-centric customers partly offset by a reduction in revenue under the Commercial Agreement with TMUSA and a reduction in revenue from net-centric customers acquired with the Cogent Fiber Business.

Our net-centric customers purchase our services on a price per megabit basis.

The net-centric market exhibits significant pricing pressure due to the continued introduction of new technology, which lowers the marginal cost of transmission and routing, and the commodity nature of the service where price is typically the only differentiating factor for these customers.

Our average price per megabit of our installed base of customers decreased by 25.1% from the three months ended March 31, 2024 to the three months ended March 31, 2025.

Our average price per megabit of our installed base of customers decreased by 30.1% from the three months ended June 30, 2024 to the three months ended June 30, 2025.

The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our revenue from our enterprise customers decreased primarily due to a reduction in revenue from low-margin and non-core enterprise customers acquired with the Sprint Business.

Service revenue classified as on-net revenue and enterprise revenue from a low margin resale customer acquired in connection with the Sprint Business was $5.1 million for the three months ended March 31, 2024.

The resale customer cancelled its service on July 31, 2024.

Our revenue from our enterprise customers decreased primarily due to a reduction in revenue from low-margin and non-core enterprise customers acquired with the Cogent Fiber Business.

Service revenue classified as on-net revenue and enterprise revenue from a low-margin resale customer acquired in connection with the Cogent Fiber Business was $3.9 million for the three months ended June 30, 2024.

The resale customer cancelled its service on June 1, 2024.

Revenue and customer connections by network connection type.

On the Closing Date, we classified the total $39.5 million of monthly Sprint Business revenue as $2.5 million of on-net revenue, $32.3 million of off-net revenue and $4.7 million of non-core revenue.

Additionally, on the Closing Date, we classified the total 46,743 Sprint Business customer connections as 1,560 on-net customer connections, 24,667 off-net customer connections and 20,516 non-core customer connections.

Revenues from our on-net, off-net, wavelength and non-core customers represented 52.5%, 43.4%, 2.9% and 1.2% of total service revenue, respectively, for the three months ended March 31, 2025 and represented 52.1%, 44.4%, 1.2% and 2.3% of total service revenue, respectively, for the three months ended March 31, 2024.

Our on-net revenues increased from the three months ended March 31, 2024 to the three months ended March 31, 2025, primarily from customers acquired with the Sprint Business and an increase in revenues from our legacy Cogent customers, partially offset by cancellation of service from one customer.

The resale customer cancelled its service on July 31, 2024.

Our off-net revenues decreased from the three months ended March 31, 2024 to the three months ended March 31, 2025 primarily from cancellations of low-margin off-net customers and off-net customers in unlicensed markets that we acquired with the Sprint Business.

In connection with our acquisition of the Sprint Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.

Wavelength revenue was $7.1 million for the three months ended March 31, 2025 and $3.3 million for the three months ended March 31, 2024.

Our non-core revenues decreased from the three months ended March 31, 2024 to the three months ended March 31, 2025 from the cancellation of non-core revenues acquired in the Sprint Business.

Non-core services are services, which we acquired and continue to support but do not actively sell.

On the Closing Date, we classified the total $39.5 million of monthly Cogent Fiber Business revenue as;

● $2.5 million of on-net revenue,

● $32.3 million of off-net revenue and

● $4.7 million of non-core revenue.

Additionally, on the Closing Date, we classified the total 46,743 Cogent Fiber Business customer connections as;

● 1,560 on-net customer connections,

● 24,667 off-net customer connections and

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● 20,516 non-core customer connections.

Revenues from our on-net, off-net, wavelength and non-core customers represented 53.7%, 41.5%, 3.7% and 1.1% of total service revenue, respectively, for the three months ended June 30, 2025 and represented 54.0%, 42.8%, 1.4% and 1.8% of total service revenue, respectively, for the three months ended June 30, 2024.

Our on-net revenues increased from the three months ended June 30, 2024 to the three months ended June 30, 2025, primarily from customers acquired with the Cogent Fiber Business and an increase in revenues from our legacy Cogent customers, partially offset by cancellation of service from one low-margin resale customer.

Service revenue classified as on-net revenue and enterprise revenue from a low margin resale customer acquired in connection with the Cogent Fiber Business was $3.9 million for the three months ended June 30, 2024.

The resale customer cancelled its service on June 1, 2024.

Our off-net revenues decreased from the three months ended June 30, 2024 to the three months ended June 30, 2025 primarily from cancellations of low-margin off-net customers and off-net customers in unlicensed markets that we acquired with the Cogent Fiber Business.

In connection with our acquisition of the Cogent Fiber Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.

Wavelength revenue was $9.1 million for the three months ended June 30, 2025 and $3.6 million for the three months ended June 30, 2024.

Our non-core revenues decreased from the three months ended June 30, 2024 to the three months ended June 30, 2025 from the cancellation of non-core revenues acquired in the Cogent Fiber Business.

Non-core services are services, which we acquired and continue to support but do not actively sell.

Network Operations Expenses.

1 unchanged sentence

Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee’s salary and other compensation.

Our 18.6% decrease in network operations expense is primarily attributable to our efforts to reduce the network operations costs related to our acquisition of the Sprint Business.

Our 12.0% decrease in network operations expense is primarily attributable to our efforts to reduce the network operations costs related to our acquisition of the Cogent Fiber Business.

These costs primarily include leased circuit costs, including the reduction of the related “tail-circuit” costs for the reduction in off-net revenue and facilities costs.

Selling, General, and Administrative (“SG&A”) Expenses.

Our SG&A expenses, including non-cash equity-based compensation expense, decreased by 3.7% from the three months ended March 31, 2024 to the three months ended March 31, 2025.

Our decrease in SG&A operations expense is primarily attributable to our efforts to reduce SG&A costs related to our acquisition of the Sprint Business.

Our SG&A expenses, including non-cash equity-based compensation expense, decreased by 5.0% from the three months ended June 30, 2024 to the three months ended June 30, 2025.

Our decrease in SG&A operations expense is primarily attributable to our efforts to reduce SG&A costs related to our acquisition of the Cogent Fiber Business.

These costs primarily include compensation and related costs and third-party services costs.

2 unchanged sentences

In connection with the Transaction and negotiation of the Purchase Agreement, we incurred cumulative professional fees, other acquisition related costs totaling $42.1 million, including $28.6 million of reimbursed severance costs.

Such fees totaled $9.0 million for the three months ended March 31, 2024.

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

Such fees totaled $12.4 million for the three months ended June 30, 2024.

There were no acquisition related costs recorded in the three months ended June 30, 2025.

Depreciation and Amortization Expenses.

Our depreciation and amortization expense increased by 7.3% primarily due to the depreciation expense associated assets acquired with the Sprint Business and an increase in deployed fixed assets.

Reduction to Gain on Bargain Purchase.

Our depreciation and amortization expense increased by 1.7% primarily due to the depreciation expense associated assets acquired with the Cogent Fiber Business and an increase in deployed fixed assets.

Gain on Lease Termination.

In June 2024, we elected to exercise a contractual option to prepay in full at a 12.0% discounted rate an IRU finance lease agreement between a us and a vendor we assumed with the Cogent Fiber Business for $114.6 million.

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

We are continuing to use the related IRU asset.

Gain on Bargain Purchase.

We accounted for the Transaction as a business combination.

The identifiable assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date.

Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions.

In the three months ended March 31, 2024 we reduced the gain on bargain purchase by $5.5 million.

The total bargain purchase gain from the Transaction was $1.4 billion.

Assigning fair market values to the assets acquired and

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liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions.

During the three months ended June 30, 2024, we made certain adjustments to our estimates of the fair market value of the assets acquired and liabilities assumed resulting in increase to the gain on bargain purchase of $27.7 million for the three months ended June 30, 2024.

The total bargain purchase gain was $1.4 billion.

Interest Income - IP Transit Services Agreement .

1 unchanged sentence

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

The amortization of the discount resulted in interest income of $4.3 million for the three months ended June 30, 2025 and $5.9 million for the three months ended June 30, 2024.

Loss on Debt Extinguishment and Redemption - 2026 Existing Notes .

On June 17, 2025 Cogent Communications Group, LLC (“Group”) and Cogent Finance, Inc.

(the “Co-Issuer” and, together with Group, the “Issuers”), two wholly owned subsidiaries of Cogent Communications Holdings, Inc.

(“Holdings”), issued $600.0 million aggregate principal amount of our 6.50% Senior Secured Notes due 2032 (the “2032 Notes”).

The 2032 Notes were issued in connection with the extinguishment of our $500.0 million aggregate principal amount of 3.50% Senior Secured Notes that were due in May 2026 that we issued in May 2021 (the “Existing 2026 Notes”), The net proceeds from the 2032 Notes offering were $597.8 million after deducting offering expenses.

We used $507.3 million of the net proceeds from the 2032 Notes offering to redeem in full, and satisfy and discharge our obligations under our Existing 2026 Notes.

The obligations under our Existing 2026 Notes included the $500.0 million principal amount, a $5.0 million settlement payment and $2.2 million of accrued interest.

As a result of the redemption of the Existing 2026 Notes we incurred a loss on debt extinguishment and redemption of $5.6 million.

Interest Expense.

Our interest expense resulted from interest incurred on our $500.0 million aggregate principal amount of 3.50% Senior Secured Notes due 2026 that we issued in May 2021 (the “2026 Notes”), interest incurred on our $450.0 million aggregate principal amount of 7.00% Senior Unsecured Notes due 2027 that we issued in June 2022 (the “2027 Notes”), interest incurred on $206.0 million aggregate principal amount of 7.924% IPv4 secured notes that we issued in May 2024 (the “IPv4 Notes”), interest incurred on our $300.0 million aggregate principal amount of 7.00% Senior Unsecured Notes due 2027 that we issued in June 2024 (the “2027 Mirror Notes”) and interest on our Swap Agreement and interest incurred on our finance lease obligations.

As of March 31, 2025, the fair value of our Swap Agreement was a net liability of $22.5 million Changes in the valuation of the Swap Agreement are related changes in interest rates and are included in interest expense.

Our interest expense increased by 17.3% from the three months ended March 31, 2024 to the three months ended March 31, 2025, primarily due to the issuance of our IPv4 Notes in May 2024 and the issuance of our 2027 Mirror Notes in June 2024.

Our interest expense resulted from interest incurred on our:

● $500.0 million Existing 2026 Notes issued in May 2021 until they were extinguished on June 17, 2025,

● $600.0 million 2032 Notes issued on June 17, 2025 in connection with the extinguishment of our Existing 2026 Notes,

● $174.4 million of 6.646% New IPv4 Notes issued in April 2025 and $206.0 million of 7.924% Existing IPv4 Notes issued in May 2024 (collectively the “IPv4 Notes”),

● $300.0 million of 7.00% Senior Unsecured Notes due 2027 issued in June 2024 (the “2027 Mirror Notes”),

● $450.0 million of 7.00% Senior Unsecured Notes due 2027 issued in June 2022 (the “2027 Notes”),

● Swap Agreement;

● Finance lease obligations.

As of June 30, 2025, the fair value of our Swap Agreement was a net liability of $13.6 million.

Changes in the valuation of the Swap Agreement are related changes in interest rates and are included in interest expense.

Our interest expense increased by 34.7% from the three months ended June 30, 2024 to the three months ended June 30, 2025, primarily due to the May 2024 issuance of our $206.0 million of Existing IPv4 Notes, the April 2025 issuance of $174.4 million of our New IPv4 Notes and the June 2024 issuance of our $300.0 million 2027 Mirror Notes.

Income Tax Benefit.

Our income tax benefit was $18.2 million for the three months ended March 31, 2025 and $19.1 million for the three months ended March 31, 2024.

The change in our income tax benefit is primarily related to projected operating results related to the Sprint Business acquisition and the reversal of deferred tax liabilities acquired with the Sprint Business.

Our income tax benefit was $16.7 million for the three months ended June 30, 2025 and $7.9 million for the three months ended June 30, 2024.

The change in our income tax benefit is primarily related to projected operating results related to the Cogent Fiber Business acquisition and the timing of the reversal of deferred tax liabilities acquired with the Cogent Fiber Business.

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Buildings On-net.

As of March 31, 2025 and 2024, we had a total of 3,500 and 3,321 on-net buildings connected to our network, respectively.

As of June 30, 2025, and 2024, we had a total of 3,529 and 3,386 on-net buildings connected to our network, respectively.

The increase in our on-net buildings was a result of our disciplined network expansion program.

We anticipate adding a similar number of buildings to our network for the next several years.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality and variability of our service revenue, operating results and cash flows.

The following summary tables present a comparison of our results of operations with respect to certain key financial measures.

The comparisons illustrated in the tables are discussed in greater detail below.

Six Months Ended

(in thousands)

Service revenue

Network operations expenses (1)

Selling, general, and administrative (“SG&A) expenses (2)

Sprint acquisition costs

Depreciation and amortization expenses

Gain on lease termination

Gain on bargain purchase – Sprint

Interest income – IP Transit Services Agreement

Loss on debt extinguishment and redemption – 2026 notes

Interest expense – including change in valuation interest rate swap agreement

Income tax benefit

(1) Includes non-cash equity-based compensation expenses of $996 and $385 in the six months ended June 30, 2025 and 2024, respectively.

(2) Includes non-cash equity-based compensation expenses of $11,681 and $10,131 in the six months ended June 30, 2025 and 2024, respectively.

NM – not meaningful

Service Revenue .

We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our network.

We do this by investing capital to expand the geographic footprint of our network, increasing the number of buildings that we are connected to, including CNDCs and MTOBs, and increasing our penetration rate into our existing buildings.

These efforts broaden the global reach of our network and increase the size of our potential addressable market.

We also seek to grow our service revenue by investing in our sales and marketing team.

In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.

Our service revenue decreased by 6.3% from the six months ended June 30, 2024 to the six months ended June 30, 2025.

Exchange rates positively impacted our service revenue by $0.2 million reflecting the impact of translating our service revenue for the six months ended June 30, 2025 at the average foreign currency exchange rates for the six months ended June 30, 2024.

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We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our condensed consolidated statements of comprehensive loss.

The impact of these taxes including the Universal Service Fund resulted in an increase to our revenues of $0.5 million from the six months ended June 30, 2024 to the six months ended June 30, 2025.

Six Months Ended

Other Operating Data

Revenue by Customer Type – (thousands)

Customer Connections by Customer Type - end of period

Revenue – by Network Connection Type – (thousands)

Customer Connections – by Network Connection Type - end of period

Average Revenue Per Unit (ARPU)

ARPU wavelength

Average Price per Megabit installed base

Revenue and customer connections by customer type.

Our corporate customers generally purchase their services on a price per connection basis.

Our net-centric customers generally purchase their services on a price per megabit-metered basis.

We began to serve enterprise customers in connection with our acquisition of the Cogent Fiber Business.

Our enterprise customers generally purchase our services on a price per location basis.

On the Closing Date, we acquired:

● 17,823 corporate customer connections,

● 5,711 net-centric customer connections and

● 23,209 enterprise customer connections with the Cogent Fiber Business.

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We classified the $39.5 million of May 2023 Cogent Fiber Business revenue as:

● $20.1 million of monthly recurring revenue as enterprise revenue,

● $12.9 million of monthly recurring revenue as corporate revenue and

● $6.5 million of monthly recurring revenue as net-centric revenue.

Revenues from our corporate, net-centric and enterprise customers represented 44.5%, 38.5% and 17.0% of total service revenue, respectively, for the six months ended June 30, 2025 and represented 46.4%, 34.8% and 18.8% of total service revenue, respectively, for the six months ended June 30, 2024.

Our revenue from our corporate customers decreased primarily due to cancellations of low margin and non-core corporate customers acquired with the Cogent Fiber Business.

Our corporate customers take advantage of our superior speeds, greater aggregate throughput, service levels and installation times versus our competitors During the six months ended June 30, 2025, we continued to see declining vacancy rates compared to their peak during the COVID-19 pandemic and rising office occupancy rates in certain markets in which we operate continuing a trend that began following the end of the COVID-19 pandemic.

Other markets, particularly those in California, Washington D.C.

and the Pacific Northwest, continue to see markedly higher vacancy rates.

These higher vacancy rates may represent a long-term change in office attendance and occupancy rates in these markets.

Despite this overall environment, we are seeing some positive trends in our corporate business.

As the option to fully or partially work from home becomes permanently established at many companies, our corporate customers are integrating some of the new applications that became part of the remote work environment, which benefits our corporate business as these customers upgrade their Internet access infrastructure to higher capacity connections.

Further, if and when companies eventually return to the buildings in which we operate, we believe it will present an opportunity for increased sales.

However, the exact timing and path of these positive trends remains uncertain.

Our net-centric customers purchase our services on a price per megabit basis.

Our average price per megabit of our installed base of customers decreased by 21.0% from the six months ended June 30, 2024 to the six months ended June 30, 2025.

The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our revenue from our enterprise customers decreased primarily due to a reduction in revenue from low-margin and non-core enterprise customers acquired with the Cogent Fiber Business.

Service revenue classified as on-net revenue and enterprise revenue from a low-margin resale customer acquired in connection with the Cogent Fiber Business was $9.7 million for the six months ended June 30, 2024.

The resale customer cancelled its service on June 1, 2024.

Revenue and customer connections by network connection type.

On the Closing Date, we classified the total $39.5 million of monthly Cogent Fiber Business revenue as:

● $2.5 million of on-net revenue,

● $32.3 million of off-net revenue and

● $4.7 million of non-core revenue.

Additionally, on the Closing Date, we classified the total 46,743 Cogent Fiber Business customer connections as:

● 1,560 on-net customer connections,

● 24,667 off-net customer connections and

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● 20,516 non-core customer connections.

Revenues from our on-net, off-net, wavelength and non-core customers represented 53.1%, 42.4%, 3.3% and 1.2% of total service revenue, respectively, for the six months ended June 30, 2025 and represented 53.1%, 43.6%, 1.3% and 2.0% of total service revenue, respectively, for the six months ended June 30, 2024.

Our on-net revenues increased from the six months ended June 30, 2024 to the six months ended June 30, 2025, primarily from customers acquired with the Cogent Fiber Business and an increase in revenues from our legacy Cogent customers, partially offset by cancellation of service from one low-margin resale customer under an uneconomic contract.

Service revenue classified as on-net revenue and enterprise revenue from this low-margin resale customer acquired in connection with the Cogent Fiber Business was $9.7 million for the six months ended June 30, 2024.

The resale customer cancelled its service on June 1, 2024.

Our off-net revenues decreased from the six months ended June 30, 2024 to the six months ended June 30, 2025 primarily from cancellations of low-margin off-net customers and off-net customers in unlicensed markets that we acquired with the Cogent Fiber Business.

In connection with our acquisition of the Cogent Fiber Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.

Wavelength revenue was $16.2 million for the six months ended June 30, 2025 and $7.0 million for the six months ended June 30, 2024.

Our non-core revenues decreased from the six months ended June 30, 2024 to the six months ended June 30, 2025 from the cancellation of non-core revenues acquired in the Cogent Fiber Business.

Non-core services are services, which we acquired and continue to support but do not actively sell.

Network Operations Expenses.

Network operations expenses include the costs of personnel associated with service delivery, network management and customer support, network facilities costs, right-of-way fees, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis.

Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee’s salary and other compensation.

Our 15.3% decrease in network operations expense is primarily attributable to our efforts to reduce the network operations costs related to our acquisition of the Cogent Fiber Business.

These costs primarily include leased circuit costs, including the reduction of the related “tail-circuit” costs for the reduction in off-net revenue and facilities costs.

Selling, General, and Administrative (“SG&A”) Expenses.

Our SG&A expenses, including non-cash equity-based compensation expense, decreased by 4.5% from the six months ended June 30, 2024 to the six months ended June 30, 2025.

Our decrease in SG&A operations expense is primarily attributable to our efforts to reduce SG&A costs related to our acquisition of the Cogent Fiber Business.

These costs primarily include compensation and related costs and third-party services costs.

Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee’s salary and other compensation.

Acquisition-Related Costs.

In connection with the Transaction and negotiation of the Purchase Agreement, we incurred cumulative professional fees and other acquisition related costs totaling $42.1 million, including $28.6 million of reimbursed severance costs.

Such fees totaled $21.4 million for the six months ended June 30, 2024.

There were no acquisition related costs recorded in the six months ended June 30, 2025.

Depreciation and Amortization Expenses.

Our depreciation and amortization expense increased by 4.4% primarily due to the depreciation expense associated assets acquired with the Cogent Fiber Business and an increase in deployed fixed assets.

Gain on Lease Termination.

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

We are continuing to use the related IRU asset.

Gain on Bargain Purchase.

We accounted for the Transaction as a business combination.

The identifiable assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date.

Assigning fair market values to the assets acquired and

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liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions.

During the six months ended June 30, 2024, we made certain adjustments to our estimates of the fair market value of the assets acquired and liabilities assumed resulting in increase to the gain on bargain purchase of $22.2 million for the six months ended June 30, 2024.

The total bargain purchase gain was $1.4 billion.

Interest Income - IP Transit Services Agreement .

Under the IP Transit Services Agreement, TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months.

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 amortization of the discount resulted in interest income of $9.0 million for the six months ended June 30, 2025 and $13.3 million for the six months ended June 30, 2024.

Loss on Debt Extinguishment – Existing 2026 Notes .

On June 17, 2025 we issued $600.0 million aggregate principal amount of our 6.50% Senior Secured Notes due 2032 (the “2032 Notes”).

Our 2032 Notes were issued in connection with the extinguishment of our $500.0 million aggregate principal amount of our Existing 2026 Notes.

The net proceeds from the 2032 Notes offering were $597.8 million after deducting offering expenses.

We used $507.3 million of the net proceeds from the 2032 Notes offering to redeem in full, and satisfy and discharge our obligations under the 2026 Notes.

The obligations under the 2026 Notes included the $500.0 million principal amount, a $5.0 million settlement payment and $2.2 million of accrued interest.

As a result of the redemption of the Existing 2026 Notes we incurred a loss on debt extinguishment of $5.6 million.

Interest Expense.

Our interest expense resulted from interest incurred on our;

● $500.0 million Existing 2026 Notes issued in May 2021 until they were extinguished on June 17, 2025,

● $600.0 million 2032 Notes issued on June 17, 2025 in connection with the extinguishment of our Existing 2026 Notes,

● $174.4 million of 6.646% New IPv4 Notes issued in April 2025 and our $206.0 million of 7.924% Existing IPv4 Notes issued in May 2024 (collectively the “IPv4 Notes”),

● $300.0 million of 7.00% Senior Unsecured Notes due 2027 issued in June 2024 (the “2027 Mirror Notes”),

● $450.0 million of 7.00% Senior Unsecured Notes due 2027 issued in June 2022 (the “2027 Notes”),

● Swap Agreement;

● Finance lease obligations.

As of June 30, 2025, the fair value of our Swap Agreement was a net liability of $13.6 million.

Changes in the valuation of our Swap Agreement are related changes in interest rates and are included in interest expense.

Our interest expense increased by 26.0% from the six months ended June 30, 2024 to the six months ended June 30, 2025, primarily due to the May 2024 issuance of our $206.0 million of Existing IPv4 Notes, the April 2025 issuance of $174.4 million of our New IPv4 Notes and the June 2024 issuance of our $300.0 million 2027 Mirror Notes.

Income Tax Benefit.

Our income tax benefit was $34.9 million for the six months ended June 30, 2025 and $27.0 million for the six months ended June 30, 2024.

Buildings On-net.

As of June 30, 2025, and 2024, we had a total of 3,529 and 3,386 on-net buildings connected to our network, respectively.

The increase in our on-net buildings was a result of our disciplined network expansion program.

We anticipate adding a similar number of buildings to our network for the next several years.

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Liquidity and Capital Resources

Acquisition of Sprint Communications – Cash Flow

The Sprint Business’s cash flow was negative at the time of negotiations and during its recent history.

Due to the dire financial condition of the Sprint Business, it was understood that a payment from T-Mobile to any potential buyer would be required to execute a transaction to give a buyer sufficient cash inflow to offset losses that would be expected until a buyer could optimize the business.

The Cogent Fiber Business’s cash flow was negative at the time of negotiations and during its recent history.

Due to the dire financial condition of the Cogent Fiber Business, it was understood that a payment from T-Mobile to any potential buyer would be required to execute a transaction to give a buyer sufficient cash inflow to offset losses that would be expected until a buyer could optimize the business.

Based on management’s internal modeling at the culmination of the due diligence process, management determined this cash payment to be $700.0 million.

Management intends to reduce the negative cash flow of the Sprint Business through the payments from the IP Transit Services Agreement, reducing operating costs and increasing revenue primarily by providing optical wavelength and optical transport services over our fiber network, including the owned network we acquired with the Sprint Business.

We are selling these services to our existing customers, customers we acquired with the Sprint Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

As part of the Transaction, we began incurring costs associated with the TSA.

The amount of these costs will be dependent upon our ability to integrate the operations of the Sprint Business into our operations.

Our cash flow requirements related to the acquisition of the Sprint Business will be dependent upon our ability to reduce the acquired operating costs, our success in retaining the acquired customers and our ability to sell optical wavelength and optical transport services over our fiber network.

Management intends to reduce the negative cash flow of the Cogent Fiber Business through the payments from the IP Transit Services Agreement, reducing operating costs and increasing revenue primarily by providing optical wavelength and optical transport services over our fiber network, including the owned network we acquired with the Cogent Fiber Business.

We are selling these services to our existing customers, customers we acquired with the Cogent Fiber Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

Our cash flow requirements related to the acquisition of the Cogent Fiber Business will be dependent upon our ability to reduce the acquired operating costs, our success in retaining the acquired customers and our ability to sell optical wavelength and optical transport services over our fiber network.

Under the IP Transit Services Agreement, TMUSA will pay us 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.

Through March 31, 2025, we received monthly payments totaling $433.3 million under the IP Transit Services Agreement, reflected as cash flows from investing activities in our condensed consolidated statements of cash flows.

Through June 30, 2025, we received monthly payments totaling $458.3 million under the IP Transit Services Agreement, reflected as cash flows from investing activities in our condensed consolidated statements of cash flows.

As our business has grown as a result of an increasing customer base, the Transaction, broader geographic coverage and increased traffic on our network, we have historically produced a growing level of cash provided by operating activities.

Since we closed the Transaction we have experienced a reduction of cash provided by operating activities from the impact of the Transaction.

The cash received from the IP Transit Services Agreement was designed to offset operating losses associated with the Sprint Business.

Increasing our cash provided by operating activities is, in part, dependent upon our ability to reduce the operating costs of the Sprint Business while retaining its revenue, expanding our geographic footprint and increasing our network capacity.

During the first three months of 2025, we have received a total of $25.0 million under the IP Transit Services Agreement.

Since we closed the Transaction we experienced a reduction of cash provided by operating activities from the impact of the Transaction.

The cash received from the IP Transit Services Agreement was designed to offset operating losses associated with the Cogent Fiber Business.

Increasing our cash provided by operating activities is, in part, dependent upon our ability to reduce the operating costs of the Cogent Fiber Business while retaining its profitable revenue, expanding our geographic footprint and increasing our revenues from our wavelength and optical network services.

During the first six months of 2025, we have received a total of $50.0 million under the IP Transit Services Agreement.

During the remainder of 2025 we expect to receive a total of $50.0 million under the monthly payments under the IP Transit Services Agreement.

This includes nine monthly payments of $8.3 million each.

Increasing our cash provided by operating activities is, in part, dependent upon our ability to continue to reduce the operating costs of the Sprint Business while retaining its profitable revenue.

Issuance of $174.4 Million New IPv4 Notes

On April 11, 2025 (the “Closing Date”), Cogent IPv4 LLC (the “IPv4 Issuer”), a special-purpose, bankruptcy remote, indirect wholly owned subsidiary of the Company, 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 New IPv4 Notes were issued pursuant to an indenture, dated as of May 2, 2024 (as amended and supplemented to date, the “Base Indenture”), entered into by and between the IPv4 Issuer and Wilmington Trust, National Association, as the indenture trustee (the “Trustee”), 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 (as defined below).

The Base Indenture allows the IPv4 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.”

While the New IPv4 Notes are outstanding, scheduled payments of interest are required to be made 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.

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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 only of the IPv4 Issuer pursuant to the Indenture, and are secured by a security interest in substantially all of the Internet Protocol version 4 (“IPv4”) addresses (the “Contributed IP Addresses”), customer IPv4 address leases, customer accounts receivable and other IPv4 address assets (collectively, “IPv4 Address Assets”) pursuant to the Indenture.

The New IPv4 Notes are guaranteed by Cogent IPv4 Holdco LLC, a special-purpose entity and an indirect wholly owned subsidiary of the Company (the “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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This includes six monthly payments of $8.3 million each.

Liquidity and cash obligations

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Since our initial public offering, we have returned $1.7 billion to our stockholders through share repurchases and dividends.

We will continue to assess our capital and liquidity needs and, where appropriate, return capital to stockholders.

Over the next several years, we have significant contractual and anticipated cash outlays including our indicative dividend payments on our common stock, our maturing debt obligations, interest payments on our debt obligations and Swap Agreement and our projected capital expenditure requirements in order to help execute our business plan including the integration of Sprint Business.

We will continue to assess our capital and liquidity needs and, where appropriate, return capital to our stockholders.

Based upon the historical growth rate of our dividend, we expect that we would have to provide approximately $399 million in order to meet our expected quarterly dividend payments over the next two years.

Our $500.0 million of 2026 Notes accrue interest at 3.50%, mature in May 2026 and include annual interest payments of $17.5 million until maturity.

Our $450.0 million of 2027 Notes mature in June 2027 and include annual interest payments of $31.5 million until maturity.

Our $300.0 million of 2027 Mirror Notes mature in June 2027 and include annual interest payments of $21.0 million until maturity.

Our $206.0 million of IPv4 Notes effectively mature in May 2029 and include annual interest payments of $16.3 million until maturity (which amount increases if the IPv4 Notes are not repaid prior to May 2029).

Our $174.4 million of New IPv4 Notes effectively mature in April 2030 and include annual interest payments of $11.6 million until maturity (which amount increases if the New IPv4 Notes are not repaid prior to April 2030).

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The long-term debt interest obligations and maturity dates of our long-term debt obligations are as follows:

● Our $600.0 million 2032 Notes mature in July 2032 and include annual interest payments of $39.0 million until maturity,

● Our $450.0 million 2027 Notes mature in June 2027 and include annual interest payments of $31.5 million until maturity,

● Our $300.0 million 2027 Mirror Notes mature in June 2027 and include annual interest payments of $21.0 million until maturity,

● Our $206.0 million Existing IPv4 Notes effectively mature in May 2029 (i.e., the interest rate will significantly increase if we do not pay them on the monthly payment date in May of 2029) and include annual interest payments of $16.3 million until such date (which amount increases if the Existing IPv4 Notes are not repaid prior to May 2029), and

● Our $174.4 million New IPv4 Notes effectively mature in April 2030 (i.e., the interest rate will significantly increase if we do not pay them on the monthly payment date in April of 2030) and include annual interest payments of $11.6 million until such date (which amount increases if the New IPv4 Notes are not repaid prior to April 2030).

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

These settlement payments are made in November and May of each year until the Swap Agreement expires in February 2026.

As of March 31, 2025, $22.5 million of our cash and cash equivalents are restricted for use under our Swap Agreement.

As of June 30, 2025, $13.6 million of our cash and cash equivalents are restricted for use under our Swap Agreement.

We have made a $13.8 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $13.8 million, we will be required to deposit additional funds with the counterparty equal to the net liability fair value.

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

In June 2024, we elected to exercise a contractual option to prepay in full at a 12.0% discounted rate an IRU finance lease agreement between us and a vendor we assumed with the Sprint Business for $114.6 million.

At the payment date, the present value of the IRU finance lease liability was $117.9 million and the remaining thirty-one $4.2 million monthly principal payments 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.

We are continuing to use the related IRU asset.

We may need to, or elect to, refinance all or a portion of our indebtedness at or before maturity and we cannot provide assurances that we will be able to refinance any such indebtedness on commercially reasonable terms or at all.

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The amounts involved may be material.

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In light of the economic uncertainties associated with the global economy, including due to the impact from tariffs and trade restrictions, the cash flow requirements of the Sprint Business, the lingering impact of the COVID-19 pandemic and recent bank failures and liquidity concerns at certain other banks, our executive officers and Board of Directors have continued to carefully monitor our liquidity and cash requirements.

In light of the economic uncertainties associated with the global economy, including due to the impact from tariffs and trade restrictions, the cash flow requirements of the Cogent Fiber Business, the lingering impact of the COVID-19 pandemic and recent bank failures and liquidity concerns at certain other banks, our executive officers and Board of Directors have continued to carefully monitor our liquidity and cash requirements.

Based on current circumstances, we currently plan to continue our current dividend policy.

Given uncertainties regarding the potential impact of tariffs and trade restrictions, the global economy, lingering business impact of the pandemic, and the cash flow requirements of the Sprint Business, we will continue to monitor our capital spending.

Given uncertainties regarding the potential impact of tariffs and trade restrictions, the global economy, lingering business impact of the pandemic, and the cash flow requirements of the Cogent Fiber Business, we will continue to monitor our capital spending.

As we do each year, we will continue to monitor our future sources and uses of cash, and anticipate that we will adjust our capital allocation strategies when, as and if determined by our Board of Directors.

As of March 31, 2025, we had cash, cash equivalents and restricted cash of $184.0 million.

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 our monthly leverage ratio and our debt service coverage ratio (as defined in the Base Indenture) under our combined $380.4 million of IPv4 notes.

Cash, cash equivalents and restricted cash

As of June 30, 2025, we had cash, cash equivalents and restricted cash of $306.7 million.

Restricted cash as of June 30, 2025 was $93.1 million.

The net proceeds from our 2032 Notes, after the extinguishment and redemption of our Existing 2026 Notes, were $92.8 million.

The net proceeds of our $174.4 million New IPv4 Notes that we issued in April 2025 were $170.5 million of which

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$72.6 million was restricted.

This restricted cash will become available to us based upon improvements in our monthly leverage ratio and our debt service coverage ratio (as defined in the IPv4 Notes Indenture).

We believe we are able to timely service our debt obligations and will not require any concessions to do so.

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The following table sets forth our consolidated cash flows.

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Net cash provided by operating activities

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash used in financing activities

Net cash provided by financing activities

Effect of exchange rates changes on cash

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

Net increase in cash and cash equivalents and restricted cash

Net Cash Provided by Operating Activities.

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Our changes in cash provided by operating activities are primarily due to changes in our operating profit and changes in our interest payments.

On the Closing Date, we entered into a TSA with the Seller, pursuant to which the Seller will provide to us, and we will provide to the Seller on an interim basis following the Closing Date, Transition Services to ensure an orderly transition following the separation of the Sprint Business from Sprint Communications.

We paid $48.0 million and $26.9 million of interest on our long-term debt obligations for the six months ended June 30, 2025 and 2024, respectively.

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

During the three months ended March 31, 2025 and 2024, we were billed $0.4 million and $16.7 million as due to the Seller under the TSA, respectively.

During the three months ended March 31, 2025 and 2024, we 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, we 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 us $76,870 and $0.5 million under the TSA, respectively.

As of March 31, 2025, we owed $0.2 million to the Seller under the TSA.

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

Amounts recorded and paid as due to the Seller under the TSA resulted in a use of cash in operating activities of $0.3 million for the three months ended March 31, 2025 and $61.1 million for the three months ended March 31, 2024.

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During the six months ended June 30, 2025 and 2024, we were billed $0.4 million and $23.3 million as due to the Seller under the TSA, respectively.

During the six months ended June 30, 2025 and 2024, we paid $0.9 million and $88.2 million to the Seller under the TSA, respectively.

Amounts recorded and paid as due to the Seller under the TSA resulted in a use of cash in operating activities of $0.5 million for the six months ended June 30, 2025 and $64.6 million for the six months ended June 30, 2024.

Net Cash (Used in) Provided by Investing Activities.

Our primary use of cash for investing activities is for purchases of property and equipment.

Purchases of property and equipment were $58.1 million and $40.9 million for the three months ended March 31, 2025 and 2024, respectively.

The changes in purchases of property and equipment were primarily due to the timing and scope of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Sprint Business, costs associated with providing wave services, conversion costs related to acquired data centers and adding buildings to our network.

On the Closing Date, we entered into the IP Transit Services Agreement pursuant to which TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months.

During the three months ended March 31, 2025 and 2024 we were paid $25.0 million and $87.5 million under the IP Transit Services Agreement, respectively.

Net Cash Used in Financing Activities.

Purchases of property and equipment were $114.3 million and $89.7 million for the six months ended June 30, 2025 and 2024, respectively.

The changes in purchases of property and equipment were primarily due to the timing and scope of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Cogent Fiber Business, costs associated with providing wave and optical transport services, conversion costs related to acquired data centers and adding buildings to our network.

Our primary source of investing cash is from payments under the IP Transit Services Agreement with TMUSA, pursuant to which TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months.

During the six months ended June 30, 2025 and 2024 we were paid $50.0 million and $154.2 million under the IP Transit Services Agreement, respectively.

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Net Cash Provided by Financing Activities.

Our primary uses of cash for financing activities are for dividend payments, purchases of our common stock and principal payments under our finance lease obligations.

Our primary sources of cash for financing activities are issuances of note obligations.

During the three months ended March 31, 2025 and 2024 we paid $0.5 million and $49.1 million for our quarterly dividend payments, respectively.

Our first quarter 2024 dividend payment totaling $45.8 million was paid in April 2024 and accrued at March 31, 2024.

During the six months ended June 30, 2025 and 2024 we paid $98.7 million and $93.8 million for our quarterly dividend payments, respectively.

Our quarterly dividends payments have increased due to increases in our quarterly dividend per share amounts.

Principal payments under our finance lease obligations were $8.0 million and $23.2 million for the three months ended March 31, 2025 and 2024, respectively.

Changes in our principal payments under our finance lease obligations were primarily due to the timing and extent of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Sprint Business associated with providing wave services and adding buildings to our network.

Cash Position and Indebtedness

At March 31, 2025, our total indebtedness, at par, was $2.0 billion and our total cash, cash equivalents and restricted cash ($30.2 million) was $184.0 million.

Our total indebtedness at March 31, 2025 includes $568.5 million of finance lease obligations for dark fiber under long-term IRU agreements.

Purchases of our common stock under our stock buyback program were $11.5 million and $8.0 million for the six months ended June 30, 2025 and 2024, respectively.

Principal payments under our finance lease obligations were $16.5 million and $42.1 million for the six months ended June 30, 2025 and 2024, respectively.

At the payment date, the present value of the IRU finance lease liability was $117.9 million and the remaining thirty-one $4.2 million monthly principal payments 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 and the cash payment.

Changes in our principal payments under our finance lease obligations were primarily due to the timing and extent of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Cogent Fiber Business associated with providing wave and optical network services and adding buildings to our network.

We completed a series of debt issuances in the six months ended June 30, 2025.

On April 11, 2025 we issued $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 repayment date in April 2030, in an offering exempt from registration under the Securities Act.

The net proceeds of the New IPv4 Notes, after offering expenses were $170.4 million.

O which $72.6 million are restricted cash.

Certain of the restricted cash net proceeds will become available to us based upon improvements in our monthly leverage ratio and debt service coverage ratio (both as defined in the IPv4 Notes Indenture).

Interest on the New IPv4 Notes is paid on a monthly basis.

From and after the monthly payment date in April of 2030, 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 monthly payment date in April of 2030, unless certain rapid amortization, mandatory prepayment or acceleration triggers are activated.

On June 17, 2025 (the “2032 Notes Closing Date”), we completed an offering of $600.0 million of 2032 Notes for issuance in a private placement not registered under the Securities Act.

The net proceeds from the offering were $597.8 million after deducting offering expenses.

On June 4, 2025, we issued a notice of conditional full redemption to holders of all of our outstanding $500.0 million of our Existing 2026 Notes, specifying the 2032 Notes Closing Date as the redemption date.

On the 2032 Notes Closing Date, we used $507.3 million of the net proceeds from the offering to redeem in full, and satisfy and discharge our obligations under our Existing 2026 Notes.

The obligations paid under our Existing 2026 Notes included;

● $500.0 million principal amount,

● $5.0 million make-whole payment, and

● $2.2 million of accrued interest.

We completed a series of debt issuances in the six months ended June 30, 2024.

On May 2, 2024, we issued $206.0 million of our Existing IPv4 Notes, with an anticipated repayment date in May 2029.

The net proceeds from the offering, after debt offering costs, were $198.4 million.

Interest on the Existing IPv4 Notes is paid on a monthly basis.

From and after the monthly payment date in May of 2029, principal payments will also be required to be made on the Existing IPv4 Notes on a monthly basis.

No principal payments will be due on the Existing IPv4 Notes prior to the monthly payment date in May of 2029, unless certain rapid amortization, mandatory prepayment or acceleration events occur.

On June 11, 2024, we completed an offering of $300.0 million of 2027 Mirror Notes for issuance in a private placement not registered under the Securities Act.

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.

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

Interest began to accrue on the 2027 Mirror Notes on June 11, 2024 and will be paid semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2024.

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

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Cash Position and Indebtedness

At June 30, 2025, our total indebtedness, at par, was $2.4 billion and our total cash, cash equivalents and restricted cash ($93.1 million) was $306.7 million.

Our total indebtedness at June 30, 2025 includes $605.2 million of finance lease obligations for dark fiber under long-term IRU agreements.

Summarized Financial Information of Holdings

Neither Holdings nor any of its subsidiaries that is not also a subsidiary of Group is a “Restricted Subsidiary” as defined under the indentures governing our 2026 Notes, our 2027 Notes or our 2027 Mirror Notes (the “Indentures”).

Neither Holdings nor any of its subsidiaries that is not also a subsidiary of Group is a “Restricted Subsidiary” as defined under the indentures governing our 2032 Notes, our 2027 Notes or our 2027 Mirror Notes (collectively the “Indentures”).

Holdings is a guarantor under these notes, but none of its subsidiaries that is not also a subsidiary of Group is a guarantor under these notes.

Under the Indentures, we are required to disclose certain reasonably related information of Holdings and its subsidiaries that is not attributable to Group and its subsidiaries, relating to Holdings’ assets, liabilities and operating results (“Holdings Financial Information”).

The Holdings Financial Information as of and for the three months ended March 31, 2025 is detailed below (in thousands):

As of March 31, 2025

The Holdings Financial Information as of and for the three and six months ended June 30, 2025 is detailed below (in thousands):

As of June 30, 2025

Cash and cash equivalents

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Total liabilities and stockholders’ deficit

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Three Months Ended

March 31, 2025

June 30, 2025

Service revenue

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Interest income and other, net

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Six Months Ended

June 30, 2025

Service revenue

Operating expenses:

Network operations

Selling, general, and administrative

Equity-based compensation expense

Depreciation and amortization

Total operating expenses

Operating loss

Interest expense

Interest income - Purchase Agreement

Interest income and other, net

Common Stock Buyback Program

Our Board of Directors has approved purchases of shares of our common stock under a buyback program (the “Buyback Program”).

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

As of March 31, 2025, there was a total of $22.4 million available under the Buyback Program that is authorized to continue through December 31, 2025.

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

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

In the second quarter of 2025, we purchased 229,507 shares of our common stock for $11.5 million at an average price of $50.18 per share under the Buyback Program.

As of June 30, 2025, there was a total of $10.9 million available under the Buyback Program that was authorized to continue through December 31, 2025.

On August 6, 2025, our Board of Directors approved a $100.0 million increase to our Buyback Program to continue to December 31, 2026.

Dividends on Common Stock and Return of Capital Program

On May 7, 2025, our Board of Directors approved the payment of our quarterly dividend of $1.01 per common share.

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

On August 6, 2025, our Board of Directors approved the payment of our quarterly dividend of $1.015 per common share.

This estimated $48.4 million dividend payment is expected to be made on September 5, 2025.

The payment of any future dividends and any other returns of capital, including stock buybacks, will be at the discretion of our Board of Directors and may be reduced, eliminated or increased and will be dependent upon our financial position, results of operations, available cash, cash flow, capital requirements, limitations under our debt indentures and other factors deemed relevant by our Board of Directors.

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See Note 3 of our interim condensed consolidated financial statements for additional discussion of limitations on distributions.

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Future Capital Requirements

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Any future acquisitions or other significant unplanned costs or cash requirements in excess of amounts we currently hold may require that we raise additional funds through the issuance of debt or equity.

In addition, our 2026 Notes will mature in May 2026.

At that time or earlier, we may elect to refinance or repay our 2026 Notes which may require us to issue additional indebtedness.

We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all.

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As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

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Critical Accounting Estimates

Management believes that as of March 31, 2025, there have been no material changes to our critical accounting policies and significant estimates from those listed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2024.

Management believes that as of June 30, 2025, there have been no material changes to our critical accounting policies and significant estimates from those listed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2024.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management believes that as of March 31, 2025, there have been no material changes to our exposures to market risk from those disclosed in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our annual report on Form 10-K for the year ended December 31, 2024.

Management believes that as of June 30, 2025, there have been no material changes to our exposures to market risk from those disclosed in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our annual report on Form 10-K for the year ended December 31, 2024.

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 2. Management’s Discussion and Analysis