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What changed in COGENT COMMUNICATIONS HOLDINGS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of COGENT COMMUNICATIONS HOLDINGS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+473 added−427 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in COGENT COMMUNICATIONS HOLDINGS, INC.'s 2024 10-K

473 paragraphs added · 427 removed · 344 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

110 edited+15 added−9 removed65 unchanged
Biggest changeWe currently interconnect with 7,988 networks that pay us to exchange traffic as our customers. We supplement our customer network interconnections with settlement-free peering to our non-customer tier one global ISPs. We have settlement-free private peering interconnections between our network and 23 other major ISPs who are not our customers. Tier 1 ISP Status.
Biggest changeWe interconnect with the networks of our customers, which represent the majority of our interconnections and network traffic, through the sale of our transit services. We currently interconnect with 8,250 networks that pay us to exchange traffic as our customers. We supplement our customer network interconnections with settlement-free peering to our non-customer tier one global ISPs.
In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.
In addition to providing on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to our network.
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, and 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 fiber networks to serve those buildings, the costs to connect buildings to our network and equipment availability.
This service enables these customers to access the Internet with a high-speed, bi-directional, symmetric circuit with a very high degree of reliability and 100% access to that contractual capacity at all times. Depending upon the geographic breadth of our customers’ footprint and their communications requirements, we also sell these corporate customers private network services.
This service enables these customers to access the Internet with a high-speed, bi-directional, symmetric circuit with a high degree of reliability and 100% access to that contractual capacity at all times. Depending upon the geographic breadth of our customers’ footprint and their communications requirements, we also sell these corporate customers private network services.
Our inter-city network is comprised of the approximately 19,000-mile inter-city portion of the Sprint Network and long-term, leased strands of optical fiber, typically two, out of the multiple fibers owned from various dark fiber vendors. We install the optical and electronic equipment necessary to amplify, regenerate, and route the optical signals along this network.
Our inter-city network is comprised of the approximately 19,000-mile inter-city portion of the Sprint Network and long-term, leased strands of optical fiber, typically two to four, out of the multiple fibers owned from various dark fiber vendors. We install the optical and electronic equipment necessary to amplify, regenerate, and route the optical signals along this network.
Our intra-city networks are a combination of the 1,300 miles of owned Sprint Network and our rights to use optical fiber that we obtained from carriers with optical fiber networks in those cities. These metropolitan networks consist of optical fiber that runs from the central router in a market into routers located in our on-net buildings.
Our intra-city networks are a combination of the 1,300 miles of owned Sprint Network and our IRU rights to use optical fiber that we obtained from carriers with optical fiber networks in those cities. These metropolitan networks consist of optical fiber that runs from the central router in a market into routers located in our on-net buildings.
We believe these agreements broaden our addressable market for corporate dedicated internet access, VPN services and/or MPLS and enable us to better leverage the skills and capacity of our direct salesforce. As our sales of off-net services has increased, the pricing in our carrier agreements has commensurately decreased in light of our increased volume.
We believe these agreements broaden our addressable market for corporate dedicated internet access, VPN services and/or MPLS and enable us to better leverage the skills and capacity of our direct salesforce. As our sales of off-net services have increased, the pricing in our carrier agreements has commensurately decreased in light of our increased volume.
Our net-centric customers include bandwidth-intensive users that leverage our network either to deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.
Our net-centric customers include bandwidth-intensive users that leverage our network either to deliver content to end users or to provide access to residential or commercial Internet users. Content delivery customers include over the top media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.
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. Balanced, High-Traffic Network . Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic.
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. Balanced, High-Traffic IP Network. Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic.
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 customer as well.
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.
Acquisition of the Sprint Business On May 1, 2023 (the “Closing Date”), Cogent Infrastructure, Inc., a Delaware corporation and our direct wholly owned subsidiary (“Cogent Infrastructure”), closed on its acquisition of the U.S. 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”).
Acquisition of the Sprint Business On May 1, 2023 (the “Closing Date”), Cogent Infrastructure, Inc., (now Cogent Infrastructure, LLC), a Delaware corporation and our direct wholly owned subsidiary (the “Buyer” or “Cogent Infrastructure”), closed on its acquisition of the U.S. 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”).
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 and private network services at attractive prices. With our acquisition of the Sprint Business, we began offering services to larger enterprise customers.
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 and private network services at attractive prices. After our acquisition of the Sprint Business, we began offering services to larger enterprise customers.
We have expanded our network by acquiring owned and leased fiber through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost. Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase our profitability with incremental capital expenditures. Inter-city Network.
We have expanded our network by acquiring owned and leased fiber through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost. Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase our profitability with incremental capital expenditures.
We intend to further load our high-capacity network as a result of the growing demand for high-speed internet access generated by these types of bandwidth-intensive applications such as OTT media services, online gaming, video, Internet of Things, voice over IP, remote data storage, and other services.
We intend to further load our high-capacity network as a result of the growing demand for high-speed Internet access generated by these types of bandwidth-intensive applications such as over-the-top media services, online gaming, video, Internet of Things, voice over IP, remote data storage, and other services.
We have moved and may continue to move, to the extent permitted by and in compliance with the indentures governing our 2026 Notes and 2027 Notes, certain assets and obligations between the companies owned by Cogent Infrastructure and Cogent Group to better align these assets and obligations with our business and operations and for general corporate purposes.
We have moved and may continue to move, to the extent permitted by and in compliance with the indentures governing our 2026 Notes, 2027 Notes, 2027 Mirror Notes and IPv4 Notes, certain assets and obligations between the companies owned by Cogent Infrastructure and Cogent Group to better align these assets and obligations with our business and operations and for general corporate purposes.
These buildings include 1,862 large MTOBs (totaling over 1.0 billion square feet of office space) 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.
These buildings include 1,871 large MTOBs (totaling over 1.0 billion square feet of office space) 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.
In connection with our acquisition of the Sprint Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network.
In connection with our acquisition of the Sprint Business, we expanded our offerings of optical wavelength - optical transport services over our fiber network.
Our service is initiated by connecting a fiber optic cable from our customer’s local area network in their suite to the infrastructure in the building riser giving our customer dedicated and secure access to our network using an Ethernet connection.
Our service is initiated by connecting a fiber optic cable from our customer’s local area network in its suite to the infrastructure in the building riser giving our customer dedicated and secure access to our network using an Ethernet connection.
Our 14 regional learning managers and management development trainers are located around the world and are available for intensive, in-person group training as well as individual training with sales representatives who may need extra assistance.
Our 15 regional learning managers and management development trainers are located around the world and are available for intensive, in-person group training as well as individual training with sales representatives who may need extra assistance.
Expand our Off-net Corporate and Enterprise Internet Access and VPN Business. We have agreements with over 620 national and international carriers providing us last mile network access to over 6 million commercial buildings that are lit by fiber optic cable in the 54 countries we serve and that are not currently served by our network.
Expand our Off-net Corporate and Enterprise Internet Access and VPN Business . We have agreements with over 700 national and international carriers providing us last mile network access to over 6 million commercial buildings that are lit by fiber optic cable in the countries we serve and that are not currently served by our network.
We have acquired a large portfolio of dark fiber leases from over 325 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.
We have acquired a large portfolio of dark fiber leases from 369 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.
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. Page 8 of 90 Table of Contents Expand our Product Offerings to Include Wavelength and Optical Transport Services .
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. Page 8 of 96 Table of Contents Expand our Product Offerings to Include Wavelength - Optical Transport Services .
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 3,277 total buildings located in 228 metropolitan markets globally.
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 3,453 total buildings located in 264 metropolitan markets globally.
Page 9 of 90 Table of Contents Our inter-city network consists of optical fiber, including transoceanic capacity circuits for undersea portions, connecting major cities in North America, Europe, Asia, South America, Oceania and Africa.
Page 9 of 96 Table of Contents Inter-city Network. Our inter-city network consists of optical fiber, including transoceanic capacity circuits for undersea portions, connecting major cities in North America, Europe, South America, Oceania and Africa.
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 Page 4 of 90 Table of Contents restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).
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, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).
We believe that Ethernet is the lowest cost network connection technology and is almost universally used for the local area networks that businesses operate. Carrier Neutral Data Centers. Our network is collocated in and can provide connectivity to customers in 1,558 CNDCs located in 1,347 buildings across our footprint.
We believe that Ethernet is the lowest cost network connection technology and is almost universally used for the local area networks that businesses operate. Carrier Neutral Data Centers. Our network is collocated in and can provide connectivity to customers in 1,646 CNDCs located in 1,478 buildings across our footprint.
Our net-centric customers include 7,988 access networks comprised of other Internet service providers (“ISPs”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world. These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers.
Our net-centric customers include access networks comprised of other internet service providers (“ISP’s”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world. These net-centric customers generally receive our services in carrier neutral colocation facilities and in our own data centers.
ITEM 1. BUSINESS We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space and power. Our network is specifically designed and optimized to transmit packet routed data.
ITEM 1. BUSINESS Description of business We are a facilities-based provider of low-cost, high-speed Internet access, private network services, optical wavelength and optical transport services and data center colocation space and power. Our network is specifically designed and optimized to transmit packet-routed data.
We expect that we will continue to grow our shares of these segments by offering our customers a series of attractive features including: ● Geographic breadth – We have the broadest CNDC footprint in the industry and currently offer network services in 54 countries – as net-centric customers seek a more international audience, this footprint is a significant advantage; ● High capacity and reliability – We offer 100 Mbps to 100 Gbps ports in all of the CNDCs and 400 Gbps in selected locations on our network, which differentiates the capacity choices we provide our net-centric clients; ● Balanced customer base – Our leading share of content providers and access networks increases the amount of traffic that originates and terminates on our network, thereby reducing latency and enhancing reliability; ● 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; and Page 7 of 90 Table of Contents ● Wave and optical transport services – We began offering wave and optical transport services to our net-centric customers who require these high bandwidth services Pursue On-net Customer Growth.
We expect that we will continue to grow our shares of these segments by offering our customers a series of attractive features including: ● Geographic breadth – We have one of the broadest CNDC footprints in the industry and currently offer network services in 56 countries – as net-centric customers seek a more international audience this footprint is a significant advantage; ● High capacity and reliability – We offer 100 Mbps to 100 Gbps ports in all of the CNDCs and 400 Gbps in selected locations on our network, which differentiates the capacity choices we provide our net-centric clients; ● Balanced customer base for IP services – Our leading share of content providers and access networks increases the amount of traffic that originates and terminates on our network thereby reducing latency and enhancing reliability; ● 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; and ● 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.
We directly connect with 7,988 total networks. As a result of the size and breadth of our customer base and the extensive footprint and scale of our network, we are a Tier 1 ISP. We currently exchange traffic with 23 other Tier 1 ISPs on a settlement free basis. The remaining networks are customers whom we charge for Internet access.
As a result of the size and breadth of our customer base and the extensive footprint and scale of our network, we are a Tier 1 ISP. We currently exchange traffic with 23 other Tier 1 ISPs on a settlement free basis. The remaining networks are customers whom we charge for Internet access.
For the portions of our network that are leased under indefeasible rights of use, or IRUs, from providers, some of which compete with us, we do not have title to the dark fiber. We rely on the owner of this leased fiber to maintain the fiber.
For the portions of our network that are leased under IRUs from providers, some of which compete with us, we do not have title to the dark fiber. We rely on the owner of this leased fiber to maintain the fiber.
In addition to contractual capacity, certain net-centric customers also purchase metered service that enables customers to pay for actual volume of bits delivered on a per bit per second basis. We also offer a burst product that allows net-centric customers to utilize capacity when they exceed their contractual capacity.
In addition to contractual capacity, certain net-centric customers also purchase metered service that enables customers to pay for actual volume of bits delivered on a per bit per second basis. We also offer a burst product that allows net-centric customers to utilize Page 11 of 96 Table of Contents capacity when they exceed their contractual capacity.
Our corporate customers primarily purchase dedicated internet access from us on-net in MTOBs and CNDCs or off-net through other carriers’ “last mile” connections to those customer facilities in metropolitan markets in North America.
Our corporate customers primarily purchase our services from us on-net in MTOBs and CNDCs or off-net through other carriers’ “last mile” connections to those customer facilities in metropolitan markets in North America.
Page 10 of 90 Table of Contents Peering agreements between ISPs enable them to exchange traffic.Without settlement-free peering agreements, each ISP backbone would have to buy Internet access from every other ISP backbone in order for its customer’s traffic to reach and be received from customers of other ISP backbones.
Peering agreements between ISPs enable them to exchange traffic.Without settlement-free peering agreements, each ISP backbone would have to buy Internet access from every other ISP backbone in order for its customer’s traffic to reach and be received from customers of other ISP backbones.
Our ability to recruit and retain all of our employees depends on a number of factors, including professional development, compensation and benefits, and employee engagement. A total of 942 employees transitioned to the Company on the Closing Date in connection with the acquisition of the Sprint Business.
Our ability to recruit and retain all of our employees depends on a number of factors, including professional development, compensation and benefits, and employee engagement. Page 12 of 96 Table of Contents A total of 942 employees transitioned to the Company on the Closing Date in connection with the acquisition of the Sprint Business.
Our field services organization includes over 400 employees globally. The department facilitates the deployment, maintenance, and support of products or services in our data centers, network PoPs, CNDCs and MTOBs. This department is responsible for on-site activities, ranging from initial installations and configurations to troubleshooting, repairs, and upgrades.
Our field services organization includes over 350 employees globally. The department facilitates the deployment, maintenance, and support of products or services in our data centers, network points of presence (“PoPs”), CNDCs and MTOBs. This department is responsible for on-site activities, ranging from initial installations and configurations to troubleshooting, repairs, and upgrades.
We seek to maintain a consistent level of sales productivity as measured by the number of connections sold per salesperson per month, taking into account adjustments to the changing mix of products sold and installed.
We seek to maintain a consistent level of sales productivity as measured by the number of connections sold per salesperson per month, considering adjustments to the changing mix of products sold and installed.
In addition, we conduct building events and public relations efforts focused on cultivating Page 13 of 90 Table of Contents industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet access, colocation and private network services.
In addition, we conduct building events and public relations efforts focused on cultivating industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet access, colocation and private network services.
In the CNDCs, we are collocated with our customers. As a result, only a cross-connection within the data center is required to provide our services to our customers, including our newer optical wave and optical transport offerings. The structure of our on-net service provides us with more control over our service, its quality and pricing.
As a result, only a cross-connection within the data center is required to provide our services to our customers, including our newer optical wave and optical transport offerings. The structure of our on-net service provides us with more control over our service, quality and pricing.
Our Customers We offer our high-speed Internet access and IP transit connectivity services to three sets of customers: corporate customers, which primarily include small and medium-sized businesses located in North America, enterprise customers, and net-centric customers, which include, content providers, applications service providers and access networks, comprised of ISPs, cable operators, mobile operators and phone companies located in North America, Europe, Asia, South America, Oceania and Africa.
Our Customers We offer our services to three sets of customers: corporate customers, which primarily include small and medium-sized businesses located in North America, enterprise customers, and net-centric customers, which include, content providers, applications service providers and access networks, comprised of ISPs, cable operators, mobile operators and phone companies located in North America, Europe South America, Oceania and Africa.
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.
We are selling these wavelength services to our existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.
Our single network protocol allows us to avoid many of the costs that our competitors who operate circuit-switched, time-division multiplexing (“TDM”) and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols. Selecting one operating protocol has also had positive effects in terms of our operating overhead and the simplicity of our organization.
Our single network protocol allows us to avoid many of the costs that our competitors who operate circuit-switched, time-division multiplexing (“TDM”) and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols. Selecting one operating protocol has positively impacted our operating overhead and the simplicity of our organization.
Field Services is also responsible for deployment, repair and reconfiguration of the approximately 20,000 miles of fiber optic cable comprising the Sprint Network.
Field Services is also responsible for deployment, repair and reconfiguration of the approximately 20,800 route miles of owned fiber optic cable comprising the Sprint Network.
The reports are also made available through a link to the SEC’s Internet website at www.sec.gov . You can find these reports and request a copy of our Code of Conduct on our website at www.cogentco.com under the “About Cogent” tab at the “Investor Relations” link under “Reports” and under “Governance” at “Corporate Governance Documents”. ​
The reports are also made available through a link to the Securities and Exchange Commission (SEC)’s Internet website at www.sec.gov . You can find these reports and request a copy of our Code of Conduct on our website at www.cogentco.com under the “About Cogent” tab at the “Investor Relations” link under “Reports” and under “Governance” at “Corporate Governance Documents.” ​
We expanded selling our services to enterprise customers in connection with our acquisition of the Sprint Business (as defined below). We define “enterprise” customers as large corporations (typically, Fortune 500 companies or companies with greater than $5 billion in annual revenue) running Wide Area Networks (“WANs”) with several dozen to several hundred sites.
We began to serve enterprise customers in connection with our acquisition of the Sprint Business. We define “enterprise” customers as large corporations (typically, Fortune 500 companies or companies with greater than $5 billion in annual revenue) running Wide Area Networks with several dozen to several hundred sites.
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. Scalable Network Equipment and Hub Configurations .
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. ● Scalable Network Equipment and Hub Configurations .
Page 12 of 90 Table of Contents As part of our commitment to professional development of our sales personnel, we established a sales training and enablement department that provides both online and in-person training.
As part of our commitment to professional development of our sales personnel, we established a sales training and enablement department that provides both online and in-person training.
Cogent Group is the parent of Cogent Communications, Inc., which was our sole operating company prior to the Closing Date, and Cogent Group is the issuer of our $500.0 million of 3.50% senior secured notes due in May 2026 (“2026 Notes”) and our $450.0 million of 7.00% senior unsecured notes due in June 2027 (“2027 Notes”).
Cogent Group is the parent of Cogent Communications, LLC (formerly Cogent Communications, Inc.), which was our sole operating company prior to the Closing Date, and Cogent Group is the issuer of our $500.0 million of 3.50% senior secured notes due in May 2026 (“2026 Notes”) and our $750.0 million of 7.00% senior unsecured notes due in June 2027 of which $450.0 million were issued in June 2022 (“2027 Notes”) and $300.0 million were issued in June 2024 (“2027 Mirror Notes”).
As of December 31, 2023, 34% of our employees were quota-bearing sales representatives, 10% were in sales management or sales support roles and 56% were in operational or administrative functions. Unions represent 32 of our employees in France and 3 of our employees in Sweden.
As of December 31, 2024, 34% of our employees were quota-bearing sales representatives, 10% were in sales management or sales support roles and 56% were in operational or administrative functions. Unions represent 30 of our employees in France and 4 of our employees in Sweden.
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 nearly 11.1 million of our IPv4 addresses to our customers on contracts with service terms ranging from 1 month to 5 years.
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 13.0 million of our IPv4 addresses to our customers on contracts with service terms ranging from one month to five years.
Cogent Group owns, among other things, our IRU network, Cogent data centers, Cogent operating subsidiaries in 54 countries worldwide, our corporate and net-centric customer base and over 28 million IPv4 addresses. Cogent Group also receives payments due from T-Mobile for IP transit services in connection with the Transaction.
Cogent Group owns, among other things, our indefeasible-right-of-use (“IRU”) network, Cogent data centers, Cogent operating subsidiaries in 56 countries worldwide, our corporate and net-centric customer base and over 25 million IPv4 addresses. Cogent Group also receives payments due from T-Mobile for IP transit services in connection with the Transaction.
Our fiber network and associated facilities and equipment particularly in the United States are also subject to the regulatory authority of various agencies in which the network and facilities are located. These regulations include environmental, health and safety reporting and compliance. We have established a compliance team to manage this effort.
Our fiber network and associated facilities and equipment particularly in the United States are also subject to the regulatory authority of various agencies in which the network and facilities are located. These regulations include environmental, health and safety reporting and compliance. We have established a compliance team to manage this effort. Available Information We maintain an Internet website at www.cogentco.com.
The Sprint Network is mostly complementary to our Page 5 of 90 Table of Contents existing leased dark fiber network, offers unique geographic routes and will allow us to reduce our reliance on leased dark fiber.
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.
Professional Development . We recognize the importance of retaining our employees, and we continually strive to improve the performance of our personnel to reduce turnover. To that end, we have invested heavily in professional development as a means for improving performance.
We were fully reimbursed for these severance costs by the Seller. Professional Development . We recognize the importance of retaining our employees, and we continually strive to improve the performance of our personnel to reduce turnover. To that end, we have invested heavily in professional development as a means for improving performance.
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 services, a new service for the Company, as well. We have not previously focused our sales efforts on 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.
As of December 31, 2023, we had 1,947 employees located in 25 different countries in a variety of different roles. Approximately 87% of our employees are located in the United States, Canada and Mexico, 11.2% are located in Europe and 1.6% are located in Asia and 0.2% in South America.
As of December 31, 2024, we had 1,916 employees located in 25 different countries in a variety of different roles. Approximately 88% of our employees are located in the United States, Canada and Mexico, 11% are located in Europe, 2% are located in Oceania and 0.2% in South America.
While nearly all of our employees work solely in office environments, for our field personnel, we provide safety gear as appropriate given employee job duties.
While nearly all of our employees work solely in office environments, for our field personnel, we provide safety gear as appropriate given employee job duties. We also provide training to our field personnel in a variety of workplace safety topics.
Corporate Structure after the Closing Date The Company operates through its two direct, wholly owned subsidiaries, Cogent Infrastructure and Cogent Communications Group, Inc. (“Cogent Group”). Cogent Infrastructure holds the Sprint Business operations.
Page 4 of 96 Table of Contents Corporate Structure after the Closing Date The Company operates through its two direct, wholly owned subsidiaries, Cogent Infrastructure and Cogent Communications Group, LLC (“Cogent Group”). Cogent Infrastructure holds the Sprint Business operations.
Our senior management team has designed and built our network and, during our formative years, led the integration of network assets we acquired through the 13 significant acquisitions prior to our acquisition of the Sprint Business and managed the expansion and growth of our business.
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.
As of December 31, 2023, we also operate 68 of our own data centers (13 of which converted from facilities acquired with the Sprint Business) across the United States and in Europe, which comprise over 1.3 million square feet of floor space, offer 125 MW of power, and are directly connected to our network.
We also operate 104 of our own data centers 48 of which were converted from facilities acquired with the Sprint Business) across the United States and in Europe, which comprise over 1.9 million square feet of floor space, offer 177 MW of power and are directly connected to our network.
Expand our Business with Enterprise Customers . With our acquisition of the Sprint Business, we acquired a number of larger enterprise customers.
Page 7 of 96 Table of Contents Expand our Business with Enterprise Customers . With our acquisition of the Sprint Business, we acquired a number of larger enterprise customers.
Our network is comprised of 3,277 buildings which are on-net, and we serve 228 metropolitan markets in North America, Europe, Asia, South America, Oceania and Africa.
Our network is comprised of 3,453 on-net buildings and we serve 264 metropolitan markets in North America, Europe South America, Oceania and Africa.
Our sales and marketing organization comprises 39% of our employees and our sales representatives comprise 34% of our employees. For the year ending December 31, 2023, we averaged a 5.0% monthly churn rate within our sales representatives.
Our sales and marketing organization comprises 45% of our employees and our sales representatives comprise 34% of our employees. For the year ended December 31, 2024, we averaged a 5.7% monthly churn rate within our sales representatives.
In all jurisdictions regulations continue to evolve. We also enter into new markets with their own regulations. The regulations with which we need to comply include obtaining the proper licenses to provide our services, data privacy, and interception of communications by law enforcement, blocking of websites, net-neutrality in California and other states in the U.S. and other regulations.
The regulations with which we need to comply include obtaining the proper licenses to provide our services, data privacy, and interception of communications by law enforcement, blocking of websites, net-neutrality in California and other states in the U.S. and other regulations. We believe that we comply with all regulations in the jurisdictions in which we operate.
This service offers Internet access combined with rack space and power in our facilities, allowing the customer to locate a server or other equipment at that location and connect to our Internet access service.
This service offers Internet access combined with rack space and power in our facilities, allowing the customer to locate a server or other equipment at that location and connect to our Internet access service. We currently offer wavelength services in 808 CNDCs, in the United States and Mexico.
As of December 31, 2023, our sales force included 847 full-time employees. Our quota bearing sales force includes 657 employees with 374 employees focused primarily on the corporate market271 employees focused primarily on the net-centric market and 12 employees focused primarily on the enterprise market.
As of December 31, 2024, our sales force included 843 full-time employees. Our quota-bearing sales force includes 650 employees with 347 employees focused primarily on the corporate market, 288 employees focused primarily on the net-centric market and 15 employees focused primarily on the enterprise market. As of December 31, 2023, our sales force included 847 full-time employees.
We believe the vast majority of our competition currently operates their networks with multiple protocols, and we believe that attempts to upgrade their networks to one protocol would be operationally challenging and costly. Our Network.
We believe the vast majority of our competitors currently operate their networks with multiple protocols and we believe that attempts to upgrade their networks to one protocol would be operationally challenging and costly. Page 5 of 96 Table of Contents ● Our IP Network .
We believe that we comply with all regulations in the jurisdictions in which we operate. The laws related to Internet telecommunications are unsettled and there may be new legislation and court decisions that may affect our services and expose us to burdensome requirements and liabilities.
The laws related to Internet telecommunications are unsettled and there may be new legislation and court decisions that may affect our services and expose us to burdensome requirements and liabilities.
We anticipate that our management team will successfully manage the integration of the Sprint Business into our current operations. Our Strategy 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. The principal elements of our strategy include: Grow our Corporate Customer Base.
Our Strategy 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. The principal elements of our strategy include: Grow our Corporate Customer Base.
We are also upgrading our network and operational infrastructure to provide wave and optical transport services in more of our on-net buildings. We emphasize our on-net services because they generate greater profit margins and we have more control over service levels, quality and pricing, and our on-net services are provisioned in considerably less time than our off-net services.
We emphasize our on-net services because they generate greater profit margins and we have more control over service levels, quality and pricing, and our on-net services are provisioned in considerably less time than our off-net services.
We operate 68 data centers across the United States and in Europe. These facilities comprise over 1.3 million square feet of floor space with 125 MW of available power and are directly connected to our network. Each location is equipped with secure access, UPS, and backup generators. Our customers typically purchase bandwidth, rack space, and power within these facilities. Internetworking.
We operate 104 data centers across the United States and in Europe. These facilities comprise over 1.9 million square feet of floor space with 177 MW of available power and are directly connected to our network. We also operate 55 Cogent edge data centers. Each location is equipped with secure access, UPS, and backup generators.
These buildings also include 1,558 CNDCs located in 1,347 buildings in North America, Europe, Asia, South America, Oceania and Africa where our net-centric customers directly interconnect with our network.
These buildings also include 1,646 CNDCs located in 1,478 buildings in North America, Europe, South America, Oceania and Africa where our net-centric customers directly interconnect with our network and 55 Cogent edge data centers.
Since our founding, we have strategically focused on delivering a very narrow product set to our customers. The vast majority of our revenue is driven by or related to our high-capacity, bi-directional, symmetric internet access services which can be accessed on-net in MTOBs and carrier neutral data centers (“CNDCs”) or off-net through other carriers’ “last mile” connections to customer facilities.
The vast majority of our revenue is driven by or related to our high-capacity, bi-directional, symmetric Internet access services which can be accessed on-net in multi-tenant office buildings (“MTOBs”) and carrier neutral data centers (“CNDCs”) or off-net through other carriers’ “last mile” connections to customer facilities.
This strategic combination of owned and leased dark fiber will help to ensure a robust and reliable network and enables us to connect via dark fiber to virtually any geographic route or facility we require on a long-term, cost-effective basis. Narrow and Focused Product Set .
This strategic combination of owned and leased dark fiber will help to ensure a robust and reliable network and enables us to connect via dark fiber to virtually any geographic route or facility we require on a long-term, cost-effective basis. ● Optical Wave Network - Acquiring the Sprint Network has also allowed us to construct a wavelength network using the predominantly owned fiber.
Because of these growing 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.
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. This control of traffic is an important differentiator as it increases our service reliability and speed of traffic delivery.
During the year ended December 31, 2023, we hired 478 new sales representatives and ended the year with 657 sales representatives, a net increase of 109 sales representatives from our total sales representatives at December 31, 2022.
During the year ended December 31, 2024, we hired 443 new sales representatives and ended the year with 650 sales representatives, a net decrease of 7 sales representatives from our total sales representatives at December 31, 2023.
We deliver our services on our network to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 54 countries across North America, Europe, Asia, South America, Oceania and Africa. We are a Delaware corporation, and we are headquartered in Washington, DC.
We deliver our services primarily to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 56 countries across North America, Europe, South America, Oceania and Africa. We are a Delaware corporation and headquartered in Washington, DC. We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises.
We also provide certain non-core services because of certain acquisitions, including our acquisition of the Sprint Business. We continue to support but do not actively sell these non-core services. We expect that our revenues from non-core services will decline.
We also provide certain non-core services that resulted from acquisitions, including the acquisition of Sprint Communications (as discussed below). We continue to support but do not actively sell these non-core services.
We provide our on-net Internet access, private network services and MPLS services to our corporate, net-centric and enterprise customers. Our corporate customers are located in multi-tenant office buildings (“MTOBs”), which typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.
Our corporate customers are located in multi-tenant office buildings that typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.
Following the Closing Date, Cogent Infrastructure, through its subsidiaries, owned, among other things, the Sprint Network (as defined below), consisting of approximately 20,000 fiber miles of fiber optic cable in the continental United States, a portfolio of owned properties totaling approximately 1.9 million square feet.
Following the Closing Date, Cogent Infrastructure, through its subsidiaries, owned, among other things, the Sprint Network (as defined below), consisting of approximately 20,800 route miles of owned fiber optic cable in the continental United States, a portfolio of owned and leased properties totaling approximately 1.9 million square feet, Sprint operating subsidiaries in over 30 countries worldwide, approximately 1,300 Sprint customers, both enterprise and net-centric, vendor and supply agreements and 9.9 million IPv4 addresses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may encounter difficulties retaining such customers, in converting such customers from their legacy services to newer technologies or in attracting new enterprise customers. Our inability to retain or attract such customers or to convert them to our services, could impair our growth, cash flow and profitability.
Biggest changeA number of our acquired enterprise customers purchased non-core services that we are in the process of eliminating, and this may cause such customers to look to other providers who offer a broader set of services. We may encounter difficulties retaining such customers, in converting such customers from their legacy services to newer technologies or in attracting new enterprise customers.
Our ability to avoid the higher costs of acquiring paid dedicated network capacity (transit or paid peering) and to maintain high network performance is dependent upon our ability to establish and maintain settlement-free peering relationships and to increase the capacity or to add additional locations of the interconnections provided by these relationships.
Our ability to avoid the higher costs of acquiring paid dedicated network capacity (transit or paid peering) and to maintain high network performance is dependent upon our ability to establish and maintain settlement-free peering relationships and to increase the capacity or add additional locations of the interconnections provided by these relationships.
An attack on or security breach of our network could result in theft Confidential Information, the interruption, degradation, or cessation of services, an inability to meet our service level commitments or our financial reporting obligations, and potentially compromise customer data stored on or transmitted over our network.
An attack on or security breach of our network could result in theft of Confidential Information, the interruption, degradation, or cessation of services, an inability to meet our service level commitments or our financial reporting obligations, and could potentially compromise customer data stored on or transmitted over our network.
As new laws are implemented or existing structures are declared insufficient, we may find it difficult to comply with such regulations or find it costly to do so. Moreover, for our customers who collect personal information, increased regulation of the collection, processing and use of personal data may impact their business and their use of services in unknown ways.
As new laws are implemented or existing structures are declared insufficient, we may find it difficult to comply with such regulations or find it costly to do so. Moreover, for our customers who collect personal information, increased regulation of the collection, processing and use of personal information may impact their business and their use of services in unknown ways.
Our business could suffer because telephone companies and cable companies may provide better delivery of certain Internet content, including content originating on their own networks, than content on the public Internet. Broadband connections provided by cable TV, telephone, and fixed and mobile companies have become the predominant means by which consumers connect to the Internet.
Our business could suffer because telephone companies and cable companies may provide better delivery of certain Internet content, including content originating on their own networks, than content on the public Internet. Broadband connections provided by cable TV, telephone, and fixed and mobile wireless companies have become the predominant means by which consumers connect to the Internet.
Our off-net customers are connected to our network by means of fiber optic capacity that are provided as services by local telephone and cable companies and others.
Our off-net customers are connected to our network by means of fiber optic capacity that is provided as services by local telephone and cable companies and others.
In addition, the recent acquisition of the Sprint Business has made us subject to additional or duplicate regulatory obligations, particularly in the countries where the Sprint Business has subsidiaries and related to the Sprint Business.
In addition, the acquisition of the Sprint Business has made us subject to additional or duplicate regulatory obligations, particularly in the countries where the Sprint Business has subsidiaries and related to the Sprint Business.
In response to past attacks, we have implemented further controls and taken and planned for other preventative actions to further strengthen our systems against future attacks.
In response to past attacks, we have implemented additional controls and taken and planned for other preventative actions to further strengthen our systems against future attacks.
Despite these positive indicators, the precise timing and trajectory of these trends remain uncertain. The lingering effects of the COVID-19 pandemic introduce an element of unpredictability, and we may continue to see increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities, which would negatively affect our corporate revenue growth.
Despite these positive indicators, the precise timing and trajectory of these trends remain uncertain. The lingering effects of the pandemic introduce an element of unpredictability, and we may continue to see increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities, which would negatively affect our corporate revenue growth.
We cannot guarantee that our security measures will not be circumvented, thereby resulting in security events, network failures or interruptions that could impact our network security or availability and have a material adverse effect on our business, our ability to meet our financial reporting obligations, financial condition and operational results.
We cannot guarantee that our security measures will not be circumvented, thereby resulting in security events, network failures or interruptions that could impact our network security or availability and have a material adverse effect on our business, our ability to meet our financial reporting obligations, brand and reputation, financial condition and operational results.
Lower vacancy rates as a result of diminished lease terminations and increased leasing and subleasing activity will be a key factor in driving renewed growth in our corporate business. During the pandemic, we saw increasing vacancy rates in many of our buildings due to higher lease terminations and lower leasing activity.
Lower vacancy rates as a result of diminished lease terminations and increased leasing and subleasing activity will be a key factor in driving renewed growth in our corporate business. During the COVID-19 pandemic, we saw increasing vacancy rates in many of our buildings due to higher lease terminations and lower leasing activity.
Through much of 2021, 2022, and 2023, we saw corporate customers continue their remote work policies and take a cautious approach to new services and upgrades, as well as a reduced demand for connecting smaller satellite offices.
Through much of 2022, 2023, and 2024, we saw corporate customers continue their remote work policies and take a cautious approach to new services and upgrades, as well as a reduced demand for connecting smaller satellite offices.
Our historical reductions in our prices are expected to continue in an inflationary economy even as our costs may increase. Many of the regions in which we operate continue to experience an increase in inflation rates.
Our historical reductions in our prices are expected to continue in an inflationary economy even as our costs may increase. Many of the regions in which we operate continue to experience an increase in or elevated inflation rates.
Catastrophic events, such as major natural disasters, extreme weather, fire, flooding or similar events as well as the continued threat of terrorist activity and other acts of war or hostility have had, and may continue to have, an adverse effect on our headquarters, other offices, our network, infrastructure or equipment or our customers and prospective customers, which could adversely affect our business.
Catastrophic events, such as major natural disasters, extreme weather, fire, flooding, pandemics such as the COVID-19 pandemic or similar events as well as the continued threat of terrorist activity and other acts of war or hostility have had, and may continue to have, an adverse effect on our headquarters, other offices, our network, infrastructure or equipment or our customers and prospective customers, which could adversely affect our business.
These risks include: ● inability to achieve the financial and strategic goals for the Sprint Business and the combined businesses; Page 16 of 90 Table of Contents ● inability to achieve the projected cost savings for the Sprint Business and the combined businesses and the resulting impact on profitability; ● difficulty in, and the cost of, effectively integrating the operations, technologies, products or services, and personnel of the Sprint Business; ● entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions; ● disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges; ● inability to retain key personnel of the Sprint Business; ● inability to retain key customers, vendors and other business partners of the Sprint Business or to migrate customers from legacy the Sprint Business services; ● any non-occurrence of anticipated tax benefits or potential for adverse tax consequences; ● the effects of complex accounting requirements on our reported results; ● incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results; ● elevated delinquency or bad debt write-offs related to receivables of the Sprint Business; ● difficulty in maintaining internal controls, procedures and policies during the transition and integration; ● impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services; ● failure of our due diligence processes to identify significant problems, liabilities or other challenges of the Sprint Business or technology; ● exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the Transaction, such as claims from terminated employees, customers, or other third parties; ● inability to conclude that our internal control over financial reporting is effective; ● delay in customer purchasing decisions due to uncertainty about the direction of our product and service offerings; ● Transition Services (as defined below) costs for longer than anticipated; ● increased accounts receivables collection times and working capital requirements associated with business models of the Sprint Business; and ● incompatibility of business cultures.
These risks include: ● inability to achieve the financial and strategic goals for the Sprint Business and the combined businesses; ● inability to achieve the projected cost savings for the Sprint Business and the combined businesses and the resulting impact on profitability; ● difficulty in, and the cost of, effectively integrating the operations, technologies, products or services, and personnel of the Sprint Business; ● entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions; ● disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges; ● inability to retain key personnel of the Sprint Business; ● inability to retain key customers, vendors and other business partners of the Sprint Business or to migrate customers from legacy the Sprint Business services; ● any non-occurrence of anticipated tax benefits or potential for adverse tax consequences; ● the effects of complex accounting requirements on our reported results; ● incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results; ● elevated delinquency or bad debt write-offs related to receivables of the Sprint Business; ● impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services; ● failure of our due diligence processes to identify significant problems, liabilities or other challenges of the Sprint Business or technology; ● exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the Transaction, such as claims from terminated employees, customers, or other third parties; ● delay in customer purchasing decisions due to uncertainty about the direction of our product and service offerings; Page 16 of 96 Table of Contents ● Transition Services (as defined below) costs for longer than anticipated; ● increased accounts receivables collection times and working capital requirements associated with business models of the Sprint Business; and ● incompatibility of business cultures.
Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational Page 22 of 90 Table of Contents impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs.
Any adverse impact to the availability, integrity or confidentiality of our IT Systems or Confidential Information can result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs.
Our ability to manage our growth will be particularly dependent upon our ability to: ● expand, develop and retain an effective sales force and qualified personnel; ● maintain the quality of our operations and our service offerings; ● maintain and enhance our system of internal controls to ensure timely and accurate compliance with our financial and regulatory reporting requirements; and Page 18 of 90 Table of Contents ● expand our accounting and operational information systems in order to support our growth.
Our ability to manage our growth will be particularly dependent upon our ability to: ● expand, develop and retain an effective sales force and qualified personnel; ● maintain the quality of our operations and our service offerings; ● maintain and enhance our system of internal controls to ensure timely and accurate compliance with our financial and regulatory reporting requirements; and ● expand our accounting and operational information systems in order to support our growth.
As the law in this area develops and as we expand our international operations, the potential imposition of liabilities upon us for the behavior of our customers or the information carried on and disseminated through our network could require us to implement measures to reduce our exposure to such liabilities, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings.
As the law in this area develops and as we expand our international operations, the potential imposition of liabilities upon us for the behavior of our customers or the information carried on and disseminated through our network could require us to implement measures to Page 25 of 96 Table of Contents reduce our exposure to such liabilities, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings.
We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”).
We rely on our own and third-party computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”).
These integration matters could have an adverse effect on us during the transition period and on the combined company for an undetermined period after completion of the Transaction. Page 17 of 90 Table of Contents Business Risks We need to retain existing customers and continue to add new customers in order to become consistently profitable and cash flow positive.
These integration matters could have an adverse effect on us during the transition period and on the combined company for an undetermined period after completion of the Transaction. Business Risks We need to retain existing customers and continue to add new customers in order to become consistently profitable and cash flow positive.
The possibility of this has been characterized as an issue of “net Page 21 of 90 Table of Contents neutrality.” As many of our customers operate websites and services that deliver content to consumers, our ability to sell our services would be negatively impacted if Internet content delivered by us was less easily received by consumers than Internet content delivered by others.
The possibility of this has been characterized as an issue of “net neutrality.” As many of our customers operate websites and services that deliver content to consumers, our ability to sell our services would be negatively impacted if Internet content delivered by us was less easily received by consumers than Internet content delivered by others.
These covenants place restrictions on our ability to, among other things: ● incur additional debt; ● create liens; ● make certain investments; ● enter into certain transactions with affiliates; ● declare or pay dividends, redeem stock or make other distributions to stockholders; and Page 29 of 90 Table of Contents ● consolidate, merge or transfer or sell all or substantially all of our assets.
These covenants place restrictions on our ability to, among other things: ● incur additional debt; ● create liens; ● make certain investments; ● enter into certain transactions with affiliates; ● declare or pay dividends, redeem stock or make other distributions to stockholders; and ● consolidate, merge or transfer or sell all or substantially all of our assets.
We are particularly vulnerable to acts of terrorism because our largest customer concentration is located in New York, our headquarters is located in Washington, D.C., and we have significant operations in Paris, Madrid and London, cities that have historically been targets for terrorist attacks and may be vulnerable to pandemics.
We are particularly vulnerable to acts of terrorism because our largest customer concentration is Page 15 of 96 Table of Contents located in New York, our headquarters is located in Washington, D.C., and we have significant operations in Paris, Madrid and London, cities that have historically been targets for terrorist attacks and may be vulnerable to pandemics.
Additionally, these providers are often competing with us for the same customers and have marketed their own service to our off-net customers when our initial contract with our customer nears the end of its term. Our business could suffer from an interruption of service from our fiber providers.
Additionally, these providers are often competing with us for the same customers and have marketed their own service to our off-net customers when our initial contract with our customer nears the end of its term. Page 23 of 96 Table of Contents Our business could suffer from an interruption of service from our fiber providers.
Page 19 of 90 Table of Contents Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, financial condition and results of operations.
Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, financial condition and results of operations.
The Company maintains the majority of its cash and cash equivalents in accounts with U.S. and multi-national financial institutions, and our deposits at certain of these institutions, including the counterparty to our Swap Agreement, exceed insured limits. Market conditions can affect the viability of these institutions.
We maintain the majority of our cash and cash equivalents in accounts with U.S. and multi-national financial institutions, and our deposits at certain of these institutions, including the counterparty to our Swap Agreement, exceed insured limits. Market conditions can affect the viability of these institutions.
Page 24 of 90 Table of Contents Effects of climate change may impose risk of damage to our infrastructure, and our ability to provide services. Long-term climate change may give rise to extreme weather events, posing a direct threat to network facilities and impeding our ability to construct and maintain segments of our network.
Effects of climate change may impose risk of damage to our infrastructure and our ability to provide services. Long-term climate change may give rise to extreme weather events, posing a direct threat to network facilities and impeding our ability to construct and maintain segments of our network.
While our top 25 customers represented approximately 15.2% of our revenue for the year ended December 31, 2023, several large net-centric customers are or may be the subject of increased regulatory scrutiny, which may impact their businesses and, consequently, their use of our services in unknown ways.
While our top 25 customers represented approximately 17.6% of our revenue for the year ended December 31, 2024, several large net-centric customers are or may be the subject of increased regulatory scrutiny, which may impact their businesses and, consequently, their use of our services in unknown ways.
Any such disruption could increase our costs, decrease our operating efficiencies and have an adverse effect on our business, results of operations and financial condition. Cisco or Ciena may also be subject to litigation with respect to the technology on which we depend, including litigation involving claims of patent infringement. Such claims have been growing rapidly in the communications industry.
Any such disruption could increase our costs, decrease our operating efficiencies and have an adverse effect on our business, results of operations and financial condition. Cisco, Ciena or Arista may also be subject to litigation with respect to the technology on which we depend, including litigation involving claims of patent infringement.
Even if we enter into these transactions, we may experience: ● delays in realizing or a failure to realize the benefits we anticipate; ● difficulties or higher-than-anticipated costs associated with integrating any acquired companies, products or services into our existing business; ● attrition of key personnel from acquired businesses; ● unexpected costs or charges; and ● unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations. ● unforeseen difficulties or costs associated with the repurposing of the Sprint Network and buildings acquired with the Sprint Business.
Even if we enter into these transactions, we may experience: ● delays in realizing or a failure to realize the benefits we anticipate; ● difficulties or higher-than-anticipated costs associated with integrating any acquired companies, products or services into our existing business; Page 18 of 96 Table of Contents ● attrition of key personnel from acquired businesses; ● additional costs or charges associated with the repurposing or retirement of acquired assets or the elimination of acquired non-core products and services; ● unexpected costs or charges; ● unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations; and ● unforeseen difficulties or costs associated with the repurposing of the Sprint Network and buildings acquired with the Sprint Business.
If Cisco or Ciena fails to provide equipment on a timely basis or fails to meet our performance expectations, including in the event that either vendor fails to enhance, maintain, upgrade or improve the hardware or software products we purchase from them when and how we need them, we may be delayed or unable to provide services as and when requested by our customers.
Page 24 of 96 Table of Contents If Cisco, Ciena or Arista fail to provide equipment on a timely basis or fails to meet our performance expectations, including in the event that either vendor fails to enhance, maintain, upgrade or improve the hardware or software products we purchase from them when and how we need them, we may be delayed or unable to provide services as and when requested by our customers.
Throughout the year concluding on December 31, 2023, we observed a gradual reduction in vacancy rates and an upward trend in office occupancy rates but elevated vacancy rates remain in a number of markets, predominantly in California and the Pacific Northwest. Concurrently, there were encouraging developments in our corporate business.
Throughout the year ended December 31, 2024, we observed a gradual reduction in vacancy rates and an upward trend in office occupancy rates but elevated vacancy rates remain in a number of markets, predominantly in California, Washington D.C. and the Pacific Northwest. Concurrently, there were encouraging developments in our corporate business.
Page 25 of 90 Table of Contents Our international operations involve a number of risks, including: ● fluctuations in currency exchange rates, particularly those involving the Euro as we are required to fund certain of our cash flow requirements of our operations outside of the United States; ● exposure to additional regulatory and legal requirements, including laws that may make it difficult or costly to enforce our contracts, import restrictions and controls, exchange controls, tariffs and other trade barriers and privacy and data protection regulations; ● compliance with laws regarding privacy, trade restrictions, economic sanctions, and corruption and bribery, including the United States Foreign Corrupt Practices Act; ● difficulties in staffing and managing our foreign operations; ● changes in political and economic conditions; and ● exposure to additional and potentially adverse tax regimes.
Our international operations involve a number of risks, including: ● fluctuations in currency exchange rates, particularly those involving the Euro as we are required to fund certain of our cash flow requirements of our operations outside of the United States; ● exposure to additional regulatory and legal requirements, including laws that may make it difficult or costly to enforce our contracts, import restrictions and controls, exchange controls, tariffs and other trade barriers, increase the regulatory approvals of or otherwise delay the expansion of our network, impose new obligations on us with respect to legal enforcement and monitoring, and privacy and data protection regulations; ● compliance with laws regarding privacy, trade restrictions, economic sanctions, and corruption and bribery, including the United States Foreign Corrupt Practices Act; ● difficulties in staffing and managing our foreign operations; ● changes in political and economic conditions; and ● exposure to additional and potentially adverse tax regimes.
We purchase our network infrastructure equipment from a small circle of vendors. Historically, we purchased from Cisco Systems, Inc. (“Cisco”) all of the routers and transmission equipment used in our network. We have added a new provider for certain types of IP transport equipment but Cisco remains our primary vendor for IP transport equipment.
We purchase our network infrastructure equipment from a small circle of vendors. Historically, we purchased from Cisco Systems, Inc. (“Cisco”) all of the routers and transmission equipment used in our network. We have expanded our suppliers of routers, added Arista Networks, Inc. (‘Arista”) as a provider for certain types of routers but Cisco remains our primary vendor for routers.
We are also subject to audit of our tax compliance in numerous jurisdictions. These may result in the assessment of amounts due that are material and therefore would have an adverse effect on us.
We are subject to value-added taxes and other taxes in many jurisdictions outside of the United States. We are also subject to audit of our tax compliance in numerous jurisdictions. These may result in the assessment of amounts due that are material and therefore would have an adverse effect on us.
In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all.
Elsewhere the regulation is greater, though not as extensive as the regulation for providers of voice services. However, governmental authorities may decide to impose additional regulation and taxes upon providers of Internet access and private network services.
Internet service is also subject to minimal regulation in Western Europe and in Canada. Elsewhere the regulation is greater, though not as extensive as the regulation for providers of voice services. However, governmental authorities may decide to impose additional regulation and taxes upon providers of Internet access and private network services.
While we have successfully mitigated the effects of prior service interruptions and business disputes in the past, we may incur significant delays and costs in restoring service to our customers in connection with future service interruptions, and as a result we may lose customers. With the Sprint Business acquisition, our reliance on agreements with landowners has increased.
We may incur significant delays and costs in restoring service to our customers in connection with future service interruptions, and as a result we may lose customers. With the Sprint Business acquisition, our reliance on agreements with landowners has increased.
Any unforeseen disruptions to our supply chain or inflationary pressures might substantially impact the costs associated with our planned expansion projects, potentially hindering our ability to fulfill commitments to customers who have contracted for space in new data centers under construction. Construction projects are dependent on receiving permits from public agencies and utility companies.
Any unforeseen disruptions to our supply chain or inflationary pressures might substantially impact the costs associated with our planned expansion projects, potentially hindering our ability to fulfill commitments to customers who have contracted for space in new data centers under construction.
We may be required to censor content on the Internet, which we may find difficult to do and which may impact our ability to provide our services in some countries as well as impact the growth of Internet usage, upon which we depend. Some governments attempt to limit access to certain content on the Internet.
Page 26 of 96 Table of Contents We may be required to censor content on the Internet, which we may find difficult to do and which may impact our ability to provide our services in some countries as well as impact the growth of Internet usage, upon which we depend.
We believe we collect all required taxes; however, a jurisdiction may assert we have failed to collect certain taxes. The expense of paying any unpaid taxes could be substantial and we might not be able to collect such back taxes from our customers. We are subject to value-added taxes and other taxes in many jurisdictions outside of the United States.
We believe we collect all required taxes; however, a jurisdiction may assert that we have failed to collect certain taxes. The expense of paying any unpaid taxes could be substantial and we might not be able to collect such back taxes from our customers.
By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other.
Both customers and settlement-free peers may be competitors of ours. By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other.
We also may be unable to upgrade our network and face greater difficulty maintaining and expanding our network. Transitioning from Cisco or Ciena to another vendor for the types of equipment each provides would be disruptive because of the time and expense required to learn to install, maintain and operate the new vendor’s equipment and to operate a multi-vendor network.
Transitioning from Cisco, Ciena, or Arista to another vendor for the types of equipment each provides would be disruptive because of the time and expense required to learn to install, maintain and operate the new vendor’s equipment and to operate a multi-vendor network.
Our business and operations are growing rapidly, and we may not be able to efficiently manage our growth. We have grown our Company rapidly through network expansion, by obtaining new customers through our sales efforts and by our acquisition of the Sprint Business. Our expansion places significant strains on our management, operational and financial infrastructure.
We have grown our Company rapidly through network expansion, by obtaining new customers through our sales efforts and by our acquisition of the Sprint Business. Our expansion places significant strains on our management, operational and financial infrastructure.
Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns. Our commitments and disclosures regarding environmental, social, and governance (ESG) matters expose us to potential reputational and legal risks.
Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.
By entering into the Swap Agreement, we have assumed the risk associated with variable interest rates. Changes in interest rates affect the valuation of the Swap Agreement that we recognize in our consolidated statements of comprehensive income.
The settlement payment is made each November and May until the Swap Agreement expires in February 2026. By entering into the Swap Agreement, we have assumed the risk associated with variable interest rates. Changes in interest rates affect the valuation of the Swap Agreement that we recognize in our consolidated statements of comprehensive income.
These providers may be customers (who connect their network to ours by buying Internet access from us) or may be other large ISPs to whom we connect on a settlement-free peering basis as described below. Both customers and settlement-free peers may be competitors of ours.
In order to obtain Internet connectivity for our network, we must establish and maintain relationships with other ISPs and certain of our larger customers. These providers may be customers (who connect their network to ours by buying Internet access from us) or other large ISPs to whom we connect on a settlement-free peering basis as described below.
Any failure or perceived failure by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies, or others. If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.
Any failure or perceived failure by us to comply with data privacy laws, rules, regulations, industry standards and other requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies, or others.
Further, recent changes to the tax law in the United States and changes to tax laws in other jurisdictions in which we operate may impact our utilization of our net operating losses. Risk Factors Related to Our Indebtedness We have substantial debt which we may not be able to repay when due.
Further, recent changes to the tax law in the United States and changes to tax laws in other jurisdictions in which we operate may impact our utilization of our net operating losses.
Although none of the incidents, individually or in the aggregate, have materially impacted our operations or business, we cannot guarantee material incidents will not occur in the future.
Our customer-facing network firewall regularly suppresses cyber-attacks and our network routinely manages DDOS attacks. Although none of the incidents, individually or in the aggregate, have materially impacted our operations or business, we cannot guarantee material incidents will not occur in the future.
Cogent has not signed a Legacy Registration Services Agreement with the American Registry for Internet Numbers (“ARIN”) or any other regional Internet registry (“RIR”) with respect to a substantial portion of our IPv4 addresses. Many of the IPv4 addresses we own were originally allocated prior to the creation of ARIN and the other RIRs.
Page 22 of 96 Table of Contents Cogent has not signed a Legacy Registration Services Agreement with the American Registry for Internet Numbers (“ARIN”) or any other regional Internet registry (“RIR”) with respect to a substantial portion of our IPv4 addresses.
To sustain our growth in various existing and emerging markets, we may need to expand an existing data center, lease a new facility, or acquire suitable land, with or without existing structures. Undertaking such projects exposes us to numerous risks that could adversely impact our financial condition and operational results.
To sustain our growth in various existing and emerging markets, we may need to expand an existing data center, lease a new facility, or acquire suitable land, with or without existing structures.
We and our employees are the target of phishing attempts and compromised links, and our IT Systems are the target of attempts at unauthorized access, a small number of which have been successful in accessing non-critical areas of our IT Systems. Our customer-facing network firewall regularly suppresses cyber-attacks and our network routinely manages DDOS attacks.
Page 21 of 96 Table of Contents We and our employees are the target of phishing attempts and compromised links, and our IT Systems are the target of attempts at unauthorized access, a small number of which have been successful in accessing non-critical areas of our IT Systems.
The agreements governing our various debt obligations include covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.
These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.
Regardless of the merit of these claims, they can result in the diversion of technical and management personnel or require us to obtain non-infringing technology or enter into license agreements for the technology on which we depend. There can be no assurance that such non-infringing technology or licenses will be available on acceptable terms and conditions, if at all.
Such claims have been growing rapidly in the communications industry. Regardless of the merit of these claims, they can result in the diversion of technical and management personnel or require us to obtain non-infringing technology or enter into license agreements for the technology on which we depend.
Any costs that are incurred as a result of such measures or the imposition of liabilities could have a material adverse effect on our business. Page 26 of 90 Table of Contents Regulatory Risks Existing and proposed privacy regulations may impact our business.
Any costs that are incurred as a result of such measures or the imposition of liabilities could have a material adverse effect on our business.
The Internet is composed of various network providers who operate their own networks that interconnect at public and private interconnection points. Our network is one such network. In order to obtain Internet connectivity for our network, we must establish and maintain relationships with other ISPs and certain of our larger customers.
Competitive Risks Our connections to the Internet require us to establish and maintain relationships with other providers, which we may not be able to maintain. The Internet is composed of various network providers who operate their own networks that interconnect at public and private interconnection points. Our network is one such network.
Moreover, we are not prevented from incurring other liabilities that do not constitute indebtedness as defined in the indentures, including additional operating leases obligations and finance lease obligations in the form of IRUs. These liabilities may represent claims that are effectively prior to the claims of our note holders.
In addition, the indentures allow us to issue additional notes and other indebtedness secured by the collateral under certain circumstances. Moreover, we are not prevented from incurring other liabilities that do not constitute indebtedness as defined in the indentures, including additional operating leases obligations and finance lease obligations in the form of IRUs.
It is impossible for us to filter all content that flows across the Internet connections we provide. For example, some content is encrypted when a secure website is accessed. It is difficult to limit access to websites by blocking a fixed set of Internet addresses when the website operators engage in practices that make it difficult to block them.
Some governments attempt to limit access to certain content on the Internet. It is impossible for us to filter all content that flows across the Internet connections we provide. For example, some content is encrypted when a secure website is accessed.
Our corporate business would be particularly impacted by an increase in vacancy rates in the MTOBs that we serve. Our total revenue growth is predicated on growth in the use of the Internet that makes up for the declining prices of Internet service.
Our total revenue growth is predicated on growth in the use of the Internet that makes up for the declining prices of Internet service.
If we are not successful in developing our market presence in these regions, our operating results and revenue growth could be adversely impacted.
We have experienced difficulties, ranging from lack of dark fiber, to regulatory issues, to slower revenue growth rates from our operations in these markets. If we are not successful in developing our market presence in these regions, our operating results and revenue growth could be adversely impacted.
Under the 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. The settlement payment is made each November and May until the Swap Agreement expires in February 2026.
The critical terms of the Swap Agreement match the terms of the 2026 Notes, including the notional amount and the optional redemption date on February 1, 2026. Under the 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.
Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our notes and our other indebtedness. We have substantial indebtedness. Our substantial debt may have important consequences.
Page 27 of 96 Table of Contents Risk Factors Related to Our Indebtedness Our substantial level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our notes and our other indebtedness.
A number of these providers also have large bases of consumers, which makes their networks particularly attractive to content providers as they can provide a direct connection to their customers.
Relative to us, many of these providers have significantly greater financial resources, more well-established brand names, larger customer bases, and more diverse strategic plans and service offerings. A number of these providers also have large bases of consumers, which makes their networks particularly attractive to content providers as they can provide a direct connection to their customers.
Scrutiny regarding the accuracy, adequacy, or completeness of ESG disclosures may arise. Any perceived failure to achieve our ESG-related initiatives, goals, commitments, or mandates could adversely affect our reputation and materially harm our business. The growing emphasis on ESG matters has prompted the adoption of legal and regulatory requirements to address climate change effects and necessitate additional disclosures.
The timing, scope, or nature of these initiatives, goals, or commitments, as well as any revisions, may lead to criticism. Scrutiny regarding the accuracy, adequacy, or completeness of ESG disclosures may arise. Any perceived failure to achieve our ESG-related initiatives, goals, commitments, or mandates could adversely affect our reputation and materially harm our business.
Our growth and financial health are subject to a number of economic risks. A downturn in the world economy, especially the economies of North America and Europe, would negatively impact our growth. Our net-centric business would be particularly impacted by a decline in the development of new applications and businesses that make use of the Internet.
ITEM 1A. RISK FACTORS Market Risks Our growth and financial health are subject to a number of economic risks. A downturn in the world economy, especially the economies of North America and Europe, would negatively impact our growth.
We and our subsidiaries may incur additional indebtedness, including additional secured indebtedness, in the future. The terms of our debt indentures restrict, but do not completely prohibit, us from doing so. In addition, the indentures allow us to issue additional notes and other indebtedness secured by the collateral under certain circumstances.
Despite our leverage, we may still be able to incur more debt. This could further exacerbate the risks that we and our subsidiaries face. We and our subsidiaries may incur additional indebtedness, including additional secured indebtedness, in the future. The terms of our debt indentures restrict, but do not completely prohibit, us from doing so.
The sector in which we operate is highly competitive, and we may not be able to compete effectively. We face significant competition from incumbent carriers, Internet service providers and facilities-based network operators. Relative to us, many of these providers have significantly greater financial resources, more well-established brand names, larger customer bases, and more diverse strategic plans and service offerings.
Page 20 of 96 Table of Contents The sector in which we operate is highly competitive, and we may not be able to compete effectively. We face significant competition from incumbent carriers, Internet service providers and facilities-based network operators.
The perception of our ESG profile as less attractive to customers or employees may impact our brand and reputation. Our level of commitment to ESG initiatives could influence our ability to attract or retain customers and employees. The timing, scope, or nature of these initiatives, goals, or commitments, as well as any revisions, may lead to criticism.
Our commitments and disclosures regarding environmental, social, and governance (“ESG”) matters expose us to potential reputational and legal risks. The perception of our ESG profile as less attractive to customers or employees may impact our brand and reputation. Our level of commitment to ESG initiatives could influence our ability to attract or retain customers and employees.
The amount of our IRU finance lease obligations may be impacted due to our expansion activities, the timing of payments and fluctuations in foreign currency rates.
Our total indebtedness at December 31, 2024 excludes $359.2 million of operating lease liabilities, which were required to be recorded as right-to-use assets and operating lease liabilities. The amount of our IRU finance lease obligations may be impacted due to our expansion activities, the timing of payments and fluctuations in foreign currency rates.
This increased potential for route hijacking and longer recovery time may also result in some customers opting to lease IPv4 addresses from our competitors.
This increased potential for route hijacking and longer recovery time may also result in some customers opting to lease IPv4 addresses from our competitors. Network Augmentation and Maintenance Risks Our network is comprised of a number of separate components, and we may be unable to obtain or maintain the agreements necessary to augment or maintain our network.
Changes in laws, rules, and enforcement could adversely affect us. We are not subject to substantial regulation by the FCC or the state public utilities commissions in the United States. Internet service is also subject to minimal regulation in Western Europe and in Canada.
If any of these events were to occur, our business, results of operations, financial condition, and brand and reputation could be materially adversely affected. Changes in laws, rules, and enforcement could adversely affect us. We are not subject to substantial regulation by the FCC or the state public utilities commissions in the United States.
Achieving our ESG commitments is contingent on numerous external factors beyond our control, including evolving and potentially inconsistent regulatory requirements, supplier availability meeting our standards, and the recruitment, development, and retention of diverse talent. Competitive Risks Our connections to the Internet require us to establish and maintain relationships with other providers, which we may not be able to maintain.
Our selection of voluntary disclosure frameworks and standards, as well as their interpretation or application, may change and might not align with investor or stakeholder expectations. Achieving our ESG commitments is contingent on numerous external factors beyond our control, including evolving and potentially inconsistent regulatory requirements, supplier availability meeting our standards, and the recruitment, development, and retention of diverse talent.
Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategy. Despite our leverage we may still be able to incur more debt. This could further exacerbate the risks that we and our subsidiaries face.
Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategy. We have assumed the risk associated with variable interest rates under our interest rate swap agreement.
The FCC had promulgated rules that would have banned practices such as blocking and throttling of Internet traffic, but those rules were rescinded by the FCC in December 2017. In October 2023 the FCC voted to move ahead with a plan that would restore net neutrality rules and common-carrier regulation of Internet service providers.
The FCC had promulgated rules that would have banned practices such as blocking and throttling of Internet traffic, but those rules were rescinded by the FCC in December 2017. A subsequent attempt to reintroduce these rules in 2024 was overturned by the U.S. Court of Appeals for the Sixth Circuit in 2025.
If new debt or other liabilities are added to our debt levels, the related risks that we and our subsidiaries now face could intensify. The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.
These liabilities may represent claims that are effectively prior to the claims of our note holders. If new debt or other liabilities are added to our debt levels, the related risks that we and our subsidiaries now face could intensify.
Any delay in receiving permits could delay our construction projects and affect our growth.
Page 19 of 96 Table of Contents Construction projects are dependent on receiving permits from public agencies and utility companies. Any delay in receiving permits could delay our construction projects and affect our growth.
Should any government require us to perform these types of blocking procedures we could experience Page 27 of 90 Table of Contents difficulties ranging from incurring additional expenses to ceasing to provide service in that country. We could also be subject to penalties if we fail to implement the censorship.
It is difficult to limit access to websites by blocking a fixed set of Internet addresses when the website operators engage in practices that make it difficult to block them. Should any government require us to perform these types of blocking procedures we could experience difficulties ranging from incurring additional expenses to ceasing to provide service in that country.
Our total indebtedness, at par, at December 31, 2023 was $1.5 billion and includes $500.0 million of our 3.50% senior secured notes due in May 2026 (“2026 Notes”) and $450.0 million of our 7.00% senior unsecured notes due in June 2027 (“2027 Notes”).
Our total indebtedness, at par, at December 31, 2024 at par value, was $2.0 billion and includes $500.0 million of our 2026 Notes, $450.0 million of our 2027 Notes, $300.0 million of our 2027 Mirror Notes and $206.0 million of our IPv4 Notes.
Our 2026 Notes require annual interest payments of $17.5 million per year and our 2027 Notes require interest payments of $31.5 million per year, each paid semi-annually. All of our noteholders have the right to be paid the principal upon default and upon certain designated events, such as certain changes of control.
The 2026 Notes are due in March 2026 and require interest payments of $17.5 million per year, the 2027 Notes are due in June 2027 and require interest payments of $31.5 million per year, and the 2027 Mirror Notes are due in June 2027 and require interest payments of $21.0 million per year, each paid semi-annually.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Cybersecurity Engineer is a certified information systems security professional by the International Information System Security Certification Consortium, and his experience includes cybersecurity architecture, engineering and administration together with the development of cybersecurity policies, practices and training.
Biggest changeOur Cybersecurity Operations Team includes three certified information systems security professionals and their experience includes cybersecurity architecture, engineering and administration together with the development of cybersecurity policies, practices and training. Page 30 of 96 Table of Contents
Our CEO regularly meets with our CIO to discuss, in part, any significant cybersecurity issues. In addition to the CIO, our Cybersecurity Engineer and the Information Technology team are responsible for the day to day monitoring of the cybersecurity landscape, the Company’s monitoring and response processes and training of Company employees.
Our CEO regularly meets with our CIO to discuss, in part, any significant cybersecurity issues. In addition to the CIO, our Cybersecurity Team and the Information Technology Team are responsible for the day-to-day monitoring of the cybersecurity landscape, the Company’s monitoring and response processes and training of Company employees.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: o cybersecurity awareness training and communications for employees; o a dedicated security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; o cybersecurity controls to detect cybersecurity incidents or risks within our IT Systems ; Page 30 of 90 Table of Contents o internal and external risk assessments designed to help identify material cybersecurity risks to our critical systems and information; and o a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: o cybersecurity awareness training and communications for employees; o a dedicated security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; o cybersecurity controls to detect cybersecurity incidents or risks within our IT Systems; o internal and external risk assessments designed to help identify material cybersecurity risks to our critical systems and information; and o a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
We have a dedicated Cybersecurity Engineer in our Information Technology department who reports directly to the CIO. Our Cybersecurity Engineer is primarily responsible for continuously evaluating our security efforts and coordinating with our CIO and other management employees as necessary.
We have a dedicated Cybersecurity Operations Team in our Information Technology department which reports directly to the CIO . The Cybersecurity Operations Team is primarily responsible for evaluating our security efforts and coordinating with our CIO and other management employees as necessary.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease space for offices, data centers, colocation facilities, and points-of-presence. We lease a total of approximately 1.1 million square feet of space for our data centers, offices and operations centers. Certain of these leases are with entities controlled by our Chief Executive Officer. We believe that our facilities, both owned and leased are generally in good condition.
Biggest changeCertain of these leases are with entities controlled by our Chief Executive Officer. We believe that our facilities, both owned and leased are generally in good condition. Our leased properties and the vast majority of our owned properties are generally suitable for our operations, and we are in the process of repurposing any owned properties as necessary.
On July 25, 2023 we entered into a Second Amendment to the lease agreement (the “Amendment”), with Germanium which amends the Network Operations Lease to lease an additional 7,369 square feet on the first floor of the building, beginning on August 1, 2023, in connection with the planned expansion of the technical space.
On July 25, 2023 we entered into a Second Amendment to the lease agreement with Germanium (the “Amendment”), which amended the Network Operations Lease to lease an additional 7,369 square feet on the first floor of the building, beginning on August 1, 2023, in connection with the planned expansion of the technical space.
The first of the New Leases is with Thorium for approximately 54,803 square feet of office space, which serves as office space replacing a portion of its office space in the Northern Virginia area (“Office Lease”).
The first of the New Leases is with Thorium for approximately 54,803 square feet of office space, which serves as office space replacing a portion of its office space in the Northern Virginia area..
On January 6, 2023, we entered into two lease agreements (the “New Leases”), one with Thorium LLC ('Thorium") and one with Germanium LLC (“Germanium”), entities owned by our Chief Executive Officer, David Schaeffer.
On January 6, 2023, we entered into two lease agreements (the “New Leases”), one with Thorium LLC (“Thorium”) and one with Germanium LLC (“Germanium”), entities owned by our Chief Executive Officer and Chairman, David Schaeffer.
We are responsible for paying our proportionate share of the building’s operating expenses that exceed a 2023 base year and we are also responsible for paying our metered utility costs and a proportionate share of the building’s other operating expenses that exceed a 2023 base year.
We took occupancy of the office space and network operations space in April 2023. We are responsible for paying our proportionate share of the building’s operating expenses that exceed a 2023 base year and we are also responsible for paying our metered utility costs and a proportionate share of the building’s other operating expenses that exceed a 2023 base year.
The second of the New Leases is with Germanium LLC for approximately 1,587 square feet of technical space which serves as network operations space (“Network Operations Lease”). The term for each of the New Leases is five years beginning on April 1, 2023.
The second of the New Leases is with Germanium LLC for approximately 1,587 square feet of technical space which serves as network operations space (“Network Operations Lease”). The term for each of the New Leases is five years beginning on April 1, 2023. Both of the New Leases are cancellable by us without penalty upon 60 days written notice.
The lease for our headquarters is with an entity controlled by our Chief Executive Officer and expires in May 2025. The lease may be cancelled by us upon 60 days’ notice.
Our headquarters facility consists of 43,117 square feet located in Washington, D.C. The lease for our headquarters is with an entity controlled by our Chief Executive Officer and expires in May 2025. The lease may be cancelled by us upon 60 days’ notice.
ITEM 2. PROPERTIES As part of the acquisition of the Sprint Business, we acquired a portfolio of owned properties totaling approximately 1.9 million square feet. The properties are made up of technical facilities in the United States, including core switch facilities, PoP sites, regeneration and fiber pass through locations as well as warehouse buildings that support the acquired Sprint Network.
The properties are made up of technical facilities in the United States, including core switch facilities, PoP sites, regeneration and fiber pass through locations as well as warehouse buildings that support the acquired Sprint Network.
This includes 4,987 square feet for an auditorium suitable for training and 2,382 square feet for the data center in the building. The amended Network Operations Lease remains cancellable by us without penalty upon 60 days written notice. We are responsible for paying a proportionate share of real estate taxes and operating expenses and separately metered utilities expense.
This included 4,987 square feet for an auditorium suitable for training and 2,382 square feet for the data center in the building. The amended Network Operations Lease remains cancellable by us without penalty upon 60 days written notice.
Removed
The largest 45 properties, which are in the process of being evaluated and/or converted to commercial data centers, range in size from 5,000 to 110,000 square feet and total approximately 1.3 million square feet and are in the process of being evaluated and converted to commercial data centers. We also own two data centers in Paris, France and Grenoble, France.
Added
ITEM 2. PROPERTIES As part of the acquisition of the Sprint Business, we acquired a portfolio of owned and leased properties totaling approximately 1.9 million square feet.
Removed
Our leased properties and the vast majority of our owned properties are generally suitable for our operations, and we are in the process of repurposing any owned properties as necessary. Our headquarters facility consists of 43,117 square feet located in Washington, D.C.
Added
Since the acquisition closing, we have added 52 major Sprint Data Centers and 55 smaller Edge Data Centers to our existing 52 Cogent Data Center portfolio (down from 55 at close); growing our data center portfolio to 159 buildings.
Removed
Both of the New Leases are cancellable by us without penalty upon 60 days written Page 31 of 90 Table of Contents notice. We took occupancy of the office space and network operations space in April 2023.
Added
We have also added 3 office buildings, 5 Carrier Neutral Data Centers and converted 36 nodes located in Carrier Neutral Data Centers to the Cogent network. We lease space for offices, data centers, colocation facilities, and PoPs. We lease a total of approximately 1.0 million square feet of space for our data centers, offices and operations centers.
Added
The Amendment provides for $162,118 of additional fixed annual rent during the term of the Network Operations Lease, plus a proportionate share of real estate taxes and operating expenses and separately metered utilities expense.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparison below assumes $100 was invested on December 31, 2018 in our common stock, the S&P 500 Index and the NASDAQ Telecommunications Index, with dividends, if any, reinvested. ​ Page 32 of 90 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/18 12/19 12/20 12/21 12/22 12/23 Cogent Communications Holdings $ 100.00 $ 151.89 $ 143.88 $ 183.76 $ 152.19 ​ $ 214.92 S&P 500 ​ 100.00 ​ 131.49 ​ 155.68 ​ 200.37 ​ ​ 164.08 ​ ​ 207.21 NASDAQ Telecommunications ​ 100.00 ​ 118.74 ​ 130.71 ​ 133.51 ​ 97.62 ​ ​ 108.00 ​ The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Biggest changeThe comparison below assumes $100 was invested on December 31, 2019 in our common stock, the S&P 500 Index and the NASDAQ Telecommunications Index, with dividends, if any, reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/19 12/20 12/21 12/22 12/23 12/24 Cogent Communications Holdings $ 100.00 $ 94.72 $ 120.98 $ 100.20 $ 141.50 ​ $ 151.75 S&P 500 ​ 100.00 ​ 118.40 ​ 152.39 ​ 124.79 ​ ​ 157.59 ​ ​ 197.02 NASDAQ Telecommunications ​ 100.00 ​ 110.08 ​ 112.44 ​ 82.71 ​ 90.96 ​ ​ 103.21 ​ The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Issuer Purchases of Equity Securities Our Board of Directors authorized a plan to permit the repurchase of up to $50.0 million of our common stock in negotiated and open market transactions through December 31, 2024. As of December 31, 2023, $30.4 million remained available for such negotiated and open market transactions concerning our common stock.
Issuer Purchases of Equity Securities Our Board of Directors authorized a plan to permit the repurchase of up to $50.0 million of our common stock in negotiated and open market transactions through December 31, 2025. As of December 31, 2024, $22.4 million remained available for such negotiated and open market transactions concerning our common stock.
The chart below compares the relative changes in the cumulative total return of our common stock for the period from December 31, 2018 to December 31, 2023, against the cumulative total return for the same period of the (1) The Standard & Poor’s 500 (S&P 500) Index and (2) the NASDAQ Telecommunications Index.
The chart below compares the relative changes in the cumulative total return of our common stock for the period from December 31, 2019 to December 31, 2024, against the cumulative total return for the same period of the (1) The Standard & Poor’s 500 (S&P 500) Index and (2) the NASDAQ Telecommunications Index.
We may purchase shares from time to time depending on market, economic, and other factors. We did not purchase shares of our common stock during the year ended December 31, 2023. ​ Page 33 of 90 Table of Contents
We may purchase shares from time to time depending on market, economic, and other factors. We did not purchase shares of our common stock during the three months ended December 31, 2024. ​ Page 32 of 96 Table of Contents
As of February 1, 2024, there were 112 holders of record of shares of our common stock holding 47,425,367 shares of our common stock. Performance Graph Our common stock currently trades on the NASDAQ Global Select Market.
As of February 1, 2025, there were 103 holders of record of shares of our common stock holding 47,650,780 shares of our common stock. Performance Graph Our common stock currently trades on the NASDAQ Global Select Market.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe comparisons illustrated in the tables are discussed in greater detail below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ Percent ​ 2023 2022 Change ​ ​ (in thousands) ​ ​ ​ Service revenue ​ $ 940,922 ​ $ 599,604 56.9 % On-net revenues ​ 518,588 ​ 452,779 14.5 % Off-net revenues ​ 393,494 ​ 146,152 169.2 % Non-core revenues ​ ​ 28,840 ​ ​ 673 ​ NM ​ Network operations expenses (1) ​ 544,232 ​ 228,154 138.5 % Selling, general, and administrative expenses (2) ​ 275,318 ​ 163,021 68.9 % Acquisition costs - Sprint Business ​ ​ 18,492 ​ ​ 2,248 ​ 722.6 % Depreciation and amortization expenses ​ 232,209 ​ 92,222 151.8 % Gain on foreign exchange - 2024 Notes ​ ​ — ​ ​ 31,561 ​ NM ​ Loss on debt extinguishment and redemption – 2024 Notes ​ ​ — ​ ​ 11,885 ​ NM ​ Change in valuation expense - interest rate swap agreement ​ ​ 13,439 ​ ​ (43,113) ​ NM ​ Interest expense ​ 106,783 ​ 67,584 58.0 % Gain on bargain purchase – Sprint Business ​ ​ 1,406,435 ​ ​ — ​ NM ​ Interest income – IP Transit Services Agreement ​ ​ 26,796 ​ ​ — ​ NM ​ Income tax benefit (expense) ​ 53,964 ​ (21,230) NM ​ (1) Includes non-cash equity-based compensation expense of $1,069 and $553 for 2023 and 2022, respectively.
Biggest changeThe comparisons illustrated in the tables are discussed in greater detail below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ Percent ​ 2024 2023 Change ​ ​ (in thousands) ​ ​ ​ Service revenue ​ $ 1,036,104 ​ $ 940,922 10.1 % Network operations expenses (1) ​ 641,836 ​ 544,232 17.9 % Selling, general, and administrative expenses (2) ​ 275,781 ​ 275,318 0.2 % Acquisition costs - Sprint Business ​ ​ 21,407 ​ ​ 18,492 ​ 15.8 % Depreciation and amortization expenses ​ 298,018 ​ 232,209 28.3 % Gain on lease termination ​ 3,332 ​ — NM ​ Interest expense, including change in valuation of Swap Agreement ​ ​ 123,317 ​ ​ 93,344 ​ 32.1 % Gain on bargain purchase – Sprint Business ​ ​ 22,202 ​ ​ 1,406,435 ​ NM ​ Interest income – IP Transit Services Agreement ​ ​ 23,767 ​ ​ 26,796 ​ (11.3) % Income tax benefit ​ 55,575 ​ 53,964 3.0 % (1) Includes non-cash equity-based compensation expense of $1,681 and $1,069 for 2024 and 2023, respectively.
Our primary source of operating cash is receipts from our customers who are billed on a monthly basis for our services. Our primary uses of operating cash are payments made to our vendors, payments under the TSA, payments to employees and interest payments made to our finance lease vendors and our note holders.
Our primary source of operating cash is receipts from our customers who are billed on a monthly basis for our services. Our primary uses of operating cash are payments made to our vendors, payments made under the TSA, payments to employees and interest payments made to our finance lease vendors and our note holders.
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 the our Board of Directors.
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.
In addition, we may elect to secure additional capital in the future, at acceptable terms, to improve our liquidity or fund acquisitions or for general corporate purposes.
In addition, we may elect to secure additional capital in the future, at acceptable terms, to improve our liquidity or fund acquisitions or for general corporate purposes.
We will evaluate any such transactions in light of the existing market conditions. The amounts involved in any such transaction, individually or in the aggregate, may be material.
We will evaluate any such transactions in light of the existing market conditions. The amounts involved in any such transaction, individually or in the aggregate, may be material.
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, the COVID-19 pandemic and accompanying 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; the impact of changing foreign exchange rates (in particular the Euro to US dollar and Canadian dollar to US dollar exchange rates) on the translation of our non-US dollar denominated revenues, expenses, assets and liabilities into US dollars; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including rules regarding data protection, cyber security and net neutrality; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering and right-of-way arrangements on favorable terms; our ability to renew our long-term leases of optical fiber and right-of-way agreements that comprise our network; our reliance on a limited number of equipment vendors, and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber and right-of-way providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; our ability to make payments on our indebtedness as they become due and outcomes in litigation, risks associated with variable interest rates under our Swap Agreement as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, this Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.
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, the COVID-19 pandemic and accompanying 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; the impact of changing foreign exchange rates (in particular the Euro to US dollar and Canadian dollar to US dollar exchange rates) on the translation of our non-US dollar denominated revenues, expenses, assets and liabilities into US dollars; legal and operational difficulties in new markets; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including rules regarding data protection, cyber security and net neutrality; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering and right-of-way arrangements on favorable terms; our ability to renew our long-term leases of optical fiber and right-of-way agreements that comprise our network; our reliance on a limited number of equipment vendors, and the potential for hardware or software problems associated with such equipment; tariffs imposed on equipment we purchase for our network; the dependence of our network on the quality and dependability of third-party fiber and right-of-way providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; our ability to make payments on our indebtedness as they become due and outcomes in litigation, risks associated with variable interest rates under our Swap Agreement as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, this Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.
Senior unsecured 2027 notes—$450.0 million In June 2022, Group issued $500.0 million of 2027 Notes. The 2027 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and mature on June 15, 2027. Interest accrues at 7.00% and is paid semi-annually in arrears on June 15 and December 15 of each year.
Senior Unsecured 2027 Notes—$450.0 Million In June 2022, Group issued $450.0 million of 2027 Notes. The 2027 Notes were sold in private offerings for resale to qualified institutional buyers pursuant to SEC Rule 144A and mature on June 15, 2027. Interest accrues at 7.00% and is paid semi-annually in arrears on June 15 and December 15 of each year.
We also have witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals which resulted in fewer sales opportunities for our salesforce and a reduction in VPN opportunities.
We also witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals, which resulted in fewer sales opportunities for our salesforce and a reduction in VPN opportunities.
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, holds Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).
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”).
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 and mitigates the overall impact of remote work policies on our corporate business.
As the option to fully or partially work from home becomes permanently established at many companies, our corporate customers are integrating certain 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, and mitigates the overall impact of remote work policies on our corporate business.
Based upon the historical growth rate of our dividend, we expect that we would have to provide approximately $379 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.
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.
The Purchase Agreement includes an estimated payment from Seller to Buyer related to short-term lease obligations. This amount was recorded at its present value resulting in a discount. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors.
The Purchase Agreement includes an estimated payment from Seller to Buyer related to short-term lease obligations. This amount was recorded at its present value resulting in a discount. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors.
There are certain exceptions to the limitations on the Company’s ability to incur indebtedness under the Indentures, including IRU agreements incurred in the normal course of business and any additional indebtedness if the Company’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or the Company’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater.
There are certain exceptions to the limitations on the ability to incur indebtedness under the Indentures, including IRU agreements incurred in the normal course of business and any additional indebtedness if Group’s consolidated leverage ratio, as defined in the Indentures, is less than 6.0 to 1.0 or Group’s fixed charge coverage ratio, as defined in the Indentures, is 2.0 to 1.0 or greater.
We are a Delaware Corporation and under the General Corporation Law of the State of Delaware distributions may be restricted including a restriction that distributions, including stock purchases and dividends, do not result in an impairment of a corporation’s capital, as defined under Delaware Law. The indentures governing our notes limit our ability to return cash to our stockholders.
We are a Delaware Corporation and under the General Corporation Law of the State of Delaware distributions may be restricted including a restriction that distributions, including stock purchases and dividends, do not result in an impairment of a corporation’s capital, as defined under Delaware Law. The Indentures limit our ability to return cash to our stockholders.
The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors. The determination of the discount rate and the conclusions reached related to the IP Transit Services Agreement required significant judgment.
The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors. The determination of the discount rate and the conclusions reached related to the IP Transit Services Agreement required significant judgment.
The accounting policies we believe to be most critical to understanding our financial results and condition or that require complex, significant and subjective management judgments are discussed below. Acquisition accounting In connection with our acquisition of the Wireline Business we made the following significant changes to our critical accounting policies and significant estimates.
The accounting policies we believe to be most critical to understanding our financial results and condition or that require complex, significant and subjective management judgments are discussed below. Acquisition accounting In connection with our acquisition of the Sprint Business we made the following significant changes to our critical accounting policies and significant estimates.
Management valued these assets using factors which represent an orderly liquidation value, to approximate the highest and best use of assets acquired in a distressed business. The valuation of the optical fiber requires the estimation of the total replacement cost per mile of fiber and a factor to reflect the orderly liquidation value.
Management valued these assets using factors that represent an orderly liquidation value, to approximate the highest and best use of assets acquired in a distressed business. The valuation of the optical fiber requires the estimation of the total replacement cost per mile of fiber and a factor to reflect the orderly liquidation value.
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 inflows to offset losses that would be expected until a buyer could optimize the business.
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.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Critical Accounting Policies and Significant Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
We concluded that TMUSA did not represent a “customer” as defined by ASC 606, the stated contract price did not represent consideration for services to be delivered, and the transaction did not satisfy the definition of revenue, which excluded this arrangement from the scope of ASC 606.
We concluded that T-Mobile did not represent a “customer” as defined by ASC 606, the stated contract price did not represent consideration for services to be delivered, and the transaction did not satisfy the definition of revenue, which excluded this arrangement from the scope of ASC 606.
The fair value of the identifiable assets acquired was $1.9 billion (including amounts due under the IP Transit Services Agreement) and was in excess of the $0.9 billion liabilities assumed and the $0.6 billion net consideration to be received from the Seller resulting in a gain on bargain purchase of $1.4 billion.
As of December 31, 2023, the fair value of the identifiable assets acquired was $1.9 billion (including amounts due under the IP Transit Services Agreement) and was in excess of the $0.9 billion liabilities assumed and the $0.6 billion net consideration to be received from the Seller resulting in a gain on bargain purchase of $1.4 billion.
Other Services Provided to Seller In addition, on the Closing Date, we entered into a commercial agreement with TMUSA (“Commercial Agreement”) 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.
Other Services Provided to the Seller In addition, on the Closing Date, we entered into a commercial agreement (the “CSA”) with TMUSA for colocation and connectivity services, pursuant to which we provide such services to TMUSA for a per service monthly fee plus certain third-party costs incurred in providing the services.
As of December 31, 2023 and 2022, we had a total of 3,277 and 3,155 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.
As of December 31, 2024 and 2023, we had a total of 3,453 and 3,277 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.
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.
Management is reducing 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.
There is not active market data for these assumptions and these assumptions are inherently subjective. Market participants could have differing views on these assumptions, which could result in a materially different fair value of the optical fiber. Page 46 of 90 Table of Contents On the Closing Date, we entered into the IP Transit Services Agreement.
There is not active market data for these assumptions and these assumptions are inherently subjective. Market participants could have differing views on these assumptions, which could result in a materially different fair value of the optical fiber. On the Closing Date, we entered into the IP Transit Services Agreement.
Under the Indentures, the Company can pay dividends, make other distributions, make certain investments and make other restricted payments under certain circumstances, including if, after giving pro forma effect to such restricted payment, the Company could still incur $1 of indebtedness, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is 2.0 to 1.0 or greater).
Under the Indentures, Group and its restricted subsidiaries can pay dividends, make other distributions, make certain investments and make other restricted payments under certain circumstances, including if, after giving pro forma effect to such restricted payment, Group could still incur $1 of “Ratio Debt,”, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is 2.0 to 1.0 or greater).
As 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, and mitigates the overall impact of remote work policies on 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.
Purchase Price The Transaction closed on May 1, 2023 (the “Closing Date”). 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.
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.
The services to be provided by us to the Seller include, among others, information technology and network support, finance and back office and other wireless business support.
The services provided by the Buyer to the Seller include, among others, information technology and network support, finance and back office and other wireless business support.
Acquisition of Sprint Communications On May 1, 2023 (the “Closing Date”), Cogent Infrastructure, Inc., a Delaware corporation and our direct wholly owned subsidiary, closed on its acquisition of the U.S. 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”).
(now Cogent Infrastructure, LLC), a Delaware corporation and our direct wholly owned subsidiary (the “Buyer” or “Cogent Infrastructure”), closed on its acquisition of the U.S. 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”).
For the fair values of the assets acquired and liabilities assumed, we used the cost, income and market approaches, including market participant assumptions. In connection with the Transaction, the identifiable assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date.
For the fair values of the assets acquired and liabilities assumed, we used the cost, income and market approaches, including market participant assumptions. ​ Page 48 of 96 Table of Contents In connection with the Transaction, the identifiable assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date.
Transition Services Agreement On the Closing Date, we entered into a transition services agreement (the “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, certain specified services (the “Transition Services”) to ensure an orderly transition following the separation of the Sprint Business from Sprint Communications.
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.
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. During 2023, we experienced a $140.1 million reduction of cash provided by operating activities from the impact of the Transaction.
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 experienced a reduction of cash provided by operating activities from the impact of the Transaction.
Our average price per megabit of our installed base of customers decreased by 3.6% from the year ended December 31, 2022 to the year ended December 31, 2023. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.
Our average price per megabit of our installed base of customers decreased by 14.2% from the year ended December 31, 2023 to the year ended December 31, 2024. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.
Future Capital Requirements We believe that our cash on hand and cash generated from our operating activities and cash from the IP Transit Services Agreement will be adequate to meet our working capital, capital expenditure, debt service, dividend payments and other cash requirements for the next twelve months and beyond the next twelve months if we execute our business plan.
Page 47 of 96 Table of Contents Future Capital Requirements We believe that our cash on hand and cash generated from our operating activities and cash from the IP Transit Services Agreement will be adequate to meet our working capital, capital expenditure, debt service, dividend payments and other cash requirements for the next 12 months and beyond the next 12 months if we execute our business plan.
The Company can also incur unlimited liens (which can be used, together with capacity under the debt covenant, to incur additional secured indebtedness) if the Company’s consolidated secured leverage ratio, as defined in the Indentures, is less than 4.0 to 1.0.
Group and its subsidiaries can also incur unlimited liens (which can be used, together with capacity under the debt covenant, to incur additional secured indebtedness) if Group’s consolidated secured leverage ratio, as defined in the Indentures, is less than 4.0 to 1.0.
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.
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.
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.
Page 41 of 96 Table of Contents On the Closing Date, we entered into a TSA with the Seller, pursuant to which the Seller provides to us, and we 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 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.
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.
We completed a series of debt redemptions and issuances in 2022 and 2021. In June 2022, we paid $375.4 million to redeem and extinguish our 2024 Notes at 101.094% of par value, and we issued $450.0 million of our 2027 Notes for net proceeds of $446.0 million.
In June 2022, we paid $375.4 million to redeem and extinguish our 2024 Notes at 101.094% of par value, and we issued $450.0 million of our 2027 Notes for net proceeds of $446.0 million.
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) was $66.1 million, of which $61.1 million was paid to the Seller 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 Sprint Business) resulted in us making a payment to the Seller of $61.1 million on the Closing Date.
We have experienced certain corporate customers taking a more cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the remote work environment that resulted from the COVID-19 pandemic.
Continued Impact of Changing Office Occupancy Rates Since the onset of the COVID-19 pandemic in 2020, we have experienced certain corporate customers taking a more cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the remote work environment that resulted initially from the pandemic.
Our changes in cash provided by operating activities are primarily due to changes in our operating profit and changes in our interest payments.
Our changes in cash provided by operating activities are primarily due to changes in net payments under the TSA, changes in our operating profit and changes in our interest payments.
The TSA may be terminated in its entirety if the other party has failed to perform any of its material obligations and such failure is not cured within 30 days. The TSA provides for customary indemnification and limits on liability.
The TSA may be terminated in its entirety if the other party has failed to perform any of its material obligations and such failure is not cured within 30 days. The TSA provides for customary indemnification and limits on liability. Amounts billed under the TSA are due 30 days from receipt of the related invoice.
Further, if and when companies eventually return to the buildings in which we operate, we believe it will present an opportunity for increased sales.
Further, if and when companies eventually return to the buildings in which we operate, whether as existing or new tenants, we believe it will present an opportunity for increased sales.
IP Transit Services Agreement On the Closing Date, Cogent Communications, Inc. and T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of T-Mobile (“TMUSA”), entered into an agreement for IP transit services (“IP Transit Services Agreement”), pursuant to which TMUSA will pay 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.
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.
Our revenue from our net-centric customers increased primarily due to an increase in our number of net-centric customers and growth in network traffic from these customers and from net-centric customer connections acquired with the Sprint Business. Our net-centric customers purchase our services on a price per megabit basis.
Our revenue from our net-centric customers increased primarily due to growth in network traffic from our legacy net-centric customers and from net-centric customers acquired with the Sprint Business. Our net-centric customers purchase our services on a price per megabit basis.
Increasing our combined cash provided by operating activities and cash provided by the IP Transit Service Agreement is, in part, dependent upon our ability to reduce the operating costs of the Sprint Business while retaining its revenue.
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 profitable revenue.
The combination of this improved operating performance and access to capital has enhanced our financial flexibility and increased our ability to make distributions to stockholders in the form of cash dividends or through share repurchases. Since our initial public offering, we have returned $1.4 billion to our stockholders through share repurchases and dividends.
The combination of this improved operating performance and access to capital has preserved our financial flexibility and buttressed our ability to make distributions to stockholders in the form of cash dividends or through share repurchases. We have returned $1.6 billion to our stockholders through share repurchases and dividends.
Our SG&A expenses, including non-cash equity-based compensation expense, increased by 68.9% from the year ended December 31, 2022 to the year ended December 31, 2023. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee’s salary and other compensation.
Selling, General, and Administrative (“SG&A”) Expenses. Our SG&A expenses, including non-cash equity-based compensation expense, increased by 0.2% from the year ended December 31, 2023 to the year ended December 31, 2024. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee’s salary and other compensation.
As of December 31, 2023, $38.7 million of our cash and cash equivalents are restricted for use under our Swap Agreement. We have made a $38.8 million deposit with the counterparty to the Swap Agreement.
As of December 31, 2024, $22.3 million of our cash and cash equivalents are restricted for use under our Swap Agreement. We have made a $23.4 million deposit with the counterparty to the Swap Agreement.
Either party to the TSA may terminate the agreement (i) with respect to any individual service in full for convenience upon 30 days’ prior written notice for certain services and reduced for other services after a 90-day period.
Amounts paid for the Sprint 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.
Page 35 of 90 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 In this section, we discuss the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 In this section, we discuss the results of our operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Interest Income - IP Transit Services Agreement On the Closing Date, we entered into 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.
Page 38 of 96 Table of Contents 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.
In some markets, office occupancy rates may never return to pre-pandemic levels. As a result, we may continue to experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities.
In some markets, office occupancy rates may never return to pre-2020 levels. As a result, we may continue to experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities. These trends may negatively impact our revenue growth, cash flows and profitability.
During the year ended December 31, 2023, we were billed $284.1 million under the TSA primarily for reimbursement at cost of payment to vendors of the Sprint Business. During the year ended December 31, 2023 we paid $217.2 million to the Seller under the TSA. Amounts billed under the TSA are due 30 days from receipt of the related invoice.
Amounts billed under the TSA are due 30 days from receipt of the related invoice. During 2024 and 2023, we were billed $27.2 million and $284.1 million, respectively, under the TSA, primarily for reimbursement at cost of payments to vendors of the Sprint Business.
Limitations under the Indentures The 2027 Notes Indenture and the 2026 Notes Indenture (the “Indentures”), among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; to consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates.
In June 2022, the 2024 Notes were redeemed with the proceeds from our 2027 Notes. ​ Page 45 of 96 Table of Contents Limitations Under the Indentures The indentures governing the 2026 Notes, the 2027 Notes and the 2027 Mirror Notes (the “Indentures”), among other things, limit the ability of Group and its restricted subsidiaries to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; to consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates.
We increased our total service revenue by our acquisition of the Sprint Business, 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 total service revenue increased primarily due to the revenue acquired in May 2023 with the Sprint Business and 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.
Page 42 of 90 Table of Contents Cash Flows The following table sets forth our consolidated cash flows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 ​ ​ (in thousands) Net cash provided by operating activities ​ $ 17,345 ​ $ 173,707 ​ $ 170,257 Net cash provided by (used in) investing activities ​ 76,726 ​ (78,971) ​ ​ (69,916) Net cash used in financing activities ​ (257,851) ​ (144,849) ​ ​ (140,825) Effect of exchange rates on cash ​ 1,649 ​ (2,599) ​ ​ (2,193) Net decrease in cash, cash equivalents and restricted cash during the year ​ $ (162,131) ​ $ (52,712) ​ $ (42,677) ​ Net Cash Provided By Operating Activities.
Cash Flows The following table sets forth our consolidated cash flows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 2022 ​ ​ (in thousands) Net cash (used in) provided by operating activities ​ $ (8,645) ​ $ 17,345 ​ $ 173,707 Net cash provided by (used in) investing activities ​ 21,492 ​ 76,726 ​ ​ (78,971) Net cash provided by (used in) financing activities ​ 105,925 ​ (257,851) ​ ​ (144,849) Effect of exchange rates on cash ​ (4,637) ​ 1,649 ​ ​ (2,599) Net increase (decrease) in cash, cash equivalents and restricted cash during the year ​ $ 114,135 ​ $ (162,131) ​ $ (52,712) ​ Net Cash (Used in) Provided by Operating Activities.
As we do each year, we will continue to monitor our future sources and uses of cash, and anticipate that we will make adjustments to our capital allocation strategies when, as and if determined by our Board of Directors.
After consideration of these circumstances, we currently plan to continue our current dividend policy. 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.
Dividends on unvested restricted shares of common stock are paid as the awards vest. Our initial quarterly dividend payment was made in the third quarter of 2012. On February 28, 2024, our Board of Directors approved the payment of our quarterly dividend of $0.965 per common share.
Dividends on Common Stock Dividends are recorded as a reduction to retained earnings. Dividends on unvested restricted shares of common stock are paid as the awards vest. Our initial quarterly dividend payment was made in the third quarter of 2012. On February 26, 2025, our Board of Directors approved the payment of our quarterly dividend of $1.005 per common share.
We believe this level of liquidity reduces our exposure to refinancing risk, potential underperformance of the business or other unforeseen challenges and enhances our ability to pursue acquisitions or operating opportunities.
We believe this level of liquidity reduces our exposure to refinancing risk, potential underperformance of the business or other unforeseen challenges and enhances our ability to pursue acquisitions or operating opportunities. We intend to hold levels of cash and cash equivalents sufficient to maintain our ability to fund operations and make dividend payments to our stockholders.
The services to be provided by the Seller to us include, among others, information technology support, back office and finance, real estate and facilities, vendor and supply chain management including payments to vendors of the Sprint Business for us reimbursed at cost and human resources.
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.
The dividend for the first quarter of 2024 will be paid to holders of record on March 15, 2024. This estimated $45.7 million dividend payment is expected to be made on April 9, 2024.
The dividend for the first quarter of 2025 will be paid to holders of record on March 13, 2025. This estimated $47.8 million dividend payment is expected to be made on March 28, 2025.
During 2023, we received seven monthly payments totaling $204.2 million under the IP Transit Services Agreement, reflected as cash from investing activities in our consolidated statement of cash flows.
Through December 31, 2024, we received monthly payments totaling $408.3 million under the IP Transit Services Agreement, reflected as cash flows from investing activities in our consolidated statements of cash flows.
SG&A expenses increased primarily from an increase in salaries and benefits from an 80.9% increase in our total headcount, including 942 employees added to our headcount from our acquisition of the Sprint Business on the Closing Date.
SG&A expenses increased primarily from an increase in salaries and benefits from 942 employees added to our headcount from our acquisition of the Sprint Business on the Closing Date and costs associated with the Sprint acquisition including TSA costs. Our total headcount was 1,916 at December 31, 2024 and 1,947 at December 31, 2023. Acquisition-Related Costs.
Page 37 of 90 Table of Contents Further, if and when companies eventually return to the buildings in which we operate, we believe it will present an opportunity for increased sales.
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.
We believe we are able to timely service our debt obligations and will not require any concessions to do so. We believe we will have access to additional capital from a variety of sources and the public capital markets for debt and equity.
We believe we will have access to additional capital from a variety of sources and the public capital markets for debt and equity.
Under the Indentures, we are required to disclose financial information of Holdings including its assets, liabilities and its operating results (“Holdings Financial Information”).
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”).
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 2024, we expect to receive a total of $204.2 million under the monthly payments under the IP Transit Services Agreement.
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 profitable revenue, expanding our geographic footprint and increasing our network capacity.
If the fair value of the Swap Agreement exceeds a net liability of $38.8 million, we will be required to deposit additional funds with the counterparty equal to the net liability fair value. As of December 31, 2023, $38.7 million of the deposit was restricted and $0.1 million was unrestricted.
If the fair value of the Swap Agreement exceeds a net liability of $23.4 million, we will be required to deposit additional funds with the counterparty equal to the liability fair value.
The annual changes in purchases of property and equipment are primarily due to the timing and scope of our network expansion activities, including geographic expansion and adding buildings to our network and purchases in anticipation of the closing of our acquisition of the Sprint Business.
The changes in purchases of property and equipment were primarily due to the timing and scope of our network expansion 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.
Exchange rates positively affected our increase in service revenue by $2.1 million. All foreign currency comparisons herein reflect results for the year ended December 31, 2023 translated at the average foreign currency exchange rates for the year ended December 31, 2022.
All foreign currency comparisons herein reflect results for the year ended December 31, 2024 translated at the average foreign currency exchange rates for the year ended December 31, 2023.
Impact of COVID-19 on Our Liquidity and Operating Performance As of December 31, 2023, we had cash, cash equivalents and restricted cash of $113.8 million. The COVID-19 pandemic has not impacted our credit rating to date, nor do we believe that it has materially changed our cost of capital.
As of December 31, 2024, we had cash, cash equivalents and restricted cash of $227.9 million. The COVID-19 pandemic has not impacted our credit rating to date, nor do we believe that it has materially changed our cost of capital. We believe we are able to timely service our debt obligations and will not require any concessions to do so.
Revenue and customer connections by network connection type In connection with our acquisition of the Sprint Business, on the Closing Date, we classified $39.4 million of monthly Sprint Business revenue as $2.5 million of on-net revenue, $32.2 million of off-net revenue and $4.7 million of non-core revenue.
On the Closing Date, we classified the total $39.4 million of monthly Sprint Business revenue as $2.5 million of on-net revenue, $32.2 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.
Under the Swap Agreement settlement payment made in May 2023, we paid $9.5 million to the counterparty for a net cash interest cost of $9.5 million for the period from November 1, 2022 to April 30, 2023.
Under the Swap Agreement settlement payments made in May 2023 and November 2023, we paid a total of $21.5 million to the counterparty for a net cash interest cost of $21.5 million for the year ended December 31, 2023.
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. In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.
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.
The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, amongst other market factors. The determination of the discount rate requires some judgment. The amortization of the discount resulted in interest income of $26.8 million for the year ended December 31, 2023.
The Short - term Lease Payment was recorded at its present value resulting in a discount of $8.4 million. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors. The determination of the discount rate requires some judgment.
Because of the operating leverage of our network, our annual capital expenditures measured as a percentage of revenues has fallen over the last decade but increased in 2023 to 13.8% from 13.2% for 2022, from capital expenditures associated with the Transaction.
Because of the operating leverage of our network, our annual capital expenditures measured as a percentage of revenues has fallen over the last decade but increased in 2024 to 18.8% from 13.8% for 2023, primarily due to capital expenditures 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2023, the fair value of the Swap Agreement was a liability of $38.8 million, and as a result, $38.8 million of the $38.9 million deposit was restricted and $0.1 million was unrestricted.
Biggest changeAs of December 31, 2024, the fair value of the Swap Agreement was a liability of $22.3 million, and as a result, $22.3 million of the deposit was restricted and $1.1 million was unrestricted. A 1.0% change in interest rates as of December 31, 2024 would impact the change in the valuation of our Swap Agreement by approximately $6.2 million.
The values that we report for the Swap Agreement as of each reporting date are recognized as an additional non-cash expense or a reduction to expense with the corresponding amount included in liabilities or assets, respectively, in our consolidated balance sheets.
The values that we report for the Swap Agreement as of each reporting date are recognized as an additional non-cash interest expense or a reduction to interest expense with the corresponding amount included in liabilities or assets, respectively, in our consolidated balance sheets.
By entering into this Swap Agreement, we have assumed the risk associated with variable interest rates based upon SOFR related to our 2026 Notes. We have not entered into hedge agreements related to our 2027 Notes, and we do not use derivative financial instruments for trading purposes.
By entering into this Swap Agreement, we have assumed the risk associated with variable interest rates based upon SOFR related to our 2026 Notes. We have not entered into hedge agreements related to our IPv4 Notes, 2027 Mirror Notes or 2027 Notes, and we do not use derivative financial instruments for trading purposes.
Accordingly, in the event that the local currencies strengthen versus the US dollar to a greater extent than planned, the revenues, expenses and cash flow requirements associated with our international operations may be significantly higher in US-dollar terms than planned. During the year ended December 31, 2023, our foreign activities accounted for 17.9% of our consolidated revenue.
Accordingly, in the event that the local currencies strengthen versus the US dollar to a greater extent than planned, the revenues, expenses and cash flow requirements associated with our international operations may be significantly higher in US-dollar terms than planned. During the year ended December 31, 2024, our foreign activities accounted for 17.4% of our consolidated revenue.
We have a $38.9 million interest-bearing deposit with the counterparty to a Swap Agreement. If the fair value of the Swap Agreement exceeds a net liability of $38.9 million, we will be required to deposit additional funds with the counterparty equal to the net liability that is in excess of $38.9 million.
We have a $23.4 million interest-bearing deposit with the counterparty to our Swap Agreement. If the fair value of the Swap Agreement exceeds a net liability of $23.4 million, we will be required to deposit additional funds with the counterparty equal to the net liability that is in excess of the deposit.
Page 47 of 90 Table of Contents Foreign Currency Exchange Risk Our operations outside of the United States expose us to potentially unfavorable adverse movements in foreign currency rate changes. We have not entered into forward exchange contracts related to our foreign currency exposure.
Foreign Currency Exchange Risk Our operations outside of the United States expose us to potentially unfavorable adverse movements in foreign currency rate changes. We have not entered into forward exchange contracts related to our foreign currency exposure.
A 1.0% change in foreign exchange rates would impact our consolidated annual revenue by approximately $1.3 million. Changes in foreign currency rates could adversely and materially affect our operating results and cash flow. ​ Page 48 of 90 Table of Contents
A 1.0% change in foreign exchange rates would impact our consolidated annual revenue by approximately $1.4 million. Changes in foreign currency rates could adversely and materially affect our operating results and cash flow. ​ Page 50 of 96 Table of Contents
However, based upon the nature and current level of our investments, which consist of cash, cash equivalents and restricted cash, we believe that there is no material interest rate exposure related to our investments.
Interest Income Our interest income is sensitive to changes in the general level of interest rates. However, based upon the nature and current level of our investments, which consist of cash, cash equivalents and restricted cash, we believe that there is no material interest rate exposure related to our investments.
Interest Rate Risk Interest Expense and Restricted Cash Our cash flow exposure due to changes in interest rates related to our 2027 Notes is limited as our 2027 Notes have a fixed interest rate. Beginning in August 2021, we used a derivative financial instrument to manage our interest rate risk on our 2026 Notes.
Interest Rate Risk Interest Expense and Restricted Cash Our cash flow exposure due to changes in interest rates related to our IPv4 Notes, 2027 Mirror Notes and 2027 Notes is limited as these notes have fixed interest rates. Beginning in August 2021, we used a swap agreement to manage our interest rate risk on our 2026 Notes.
The Swap Agreement is recorded at its fair value at each reporting period and we incur gains and losses due to changes in market interest rates.
Our Swap Agreement has the economic effect of modifying our fixed-interest rate obligation associated with our 2026 Notes to a variable interest rate obligation based on SOFR. The Swap Agreement is recorded at its fair value at each reporting period and we incur gains and losses due to changes in market interest rates.
Removed
As of December 31, 2023, we were counterparty to our Swap Agreement that has the economic effect of modifying our fixed-interest rate obligation associated with our 2026 Notes to a variable interest rate obligation based on SOFR.
Removed
A 1.0% change in interest rates as of December 31, 2023 would impact the change in our valuation of our Swap Agreement by approximately $10.9 million. Interest Income Our interest income is sensitive to changes in the general level of interest rates.

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