CCOI Cogent Communications Holdings Inc

(In thousands)

Gain on bargain purchase

Fair value of net assets acquired

$799,214

Total net consideration to be received from Seller, net of discounts

607,221

Gain on bargain purchase

$1,406,435

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Metric ($ in
000's, except
share, per
share,
customer
connections
and network
related data) –
unaudited

On-Net
revenue

$112,634

$111,975

$113,219

$114,949

$116,143

$129,250

$132,023

$141,173

 % Change
from previous
Qtr.

1.7 %

-0.6 %

1.1 %

1.5 %

1.0 %

11.3 %

2.1 %

6.9 %

Off-Net
revenue

$36,387

$36,282

$36,611

$36,873

$37,283

$101,984

$130,560

$123,669

 % Change
from previous
Qtr.

0.2 %

-0.3 %

0.9 %

0.7 %

1.1 %

173.5 %

28.0 %

-5.3 %

Non-Core
revenue  (1)
(16)

$154

$193

$170

$157

$162

$8,572

$12,846

$7,258

 % Change
from previous
Qtr.

-0.6 %

25.3 %

-11.9 %

-7.6 %

3.2 %

NM

49.9 %

-43.5 %

Service
revenue – total

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

 % Change
from previous
Qtr.

1.3 %

-0.5 %

1.0 %

1.3 %

1.1 %

56.1 %

14.9 %

-1.2 %

Constant
currency total
revenue
quarterly
growth rate –
sequential
quarters (2)

1.7 %

0.4 %

2.0 %

1.3 %

0.2 %

55.9 %

14.9 %

-1.1 %

Constant
currency total
revenue
quarterly
growth rate –
year over year
quarters (2)

2.9 %

2.7 %

4.3 %

5.5 %

4.0 %

61.4 %

82.4 %

78.1 %

Constant
currency and
excise tax
impact on total
revenue
quarterly
growth rate –
sequential
quarters (2)

2.1 %

0.6 %

1.6 %

1.3 %

0.1 %

51.4 %

13.4 %

-3.2 %

Constant
currency and
excise tax
impact on total
revenue
quarterly
growth rate –
year over year
quarters (2)

3.5 %

3.6 %

4.7 %

5.7 %

3.7 %

56.2 %

75.5 %

67.4 %

Excise Taxes
included in
service
revenue (3)

$3,742

$3,448

$4,118

$4,086

$4,193

$11,040

$14,557

$20,428

 % Change
from previous
Qtr.

-13.7 %

-7.9 %

19.4 %

-0.8 %

2.6 %

163.3 %

31.9 %

40.3 %

Corporate
revenue (16)

$86,116

$85,177

$85,495

$85,783

$85,627

$110,998

$120,484

$126,634

 % Change
from previous
Qtr.

-0.8 %

-1.1 %

0.4 %

0.3 %

-0.2 %

29.6 %

8.5 %

5.1 %

Net-centric
revenue (15)

$63,060

$63,274

$64,506

$66,196

$67,961

$87,582

$94,936

$93,148

  % Change
from previous
Qtr.

4.4 %

0.3 %

1.9 %

2.6 %

2.7 %

28.9 %

8.4 %

-1.9 %

Enterprise
revenue (4)

-

-

-

-

-

$41,227

$60,009

$52,318

  % Change
from previous
Qtr.

-

-

-

-

-

NM

45.6 %

-12.8 %

Network
operations
expenses (3)

$57,305

$56,369

$57,044

$56,884

$58,489

$137,271

$173,224

$174,180

 % Change
from previous
Qtr.

1.8 %

-1.6 %

1.2 %

-0.3 %

2.8 %

134.7 %

26.2 %

0.6 %

GAAP gross
profit (5)

$69,038

$68,865

$69,883

$71,444

$69,790

$49,793

$15,101

$29,744

 % Change
from previous
Qtr.

1.2 %

-0.3 %

1.5 %

2.2 %

-2.3 %

-28.7 %

-69.7 %

97.0 %

GAAP gross
margin (5)

46.3 %

46.4 %

46.6 %

47.0 %

45.4 %

20.8 %

5.5 %

10.9 %

Non-GAAP
gross profit (2)
(6)

$91,870

$92,081

$92,956

$95,095

$95,099

$102,535

$102,205

$97,919

 % Change
from previous
Qtr.

1.0 %

0.2 %

1.0 %

2.3 %

0.0 %

7.8 %

-0.3 %

-4.2 %

Non-GAAP
gross margin
(2) (6)

61.6 %

62.0 %

62.0 %

62.6 %

61.9 %

42.8 %

37.1 %

36.0 %

Selling,
general and
administrative
expenses (7)

$34,715

$33,624

$33,079

$37,713

$38,646

$77,640

$58,267

$74,907

 % Change
from previous
Qtr.

3.5 %

-3.1 %

-1.6 %

14.0 %

2.5 %

100.9 %

-25.0 %

28.6 %

Depreciation
and
amortization
expense

$22,688

$23,071

$22,897

$23,563

$25,160

$52,511

$86,734

$67,805

 % Change
from previous
Qtr.

0.5 %

1.7 %

-0.8 %

2.9 %

6.8 %

108.7 %

65.2 %

-21.8 %

Equity-based
compensation
expense

$6,056

$5,907

$6,211

$6,264

$6,581

$6,249

$7,411

$6,684

 % Change
from previous
Qtr.

0.0 %

-2.5 %

5.1 %

0.9 %

5.1 %

-5.0 %

18.6 %

-9.8 %

Operating
income (loss)

$28,784

$29,566

$28,095

$27,311

$24,312

$(34,604)

$(50,558)

$(68,478)

 % Change
from previous
Qtr.

-20.4 %

2.7 %

-5.0 %

-2.8 %

-11.0 %

NM

46.1 %

35.4 %

Interest
expense (8)

$14,168

$13,478

$17,948

$21,990

$19,005

$28,653

$24,198

$34,928

 % Change
from previous
Qtr.

3.3 %

-4.9 %

33.2 %

22.5 %

-13.6 %

50.8 %

-15.5 %

44.3 %

Non-cash
change in
valuation –
Swap
Agreement (8)

$21,271

$7,510

$16,923

$(2,590)

$(1,847)

$1,305

$4,825

$(17,722)

Gain (loss) on
bargain
purchase (9)

-

-

-

-

-

$1,155,719

$(3,332)

$254,049

Net income
(loss)

$1,137

$11,164

$(8,007)

$851

$6,148

$1,123,863

$(56,723)

$200,153

Foreign
exchange
gains on 2024
Euro Notes

$8,014

$23,547

$-

$-

$-

$-

$-

$-

Basic net
income (loss)
per common
share

$0.02

$0.24

$(0.17)

$0.02

$0.13

$23.84

$(1.20)

$4.23

Diluted net
income (loss)
per common
share

$0.02

$0.24

$(0.17)

$0.02

$0.13

$23.65

$(1.20)

$4.17

Weighted
average
common
shares – basic

46,575,848

46,691,142

46,736,742

46,885,512

47,037,091

47,137,822

47,227,338

47,353,291

 % Change
from previous
Qtr.

0.3 %

0.2 %

0.1 %

0.3 %

0.3 %

0.2 %

0.2 %

0.3 %

Weighted
average
common
shares –
diluted

46,929,191

47,029,446

46,736,742

47,196,890

47,381,226

47,526,207

47,227,338

48,037,841

 % Change
from previous
Qtr.

-0.1 %

0.2 %

-0.6 %

1.0 %

0.4 %

0.3 %

-0.6 %

1.7 %

EBITDA (2)

$57,155

$58,457

$57,873

$57,138

$56,053

$24,156

$43,587

$6,011

 % Change
from previous
Qtr.

-0.4 %

2.3 %

-1.0 %

-1.3 %

-1.9 %

-56.9 %

80.4 %

-86.2 %

EBITDA
margin (2)

38.3 %

39.4 %

38.6 %

37.6 %

36.5 %

10.1 %

15.8 %

2.2 %

Sprint
acquisition
costs (14)

$-

$-

$2,004

$244

$400

$739

$351

$17,001

Cash
payments
under IP
Transit
Services
Agreement
(10)

$-

$-

$-

$-

$-

$29,167

$87,500

$87,500

EBITDA, as
adjusted for
Sprint
acquisition
costs and
cash
payments
under IP
Transit
Services
Agreement (2)
(10) (14)

$57,155

$58,457

$59,877

$57,382

$56,453

$54,062

$131,438

$110,512

 % Change
from previous
Qtr.

-0.4 %

2.3 %

2.4 %

-4.2 %

-1.6 %

-4.2 %

143.1 %

-15.9 %

EBITDA, as
adjusted for
Sprint
acquisition
costs and
cash
payments
under IP
Transit
Services
Agreement,
margin (2) (10)
(14)

38.3 %

39.4 %

39.9 %

37.8 %

36.8 %

22.5 %

47.7 %

40.6 %

Net cash
provided by
(used in)
operating
activities

$49,411

$34,403

$53,570

$36,323

$35,821

$82,654

$(52,433)

$(48,701)

  % Change
from previous
Qtr.

37.3 %

-30.4 %

55.7 %

-32.2 %

-1.4 %

130.7 %

-163.4 %

-7.1 %

Capital
expenditures

$18,121

$17,288

$23,971

$19,591

$23,204

$37,449

$25,373

$43,609

 % Change
from previous
Qtr.

18.5 %

-4.6 %

38.7 %

-18.3 %

18.4 %

61.4 %

-32.2 %

71.9 %

Principal
payments of
capital
(finance) lease
obligations

$5,863

$5,236

$9,859

$24,514

$9,450

$7,797

$41,302

$18,813

 % Change
from previous
Qtr.

-5.9 %

-10.7 %

88.3 %

148.6 %

-61.5 %

-17.5 %

429.7 %

-54.5 %

Dividends paid

$41,298

$41,855

$42,729

$43,975

$45,311

$44,907

$45,136

$46,362

Gross
Leverage Ratio
(2) (10)

4.94

5.22

5.32

5.39

5.47

5.63

4.79

4.07

Net Leverage
Ratio (2) (10)

3.58

3.70

3.93

4.20

4.46

4.56

4.24

3.75

Customer
Connections –
end of period
(15) (16)

On-Net
customer
connections

81,627

82,277

82,614

82,620

83,268

93,260

88,699

88,733

 % Change
from previous
Qtr.

1.1 %

0.8 %

0.4 %

0.0 %

0.8 %

12.0 %

-4.9 %

0.0 %

Off-Net
customer
connections

12,922

13,160

13,359

13,531

13,785

38,762

36,923

36,895

 % Change
from previous
Qtr.

2.0 %

1.8 %

1.5 %

1.3 %

1.9 %

181.2 %

-4.7 %

-0.1 %

Non-Core
customer
connections
(1) (16)

335

340

348

363

374

19,408

12,403

11,975

 % Change
from previous
Qtr.

0.3 %

1.5 %

2.4 %

4.3 %

3.0 %

NM

-36.1 %

-3.5 %

Total customer
connections
(15) (16)

94,884

95,777

96,321

96,514

97,427

151,430

138,025

137,603

 % Change
from previous
Qtr.

1.2 %

0.9 %

0.6 %

0.2 %

0.9 %

55.4 %

-8.9 %

-.3 %

Corporate
customer
connections
(16)

45,393

45,103

45,176

44,844

44,570

61,284

55,045

54,493

  % Change
from previous
Qtr.

-0.1 %

-0.6 %

0.2 %

-0.7 %

-0.6 %

37.5 %

-10.2 %

-1.0 %

Net-centric
customer
connections 
(15)

49,491

50,674

51,145

51,670

52,857

66,711

62,291

62,370

  % Change
from previous
Qtr.

2.5 %

2.4 %

0.9 %

1.0 %

2.3 %

26.2 %

-6.6 %

0.1 %

Enterprise  
customer
connections
(4)

-

-

-

-

-

23,435

20,689

20,740

  % Change
from previous
Qtr.

-

-

-

-

-

NM

-11.7 %

0.2 %

On-Net
Buildings –
end of period

Multi-Tenant
office
buildings

1,824

1,826

1,832

1,837

1,841

1,844

1,860

1,862

 Carrier neutral
data center
buildings

1,187

1,216

1,240

1,264

1,294

1,327

1,337

1,347

Cogent data
centers

54

53

54

54

55

56

60

68

Total on-net
buildings

3,065

3,095

3,126

3,155

3,190

3,227

3,257

3,277

Total carrier
neutral data
center nodes

1,383

1,409

1,433

1,458

1,490

1,526

1,528

1,558

Square feet –
multi-tenant
office
buildings – on-
net

992,336,259

993,590,499

995,522,774

1,000,044,418

1,001,382,577

1,001,491,002

1,006,523,795

1,008,006,655

Total
Technical
Buildings
Owned (11)

-

-

-

-

-

482

482

482

Square feet –
Technical
Buildings
Owned (11)

-

-

-

-

-

1,603,569

1,603,569

1,603,569

Network  – end
of period (12)

Intercity route
miles – Leased
(12)

60,869

61,024

61,065

61,292

61,300

72,694

72,694

72,552

Metro route
miles – Leased 
(12)

16,614

16,822

17,477

17,616

17,826

22,556

22,128

24,779

Metro fiber
miles – Leased
(12)

40,113

40,529

42,212

42,491

42,863

75,577

69,943

77,365

Intercity route
miles – Owned
(12)

2,748

2,748

2,748

2,748

2,748

21,883

21,883

21,883

Metro route
miles – Owned
(12)

445

445

445

445

445

1,704

1,704

1,704

Connected
networks –
AS's

7,625

7,685

7,766

7,792

7,864

7,891

7,971

7,988

Headcount –
end of period
(13)

Sales force –
quota bearing 
(13)

479

477

522

548

562

647

637

657

Sales force –
total (13)

620

619

669

698

714

841

833

847

Total
employees (13)

987

988

1,041

1,076

1,107

2,020

1,990

1,947

Sales rep
productivity –
units per full
time
equivalent
sales rep
("FTE") per
month (15)

4.7

4.9

4.6

3.8

4.0

9.2

3.6

3.3

FTE – sales
reps

453

449

465

503

539

567

621

620

(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent.

(2) See Schedules of Non-GAAP measures below for definitions and reconciliations to GAAP measures.

(3) Network operations expense excludes equity-based compensation expense of $144, $145, $176, $88, $149, $231, $370 and $370 in the three month periods ended March 31, 2022 through December 31, 2023, respectively.  Network operations expense includes excise taxes, including Universal Service Fund fees, of $3,742, $3,448, $4,118, $4,086, $4,193, $11,040, $14,557 and $20,428 in the three month periods ended March 31, 2022 through December 31, 2023, respectively. 

(4) In connection with the acquisition of the Wireline Business, Cogent classified $12.9 million of the Wireline Business monthly recurring revenue and 17,823 customer connections as corporate revenue and corporate customer connections, respectively, $6.5 million of monthly recurring revenue and 5,711 customer connections as net-centric revenue and customer connections, respectively, and $20.1 million of monthly recurring revenue and 23,209 customer connections as enterprise revenue and enterprise customer connections, respectively. Conversely, Cogent reclassified $0.3 million of monthly recurring revenue and 387 customer connections of legacy Cogent monthly recurring revenue to enterprise revenue and enterprise customer connections, respectively ($0.3 million of corporate monthly recurring revenue and 363 corporate customer connections and $0.02 million of net-centric monthly recurring revenue and 24 net-centric customer connections).

(5) GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue.

(6) Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant measures to provide investors. Management uses them to measure the margin available to the company after network service costs, in essence a measure of the efficiency of the Company's network.

(7) Excludes equity-based compensation expense of $5,912, $5,762, $6,035, $6,176, $6,432, $6,018, $7,041 and $6,314 in the three month periods ended March 31, 2022 through December 31, 2023, respectively and excludes $2,004, $244, $400, $739, $351 and $17,001 of Sprint acquisition costs for the three month periods ended September 30, 2022, December 31, 2022, March 31, 2023 June 30, 2023, September 30, 2023 and December 31, 2023, respectively. 

(8) As of December 31, 2023, Cogent was party to an interest rate swap agreement (the "Swap Agreement") that has the economic effect of modifying the fixed interest rate obligation associated with its Senior Secured 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate ("SOFR") so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR. Interest expense includes $(1.2 million), $3.3 million, $9.5 million and $12.0 million of interest (income) expense for the three month periods ended June 30, 2022, December 31, 2022, June 30, 2023 and December 31, 2023, respectively related to the Swap Agreement.

(9) The estimated gain on bargain purchase from the Sprint acquisition was $1.4 billion as shown below. The amounts presented are provisional and are subject to change as Cogent refines its estimates and inputs used in the calculations of the assets acquired and liabilities assumed.

(In thousands)

Gain on bargain purchase

Fair value of net assets acquired

$799,214

Total net consideration to be received from Seller, net of discounts

607,221

Gain on bargain purchase

$1,406,435

(10) Includes cash payments under the IP Transit Services Agreement, as discussed above, of

•

$29.2 million for the three months ended June 30, 2023. Amounts billed and amounts paid under the IP Transit Services Agreement were $58.3 million and $29.2 million in the three months ended June 30, 2023, respectively.

•

$87.5 million for the three months ended September 30, 2023. Amounts billed and amounts paid under the IP Transit Services Agreement were $87.5 million and $87.5 million in the three months ended September 30, 2023, respectively. 

•

$87.5 million for the three months ended December 31, 2023. Amounts billed and amounts paid under the IP Transit Services Agreement were $87.5 million and $87.5 million in the three months ended December 31, 2023, respectively.

(11) In connection with the acquisition of the Wireline Business, Cogent acquired 482 technical buildings.  Thirteen of those buildings have been converted to a Cogent Data Centers.

(12) As of June 30, 2023,

ο

Leased intercity route miles of dark fiber include 11,376 former Sprint route miles and 61,318 Cogent route miles. 

ο

Leased metro route miles of dark fiber include 4,527 former Sprint route miles and 18,029 Cogent route miles. 

ο

Leased metro fiber miles of dark fiber include 32,346 former Sprint fiber miles and 43,231 Cogent fiber miles

•

As of September 30, 2023,

ο

Leased intercity route miles of dark fiber include 11,376 former Sprint route miles and 61,318 Cogent route miles. 

ο

Leased metro route miles of dark fiber include 4,047 former Sprint route miles and 18,081 Cogent route miles. 

ο

Leased metro fiber miles of dark fiber include 26,602 former Sprint fiber miles and 43,341 Cogent fiber miles.  

•

As of December 31, 2023,

ο

Leased intercity route miles of dark fiber include 11,017 former Sprint route miles and 61,535 Cogent route miles. 

ο

Leased metro route miles of dark fiber include 3,911 former Sprint route miles and 20,868 Cogent route miles. 

ο

Leased metro fiber miles of dark fiber include 25,252 former Sprint fiber miles and 52,113 Cogent fiber miles.   

•

In connection with Cogent's Sprint acquisition, Cogent acquired 19,135 owned intercity route miles of dark fiber and 1,259 owned metro route miles of dark fiber.

(13) In connection with the acquisition of the Wireline Business  Cogent hired 942 total employees, including 75 quota bearing sales employees and 114 sales employees.

(14) In connection with the acquisition of the Wireline Business and negotiation of the related purchase agreement, the Company incurred $2.2 million of professional fees in the year ended December 31, 2022, $0.4 million in the three months ended March 31, 2023, $0.7 million in the three months ended June 30, 2023 and $0.4 million in the three months ended September 30, 2023, In connection with the acquisition of the Wireline Business the Company incurred $0.8 million of professional fees and $16.2 million of reimbursable severance costs in the three months ended December 31, 2023.

(15) Sales rep productivity for Q2 2023 includes 9,084 net-centric customer connections from a commercial services agreement ("CSA") with TMUSA entered into in May 2023.  Net-centric revenue under the CSA was $7.3 million for the three months ended June 30, 2023, was $8.0 million for the three months ended September 30, 2023 and was $8.6 million for the three months ended December 31, 2023. Net-centric customer connections under the CSA were 8,028 as of June 30, 2023, 4,661 as of September 30, 2023, and 3,576 as of December 31, 2023.

(16) As of June 30, 2023 total non-core customer connections included 8,486 Session Initiation Protocol ("SIP") customer connections. This non-core corporate product was discontinued. There were no SIP, non-core customer connections as of September 30, 2023 or December 31, 2023.

NM  Not meaningful

Q1
2022

Q2
2022

Q3
2022

Q4 
2022

Q1 
2023

Q2 
2023

Q3 
2023

Q4 
2023

YEAR
2022

YEAR
2023

($ in 000's) – unaudited

Net cash provided by (used in) operating
activities

$49,411

$34,403

$53,570

$36,323

$35,821

$82,654

$(52,433)

$(48,701)

$173,707

$17,345

Changes in operating assets and liabilities

$(6,294)

$5,108

$(13,017)

$4,152

$1,435

$(90,373)

$51,064

$36,288

$(10,250)

(1,589)

Cash interest expense and income tax
expense

14,038

18,946

17,320

16,663

18,797

31,875

44,956

18,424

67,163

114,048

EBITDA

$57,155

$58,457

$57,873

$57,138

$56,053

$24,156

$43,587

$6,011

$230,620

$129,804

PLUS: Sprint acquisition costs

-

-

$2,004

$244

$400

$739

$351

$17,001

$2,248

$18,492

PLUS: Cash payments made to the
Company under IP Transit Services
Agreement

-

-

-

-

-

29,167

87,500

87,500

-

204,167

EBITDA, as adjusted for Sprint
acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement

$57,155

$58,457

$59,877

$57,382

$56,453

$54,062

$131,438

$110,512

$232,868

$352,463

EBITDA margin

38.3 %

39.4 %

38.6 %

37.6 %

36.5 %

10.1 %

15.8 %

2.2 %

38.5 %

13.8 %

EBITDA, as adjusted for Sprint
acquisition costs and cash payments
made to the Company under IP Transit
Services Agreement, margin

38.3 %

39.4 %

39.9 %

37.8 %

36.8 %

22.5 %

47.7 %

40.6 %

38.8 %

37.5 %

($ in 000's) – unaudited

Q1
2022

Q2
2022

Q3
2022

Q4

2022

Q1

2023

Q2

2023

Q3

2023

Q4

2023

YEAR

2022

YEAR

2023

Service revenue, as reported – current
period

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

$599,604

$940,922

Impact of foreign currencies on service
revenue

516

1,350

1,486

(92)

(1,292)

(417)

10

375

13,063

(2,079)

Service revenue - as adjusted  for
currency impact (1)

$149,691

$149,800

$151,486

$151,887

$152,296

$239,389

$275,439

$272,474

$612,667

$938,843

Service revenue, as reported – prior
sequential period

$147,208

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$589,797

$599,604

Constant currency revenue increase
(decrease)

$2,483

$625

$3,036

$1,887

$317

$85,801

$35,633

$(2,955)

$22,870

$339,239

Constant currency revenue percent
increase (decrease)

1.7 %

0.4 %

2.0 %

1.3 %

0.2 %

55.9 %

14.9 %

-1.1 %

3.9 %

56.6 %

(1)

Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

($ in 000's) – unaudited

Q1
2022

Q2
2022

Q3
2022

Q4

2022

Q1

2023

Q2

2023

Q3

2023

Q4

2023

YEAR

2022

YEAR

2023

Service revenue, as reported – current
period

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

$599,604

$940,922

Impact of foreign currencies on service
revenue

1,914

3,417

4,246

3,371

1,553

(277)

(1,768)

(1,412)

13,063

(2,079)

Service revenue - as adjusted for
currency impact (2)

$151,089

$151,867

$154,246

$155,350

$155,141

$239,529

$273,661

$270,687

$612,667

$938,843

Service revenue, as reported – prior
year period

$146,777

$147,879

$147,927

147,208

149,175

148,450

$150,000

$151,979

$589,797

$599,604

Constant currency revenue increase

$4,312

$3,988

$6,319

8,142

5,966

91,079

$123,661

$118,708

$22,870

$339,239

Constant currency percent revenue
increase

2.9 %

2.7 %

4.3 %

5.5 %

4.0 %

61.4 %

82.4 %

78.1 %

3.9 %

56.6 %

(2)

Service revenue, as adjusted for currency impact, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the comparable prior year period. The Company believes that disclosing year over year revenue growth without the impact of foreign currencies on service revenue is a useful measure of revenue growth. Service revenue, as adjusted for currency impact, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

($ in 000's) – unaudited

Q1
2022

Q2
2022

Q3
2022

Q4

2022

Q1

2023

Q2

2023

Q3

2023

Q4

2023

YEAR

2022

YEAR

2023

Service revenue, as reported – current
period

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

$599,604

$940,922

Impact of foreign currencies on service
revenue

516

1,350

1,486

(92)

(1,292)

(417)

10

375

13,063

(2,079)

Impact of excise taxes on service
revenue

594

294

(670)

32

(107)

(6,847)

(3,517)

(5,871)

3,093

(34,824)

Service revenue - as adjusted  for
currency and excise taxes impact (3)

$150,285

$150,094

$150,816

$151,919

$152,189

$232,542

$271,922

$266,603

$615,760

$904,019

Service revenue, as reported – prior
sequential period

$147,208

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$589,797

$599,604

Constant currency and excise taxes
revenue increase (decrease)

$3,077

$919

$2,366

$1,919

$210

$78,954

$32,116

$(8,826)

$25,963

$304,415

Constant currency and excise tax
revenue percent increase (decrease)

2.1 %

0.6 %

1.6 %

1.3 %

0.1 %

51.4 %

13.4 %

-3.2 %

4.4 %

50.8 %

(3)

Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior sequential period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

($ in 000's) – unaudited

Q1
2022

Q2
2022

Q3
2022

Q4

2022

Q1

2023

Q2

2023

Q3

2023

Q4

2023

YEAR

2022

YEAR

2023

Service revenue, as reported –
current period

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

$599,604

$940,922

Impact of foreign currencies on
service revenue

1,914

3,417

4,246

3,371

1,553

(277)

(1,768)

(1,412)

13,063

(2,079)

Impact of excise taxes on service
revenue

786

1,363

695

250

(451)

(7,592)

(10,439)

(16,342)

3,093

(34,824)

Service revenue - as adjusted  for
currency and excise taxes impact
(4)

$151,875

$153,230

$154,941

$155,600

$154,690

$231,937

$263,222

$254,345

$615,760

$904,019

Service revenue, as reported –
prior year period

$146,777

$147,879

$147,927

$147,208

$149,175

$148,450

$150,000

$151,979

$589,797

$599,604

Constant currency and excise
taxes revenue increase

$5,098

$5,351

$7,014

$8,392

$5,515

$83,487

$113,222

$102,366

$25,963

$304,401

Constant currency and excise tax
percent revenue increase

3.5 %

3.6 %

4.7 %

5.7 %

3.7 %

56.2 %

75.5 %

67.4 %

4.4 %

50.8 %

(4)

Service revenue, as adjusted for currency impact and the impact of excise taxes, is determined by translating the service revenue for the current period at the average foreign currency exchange rates for the prior year period and adjusting for the changes in excise taxes recorded as revenue between the periods presented. The Company believes that disclosing quarterly sequential revenue growth without the impact of foreign currencies and excise taxes on service revenue is a useful measure of sequential revenue growth. Service revenue, as adjusted for the impact of foreign currency and excise taxes, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information.

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Q4 2023

YEAR
2022

YEAR
2023

($ in 000's) – unaudited

Service revenue total

$149,175

$148,450

$150,000

$151,979

$153,588

$239,806

$275,429

$272,099

$599,604

$940,922

Minus - Network operations expense
including equity-based compensation
and depreciation and amortization
expense

80,137

79,585

80,117

80,535

83,798

190,013

260,328

242,355

320,376

776,493

GAAP Gross Profit (1)

$69,038

$68,865

$69,883

$71,444

$69,790

$49,793

$15,101

$29,744

$279,228

$164,429

Plus  - Equity-based compensation –
network operations expense

144

145

176

88

149

231

370

370

553

1,120

Plus – Depreciation and amortization
expense

22,688

23,071

22,897

$23,563

$25,160

$52,511

$86,734

$67,805

$92,222

$232,208

Non-GAAP Gross Profit (2)

$91,870

$92,081

$92,956

$95,095

$95,099

$102,535

$102,205

$97,919

$372,003

$397,757

GAAP Gross Margin (1)

46.3 %

46.4 %

46.6 %

47.0 %

45.4 %

20.8 %

5.5 %

10.9 %

46.6 %

17.5 %

Non-GAAP Gross Margin (2)

61.6 %

62.0 %

62.0 %

62.6 %

61.9 %

42.8 %

37.1 %

36.0 %

62.0 %

42.3 %

(1)

GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity-based compensation included in network operations expense.  GAAP gross margin is defined as GAAP gross profit divided by total service revenue.

(2)

Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue.  Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant measures for investors, as they are measures that management uses to measure the margin and amount available to the Company after network service costs, in essence, these are measures of the efficiency of the Company's network.

($ in 000's) – unaudited

As of
March
31, 2022

As of
June 30,
2022

As of
September
30, 2022

As of
December
31, 2022

As of
March
31, 2023

As of
June 30,
2023

As of
September
30, 2023

As of
December
31, 2023

Cash and cash equivalents &
restricted cash

$311,771

$349,847

$323,664

$275,912

$234,422

$243,953

$166,072

$113,781

Debt

Capital (finance) leases –
current portion

17,147

17,562

24,135

17,182

19,782

20,114

63,236

64,594

Capital (finance) leases – long
term

228,102

236,652

263,750

287,044

300,600

311,405

419,941

419,921

Senior Unsecured 2024 Euro
Notes

389,019

-

-

-

-

-

-

-

Senior Secured 2026 Notes

500,000

500,000

500,000

500,000

500,000

500,000

500,000

500,000

Senior Unsecured 2027 Notes

-

450,000

450,000

450,000

450,000

450,000

450,000

450,000

Note payable

219

-

-

-

-

-

-

-

Total debt

1,134,487

1,204,214

1,237,885

1,254,226

1,270,382

1,281,519

1,433,177

1,434,515

Total net debt

822,716

854,637

914,221

978,314

1,035,960

1,037,566

1,267,105

1,320,734

Trailing 12 months EBITDA, as
adjusted for Sprint acquisition
costs and cash payments from
the IP Transit Services
Agreement

229,499

230,775

232,921

232,871

232,169

227,774

298,984

352,465

Gross leverage ratio

4.94

5.22

5.31

5.39

5.47

5.63

4.79

4.07

Net leverage ratio

3.58

3.70

3.93

4.20

4.46

4.56

4.24

3.75

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2023 AND 2022

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2023

2022

Assets

Current assets:

Cash and cash equivalents

$

75,092

$

223,783

Restricted cash

38,689

52,129

Accounts receivable, net of allowance for credit losses of $3,677 and $2,303, respectively

135,475

44,123

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

179,269

—

Due from T-Mobile, Transition Services Agreement

4,514

—

Prepaid expenses and other current assets

80,588

45,878

Total current assets

513,627

365,913

Property and equipment:

Property and equipment

2,947,376

1,714,906

Accumulated depreciation and amortization

(1,409,559)

(1,170,476)

Total property and equipment, net

1,537,817

544,430

Right-of-use leased assets

361,587

81,601

Intangible assets, net

472,815

—

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

263,750

—

Due from T-Mobile, Purchase Agreement, net of discount of $13,725

38,585

—

Deposits and other assets

23,438

18,238

Total assets

$

3,211,619

$

1,010,182

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

48,356

$

27,208

Accrued and other current liabilities

120,523

63,889

Due to T-Mobile – Transition Services Agreement

66,908

—

Due to T-Mobile – Purchase Agreement

4,981

—

Current maturities, operating lease liabilities

67,962

12,005

Finance lease obligations, current maturities

64,594

17,182

Total current liabilities

373,324

120,284

Senior secured 2026 notes, net of unamortized debt costs of $645 and $905, respectively, and discount
     of $857 and $1,203, respectively

498,498

497,892

Senior unsecured 2027 notes, net of unamortized debt costs of $941 and $1,173, respectively, and
     discount of $1,970 and $2,456, respectively

447,088

446,371

Operating lease liabilities, net of current maturities

330,095

94,587

Finance lease obligations, net of current maturities

419,921

287,044

Deferred income tax liabilities

471,498

47,646

Other long-term liabilities

61,639

34,990

Total liabilities

2,602,063

1,528,814

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value; 75,000,000 shares authorized; 48,608,569 and 48,013,330 shares issued
     and outstanding, respectively

49

48

Additional paid-in capital

606,755

575,064

Accumulated other comprehensive loss

(14,385)

(19,156)

Accumulated earnings (deficit)

17,137

(1,074,588)

Total stockholders' equity (deficit)

609,556

(518,632)

Total liabilities and stockholders' equity (deficit)

$

3,211,619

$

1,010,182

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2023

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2023

2022

2021

Service revenue

$

940,922

$

599,604

$

589,797

Operating expenses:

Network operations (including $1,069, $553 and $2,521 of equity-based
     compensation expense, respectively), exclusive of amounts shown separately

544,232

228,154

226,337

Selling, general, and administrative (including $25,855, $23,886 and $24,301 of
     equity-based compensation expense, respectively)

275,318

163,021

162,380

Acquisition costs – Sprint Business

18,492

2,248

—

Depreciation and amortization

232,209

92,222

89,240

Total operating expenses

1,070,251

485,645

477,957

Gain on lease terminations and other

—

—

7,393

Operating (loss) income

(129,329)

113,959

119,233

Interest expense

(106,783)

(67,584)

(58,059)

Change in valuation – interest rate swap

13,439

(43,113)

(9,015)

Foreign exchange gain on 2024 Notes

—

31,561

32,522

Loss on debt extinguishment and redemption – 2022 Notes

—

—

(14,698)

Loss on debt extinguishment and redemption – 2024 Notes

—

(11,885)

—

Gain on bargain purchase – Sprint Business

1,406,435

—

—

Interest income – IP Transit Services Agreement

26,796

—

—

Interest income – Purchase Agreement

1,889

—

—

Interest income and other

7,030

3,438

1,437

Income before income taxes

1,219,477

26,376

71,420