NASDAQ CCOI INVESTOR PRESENTATION Cautionary Note Regarding Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events and are subject to risks and uncertainties. The forward-looking statements, which address the Company's expected business and financial performance, among other matters, contain words such as: "will", "expect", "believe", "continue ", "optimistic", "shou ...

PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of comprehensive (loss) income, and cash flows, along with detailed notes explaining the company's business, recent developments, accounting policies, debt structure, and segment information for the periods ended September 30, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, including assets, liabilities, and stockholders' deficit, at specific reporting dates | Metric | September 30, 2022 (Unaudited) (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :------------------------------- | | Total Assets | $1,020,702 | $984,557 | | Total Liabilities | $1,512,467 | $1,357,655 | | Total Stockholders' Deficit | $(491,765) | $(373,098) | | Current Liabilities | $121,607 | $81,010 | | Senior unsecured 2027 notes | $446,200 | — | | Senior unsecured 2024 Euro notes | — | $394,112 | [Condensed Consolidated Statements of Comprehensive (Loss) Income (Three Months)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20(Three%20Months)) This table details the company's financial performance, including revenues, expenses, and net loss or income, for the three-month period | Metric | Three Months Ended September 30, 2022 (Unaudited) (in thousands) | Three Months Ended September 30, 2021 (Unaudited) (in thousands) | | :----------------------------------- | :------------------------------------------------- | :----------------------------------------------- | | Service revenue | $150,000 | $147,927 | | Operating income | $28,095 | $28,556 | | Interest expense | $(17,948) | $(14,273) | | Change in valuation – interest rate swap | $(16,923) | $(3,076) | | Foreign exchange gain – 2024 Euro Notes | — | $10,169 | | Net (loss) income | $(8,007) | $13,320 | | Basic net (loss) income per common share | $(0.17) | $0.29 | | Diluted net (loss) income per common share | $(0.17) | $0.28 | | Dividends declared per common share | $0.905 | $0.805 | [Condensed Consolidated Statements of Comprehensive (Loss) Income (Nine Months)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20(Nine%20Months)) This table details the company's financial performance, including revenues, expenses, and net income, for the nine-month period | Metric | Nine Months Ended September 30, 2022 (Unaudited) (in thousands) | Nine Months Ended September 30, 2021 (Unaudited) (in thousands) | | :----------------------------------- | :------------------------------------------------ | :---------------------------------------------- | | Service revenue | $447,625 | $442,584 | | Operating income | $86,440 | $83,055 | | Interest expense | $(45,594) | $(44,345) | | Change in valuation – interest rate swap | $(45,703) | $(3,076) | | Foreign exchange gain - 2024 Euro Notes | $31,561 | $23,759 | | Loss on debt extinguishment and redemption- 2024 Euro Notes | $(11,885) | — | | Net income | $4,294 | $29,678 | | Basic net income per common share | $0.09 | $0.64 | | Diluted net income per common share | $0.09 | $0.63 | | Dividends declared per common share | $2.64 | $2.34 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the nine-month period | Cash Flow Activity | Nine Months Ended September 30, 2022 (Unaudited) (in thousands) | Nine Months Ended September 30, 2021 (Unaudited) (in thousands) | | :------------------------------------------ | :------------------------------------------------ | :---------------------------------------------- | | Net cash provided by operating activities | $137,384 | $134,273 | | Net cash used in investing activities | $(59,380) | $(54,620) | | Net cash used in financing activities | $(76,548) | $(94,554) | | Effect of exchange rates changes on cash | $(6,416) | $(1,445) | | Net decrease in cash, cash equivalents and restricted cash | $(4,960) | $(16,346) | | Cash, cash equivalents and restricted cash, end of period | $323,664 | $354,955 | | Purchases of property and equipment | $(59,380) | $(54,620) | | Dividends paid | $(125,882) | $(110,736) | | Redemption and extinguishment – 2024 Euro Notes | $(375,354) | — | | Net proceeds from issuance of senior unsecured 2027 Notes | $446,010 | — | [Notes to Interim Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the interim condensed consolidated financial statements [1. Description of the business and recent developments](index=7&type=section&id=1.%20Description%20of%20the%20business%20and%20recent%20developments) This section outlines the company's core business, service offerings, and significant recent events, including a major acquisition - Cogent Communications Holdings, Inc. is a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space and power, serving customers in **51 countries**[24](index=24&type=chunk) - The company offers on-net services through its own network and off-net services using other carriers' 'last mile' connections. Post-Sprint acquisition, it will also provide optical wavelength services[25](index=25&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - On September 6, 2022, Cogent Infrastructure, Inc. agreed to acquire Sprint Communications' U.S. long-haul fiber network (Wireline Business) for **$1**, with T-Mobile paying **$700 million** for IP transit services over **4.5 years**. The transaction is expected to close in **H2 2023**[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The company incurred **$2.0 million** in professional fees for the Sprint acquisition in **Q3 2022**[35](index=35&type=chunk) - The unaudited condensed consolidated financial statements are prepared under SEC rules and GAAP, relying on management estimates and assumptions[36](index=36&type=chunk)[39](index=39&type=chunk) | Instrument | Carrying Amount (in thousands) | Fair Value (in thousands) | | :------------------- | :----------------------------- | :------------------------ | | 2027 Senior Unsecured Notes | $446,200 | $426,400 | | 2026 Senior Secured Notes | $497,744 | $438,800 | | Interest Rate Swap Agreement | N/A | $54,700 (liability) | | Period | Basic EPS | Diluted EPS | | :-------------------------- | :-------- | :---------- | | 3 Months Ended Sep 30, 2022 | $(0.17) | $(0.17) | | 3 Months Ended Sep 30, 2021 | $0.29 | $0.28 | | 9 Months Ended Sep 30, 2022 | $0.09 | $0.09 | | 9 Months Ended Sep 30, 2021 | $0.64 | $0.63 | | Item | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :----------------------------------------- | :----------------------------------------- | | Balance at Dec 31, 2021 | $(373,098) | N/A | | Balance at Dec 31, 2020 | N/A | $(293,166) | | Equity-based compensation | $19,905 | $23,471 | | Foreign currency translation | $(17,410) | $(7,252) | | Dividends paid | $(125,882) | $(110,736) | | Net income | $4,294 | $29,678 | | Balance at Sep 30, 2022 | $(491,765) | N/A | | Balance at Sep 30, 2021 | N/A | $(356,767) | - Service revenue recognized from deferred revenue was **$1.8 million** for **Q3 2022** and **$4.4 million** for **9M 2022**. Amortization expense for contract costs was **$4.9 million** for **Q3 2022** and **$14.5 million** for **9M 2022**[53](index=53&type=chunk) | Lease Cost Type | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Finance lease cost | $7,188 | $6,847 | $21,186 | $19,571 | | Interest expense on finance lease liabilities | $5,382 | $4,977 | $15,579 | $14,888 | | Operating lease cost | $4,547 | $4,572 | $13,948 | $13,660 | | Total lease costs | $17,117 | $16,396 | $50,713 | $48,119 | | Period | Beginning Balance (in thousands) | Current-period Provision for Credit Losses (in thousands) | Write-offs Against Allowance (in thousands) | Ending Balance (in thousands) | | :-------------------------- | :------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------- | | 3 Months Ended Sep 30, 2022 | $1,717 | $1,054 | $(805) | $1,966 | | 9 Months Ended Sep 30, 2022 | $1,510 | $3,059 | $(2,603) | $1,966 | [2. Property and equipment](index=18&type=section&id=2.%20Property%20and%20equipment) This section details the company's property and equipment, including depreciation and amortization expenses and capitalized costs | Expense Type | 3 Months Ended Sep 30, 2022 (in millions) | 3 Months Ended Sep 30, 2021 (in millions) | 9 Months Ended Sep 30, 2022 (in millions) | 9 Months Ended Sep 30, 2021 (in millions) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Depreciation and amortization expense | $22.9 | $22.6 | $68.7 | $66.7 | | Capitalized salaries and benefits | $3.0 | $3.1 | $9.3 | $10.4 | [3. Long-term debt](index=19&type=section&id=3.%20Long-term%20debt) This section describes the company's long-term debt obligations, including notes, interest rates, and compliance with debt covenants - As of September 30, 2022, the Company had **$450.0 million** in **7.00% Senior Unsecured Notes due 2027** and **$500.0 million** in **3.50% Senior Secured Notes due 2026**[65](index=65&type=chunk) - The **2024 Euro Notes (€350.0 million, 4.375%)** were redeemed in **June 2022** using proceeds from the 2027 Notes, resulting in an **$11.9 million loss** on debt extinguishment[65](index=65&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - The Company's consolidated leverage ratio was below **6.0**, secured leverage ratio below **4.0**, and fixed charge coverage ratio above **2.0** as of September 30, 2022, allowing **$207.4 million** for restricted payments[74](index=74&type=chunk) - An interest rate swap agreement converts the 2026 Notes to a variable rate based on SOFR. This non-hedge accounted swap resulted in an unrealized loss of **$16.9 million** for **Q3 2022** and **$45.7 million** for **9M 2022**, with a net liability fair value of **$54.7 million** as of September 30, 2022[76](index=76&type=chunk) [4. Commitments and contingencies](index=21&type=section&id=4.%20Commitments%20and%20contingencies) This section outlines the company's potential future obligations and legal exposures, including accrued liabilities and litigation - The Company accrues for contingent liabilities when probable and estimable. It faces potential losses of up to **$3.8 million** for leased circuits[78](index=78&type=chunk) - A Virginia litigation resulted in a **$0.4 million** payment in **October 2022** for alleged unpaid fees and early termination[78](index=78&type=chunk) [5. Income taxes](index=23&type=section&id=5.%20Income%20taxes) This section presents the company's income tax expense and its relationship to income before taxes for the reported periods | Period | Income Before Income Taxes (in thousands) | Income Tax Expense (in thousands) | | :-------------------------- | :-------------------------------------- | :-------------------------------- | | 3 Months Ended Sep 30, 2022 | $(7,038) | $(969) | | 3 Months Ended Sep 30, 2021 | $22,024 | $(8,704) | | 9 Months Ended Sep 30, 2022 | $14,357 | $(10,063) | | 9 Months Ended Sep 30, 2021 | $46,155 | $(16,477) | - The decrease in income tax expense is primarily related to the decrease in income before income taxes[140](index=140&type=chunk)[164](index=164&type=chunk) [6. Common stock buyback program](index=23&type=section&id=6.%20Common%20stock%20buyback%20program) This section details the company's authorized common stock repurchase plan and its execution status - The Board approved a common stock buyback program through **December 31, 2023**, with **$30.4 million** remaining as of **September 30, 2022**[82](index=82&type=chunk) - No common stock was purchased during the three or nine months ended September 30, 2022 or 2021[82](index=82&type=chunk) [7. Dividends on common stock](index=23&type=section&id=7.%20Dividends%20on%20common%20stock) This section reports on declared dividends per common share and the company's dividend policy - A quarterly dividend of **$0.915 per common share** was approved on **November 2, 2022**, estimated at **$42.8 million**, payable **December 2, 2022**[83](index=83&type=chunk) - Future dividends are discretionary and subject to financial position, results of operations, cash flow, capital requirements, and debt indenture limitations[84](index=84&type=chunk) [8. Related party transactions](index=23&type=section&id=8.%20Related%20party%20transactions) This section discloses financial transactions and arrangements with parties related to the company, such as its CEO - The Company leases its headquarters from Sodium LLC, owned by its CEO, for **$1.0 million annually** plus taxes and utilities[85](index=85&type=chunk) - Rent and related costs paid to Sodium LLC were **$0.5 million** for **Q3 2022** and **$1.4 million** for **9M 2022**[85](index=85&type=chunk) [9. Segment information](index=24&type=section&id=9.%20Segment%20information) This section provides a geographical breakdown of the company's service revenue and long-lived assets, indicating its single operating segment - The Company operates as one operating segment[87](index=87&type=chunk) | Region | On-net (in thousands) | Off-net (in thousands) | Non-core (in thousands) | Total (in thousands) | | :------------ | :-------------------- | :--------------------- | :---------------------- | :------------------- | | **3 Months Ended Sep 30, 2022** | | | | | | North America | $88,298 | $32,325 | $162 | $120,785 | | Europe | $19,853 | $3,929 | $8 | $23,790 | | Total | $113,219 | $36,611 | $170 | $150,000 | | **9 Months Ended Sep 30, 2022** | | | | | | North America | $261,427 | $95,873 | $475 | $357,775 | | Europe | $61,807 | $12,249 | $39 | $74,095 | | Total | $337,829 | $109,279 | $517 | $447,625 | | Region | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :------------- | :-------------------------- | :-------------------------- | | North America | $373,879 | $331,537 | | Europe and other | $129,892 | $126,355 | | Total | $503,771 | $457,892 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook. It covers business overview, competitive advantages, strategic initiatives, detailed analysis of operating results for the three and nine months ended September 30, 2022, liquidity and capital resources, and the impact of COVID-19 [General Overview](index=27&type=section&id=General%20Overview) This section provides a high-level description of the company's business model, service offerings, and operational scope - Cogent is a facilities-based provider of high-speed Internet access, private network services, and data center colocation in **51 countries**[93](index=93&type=chunk) - On-net services, delivered through its own network, accounted for **75.5% of revenues** for the three and nine months ended September 30, 2022. Off-net services, using third-party 'last mile' connections, accounted for **24.4% of revenues**[95](index=95&type=chunk)[96](index=96&type=chunk) - The company will begin providing optical wavelength services over its fiber network in connection with the Sprint acquisition[98](index=98&type=chunk) [Competitive Advantages](index=27&type=section&id=Competitive%20Advantages) This section highlights the company's key strengths, such as its low-cost operating model, network control, and market reach - The company maintains a low cost of operation through a single Ethernet network protocol, widespread access to cost-effective dark fiber leases, a narrow product set, and scalable network equipment[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - Other advantages include greater control over service delivery, high-quality reliable service, a large addressable market (**3,126 buildings in 219 metro markets**), a balanced high-traffic network, and an experienced management team[104](index=104&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Our Strategy](index=30&type=section&id=Our%20Strategy) This section outlines the company's strategic objectives, including customer growth, market share expansion, and service diversification - Key strategic elements include growing the corporate customer base, increasing net-centric market share, developing a worldwide peering platform (Global Peer Connect), pursuing on-net customer growth, improving sales efforts, expanding off-net corporate internet access, and introducing optical wavelength services post-Sprint acquisition[110](index=110&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance by comparing revenues, expenses, and key metrics across different reporting periods [Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021](index=34&type=section&id=Three%20Months%20Ended%20September%2030,%202022%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030,%202021) This section provides a detailed comparative analysis of the company's financial results for the three-month periods | Metric | 2022 (in thousands) | 2021 (in thousands) | Percent Change | | :----------------------------------- | :------------------ | :------------------ | :------------- | | Service revenue | $150,000 | $147,927 | 1.4% | | On-net revenue | $113,219 | $111,099 | 1.9% | | Off-net revenue | $36,611 | $36,656 | (0.1)% | | Network operations expenses | $57,220 | $56,645 | 1.0% | | Selling, general, and administrative expenses | $39,114 | $40,117 | (2.5)% | | Depreciation and amortization expenses | $22,897 | $22,609 | 1.3% | | Interest expense | $17,948 | $14,273 | 25.7% | | Change in valuation – interest rate swap | $16,923 | $3,076 | NM | | Income tax expense | $969 | $8,704 | NM | | Metric | 2022 | 2021 | Percent Change | | :------------------------------------ | :--- | :--- | :------------- | | ARPU—on-net | $458 | $465 | (1.5)% | | ARPU—off-net | $920 | $982 | (6.3)% | | Average Price per Megabit — installed base | $0.27 | $0.34 | (20.8)% | | On-net Customer Connections—end of period | 82,614 | 80,162 | 3.1% | | Off-net Customer Connections—end of period | 13,359 | 12,495 | 6.9% | - Service revenue increased by **1.4%** but was negatively impacted by **$4.2 million** from exchange rates. Corporate revenue decreased by **4.0%** to **$85.5 million**, while net-centric revenue increased by **9.6%** to **$64.5 million**[121](index=121&type=chunk)[124](index=124&type=chunk) - Corporate revenue was negatively impacted by cautious customer behavior, reduced demand for satellite offices, and a deteriorating real estate market due to COVID-19[125](index=125&type=chunk) - Net-centric revenue growth was partly offset by a **20.8% decline** in average price per megabit due to significant pricing pressure[126](index=126&type=chunk) - Network operations expenses increased by **1.0%** due to network expansion, partly offset by tax reductions. SG&A expenses decreased by **2.5%** due to lower salaries, benefits, and bad debt expense, influenced by a reduction in headcount[130](index=130&type=chunk)[131](index=131&type=chunk) - Interest expense increased by **25.7%** primarily due to higher interest rates on the **7.0% 2027 Notes** compared to the **4.375% 2024 Euro Notes**. An unrealized loss of **$16.9 million** was recorded on the interest rate swap agreement[134](index=134&type=chunk)[135](index=135&type=chunk) [Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021](index=38&type=section&id=Nine%20Months%20Ended%20September%2030,%202022%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030,%202021) This section provides a detailed comparative analysis of the company's financial results for the nine-month periods | Metric | 2022 (in thousands) | 2021 (in thousands) | Percent Change | | :----------------------------------- | :------------------ | :------------------ | :------------- | | Service revenue | $447,625 | $442,584 | 1.1% | | On-net revenue | $337,829 | $332,087 | 1.7% | | Off-net revenue | $109,279 | $110,079 | (0.7)% | | Network operations expenses | $171,183 | $169,920 | 0.7% | | Selling, general, and administrative expenses | $119,129 | $122,952 | (3.1)% | | Depreciation and amortization expenses | $68,659 | $66,675 | 3.0% | | Foreign exchange gains – 2024 Notes | $31,561 | $23,759 | 32.8% | | Loss on debt extinguishment and redemption – 2024 Notes | $11,885 | — | NM | | Loss on debt extinguishment and redemption – 2022 Notes | — | $14,698 | NM | | Change in valuation expense - interest rate swap | $45,703 | $3,076 | NM | | Interest expense | $45,594 | $44,345 | 2.8% | | Income tax expense | $10,063 | $16,477 | (38.9)% | | Metric | 2022 | 2021 | Percent Change | | :------------------------------------ | :--- | :--- | :------------- | | ARPU—on-net | $460 | $469 | (1.9)% | | ARPU—off-net | $933 | $1,000 | (6.7)% | | Average Price per Megabit — installed base | $0.29 | $0.36 | (19.4)% | | On-net Customer Connections—end of period | 82,614 | 80,162 | 3.1% | | Off-net Customer Connections—end of period | 13,359 | 12,495 | 6.9% | - Service revenue increased by **1.1%** but was negatively impacted by **$9.7 million** from exchange rates. Corporate revenue decreased by **5.4%** to **$256.8 million**, while net-centric revenue increased by **11.6%** to **$190.8 million**[147](index=147&type=chunk)[149](index=149&type=chunk) - Net-centric revenue growth was partly offset by a **19.4% decline** in average price per megabit due to market pricing pressure[151](index=151&type=chunk) - Network operations expenses increased by **0.7%** due to network expansion, partly offset by price reductions in leased circuits and tax reductions. SG&A expenses decreased by **3.1%** due to lower salaries, benefits, and bad debt expense, influenced by a reduction in headcount[155](index=155&type=chunk)[156](index=156&type=chunk) - Interest expense increased by **2.8%**. Losses on debt extinguishment included **$11.9 million** for **2024 Notes** and **$14.7 million** for **2022 Notes**. An unrealized loss of **$45.7 million** was recorded on the interest rate swap agreement[159](index=159&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund its operations - The Company assesses liquidity based on cash balances, receivables, payables, capital commitments, and debt payments. It anticipates significant cash outlays for dividends (**$358 million over two years**), debt obligations, and capital expenditures[166](index=166&type=chunk)[167](index=167&type=chunk) - As of September 30, 2022, total indebtedness was **$1.2 billion** (including **$287.9 million** in finance lease obligations), with total cash, cash equivalents, and restricted cash at **$323.7 million**[180](index=180&type=chunk) - The Company believes its cash on hand and operating cash flow will be adequate for the next twelve months, but future acquisitions or unplanned costs may require additional financing, potentially leading to dilution[188](index=188&type=chunk)[189](index=189&type=chunk) - The Company does not engage in off-balance sheet arrangements, structured finance, or special purpose entities, thus avoiding related risks[192](index=192&type=chunk) - COVID-19 has not materially impacted the company's credit rating or cost of capital, but has led to cautious corporate customer behavior, increased turnover, and supply chain slowdowns, potentially affecting future revenue and profitability[193](index=193&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - Employee departures increased due to vaccine mandates and return-to-office policies[196](index=196&type=chunk) [Cash Flows](index=44&type=section&id=Cash%20Flows) This section analyzes the company's cash generation and utilization from operating, investing, and financing activities | Cash Flow Activity | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $137,384 | $134,273 | | Net cash used in investing activities | $(59,380) | $(54,620) | | Net cash used in financing activities | $(76,548) | $(94,554) | | Net decrease in cash, cash equivalents and restricted cash | $(4,960) | $(16,346) | - Purchases of property and equipment were **$59.4 million** for **9M 2022**, up from **$54.6 million** in **9M 2021**[177](index=177&type=chunk) - Dividends paid totaled **$125.9 million** for **9M 2022**, an increase from **$110.7 million** in **9M 2021**[178](index=178&type=chunk) - Financing activities included **$375.4 million** for **2024 Notes redemption** and **$446.0 million** net proceeds from **2027 Notes issuance** in **June 2022**[179](index=179&type=chunk) [Cash Position and Indebtedness](index=46&type=section&id=Cash%20Position%20and%20Indebtedness) This section details the company's cash balances and total debt obligations at the end of the reporting period - Total indebtedness at September 30, 2022, was **$1.2 billion**, including **$287.9 million** in finance lease obligations. Total cash, cash equivalents, and restricted cash were **$323.7 million**[180](index=180&type=chunk) [Summarized Financial Information of Holdings](index=46&type=section&id=Summarized%20Financial%20Information%20of%20Holdings) This section presents key financial data for the parent company, Holdings, as a guarantor - Holdings, as a guarantor, reported **$84.7 million** in total assets and total equity as of **September 30, 2022**[181](index=181&type=chunk)[182](index=182&type=chunk) - For the nine months ended September 30, 2022, Holdings recorded a net loss of **$19.4 million**[184](index=184&type=chunk) [Common Stock Buyback Program](index=47&type=section&id=Common%20Stock%20Buyback%20Program) This section provides an update on the company's common stock repurchase authorization and activity - The Board authorized a common stock repurchase plan through **December 31, 2023**, with **$30.4 million** remaining. No shares were purchased in **Q3 or 9M 2022**[185](index=185&type=chunk)[218](index=218&type=chunk) [Dividends on Common Stock and Return of Capital Program](index=47&type=section&id=Dividends%20on%20Common%20Stock%20and%20Return%20of%20Capital%20Program) This section discusses the company's dividend declarations and overall capital return strategy - A quarterly dividend of **$0.915 per common share** was approved for **December 2, 2022**, totaling an estimated **$42.8 million**[186](index=186&type=chunk) - Future dividends and capital returns are discretionary and subject to financial performance and debt indenture limitations[187](index=187&type=chunk) [Future Capital Requirements](index=47&type=section&id=Future%20Capital%20Requirements) This section outlines the company's anticipated capital needs and potential financing strategies - The Company expects sufficient cash for the next twelve months but may need additional financing for acquisitions or unplanned costs, which could lead to dilution[188](index=188&type=chunk)[189](index=189&type=chunk) - Refinancing of indebtedness at or before maturity may be necessary, and terms are not assured[190](index=190&type=chunk) [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the company's lack of involvement in off-balance sheet financial structures - The Company does not engage in off-balance sheet arrangements or trading non-exchange traded contracts, thus avoiding related financial risks[192](index=192&type=chunk) [Impact of COVID-19 on Our Liquidity and Operating Performance](index=48&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Liquidity%20and%20Operating%20Performance) This section assesses the effects of the COVID-19 pandemic on the company's financial stability and operational results - The Company maintains high liquidity (**$323.7 million cash** as of **Sep 30, 2022**) and believes COVID-19 has not materially impacted its credit rating or cost of capital[193](index=193&type=chunk) - COVID-19 has led to cautious corporate customer behavior, reduced demand for satellite offices, a deteriorating real estate market, increased customer turnover, and a slowdown in equipment and fiber delivery[198](index=198&type=chunk)[199](index=199&type=chunk) - Employee departures increased due to vaccine mandates and return-to-office policies, potentially impacting sales, revenue, and profitability[196](index=196&type=chunk) [Critical Accounting Policies and Significant Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) This section confirms the consistency of the company's critical accounting policies and estimates with prior disclosures - Management states there have been no material changes to critical accounting policies and significant estimates from those disclosed in the annual Form 10-K for the year ended December 31, 2021[201](index=201&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Management asserts that there have been no material changes to the Company's market risk exposures as of September 30, 2022, compared to those reported in its previous annual filing - Management believes there have been no material changes to the Company's exposures to market risk from those disclosed in Item 7A of its annual report on Form 10-K for the year ended December 31, 2021[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022. No material changes in internal control over financial reporting occurred during the most recent fiscal quarter - The Company's management, including the principal executive officer and principal financial officer, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[205](index=205&type=chunk) - There has been no material change in internal control over financial reporting during the most recent fiscal quarter[206](index=206&type=chunk) PART II OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity security sales, and required exhibits [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in routine legal proceedings not expected to materially impact operations. A recent Virginia litigation concluded with a $0.4 million payment in October 2022 - The Company is involved in legal proceedings in the ordinary course of business that are not expected to have a material impact on operations or results[208](index=208&type=chunk) - A litigation in Virginia resulted in an order for the Company to pay approximately **$0.4 million** in damages, which was paid in **October 2022**[78](index=78&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) New risk factors primarily relate to the proposed Sprint Communications acquisition, including potential delays, failure to close, or adverse regulatory conditions. Integration risks encompass challenges in achieving financial goals, operational disruptions, retaining personnel and customers, and exposure to litigation - Regulatory approvals for the Sprint Communications acquisition may be delayed, not received, or impose adverse conditions, potentially impacting the combined company[209](index=209&type=chunk)[211](index=211&type=chunk) - Integration risks for the Sprint acquisition include inability to achieve financial and strategic goals, difficulty in integrating operations and personnel, inability to retain key employees, customers, and vendors, and exposure to litigation[212](index=212&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) - Management believes there have been no other material changes to risk factors from those disclosed in the annual Form 10-K for the year ended December 31, 2021[217](index=217&type=chunk) [Risks Relating to Our Proposed Acquisition of Sprint Communications](index=51&type=section&id=Risks%20Relating%20to%20Our%20Proposed%20Acquisition%20of%20Sprint%20Communications) This section details the specific risks associated with the proposed acquisition of Sprint Communications, including regulatory, integration, and operational challenges - The acquisition of Sprint Communications is subject to regulatory approvals, which may take longer than expected or impose conditions that could adversely affect the combined company[209](index=209&type=chunk)[211](index=211&type=chunk) - Integration risks include the inability to achieve anticipated benefits and cost savings, difficulties in combining operations and personnel, challenges in new markets, and potential disruption to ongoing business[212](index=212&type=chunk)[213](index=213&type=chunk) - Other integration risks involve retaining key personnel, customers, and vendors, managing acquisition-related costs, and potential exposure to litigation[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board of Directors authorized a common stock repurchase plan through December 31, 2023. No shares were purchased during the third quarter of 2022 - The Board of Directors authorized a plan to repurchase common stock in negotiated and open market transactions through **December 31, 2023**[218](index=218&type=chunk) - No shares of common stock were purchased during the third quarter of 2022[218](index=218&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Membership Interest Purchase Agreement for the Sprint acquisition, the related Guaranty, and certifications from the CEO and CFO - Exhibit 2.1*: Membership Interest Purchase Agreement, dated as of **September 6, 2022**, for the Sprint Communications acquisition[222](index=222&type=chunk) - Exhibit 10.1: Guaranty, dated as of **September 6, 2022**, by and between Cogent Communications Holdings, Inc. and Sprint LLC[222](index=222&type=chunk) - Exhibits 31.1 and 31.2: Certifications of the Chief Executive Officer and Chief Financial Officer, respectively[222](index=222&type=chunk) [SIGNATURES](index=40&type=section&id=SIGNATURES) The report is duly signed by David Schaeffer, Chief Executive Officer, and Thaddeus G. Weed, Chief Financial Officer and Treasurer, on November 4, 2022 - The report was signed by David Schaeffer, Chief Executive Officer, and Thaddeus G. Weed, Chief Financial Officer and Treasurer, on **November 4, 2022**[226](index=226&type=chunk)[227](index=227&type=chunk)

Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q2 2022 Earnings Conference Call August 4, 2022 4:30 PM ET Company Participants Dave Schaeffer - Chairman & Chief Executive Officer Tad Weed - Chief Financial Officer Conference Call Participants Gregory Williams - Cowen Nic Del Deo - MoffettNathanson Timothy Horan - Oppenheimer Walter Piecyk - LightShed Partners David Barden - Bank of America Michael Rollins - Citi Operator Welcome to the Cogent Communications Holdings Second Quarter 2022 Earnings Conferen ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 000-51829 COGENT COMMUNICATIONS HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 46-5706863 (State of Incorporation) (I.R.S. Employer ...

Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q1 2022 Results Conference Call May 5, 2022 8:30 AM ET Company Participants Dave Schaeffer - Chairman & Chief Executive Officer Sean Wallace - Former Chief Financial Officer Tad Weed - Returning Chief Financial Officer Conference Call Participants Phil Cusick - JPMorgan Brett Feldman - Goldman Sachs Walter Piecyk - LightShed James Breen - William Blair Nick Del Deo - MoffettNathanson Brandon Nispel - KeyBanc Capital Markets Tim Horan - Oppenheimer Operator ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 000-51829 COGENT COMMUNICATIONS HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 46-5706863 (State of Incorporation) (I.R.S. Employe ...

Financial Data and Key Metrics Changes - For full year 2021, the company's revenues increased by 3.8% year-over-year to $589.8 million, while fourth quarter revenues slightly declined to $147.2 million primarily due to foreign exchange impacts and USF tax reductions [8][12] - Non-GAAP gross profit increased by 4.5% to $366 million, with a gross margin improvement of 50 basis points to 62.1% [11] - EBITDA increased by 6.5% year-over-year to $227.9 million, with an EBITDA margin for the full year increasing by 90 basis points to 38.6% [11] Business Line Data and Key Metrics Changes - Corporate business revenues declined by 7.4% year-over-year and 2.5% sequentially, representing 59% of total revenues [26] - NetCentric business, which accounts for 41% of revenues, grew by 25.3% year-over-year and 2.6% sequentially, benefiting from increased demand for streaming services [31][27] - The number of corporate customer connections decreased by 3.7% year-over-year, while NetCentric customer connections increased by 13.9% [32][36] Market Data and Key Metrics Changes - The company experienced a 7% sequential growth in network traffic, with a year-over-year increase of 17% [7] - The average price per megabit for installed customers decreased by 19.5% year-over-year, reflecting competitive pricing pressures [40] - The corporate business is highly correlated with vacancy rates in commercial real estate, with an 84% correlation noted [94] Company Strategy and Development Direction - The company aims for long-term EBITDA margin expansion of 200 basis points per year and a constant currency revenue growth rate of approximately 10% [25] - The focus is on enhancing the corporate business as employees return to offices, with expectations of regaining historical growth rates [71][80] - The company plans to continue increasing its dividend, reflecting confidence in future cash flow and growth [15][82] Management's Comments on Operating Environment and Future Outlook - Management noted that the corporate business remains below historical averages due to the pandemic, but signs of improvement are evident with increased leasing activity [5][21] - The company is optimistic about returning to positive growth in 2022 as the corporate environment stabilizes [96] - Management acknowledged the impact of COVID-19 on operations but expressed confidence in the ability to adapt and grow [20][100] Other Important Information - The company returned $39.6 million to shareholders through dividends in the fourth quarter, with a total of $150.3 million for the year [12] - Cash at year-end was $328.6 million, providing a cushion for future investments and shareholder returns [59] - The company has a diverse customer base, with the top 25 customers representing less than 6% of total revenues [54] Q&A Session Summary Question: Are you seeing any cannibalization within larger ports? - Management indicated that there is no significant cannibalization occurring as customers upgrade to larger ports, with a trend towards higher capacity services [86][90] Question: Can you elaborate on customer interest in return-to-office? - Management noted a correlation between vacancy rates and customer losses, with improved leasing activity in markets like San Francisco and New York expected to drive corporate growth [94][95] Question: What is the outlook on leverage and dividend policy? - Management expressed comfort with being slightly above target leverage levels, anticipating growth in free cash flow and revenue, while continuing to return capital to shareholders [99][100]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) The company provides high-speed internet, private network, and data center colocation services globally using a low-cost, fiber-based network model [Overview](index=4&type=section&id=Overview) - Cogent is a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space across North America, Europe, Asia, South America, Australia, and Africa[8](index=8&type=chunk) - The company offers on-net services (**100 Mbps to 400 Gbps**) to customers in buildings physically connected to its network, avoiding reliance on local telephone or cable companies for the last mile[8](index=8&type=chunk) - Customers are categorized as corporate (small to medium-sized businesses in multi-tenant office buildings) and net-centric (bandwidth-intensive users like OTT media providers, ISPs, and mobile operators)[8](index=8&type=chunk) [Competitive Advantages](index=4&type=section&id=Competitive%20Advantages) - Cogent's low-cost operating strategy is driven by using a single network protocol (Ethernet), leasing long-term dark fiber, offering a narrow product set, and employing scalable network configurations, resulting in a **23.3% compounded annual decline** in the cost of goods sold per bit over the last five fiscal years[9](index=9&type=chunk) - The company has direct control over its on-net service delivery, including the "last mile" and in-building wiring, enabling faster provisioning (typically under two weeks) compared to competitors[11](index=11&type=chunk) - The network connects to **3,035 buildings** in **216 metropolitan markets**, including 1,817 multi-tenant office buildings and 1,359 carrier-neutral data centers, positioning it to attract high-volume internet traffic[11](index=11&type=chunk) - As a Tier 1 ISP, Cogent interconnects with **7,569 networks** and has settlement-free peering arrangements with 24 other major ISPs, which broadens geographic delivery and reduces network costs[12](index=12&type=chunk)[22](index=22&type=chunk) [Our Strategy](index=8&type=section&id=Our%20Strategy) - Grow the corporate customer base by providing high-speed dedicated internet access and private network services, capitalizing on the increasing integration of off-site data centers and cloud services[14](index=14&type=chunk) - Increase market share in the net-centric segment by leveraging geographic breadth, high capacity (up to 400 Gbps), a large salesforce, and competitive pricing to meet growing demand from applications like OTT media and online gaming[14](index=14&type=chunk) - Expand the off-net corporate internet access business by utilizing agreements with national carriers that provide last-mile access to over **4.0 million commercial buildings** in North America[17](index=17&type=chunk) - Prioritize on-net customer growth due to higher profit margins and greater control over service levels, quality, and installation times[14](index=14&type=chunk)[15](index=15&type=chunk) [Our Network](index=10&type=section&id=Our%20Network) Network Statistics as of Dec 31, 2021 | Component | Statistic | | :--- | :--- | | Total On-Net Buildings | 3,035 | | Metropolitan Markets Served | 216 | | Multi-Tenant Office Buildings | 1,817 | | Carrier Neutral Data Centers | 1,359 | | Cogent Data Centers | 54 | | Intra-city Fiber Miles | 39,559 | | Inter-city Fiber Route Miles | 60,676 | - The network is built by leasing long-term dark optical fiber and connecting Internet routers to it, a strategy that positions the company for revenue growth with limited incremental capital expenditures[18](index=18&type=chunk) - Cogent is a Tier 1 ISP, directly connecting with **7,569 networks**, and exchanges traffic with 24 other Tier 1 ISPs on a settlement-free basis, reducing operating costs as it does not purchase transit services or paid peering[22](index=22&type=chunk) [Our Customers](index=13&type=section&id=Our%20Customers) - The company serves two main customer sets: corporate customers (small and medium-sized businesses) and net-centric customers (content providers, application service providers, and access networks)[25](index=25&type=chunk) - Corporate customers primarily purchase direct internet access (**100 Mbps to 10 Gbps**) and private network services, either on-net or off-net[25](index=25&type=chunk) - Net-centric customers purchase high-capacity IP connectivity (**10 Gbps to 400 Gbps**) in 1,413 data centers across 216 markets and can purchase contractual capacity, metered service, or burst capacity[25](index=25&type=chunk) [Human Capital Management](index=13&type=section&id=Human%20Capital%20Management) Employee Statistics as of Dec 31, 2021 | Metric | Value | | :--- | :--- | | Total Employees | 1,001 | | Employees in US & Canada | 81.0% | | Employees in Europe | 18.0% | | Quota-bearing Sales Reps | 49% | | Sales Management/Support | 14% | | Operational/Admin | 37% | - In 2021, the company experienced a **7.0% average monthly churn rate** among sales representatives, attributed to performance goals and the mandate to return to the office and be vaccinated against COVID-19[30](index=30&type=chunk) - The company mandated that all US and Canadian employees be vaccinated against COVID-19 by October 2021 and return to the office full-time, though this was later modified due to the Omicron variant[32](index=32&type=chunk) [Sales and Marketing](index=17&type=section&id=Sales%20and%20Marketing) - The company employs a direct sales force of **633 full-time employees** as of December 31, 2021, down from 712 at year-end 2020, including 490 quota-bearing sales representatives[33](index=33&type=chunk) - Marketing efforts focus on direct contact and lead generation through building events and public relations, rather than traditional television, radio, or print advertising[33](index=33&type=chunk) [Competition](index=17&type=section&id=Competition) - Cogent faces competition from larger incumbent telephone and cable companies with greater financial resources, established brand names, and large customer bases[34](index=34&type=chunk) - Competition is based on price, speed, reliability, and service availability, and competitors are upgrading their networks with optical fiber to match Cogent's speed and quality[36](index=36&type=chunk) [Regulation](index=19&type=section&id=Regulation) - As a provider of Internet access and private networks to businesses, the company is not subject to significant regulation, which provides flexibility and ease of entry into new markets[37](index=37&type=chunk) - The company must comply with regulations concerning licensing, data privacy, law enforcement interception, and website blocking in the various jurisdictions where it operates[37](index=37&type=chunk) [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic's impact on corporate demand, employee retention, competition, and its substantial indebtedness [Market Risks](index=19&type=section&id=Market%20Risks) - The COVID-19 pandemic has adversely impacted the business, particularly corporate revenue, due to remote work policies, office closures, and rising vacancy rates in multi-tenant office buildings[39](index=39&type=chunk)[41](index=41&type=chunk) - The company's mandate for employees to be vaccinated and return to the office full-time has led to increased employee departures, particularly in the sales department, and may make it difficult to retain and hire new employees[42](index=42&type=chunk)[45](index=45&type=chunk) - The company is experiencing delays in the delivery of networking equipment and services from vendors, which may impact its ability to expand and augment its network[46](index=46&type=chunk) [Business Risks](index=23&type=section&id=Business%20Risks) - A long-term shift to remote work may negatively impact revenue growth, cash flows, and profitability by increasing corporate customer turnover and reducing demand for new services and upgrades[53](index=53&type=chunk) - The company's rapid growth places significant strains on its management, operational, and financial infrastructure, requiring effective expansion of its sales force and systems to manage growth[55](index=55&type=chunk)[57](index=57&type=chunk) [Competitive Risks](index=25&type=section&id=Competitive%20Risks) - Maintaining settlement-free peering relationships is critical to avoiding higher costs and ensuring high network performance, and a failure to maintain or expand these relationships could materially harm the business[60](index=60&type=chunk) - The company faces significant competition from incumbent carriers and ISPs that have greater financial resources, larger customer bases, and more diverse service offerings[61](index=61&type=chunk) [Operational Risks](index=26&type=section&id=Operational%20Risks) - The company's network is a potential target for cyber-attacks (like DDOS), which could lead to service interruptions, compromise of customer data, and material adverse effects on the business[64](index=64&type=chunk) - Reliance on complex information systems for sales, billing, and financial reporting poses a risk, as system failures could adversely affect sales, collections, and the ability to prepare timely financial statements[65](index=65&type=chunk) [Network Augmentation and Maintenance Risks](index=28&type=section&id=Network%20Augmentation%20and%20Maintenance%20Risks) - The network relies on leased optical fiber and building access from numerous vendors, and a failure to renew these leases on attractive terms could impact the network and customer base[68](index=68&type=chunk) - Substantially all network infrastructure equipment is purchased from a single vendor, **Cisco Systems, Inc**, and delays or failures from this vendor could disrupt service and network expansion[71](index=71&type=chunk) [International Operations Risks](index=30&type=section&id=International%20Operations%20Risks) - Operations in **50 countries** expose the company to risks including currency fluctuations (particularly the Euro), regulatory requirements, political and economic conditions, and diverse tax regimes[75](index=75&type=chunk) [Regulatory and Tax Risks](index=30&type=section&id=Regulatory%20and%20Tax%20Risks) - The unsettled legal landscape for ISPs could lead to new liabilities for content disseminated through the network, requiring costly measures to reduce exposure[76](index=76&type=chunk) - Changes in laws, such as those related to net neutrality, data privacy (GDPR, CCPA), and ISP liability (Section 230), could adversely affect the business and its customers[77](index=77&type=chunk)[80](index=80&type=chunk) - Governments may impose new taxes on Internet services, similar to those on telephone services, which could increase costs and discourage customer growth[82](index=82&type=chunk) [Risk Factors Related to Our Indebtedness](index=34&type=section&id=Risk%20Factors%20Related%20to%20Our%20Indebtedness) - As of December 31, 2021, the company had **$1.1 billion in total indebtedness**, including senior notes and finance lease obligations, which could make it difficult to satisfy financial obligations[85](index=85&type=chunk)[86](index=86&type=chunk) - An interest rate swap agreement on the 2026 Notes exposes the company to risks associated with variable interest rates based on the Secured Overnight Financing Rate (SOFR)[88](index=88&type=chunk) - Debt agreements impose significant restrictions on the business, limiting the ability to incur additional debt, pay dividends, make certain investments, and enter into transactions with affiliates[90](index=90&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[94](index=94&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company leases approximately 748,000 square feet for its operations, including its headquarters from an entity controlled by its CEO - The company leases its headquarters facility of **43,117 square feet** in Washington, D.C. from an entity controlled by its CEO, with a lease expiring in May 2025 that is cancellable on 60 days' notice[95](index=95&type=chunk) - In total, the company leases approximately **748,000 square feet** of space for its data centers, offices, and operations centers[95](index=95&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to have a material adverse effect on its business - The company is involved in legal proceedings in the ordinary course of business, which are not expected to have a material adverse effect, with details in Note 6 to the consolidated financial statements[96](index=96&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[97](index=97&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on NASDAQ as "CCOI" and a stock repurchase plan is authorized through December 2022 - The company's common stock trades on the NASDAQ Global Select Market under the symbol "**CCOI**"[100](index=100&type=chunk) - A stock repurchase program authorized up to **$50.0 million** is in place through December 31, 2022, with **$30.4 million** remaining available as of December 31, 2021[104](index=104&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2021 revenue grew 3.8% driven by net-centric customers, offsetting a corporate decline, while net income was significantly impacted by foreign exchange gains [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Financial Performance Comparison (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Service Revenue | $589,797 | $568,103 | 3.8% | | On-net Revenues | $442,838 | $419,454 | 5.6% | | Off-net Revenues | $146,383 | $148,128 | (1.2)% | | Network Operations Expenses | $226,337 | $219,157 | 3.3% | | SG&A Expenses | $162,380 | $158,476 | 2.5% | | Depreciation & Amortization | $89,240 | $83,477 | 6.9% | | Income Tax Expense | $23,235 | $4,096 | 467.3% | - Corporate customer revenue decreased by **6.5%** to **$358.4 million** in 2021, attributed to the COVID-19 pandemic's impact, while net-centric customer revenue increased by **25.3%** to **$231.4 million**[110](index=110&type=chunk) - The average price per megabit for the installed customer base declined by **24.2%** from 2020 to 2021, a trend expected to continue[111](index=111&type=chunk) - The number of on-net customer connections grew by **4.4%** and off-net connections grew by **5.8%** from year-end 2020 to 2021[113](index=113&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Consolidated Cash Flows (in thousands) | Cash Flow Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $170,257 | $140,320 | $148,809 | | Net cash used in investing activities | ($69,916) | ($55,952) | ($46,958) | | Net cash (used in) provided by financing activities | ($140,825) | ($116,002) | $22,020 | - As of December 31, 2021, the company had cash, cash equivalents, and restricted cash of **$328.6 million**[120](index=120&type=chunk) - The company paid **$150.3 million** in dividends in 2021, up from $129.4 million in 2020, reflecting regular quarterly increases in the dividend per share[128](index=128&type=chunk) - The company believes cash on hand and cash from operations will be adequate to meet working capital, capital expenditure, debt service, and dividend payment requirements for the next twelve months[139](index=139&type=chunk) [Indebtedness](index=50&type=section&id=Indebtedness) - Total indebtedness at December 31, 2021, was **$1.1 billion** at par value, including **$500.0 million** of 3.50% senior secured notes due 2026, **€350.0 million** of 4.375% senior unsecured notes due 2024, and **$245.9 million** of finance lease obligations[85](index=85&type=chunk)[129](index=129&type=chunk) - In May 2021, the company issued **$500.0 million** of 2026 Notes and used the proceeds to redeem its remaining 2022 Notes[130](index=130&type=chunk)[213](index=213&type=chunk) - Debt indentures limit the company's ability to make restricted payments, such as dividends and stock purchases, with **$185.5 million** unrestricted and available for such payments as of December 31, 2021[133](index=133&type=chunk) [Critical Accounting Policies and Significant Estimates](index=53&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) - A critical accounting policy involves finance lease obligations, where management must make significant judgments regarding renewal options, useful lives of assets, and the incremental borrowing rate[144](index=144&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk from a swap agreement and foreign currency risk from its Euro-denominated notes and international operations - The company is exposed to variable interest rate risk on its **$500.0 million** 2026 Notes due to an interest rate swap agreement tied to SOFR, where a 1.0% change in rates would impact annual interest expense by approximately **$20.4 million**[146](index=146&type=chunk) - Foreign currency exchange risk exists due to the **€350.0 million** 2024 Notes and international operations, which generated **25.5%** of consolidated revenue in 2021, where a 1.0% change in exchange rates would impact annual revenue by approximately **$1.2 million**[148](index=148&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements and the independent auditor's report for the fiscal year ended December 31, 2021 [Report of Independent Registered Public Accounting Firm](index=58&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2021, stating they are presented fairly in conformity with U.S. GAAP[152](index=152&type=chunk) - The audit identified a Critical Audit Matter related to the classification of Indefeasible Right of Use (IRU) lease agreements, which involved subjective judgment in determining the economic life of the underlying optical fiber assets[155](index=155&type=chunk) [Consolidated Financial Statements](index=60&type=section&id=Consolidated%20Financial%20Statements) Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $984,557 | $1,000,477 | | Total Liabilities | $1,357,655 | $1,293,643 | | Total Stockholders' Equity (Deficit) | ($373,098) | ($293,166) | Consolidated Income Statement Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Service Revenue | $589,797 | $568,103 | $546,159 | | Operating Income | $119,233 | $106,922 | $100,257 | | Net Income | $48,185 | $6,216 | $37,520 | Earnings Per Share (Diluted) | Year | Diluted EPS | | :--- | :--- | | 2021 | $1.03 | | 2020 | $0.13 | | 2019 | $0.81 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=92&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[255](index=255&type=chunk) [Item 9A. Controls and Procedures](index=92&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[256](index=256&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[256](index=256&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, issued an unqualified report on the company's internal control over financial reporting as of December 31, 2021[259](index=259&type=chunk)[262](index=262&type=chunk) [Item 9B. Other Information](index=95&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[266](index=266&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=95&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[267](index=267&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=95&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the company's 2022 definitive proxy statement - Information is incorporated by reference from the registrant's 2022 definitive proxy statement[269](index=269&type=chunk) [Item 11. Executive Compensation](index=95&type=section&id=Item%2011.%20Executive%20Compensation) Required information is incorporated by reference from the company's 2022 definitive proxy statement - Information is incorporated by reference from the registrant's 2022 definitive proxy statement[270](index=270&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=95&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Required information is incorporated by reference from the company's 2022 definitive proxy statement - Information is incorporated by reference from the registrant's 2022 definitive proxy statement[271](index=271&type=chunk) [Item 13. Certain Relationships and Related Transactions and Director Independence](index=95&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Required information is incorporated by reference from the company's 2022 definitive proxy statement - Information is incorporated by reference from the registrant's 2022 definitive proxy statement[272](index=272&type=chunk) [Item 14. Principal Accountant Fees and Services](index=95&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Required information is incorporated by reference from the company's 2022 definitive proxy statement - Information is incorporated by reference from the registrant's 2022 definitive proxy statement[273](index=273&type=chunk) Part IV [Item 15. Exhibit and Financial Statement Schedules](index=96&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section lists the financial statements, financial statement schedules, and exhibits filed with the report[276](index=276&type=chunk)[277](index=277&type=chunk) [Item 16. Form 10-K Summary](index=102&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None[288](index=288&type=chunk)

Cogent Communications Holdings, Inc. (NASDAQ:CCOI) Q3 2021 Results Conference Call November 4, 2021 8:30 AM ET Company Participants Dave Schaeffer - Chairman and CEO Sean Wallace - CFO Conference Call Participants George Engroff - Credit Suisse Phil Cusick - JP Morgan Colby Synesael - Cowen Nick Del Deo - MoffettNathanson Walter Piecyk - LightShed Michael Rollins - Citi Evan Young - KeyBanc Capital Markets Operator Good morning, and welcome to the Cogent Communications Holdings Third Quarter 2021 Earnings C ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 000-51829 COGENT COMMUNICATIONS HOLDINGS, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 46-5706863 (State of Incorporation) (I.R.S. Emp ...