Cogent(CCOI) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements of Cogent Communications Holdings, Inc. and its subsidiaries, including the balance sheets, statements of comprehensive loss for three and six months, and statements of cash flows, along with detailed notes explaining accounting policies, business operations, acquisitions, debt, and other financial aspects Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show an increase in total assets and liabilities from December 31, 2024, to June 30, 2025, while total stockholders' equity significantly decreased | Metric | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :----------------------------------- | | Total Assets | $3,270,531 | $3,173,102 | | Total Liabilities | $3,223,863 | $2,950,254 | | Total Stockholders' Equity | $46,668 | $222,848 | - Cash and cash equivalents increased from $198,486 thousand to $213,651 thousand, and restricted cash significantly rose from $29,430 thousand to $93,074 thousand[11] - Senior secured 2026 notes were fully redeemed, decreasing from $499,126 thousand to $0, while new senior secured 2032 notes of $597,857 thousand were issued[11] Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended June 30, 2025 and June 30, 2024) For the three months ended June 30, 2025, the company reported a higher net loss and comprehensive loss compared to the same period in 2024, driven by decreased service revenue, increased interest expense, and a loss on debt extinguishment, despite reduced operating expenses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (%) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Service revenue | $246,247 | $260,443 | (5.5%) | | Total operating expenses | $277,706 | $310,918 | (10.8%) | | Operating loss | $(31,459) | $(47,143) | (33.2%) | | Interest expense, including change in valuation interest rate swap agreement | $(39,777) | $(29,541) | 34.7% | | Loss on debt extinguishment and redemption – 2026 notes | $(5,606) | — | NM | | Net loss | $(57,807) | $(32,338) | 78.8% | | Basic net loss per common share | $(1.21) | $(0.68) | 77.9% | | Dividends declared per common share | $1.010 | $0.975 | 3.6% | - Acquisition costs related to Sprint were $0 in 2025, down from $12,370 thousand in 2024, contributing to the decrease in total operating expenses[12] - A gain on bargain purchase of Sprint of $27,673 thousand was recorded in 2024, with no such gain in 2025[12] Condensed Consolidated Statements of Comprehensive Loss (Six Months Ended June 30, 2025 and June 30, 2024) For the six months ended June 30, 2025, the company experienced a larger net loss and comprehensive loss compared to the prior year, primarily due to decreased service revenue, increased interest expense, and a loss on debt extinguishment, despite lower operating expenses | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (%) | | :------------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Service revenue | $493,298 | $526,613 | (6.3%) | | Total operating expenses | $565,045 | $636,481 | (11.3%) | | Operating loss | $(71,747) | $(106,536) | (32.6%) | | Interest expense, including change in valuation interest rate swap agreement | $(73,971) | $(58,703) | 26.0% | | Loss on debt extinguishment and redemption – 2026 notes | $(5,606) | — | NM | | Net loss | $(109,849) | $(97,645) | 12.5% | | Basic net loss per common share | $(2.30) | $(2.06) | 11.7% | | Dividends declared per common share | $2.015 | $1.940 | 3.9% | - Acquisition costs related to Sprint were $0 in 2025, down from $21,407 thousand in 2024, contributing to the decrease in total operating expenses[13] - A gain on bargain purchase of Sprint of $22,202 thousand was recorded in 2024, with no such gain in 2025[13] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company reported a net increase in cash, cash equivalents, and restricted cash of $78.8 million, a significant decrease from the $312.5 million increase in the prior year, primarily due to reduced cash provided by investing and financing activities | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net cash used in operating activities | $(7,687) | $(2,951) | | Net cash (used in) provided by investing activities | $(64,288) | $76,840 | | Net cash provided by financing activities | $136,739 | $232,046 | | Effect of exchange rates changes on cash | $14,045 | $6,525 | | Net increase in cash, cash equivalents and restricted cash | $78,809 | $312,460 | | Cash, cash equivalents and restricted cash, end of period | $306,725 | $426,241 | - Cash receipts from the IP Transit Services Agreement with T-Mobile decreased significantly from $154.2 million in 2024 to $50.0 million in 2025[15] - Purchases of property and equipment increased from $89.7 million in 2024 to $114.3 million in 2025[15] Notes to Interim Condensed Consolidated Financial Statements The notes provide detailed disclosures on the company's business, significant accounting policies, the Sprint acquisition, debt structure, lease obligations, income taxes, and capital allocation strategies, offering context to the condensed financial statements 1. Description of the business This note details Cogent Communications' business model as a facilities-based provider of high-speed Internet access and network services, its organizational structure, and the significant acquisition of Sprint Communications' U.S. long-haul fiber network, including the financial and operational implications of the transaction Reorganization and merger On May 15, 2014, Cogent Communications Group, Inc. adopted a new holding company structure, making Cogent Communications Holdings, Inc. the parent company. The majority of assets and operations are now conducted by Cogent Fiber LLC and Cogent Communications, LLC - Cogent Communications Holdings, Inc. became the successor issuer and holding company for Cogent Communications Group, Inc. (now Cogent Communications Group, LLC) on May 15, 2014[16] - The vast majority of the Company's assets and operations are conducted by Cogent Fiber LLC (formerly Sprint Communications Company LP) and Cogent Communications, LLC[16] Description of business Cogent Communications is a facilities-based provider of high-speed Internet access, private network, optical wavelength, and data center colocation services, primarily to businesses and service providers globally. It offers both on-net services through its own facilities and off-net services using other carriers' infrastructure, with a focus on packet-routed data - The Company is a facilities-based provider of low-cost, high-speed Internet access, private network services, optical wavelength and optical transport services, and data center colocation space and power, optimized for packet routed data[17] - Services are delivered to businesses, communications service providers, and bandwidth-intensive organizations in 57 countries across North America, Europe, Asia, South America, Oceania, and Africa[17] - On-net services are provided through the Company's own network, offering speeds from 100 Mbps to 400 Gbps, while off-net services utilize other carriers for the 'last mile' connection[18][20] Acquisition of Sprint Communications Cogent Infrastructure, Inc. acquired Sprint Communications' U.S. long-haul fiber network (Cogent Fiber Business) on May 1, 2023, for $1, with significant adjustments for working capital and a $700 million IP Transit Services Agreement with T-Mobile. The transaction resulted in a $1.4 billion bargain purchase gain, reflecting the fair value of acquired assets exceeding liabilities and consideration Purchase Price The acquisition of Sprint Communications' fiber business closed on May 1, 2023, with a nominal purchase price of $1. However, a working capital adjustment resulted in a net payment of $61.1 million to the seller on the closing date, with an additional $5.0 million paid in April 2024 - The Transaction closed on May 1, 2023, with a purchase price of $1 payable to the Seller for the Purchased Interests[25] - A Working Capital Adjustment, primarily for acquired cash and cash equivalents, resulted in a $61.1 million payment to the Seller on the Closing Date, with an additional $5.0 million accrued in Q3 2023 and paid in April 2024[25] Short-term lease payment The Purchase Agreement included a $28.1 million ($19.8 million net of discount) payment from the Seller to the Buyer for acquired short-term operating lease obligations, to be paid in four equal installments from months 55 to 58 after the Closing Date. The payment was recorded at its present value, resulting in an $8.4 million discount, which is amortized as interest income - A $28.1 million ($19.8 million net of discount) Short-term Lease Payment is due from the Seller to the Buyer for acquired short-term operating lease obligations[26] - The payment will be made in four equal installments from months 55 to 58 after the Closing Date and was recorded at its present value, resulting in an $8.4 million discount[26] - Amortization of the discount resulted in interest income of $0.4 million for the three months ended June 30, 2025, and $0.9 million for the six months ended June 30, 2025[26] Severance reimbursements The Purchase Agreement stipulated that the Seller would reimburse the Buyer for qualifying severance expenses. Total reimbursements amounted to $28.6 million, with payments ending in the second quarter of 2024 - The Seller reimbursed the Buyer for qualifying severance expenses, totaling $28.6 million[27] - Severance reimbursements of $8.0 million and $12.3 million were recorded for the three and six months ended June 30, 2024, respectively, with all payments concluding in Q2 2024[27] IP Transit Services Agreement Under the IP Transit Services Agreement, T-Mobile USA, Inc. will pay the Company $700.0 million over 54 months. This payment is considered consideration for the acquisition of a distressed business, not revenue, and was recorded at a discounted present value of $620.4 million, with the discount amortized as interest income - T-Mobile USA, Inc. will pay the Company an aggregate of $700.0 million under the IP Transit Services Agreement, with $350.0 million in the first year and $350.0 million over the subsequent 42 months[29] - The $700.0 million payment is considered consideration for the acquisition of a distressed business, not revenue, and was recorded at a discounted present value of $620.4 million (net of a $79.6 million discount)[30][40] - Amortization of the discount resulted in interest income of $4.3 million and $9.0 million for the three and six months ended June 30, 2025, respectively[30] Transition Services Agreement The Transition Services Agreement (TSA) facilitates an orderly separation of the Cogent Fiber Business from Sprint Communications, with both parties providing interim services for up to two years. Amounts billed to the Company under the TSA decreased significantly from $23.3 million in H1 2024 to $0.4 million in H1 2025, reflecting the transition progress - The TSA ensures an orderly transition of the Cogent Fiber Business, with services generally provided for up to two years, extendable by one year[31][32] - Amounts billed to the Company by the Seller under the TSA decreased from $6.7 million (Q2 2024) to $10 thousand (Q2 2025) and from $23.3 million (H1 2024) to $0.4 million (H1 2025)[34] - As of June 30, 2025, the Company owed $9 thousand to the Seller and the Seller owed $0.1 million to the Company under the TSA[37] Other Services Provided to the Seller Under a Commercial Agreement, the Company provides colocation and connectivity services to T-Mobile USA, Inc. Revenue from these services decreased from $5.9 million (Q2 2024) to $1.1 million (Q2 2025) and from $9.1 million (H1 2024) to $1.8 million (H1 2025) - The Company provides colocation and connectivity services to TMUSA under a Commercial Agreement[38] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue from Commercial Agreement | $1,100 | $5,900 | $1,800 | $9,100 | - As of June 30, 2025, TMUSA owed $0.9 million to the Company under the Commercial Agreement, down from $2.6 million at December 31, 2024[38] Acquisition-Related Costs The Company incurred $13.6 million in professional fees and other acquisition-related costs (excluding severance) since the Sprint acquisition date. No such costs were incurred in the three or six months ended June 30, 2025, compared to $12.4 million and $21.4 million in the corresponding 2024 periods - Total acquisition-related costs (excluding severance) since the acquisition date were $13.6 million[39] | Period | Acquisition-Related Costs (in thousands) | | :-------------------------------- | :------------------------------------- | | Three months ended June 30, 2025 | $0 | | Three months ended June 30, 2024 | $12,400 | | Six months ended June 30, 2025 | $0 | | Six months ended June 30, 2024 | $21,400 | Consideration The acquisition-date fair value of consideration received from the Sprint Transaction totaled $602.6 million, primarily comprising amounts due from the Seller under the IP Transit Services Agreement ($620.4 million net of discount) and the Purchase Agreement ($19.7 million net of discount), offset by working capital payments made to the Seller ($37.5 million net of severance reimbursements) | (In thousands) | May 1, 2023 | | :---------------------------------------------------------------- | :---------- | | Working capital payments made to the Seller, net of severance reimbursements | $37,532 | | Purchase Agreement payment to be received from the Seller, net of discount | $19,723 | | Amounts due from the Seller – IP Transit Services Agreement, net of discount | $620,390 | | Total net consideration to be received from the Seller | $602,581 | - The IP Transit Services Agreement payments totaling $700.0 million were recorded at their present value, resulting in a discount of $79.6 million[41] - Cash consideration for the acquisition was $1[41] Fair Value of Assets Acquired and Liabilities Assumed and Gain on Bargain Purchase The Company recorded a $1.4 billion gain on bargain purchase from the Sprint acquisition, as the fair value of identifiable assets acquired ($1.86 billion) significantly exceeded the liabilities assumed ($1.04 billion) and the net consideration received ($602.6 million). Adjustments were made in Q2 2024, increasing the gain by $27.7 million - The Transaction resulted in a gain on bargain purchase of $1.4 billion, as the fair value of identifiable assets acquired exceeded liabilities assumed and net consideration[42][46] | (In thousands) | May 1, 2023 | | :-------------------------- | :---------- | | Total assets acquired | $1,862,017 | | Total liabilities assumed | $1,035,950 | | Fair value of net assets acquired | $826,067 | | Total net consideration received | $602,581 | | Gain on bargain purchase | $1,428,648 | - Measurement period adjustments in Q2 2024 increased the gain on bargain purchase by $27.7 million, including additional severance reimbursements and adjustments to deferred income tax liabilities[44] Acquired Property & Equipment The Company acquired $965.7 million in property and equipment, primarily the legacy Sprint network (optical fiber, related equipment, and real estate). These assets were valued using cost and market approaches, reflecting an orderly liquidation value for a distressed business, with optical fiber estimated at $369.2 million - The Company acquired $965.7 million of property and equipment, primarily the legacy Sprint network, including optical fiber, related equipment, and owned real estate[47] - Assets were valued using cost and market approaches, based on an orderly liquidation value for a distressed business[47] - The estimated fair value of the optical fiber on the Closing Date was $369.2 million, based on subjective estimations of replacement cost and liquidation value[48] Acquired Leases The Company acquired a portfolio of dark fiber, rights-of-way, and facilities leases, accounted for as new at acquisition but retaining the Seller's classification. Adjustments included reclassifying $24.9 million from right-of-use to finance lease assets and $160.9 million from operating to finance lease liabilities, and recording $157.2 million for unfavorable lease terms - The Company acquired a portfolio of dark fiber, rights-of-way, and facilities leases, accounted for as new at the acquisition date but retaining the Seller's classification[49] - Measurement period adjustments reclassified $24.9 million from right-of-use to finance lease assets and $160.9 million from operating to finance lease liabilities[49][51] - An adjustment of $157.2 million was recorded for unfavorable market terms of the acquired leases, valued using the income approach[52] Acquired Intangible Assets Acquired intangible assets include $458.0 million in IPv4 addresses and $16.0 million in customer relationships. IPv4 addresses are considered indefinite-lived and not amortized, while customer relationships have a nine-year useful life, with annual amortization expense of $1.8 million - Intangible assets acquired include $458.0 million of Internet Protocol version 4 (IPv4) addresses and $16.0 million of acquired customer relationships[53] - IPv4 addresses are considered to have an indefinite useful life and are not amortized, with no impairment recorded to date[54] - Acquired customer relationships have an estimated useful life of nine years, with amortization expense of $0.8 million for the six months ended June 30, 2025, and future annual amortization of $1.8 million[53] Acquired Asset Retirement Obligations The Company assumed $32.0 million in asset retirement obligations, primarily for restoration related to acquired leases. No obligation was recorded for optical fiber removal due to an indeterminable settlement date - The Company assumed $32.0 million of asset retirement obligations, primarily related to restoration obligations for acquired leases[55] - No asset retirement obligation was recorded for the removal of acquired optical fiber because a settlement date is indeterminable, preventing a reasonable estimation of fair value[55] Reassessment of Bargain Purchase Gain Due to the material $1.4 billion bargain purchase gain, the Company reassessed the recognition and measurement of acquired assets and assumed liabilities, concluding that all were appropriately recognized and valued - The Company recorded a material bargain purchase gain of $1.4 billion because the fair value of identifiable assets acquired exceeded the fair value of consideration transferred[56] - A reassessment confirmed that all acquired assets and assumed liabilities were recognized and that valuation procedures and measures were appropriate[56] - Cogent Infrastructure, Inc. acquired the U.S. long-haul fiber network of Sprint Communications (now Cogent Fiber LLC) on May 1, 2023, through a Membership Interest Purchase Agreement[23][25] - The purchase price was $1, with a net working capital payment of $61.1 million to the Seller on the Closing Date, and an additional $5.0 million paid in April 2024[25] - The transaction was accounted for as a business combination, resulting in a gain on bargain purchase of $1.4 billion, as the fair value of identifiable assets acquired exceeded liabilities assumed and net consideration[42][46][56] Basis of presentation The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, reflecting all normal recurring adjustments. Certain information is condensed or omitted, and prior year amounts have been reclassified for consistency - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, reflecting all normal recurring adjustments[57] - Certain information and footnote disclosures are condensed or omitted, and prior year amounts have been reclassified to conform to current year presentation[57] - The statements include all wholly owned subsidiaries, with all inter-company accounts and activity eliminated[58] Use of estimates The preparation of financial statements requires management to make estimates and assumptions that impact reported amounts, and actual results may differ from these estimates - Management makes estimates and assumptions affecting reported asset and liability amounts, and disclosures of contingent assets and liabilities[59] - Actual results may differ from these estimates[59] Financial instruments The carrying amounts of short-term financial instruments like cash, receivables, and payables approximate fair value. The fair values of long-term debt instruments (2027 Notes, 2032 Notes, IPv4 Notes) and the Swap Agreement are based on recent trading prices (Level 2 market approach) - Carrying amounts of short-term instruments (cash, receivables, payables) approximate fair value due to their short-term nature[60] | Financial Instrument | Fair Value as of June 30, 2025 (in millions) | | :------------------------------------------------ | :------------------------------------------- | | 7.00% Senior Unsecured Notes due 2027 | $450.0 | | 7.00% Senior Unsecured Mirror Notes due 2027 | $300.0 | | 6.50% Senior Secured Notes due 2032 | $591.0 | | 7.924% Existing IPv4 Notes | $211.3 | | 6.646% IPv4 New Notes | $175.4 | | Swap Agreement | $13.6 | Restricted cash and interest rate swap agreement Restricted cash increased significantly to $93.1 million at June 30, 2025, primarily due to IPv4 Notes requirements and margin for the Swap Agreement. The Swap Agreement, maturing in February 2026, had a net liability fair value of $13.6 million at June 30, 2025, and converts a fixed interest rate obligation to a variable one - Restricted cash totaled $93.074 million at June 30, 2025, including $13.6 million for the Swap Agreement and $79.5 million for IPv4 Notes[11][61] - The interest rate Swap Agreement, maturing in February 2026, had a fair value of a net liability of $13.6 million at June 30, 2025, and effectively converts a fixed 3.50% interest rate to a variable SOFR-based rate[61][119][120] - The Company made a $13.8 million deposit with the counterparty to the Swap Agreement, with additional deposits required if the net liability exceeds this amount[120] Gross receipts taxes, universal service fund and other surcharges The Company records certain excise taxes and surcharges, such as Universal Service Fund fees, on a gross basis, including them in both service revenue and network operations expense. These charges amounted to $20.0 million for Q2 2025 and $40.2 million for H1 2025 - The Company records certain excise taxes and surcharges (e.g., Universal Service Fund fees) on a gross basis, including them in service revenue and network operations expense[62] | Period | Excise Taxes and Surcharges (in thousands) | | :-------------------------------- | :--------------------------------------- | | Three months ended June 30, 2025 | $20,000 | | Three months ended June 30, 2024 | $19,200 | | Six months ended June 30, 2025 | $40,200 | | Six months ended June 30, 2024 | $39,700 | Basic and diluted net loss per common share Basic and diluted net loss per common share were $(1.21) for Q2 2025 and $(2.30) for H1 2025. Due to net losses, all outstanding stock options and restricted stock were anti-dilutive and thus excluded from diluted EPS calculations | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Basic net loss per common share | $(1.21) | $(2.30) | | Diluted net loss per common share | $(1.21) | $(2.30) | | Weighted average common shares - basic | 47,592,836 | 47,804,421 | | Weighted average common shares - diluted | 47,592,836 | 47,804,421 | - Due to net losses, stock options and restricted stock were anti-dilutive and therefore excluded from the computation of diluted EPS[64][65] - Unvested shares of restricted common stock totaled 1,657,168 as of June 30, 2025[65] Stockholders' Equity Total stockholders' equity decreased significantly from $222.8 million at December 31, 2024, to $46.7 million at June 30, 2025, primarily due to accumulated deficit from net losses and dividends paid, partially offset by foreign currency translation adjustments and equity-based compensation | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :-------------------------- | :------------------------------- | :--------------------------- | | Total Stockholders' Equity | $222,848 | $46,668 | | Accumulated Deficit | $(376,345) | $(584,887) | | Accumulated Other Comprehensive Loss | $(30,685) | $(1,196) | - Net loss for the six months ended June 30, 2025, was $(109.8 million), and dividends paid were $(98.7 million), contributing to the decrease in equity[66] - Foreign currency translation adjustment positively impacted equity by $29.5 million for the six months ended June 30, 2025[66] Revenue recognition The Company recognizes revenue under ASC 606, recognizing installation fees over the contract term or estimated average customer life for month-to-month contracts. Termination fees are recognized upon collection - Revenue is recognized under ASC 606, entitling the Company to revenue for promised goods or services[68] - Installation fees for contracts longer than month-to-month are recognized over the contract term; for month-to-month contracts, they are recognized over the estimated average customer life[68] - Termination fees are recognized as they are collected[68] Lessor Accounting The Company acts as a lessor for owned dark fiber leases (IRUs) acquired in the Sprint Transaction, which are accounted for as operating leases. Cash consideration, including upfront installation fees, is recognized as service revenue on a straight-line basis over the agreement term - The Company is a lessor for owned dark fiber leases (IRUs) acquired in the Transaction, accounted for as operating leases[70] - IRUs typically have terms of 20-25 years, and cash consideration (including upfront installation fees) is recognized as service revenue on a straight-line basis over the term[70] Leases The Company applies ASU 2016-02 for leases, electing not to recognize short-term leases and not separating lease and non-lease components. Total lease costs for the six months ended June 30, 2025, were $87.5 million, with significant finance and operating lease liabilities and future minimum payments - The Company has elected not to apply ASU 2016-02 recognition requirements to short-term leases (one year or less) and not to separate lease and non-lease components[71] | Lease Cost Type | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Finance lease cost (amortization of ROU assets) | $27,891 | $23,768 | | Finance lease cost (interest expense) | $23,615 | $20,330 | | Operating lease cost | $36,013 | $46,967 | | Total lease costs | $87,519 | $91,065 | - As of June 30, 2025, total minimum lease obligations were $519.6 million for operating leases and $1,132.2 million for finance leases, with weighted-average remaining terms of 11.3 and 17.1 years, respectively[75] Allowance for credit losses The Company estimates credit losses on trade receivables based on historical data, current conditions, and forecasts, primarily monitoring collectability by reviewing delinquency status. The allowance for credit losses was $8.39 million at June 30, 2025, with a net bad debt expense of $4.7 million for the six months ended June 30, 2025 - The Company estimates credit losses expected over the life of its trade receivables using historical information, current conditions, and forecasts, with delinquency status as the primary indicator[76] | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | | Allowance for credit losses | $8,390 | $9,762 | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | | Net bad debt expense | $4,702 | $5,514 | | Bad debt recoveries | $2,633 | $1,125 | Accounting Standards Not Yet Adopted The Company will not early adopt ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures). It does not expect a material impact from ASU 2023-09 and is evaluating the impact of ASU 2024-03 - The Company will not early adopt ASU 2023-09 (Income Taxes: Improvements to Income Tax Disclosures), effective for annual periods after December 15, 2024, and does not expect a material impact[78] - The Company will not early adopt ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods after December 15, 2026, and is evaluating its impact[79] - Cogent Communications is a facilities-based provider of low-cost, high-speed Internet access, private network services, optical wavelength and transport services, and data center colocation, serving businesses and service providers in 57 countries[17] - The company acquired Sprint Communications' U.S. long-haul fiber network (now Cogent Fiber LLC) on May 1, 2023, for a purchase price of $1, with a net working capital payment of $61.1 million to the seller[23][25] - The acquisition included a $700.0 million IP Transit Services Agreement with T-Mobile, recorded at a discounted present value of $620.4 million, which is considered consideration received to complete the acquisition of a distressed business, not revenue[29][30][40] 2. Property and equipment Depreciation and amortization expense related to property and equipment and finance leases increased to $150.4 million for the six months ended June 30, 2025. The Company also recognized a $3.3 million gain on lease termination in June 2024 from prepaying an IRU finance lease | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Depreciation and amortization expense | $74,846 | $74,065 | $150,439 | $144,907 | | Capitalized compensation cost | $11,201 | $11,232 | $22,445 | $22,929 | - In June 2024, the Company prepaid an IRU finance lease for $114.6 million, resulting in a $3.3 million gain on lease termination[81] 3. Long-term debt As of June 30, 2025, the Company had $2.4 billion in long-term debt, including newly issued $600.0 million 2032 Notes (used to redeem 2026 Notes), $370.4 million in IPv4 Notes, and $750.0 million in 2027 Notes. The debt instruments have various maturities, interest rates, and covenants, with the Company also managing an interest rate swap agreement Issuance of $600.0 million principal amount of 2032 Notes and redemption of the Existing Secured 2026 Notes On June 17, 2025, Cogent issued $600.0 million of 6.50% Senior Secured Notes due 2032, using $507.3 million of the net proceeds to redeem the $500.0 million 3.50% Senior Secured 2026 Notes, resulting in a $5.6 million loss on debt extinguishment. The 2032 Notes are senior secured obligations, guaranteed by Group's material domestic subsidiaries, and include various covenants and redemption provisions - On June 17, 2025, $600.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2032 (2032 Notes) were issued[82][83] - Net proceeds of **