Cogent(CCOI) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related disclosures Item 1. Financial Statements 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 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) 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) 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 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 This section provides detailed explanations and disclosures supporting the interim condensed consolidated financial statements 1. Description of the business and recent developments 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] - 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][27][28] - 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][31][32] - The company incurred $2.0 million in professional fees for the Sprint acquisition in Q3 2022[35] - The unaudited condensed consolidated financial statements are prepared under SEC rules and GAAP, relying on management estimates and assumptions[36][39] | 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] | 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 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 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] - 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][67][69] - 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] - 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] 4. Commitments and contingencies 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] - A Virginia litigation resulted in a $0.4 million payment in October 2022 for alleged unpaid fees and early termination[78] 5. Income taxes 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][164] 6. Common stock buyback program 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] - No common stock was purchased during the three or nine months ended September 30, 2022 or 2021[82] 7. Dividends on common stock 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] - Future dividends are discretionary and subject to financial position, results of operations, cash flow, capital requirements, and debt indenture limitations[84] 8. Related party transactions 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] - Rent and related costs paid to Sodium LLC were $0.5 million for Q3 2022 and $1.4 million for 9M 2022[85] 9. Segment information 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] | 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 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 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] - 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][96] - The company will begin providing optical wavelength services over its fiber network in connection with the Sprint acquisition[98] Competitive Advantages 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][101][102][103] - 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][106][107][108][109] Our Strategy 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][112][113][114][115][116][117] Results of Operations 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 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][124] - 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] - Net-centric revenue growth was partly offset by a 20.8% decline in average price per megabit due to significant pricing pressure[126] - 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][131] - 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][135] Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 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][149] - Net-centric revenue growth was partly offset by a 19.4% decline in average price per megabit due to market pricing pressure[151] - 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][156] - 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][161][162] Liquidity and Capital Resources 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][167] - 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] - 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][189] - The Company does not engage in off-balance sheet arrangements, structured finance, or special purpose entities, thus avoiding related risks[192] - 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][198][199] - Employee departures increased due to vaccine mandates and return-to-office policies[196] Cash Flows 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] - Dividends paid totaled $125.9 million for 9M 2022, an increase from $110.7 million in 9M 2021[178] - Financing activities included $375.4 million for 2024 Notes redemption and $446.0 million net proceeds from 2027 Notes issuance in June 2022[179] Cash Position and Indebtedness 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] Summarized Financial Information of Holdings 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][182] - For the nine months ended September 30, 2022, Holdings recorded a net loss of $19.4 million[184] Common Stock Buyback Program 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][218] Dividends on Common Stock and Return of Capital Program 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] - Future dividends and capital returns are discretionary and subject to financial performance and debt indenture limitations[187] Future Capital Requirements 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][189] - Refinancing of indebtedness at or before maturity may be necessary, and terms are not assured[190] Off-Balance Sheet Arrangements 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] Impact of COVID-19 on Our Liquidity and Operating Performance 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] - 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][199] - Employee departures increased due to vaccine mandates and return-to-office policies, potentially impacting sales, revenue, and profitability[196] Critical Accounting Policies and Significant Estimates 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - There has been no material change in internal control over financial reporting during the most recent fiscal quarter[206] PART II OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity security sales, and required exhibits Item 1. Legal Proceedings 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] - 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] Item 1A. Risk Factors 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][211] - 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][213][215] - 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] Risks Relating to Our Proposed Acquisition of Sprint Communications 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][211] - 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][213] - Other integration risks involve retaining key personnel, customers, and vendors, managing acquisition-related costs, and potential exposure to litigation[215] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - No shares of common stock were purchased during the third quarter of 2022[218] Item 6. Exhibits 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] - Exhibit 10.1: Guaranty, dated as of September 6, 2022, by and between Cogent Communications Holdings, Inc. and Sprint LLC[222] - Exhibits 31.1 and 31.2: Certifications of the Chief Executive Officer and Chief Financial Officer, respectively[222] 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][227]