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Description of the business: | 3 Months Ended
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Mar. 31, 2025
Description of the business: |
Description of the business: | 1. Description of the business: Reorganization and merger On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc. (now Cogent Communications Group, LLC), a Delaware corporation (“Group”), Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”), and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings. Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, Inc. (now Cogent Communications Group, LLC) and its subsidiaries, and on and after May 15, 2014, the “Company” refers to Cogent Communications Holdings, Inc. and its subsidiaries. Cogent Communications, LLC (formerly Cogent Communications, Inc.) is wholly owned by Group, Sprint Communications Company LP is indirectly wholly owned by Holdings, and the vast majority of the Company’s assets, contractual arrangements, and operations are executed by Sprint Communications Company LP and Cogent Communications, LLC. Description of business 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. The Company’s network is specifically designed and optimized to transmit packet routed data. The Company delivers its services primarily to businesses, large and small, communications service providers and other bandwidth-intensive organizations in 57 countries across North America, Europe, Asia, South America, Oceania and Africa. The Company is a Delaware corporation and is headquartered in Washington, DC. The Company offers on-net Internet access services exclusively through its own facilities, which run from its network to its customers’ premises. The Company offers its on-net services to customers located in buildings that are physically connected to its network. As a result, the Company is not dependent on local telephone companies or cable TV companies to serve its customers for its on-net Internet access and private network services. The Company’s on-net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 megabits per second to 400 gigabits per second. The Company provides its on-net Internet access and private network services to its corporate, net-centric and enterprise customers. The Company’s corporate customers are located in multi-tenant office buildings that typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses. The Company’s net-centric customers include bandwidth-intensive users that leverage its network either to deliver content to end users or to provide access to residential or commercial Internet users. Content delivery customers include over the top media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. The Company’s net-centric customers include access networks comprised of other Internet Service Providers, telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world. These net-centric customers generally receive the Company’s services in carrier neutral colocation facilities and in the Company’s own data centers. The Company operates data centers throughout North America and Europe that allow its customers to collocate their equipment and access the Company’s network. ​ In addition to providing on-net services, the Company provides Internet access and private network services to customers that are not located in buildings directly connected to its network. The Company provides these off-net services primarily to corporate customers using other carriers’ circuits to provide the “last mile” portion of the link from the customers’ premises to the Company’s network. The Company also provides certain non-core services that resulted from acquisitions, including the acquisition of Sprint Communications (as discussed below). The Company continues to support but does not actively sell these non-core services. In connection with the Company’s acquisition of Sprint Communications, the Company began to provide optical wavelength services and optical transport services over a network that is generally independent of the Company’s legacy IP network. The Company is selling these wavelength services to its existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure. Additionally, the Sprint Business (as defined below) customers include a number of companies larger than the Company’s historical customer base. In connection with the acquisition of Sprint Communications, the Company expanded selling services to these larger “Enterprise” customers. Acquisition of Sprint Communications On September 6, 2022, Cogent Infrastructure, Inc. (now Cogent Infrastructure, LLC), a Delaware corporation and a direct wholly owned subsidiary of the Company (the “Buyer” or “Cogent Infrastructure”), entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which the Company acquired the U.S. long-haul fiber network (including the non-U.S. extensions thereof) of Sprint Communications and its subsidiaries (the “Sprint Business”). Pursuant to the Purchase Agreement, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, held Sprint Communications’ assets and liabilities relating to the Sprint Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”). The Purchase Agreement included customary representations, warranties, indemnities and covenants, including regarding the conduct of the Sprint Business prior to the closing of the Transaction (the “Closing”). In addition, the Closing was subject to customary closing conditions, including the receipt of certain required regulatory approvals and consents. The Company believes it is in a unique position to monetize the Sprint Business and its network and management expects to achieve significant cost reduction synergies and revenue synergies from the Transaction. Purchase Price The Transaction closed on May 1, 2023 (the “Closing Date”). On the Closing Date, the Buyer consummated the Transaction pursuant to the terms of the Purchase Agreement, providing a purchase price of $1 payable to the Seller for the Purchased Interests, subject to customary adjustments, including working capital (the “Working Capital Adjustment”), as set forth in the Purchase Agreement. As consideration for the Purchased Interests, the Working Capital Adjustment (primarily related to acquired cash and cash equivalents of an estimated $43.4 million at the Closing Date in order to fund the international operations of the Sprint Business) resulted in the Buyer making a payment to the Seller of $61.1 million on the Closing Date. During the third quarter of 2023, an additional Working Capital Adjustment of $5.0 million was accrued due to the Seller. The final determination of the Working Capital Adjustment (which included the Short-term Lease Payment below) was completed in April 2024 and the Company paid the Seller $5.0 million for the remaining Working Capital Adjustment. ​ Short-term lease payment The Purchase Agreement also provides for a payment of $28.1 million ($19.8 million net of discount) from the Seller to the Buyer related to acquired short-term operating lease obligations (the “Short-term Lease Payment”). The Short-term Lease Payment will be paid from the Seller to the Company in four equal payments in months 55 to 58 after the Closing Date. The final determination of the Short - term Lease Payment was completed in April 2024. The Short-term Lease Payment was recorded at its present value resulting in a discount of $8.4 million. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors. The determination of the discount rate requires some judgment. During the third quarter of 2023, the Short-term Lease Payment was reduced by $4.8 million and in the first quarter of 2024, the Short - term Lease Payment was reduced by an additional $17.0 million, net of discount of $7.2 million. Including the cumulative impact of these adjustments, the amortization of the discount resulted in interest income (expense) of $0.4 million and ($0.5) million for the three months ended March 31, 2025 and 2024, respectively. Severance reimbursements The Purchase Agreement also provided for reimbursement from the Seller to the Buyer for qualifying severance expenses incurred. Total qualifying severance expenses were $28.6 million of which $4.3 million were recorded in the three months ended March 31, 2024. These severance payments ended in the second quarter of 2024. IP Transit Services Agreement On the Closing Date, Cogent Communications, Inc. (now Cogent Communications, LLC), and T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of T-Mobile (“TMUSA”), entered into an agreement for IP transit services (“IP Transit Services Agreement”), pursuant to which TMUSA will pay an affiliate of the Company an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments of $29.2 million per month during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments of $8.3 million per month over the subsequent 42 months. Under the IP Transit Services Agreement. TMUSA paid the Company $25.0 million and $87.5 million during the three months ended March 31, 2025 and 2024, respectively. The Company accounted for the Transaction as a business combination under ASC Topic 805 Business Combinations (“ASC 805”). The Company evaluated what elements are part of the business combination and the consideration exchanged to complete the acquisition. Under ASC 805, the Company has concluded that the $700.0 million of payments to be made represent consideration received from T - Mobile to complete the acquisition of a distressed business. The Company also evaluated whether the IP Transit Services Agreement was in the scope of ASU No. 2014 - 09 Revenue from Contracts with Customers (“ASC 606”). The Company has concluded that T - Mobile did not represent a “customer” as defined by ASC 606, the stated contract price did not represent consideration for services to be delivered, and the transaction did not satisfy the definition of revenue, which excluded this arrangement from the scope of ASC 606. As a result, and considering statements made by T - Mobile, the IP Transit Services Agreement was recorded in connection with the Transaction at its discounted present value resulting in a discount of $79.6 million. The interest rate used in determining the present value was derived considering rates on similar issued debt instruments with comparable durations, among other market factors. The determination of the discount rate requires some judgment. The amortization of the discount resulted in interest income of $4.7 million and $7.3 million during the three months ended March 31, 2025 and 2024, respectively. Transition Services Agreement On the Closing Date, the Buyer entered into a transition services agreement (the “TSA”) with the Seller, pursuant to which the Seller provides to the Buyer, and the Buyer provides to the Seller on an interim basis following the Closing Date, certain specified services (the “Transition Services”) to ensure an orderly transition following the separation of the Sprint Business from Sprint Communications. The services provided by the Seller to the Buyer include, among others, information technology support, back office and finance, real estate and facilities, vendor and supply chain management, including the payment and processing of vendor invoices for the Company and human resources services. The services provided by the Buyer to the Seller include, among others, information technology and network support, finance and back office and other wireless business support. ​ The Transition Services are generally intended to be provided for a period of up to two years following the Closing Date, although such period may be extended for an additional one-year term by either party upon 30 days’ prior written notice. The fees for the Transition Services are calculated using either a per service monthly fee or an hourly rate for the employees allocated to provide such services. Any third-party costs incurred in providing the Transition Services are passed on to the party receiving such services at cost for the two-year period. Amounts paid for the Sprint Business by T-Mobile are reimbursed at cost. Either party to the TSA may terminate the agreement with respect to any individual service in full for convenience upon 30 days’ prior written notice for certain services and reduced for other services after a 90-day period. The TSA may be terminated in its entirety if the other party has failed to perform any of its material obligations and such failure is not cured within 30 days. The TSA provides for customary indemnification and limits on liability. Amounts billed under the TSA are due 30 days from receipt of the related invoice. Amounts billed to the Company under the TSA are primarily for reimbursement at cost of payments to vendors of the Sprint Business until these vendors are fully transitioned to the Company. The amounts due from the Seller were primarily reimbursements for severance costs related to Sprint Business employees and services provided by the Company for the Seller. During the three months ended March 31, 2025 and 2024, the Company was billed $0.4 million and $16.6 million as due to the Seller under the TSA, respectively. During the three months ended March 31, 2025 and 2024, the Company paid $0.7 million and $78.5 million to the Seller under the TSA, respectively. During the three months ended March 31, 2025 and 2024, the Company billed the Seller $15,126 and $0.5 million as due from the Seller under the TSA, respectively. During the three months ended March 31, 2025 and 2024, the Seller paid the Company $0.1 million and $0.5 million under the TSA, respectively. As of March 31, 2025, the Company owed $0.2 million to the Seller, and the Seller fully paid the amounts billed under the TSA. As of December 31, 2024, the Company owed $0.5 million to the Seller, and the Seller owed $0.1 million to the Company under the TSA. Other Services Provided to the Seller In addition, on the Closing Date, the Buyer and TMUSA entered into a commercial agreement (the “Commercial Agreement”) for colocation and connectivity services, pursuant to which the Company will provide such services to TMUSA for a per service monthly fee plus certain third-party costs incurred in providing the services. Under the Commercial Agreement, the Company recorded revenue of $0.7 million and $3.2 million during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, and December 31, 2024, TMUSA owed $0.1 million and $2.6 million, respectively, to the Company under the Commercial Agreement. These amounts are recorded in accounts receivable. Acquisition-Related Costs In connection with the Transaction and negotiation of the Purchase Agreement, the Company incurred a total of $13.6 million of professional fees and other acquisition-related costs (not including severance costs) since the acquisition date. Acquisition-related costs (not including severance costs) were $9.0 million for the three months ended March 31, 2024. There were no acquisition-related costs incurred in the three months ended March 31, 2025. Consideration The acquisition-date fair value of consideration received from the Transaction comprised of the following: ​
​ | ​ | ​ | ​
(In thousands) |  | May 1, 2023
Working capital payments made to the Seller, net of severance reimbursements (a) | ​ | $ | 37,532
Purchase Agreement payment to be received from the Seller, net of discount of $8,392 (b) | ​ |  | 19,723
Amounts due from the Seller – IP Transit Services Agreement, net of discount of $79,610 (c) | ​ |  | 620,390
Total to be received from the Seller | ​ |  | 640,113
Total net consideration to be received from the Seller (d) | ​ |  | 602,581
(a) | Includes $61.1 million paid to the Seller on the Closing Date and $5.0 million paid in April 2024. Additionally, includes an offsetting $28.6 million in total severance reimbursement payments received from the Seller recorded as measurement period adjustments of :
| ● | $16.2 million during the three months ended December 31, 2023;
| ● | $4.3 million during the three months ended March 31, 2024; and
| ● | $8.0 million during the three months ended June 30, 2024.
(b) | Under the Purchase Agreement, 50.0% of the assumed short-term operating lease liabilities totaling $28.1 million are to be paid to the Company from the Seller in four equal installments in months 55-58 from the Closing Date which were recorded at their present value resulting in a discount of $8.4 million. During the three months ended March 31, 2024, the Working Capital Adjustment, net of discount, was adjusted by $17.0 million to reflect the conclusion of the determination of amounts due from the Seller from the Short-term Lease Payment.
(c) | The IP Transit Services Agreement payments totaling $700.0 million were recorded at their present value resulting in a discount of $79.6 million. The $700.0 million is to be paid to the Company from the Seller in equal monthly payments of $29.2 million in months 1-12 and $8.3 million in months 13-54.
(d) | Cash consideration was $1.
Fair Value of Assets Acquired and Liabilities Assumed and Gain on Bargain Purchase The Company accounted for the Transaction as a business combination under ASC Topic 805 Business Combination (“ASC 805”). Under ASC 805, the identifiable assets acquired and liabilities assumed were recorded at their fair values as of the Closing Date. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions. For the fair values of the assets acquired and liabilities assumed, the Company used the cost, income and market approaches, including market participant assumptions. The fair value of the identifiable assets acquired (including amounts due under the IP Transit Services Agreement) were in excess of the liabilities assumed and the net consideration to be paid resulting in a gain on bargain purchase of $1.4 billion. The Transaction is considered an asset purchase for income tax purposes. The tax basis of the acquired business is the consideration paid ($1) plus the tax basis of certain liabilities assumed, with adjustments for cash acquired in excess of the purchase price. Deferred income taxes were recorded based upon the difference between the book and tax basis of the acquired assets and assumed liabilities at the Company’s marginal effective income tax rate on the Closing Date. During the three months ended March 31, 2024, the Company recorded a measurement period adjustment resulting in a reduction to the gain on bargain purchase of $5.5 million which includes;
| ● | A reduction to the Short-term Lease Receivable of $24.2 million ($17.0 million net of discount);
| ● | Additional reimbursed severance costs of $4.3 million;
| ● | An increase to unfavorable lease liabilities of $6.0 million;
| ● | A reduction to accrued liabilities of $11.3 million; and
| ● | A reduction to deferred income tax liabilities resulting from the adjustments noted above of $1.9 million.
During the three months ended June 30, 2024, the Company recorded measurement period adjustments resulting in an increase to the gain on bargain purchase of $27.7 million which included;
| ● | Additional reimbursed severance costs of $8.0 million; and
| ● | An adjustment to net deferred income tax liabilities of $19.7 million.
The following table summarizes the fair values for each major class of assets acquired and liabilities assumed at the Closing Date. The Company retained the services of certified valuation specialists to assist with assigning values to certain acquired assets and assumed liabilities. ​
​ | ​ | ​ | ​
​ |  | May 1, 2023
Assets | ​ | ​ | ​
Current assets: |  | ​ | ​
Cash and cash equivalents | ​ | $ | 47,074
Accounts receivable | ​ |  | 39,948
Prepaid expenses and other current assets | ​ |  | 22,777
Total current assets | ​ |  | 109,799
Total property and equipment | ​ |  | 965,715
Right-of-use leased assets | ​ |  | 304,982
IPv4 intangible assets | ​ |  | 458,000
Other intangible assets | ​ | ​ | 16,000
Deposits and other assets | ​ |  | 7,521
Total assets | ​ | $ | 1,862,017
Liabilities | ​ |  | ​
Current liabilities: | ​ |  | ​
Accounts payable | ​ | $ | 13,313
Accrued and other current liabilities | ​ |  | 25,344
Current maturities, operating lease liabilities | ​ |  | 74,562
Current maturities, finance lease liabilities | ​ | ​ | 39,559
Total current liabilities | ​ |  | 152,778
Operating lease liabilities, net of current maturities | ​ |  | 251,573
Finance lease liabilities, net of current maturities | ​ | ​ | 121,342
Deferred income tax liabilities | ​ |  | 474,891
Other long-term liabilities | ​ |  | 35,366
Total liabilities | ​ |  | 1,035,950
Fair value of net assets acquired | ​ | $ | 826,067
Gain on bargain purchase | ​ | ​ | ​
Fair value of net assets acquired | ​ | $ | 826,067
Total net consideration to be received from the Seller, net of discounts - see table above | ​ | ​ | 602,581
Gain on bargain purchase | ​ | $ | 1,428,648
​ Acquired Property & Equipment The Company acquired property and equipment of $965.7 million. This is primarily comprised of the legacy Sprint network and consists of optical fiber, related equipment, and owned real estate that were valued using a combination of cost and market approaches. Management intends to operate the acquired business; however, management valued these assets using factors that represent an orderly liquidation value, to approximate the highest and best use of assets acquired in a distressed business. The estimated fair value of the optical fiber on the Closing Date was $369.2 million. The valuation required the estimation of the total replacement cost per mile of fiber and a factor to reflect the orderly liquidation value. There is no active market data for these assumptions and these assumptions are inherently subjective. Market participants could have differing views on these assumptions, which could result in a materially different fair value of the optical fiber. Acquired Leases The Company acquired a portfolio of lease arrangements for the lease of dark fiber, rights-of-way and facilities. In accordance with ASC 805 and ASC Topic 842 Leases, the acquired leases are accounted for as if the leases were new at the acquisition date, however, the Company retains the lease classification from the Seller. The Company followed its historical policies with respect to evaluating the renewal periods of the acquired leases and estimating the incremental borrowing rate. During the third quarter of 2023, the Company recorded a measurement period adjustment to reclassify $24.9 million from right - of - use leased assets (net of related unfavorable lease liability amount) to finance lease assets (presented within property and equipment) and a measurement period adjustment to reclassify $160.9 million from operating lease liabilities to a finance lease liability. The Company also evaluated the leases for unfavorable terms and recorded an adjustment for unfavorable market terms of $157.2 million that was valued using the income approach. Unfavorable lease liabilities are presented net of the corresponding right-of-use assets. Acquired Intangible Assets Intangible assets acquired include $458.0 million of Internet Protocol version 4 (“ IPv4”) addresses and $16.0 million of acquired customer relationships. During the fourth quarter of 2023, the Company recorded a reduction to acquired customer relationships, totaling $41.0 million from revisions to certain assumptions. The acquired customer relationships have an estimated useful life of nine years, and the estimated fair value was determined using a market - based income approach. Amortization expense was $0.4 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively. Future amortization expense of the customer relationships is $1.8 million per year for seven years. The fair value measurement of the IPv4 addresses was based on recent auction prices and a factor to incorporate the uncertainty for how the market for IPv4 addresses will function in the future. The Company believes that the IPv4 address asset has an indefinite useful life and is not being amortized. The Company evaluates the IPv4 address asset for impairment on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. In performing the impairment assessment, the Company may first evaluate qualitative factors to determine whether it is more likely than not that the fair value of the indefinite - lived intangible asset is less than its carrying amount. Upon consideration of relevant factors, the Company concluded that it was not more - likely - than - not that impairment was present, and therefore, a quantitative impairment assessment was not required. There was no impairment recorded during the period from May 1, 2023 through March 31, 2025. Acquired Asset Retirement Obligations In connection with the Transaction, the Company assumed $32.0 million of asset retirement obligations primarily related to restoration obligations for acquired leases that were valued using the income approach. In accordance with ASC 410, the Company has not recorded an asset retirement obligation related to the removal of the acquired optical fiber because a settlement date for which to remove the fiber is indeterminable and therefore a reasonable estimation of fair value cannot be made. ​ Reassessment of Bargain Purchase Gain Because the fair value of the identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred, the Company recorded a material bargain purchase gain. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed in accordance with ASC 805-30-25-4 and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. ​ Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles, (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. While the Company believes that the disclosures are adequate to not make the information misleading, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in its annual report on Form 10-K for the year ended December 31, 2024. Certain prior year amounts have been reclassified to conform to current year presentation. The accompanying unaudited condensed consolidated financial statements include all wholly owned subsidiaries. All inter-company accounts and activity have been eliminated. Use of estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. Financial instruments At March 31, 2025 and December 31, 2024, the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments. The Company measures its cash equivalents and restricted cash at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2—market approach) at March 31, 2025;
| ● | The fair value of the Company’s $450.0 million aggregate principal amount of 7.00% Senior Unsecured Notes due 2027 (the “2027 Notes”) was $450.0 million;
| ● | The fair value of the Company’s $300.0 million aggregate principal amount of 7.00% Senior Unsecured Mirror Notes due 2027 (the “2027 Mirror Notes”) was $300.0 million;
| ● | The fair value of the Company’s $500.0 million aggregate principal amount of 3.50% Senior Secured Notes due 2026 (the “2026 Notes”) was $483.8 million;
| ● | The fair value of the Company’s $206.0 million aggregate principal amount of secured IPv4 notes (the “IPv4 Notes”) was $211.3 million; and
| ● | The fair value of the Company’s interest rate swap agreement was $22.5 million.
Restricted cash and interest rate swap agreement Restricted cash includes amounts held in segregated bank accounts by the Company’s clearing broker as margin in support of the Company’s Swap Agreement as discussed in Note 3 and was $22.5 million as of March 31, 2025. Additional restricted cash related to the IPv4 Notes, as discussed in Note 3, was $7.7 million as of March 31, 2025. Additional cash may be further restricted to maintain the Company’s Swap Agreement as interest rates fluctuate and margin requirements change and under the provisions of the Company’s IPv4 Note indenture. The Company does not use derivative financial instruments for trading purposes. Gross receipts taxes, universal service fund and other surcharges Revenue recognition standards include guidance relating to taxes or surcharges assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, gross receipts taxes, excise taxes, Universal Service Fund fees and certain state regulatory fees. Such charges may be presented gross or net based upon the Company’s accounting policy election. The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenue and network operations expense. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $20.2 million and $20.5 million for the three months ended March 31, 2025 and 2024, respectively. Basic and diluted net loss per common share Basic loss per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or net loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common stock equivalents. Shares of restricted stock are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. The following details the determination of diluted weighted-average shares: ​
​ | ​ | ​ | ​ | ​
​ |  | Three Months |  | Three Months
​ | ​ | Ended | ​ | Ended
​ |  | March 31, 2025 |  | March 31, 2024
Weighted-average common shares - basic | ​ | 47,676,735 | ​ | 47,416,268
Dilutive effect of stock options | ​ | — | ​ | —
Dilutive effect of restricted stock | ​ | — | ​ | —
Weighted-average common shares - diluted | ​ | 47,676,735 | ​ | 47,416,268
​ The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding: ​
​ | ​ | ​ | ​ | ​
​ | ​ | Three Months | ​ | Three Months
​ | ​ | Ended | ​ | Ended
​ |  | March 31, 2025 |  | March 31, 2024
Unvested shares of restricted common stock | ​ | 1,661,185 | ​ | 1,602,845
Anti-dilutive options for common stock | ​ | 137,945 | ​ | 194,990
Anti-dilutive shares of restricted common stock | ​ | 789,335 | ​ | 115,341
​ Stockholders’ (Deficit) Equity The following details the changes in stockholders’ (deficit) equity for the three months ended March 31, 2025 and 2024, respectively (in thousands except share data):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | Additional | ​ | Other | ​ | ​ | ​ | ​ | Total
​ | ​ | Common Stock | ​ | Paid-in | ​ | Comprehensive | ​ | Accumulated | ​ | Stockholders’
​ |  | Shares |  | Amount |  | Capital |  | Income (Loss) |  | Equity (Deficit) |  | Equity
Balance at December 31, 2023 | ​ | 48,608,569 | ​ | $ | 49 | ​ | $ | 606,755 | ​ | $ | (14,385) | ​ | $ | 17,137 | ​ | $ | 609,556
Forfeitures of shares granted to employees | ​ | (37,379) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Equity-based compensation | ​ | — | ​ | ​ | — | ​ | ​ | 7,616 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 7,616
Foreign currency translation | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (5,034) | ​ | ​ | — | ​ | ​ | (5,034)
Issuances of common stock | ​ | 439,090 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Exercises of options | ​ | 3,207 | ​ | ​ | — | ​ | ​ | 164 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 164
Dividends paid | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (46,351) | ​ | ​ | (46,351)
Net loss | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (65,307) | ​ | ​ | (65,307)
Balance at March 31, 2024 | ​ | 49,013,487 | ​ | $ | 49 | ​ | $ | 614,535 | ​ | $ | (19,419) | ​ | $ | (94,521) | ​ | $ | 500,644
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Common Stock | ​ | Paid-in | ​ | Comprehensive | ​ | Accumulated | ​ | Stockholders’
​ |  | Shares |  | Amount |  | Capital |  | Loss |  | Deficit |  | Equity
Balance at December 31, 2024 | ​ | 49,034,925 | ​ | $ | 49 | ​ | $ | 629,829 | ​ | $ | (30,685) | ​ | $ | (376,345) | ​ | $ | 222,848
Forfeitures of shares granted to employees |  | (10,260) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Equity-based compensation |  | — | ​ | ​ | — | ​ | ​ | 9,298 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 9,298
Foreign currency translation |  | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 11,752 | ​ | ​ | — | ​ | ​ | 11,752
Issuances of common stock |  | 310,598 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Exercises of options |  | 2,047 | ​ | ​ | — | ​ | ​ | 121 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 121
Dividends paid |  | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (49,133) | ​ | ​ | (49,133)
Net loss |  | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (52,042) | ​ | ​ | (52,042)
Balance at March 31, 2025 |  | 49,337,310 | ​ | $ | 49 | ​ | $ | 639,248 | ​ | $ | (18,933) | ​ | $ | (477,520) | ​ | $ | 142,844
​ Revenue recognition The Company recognizes revenue under ASU No. 2014 - 09, Revenue from Contracts with Customers (“ASC 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Fees billed in connection with customer installations are recorded as deferred revenue. Installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts. To the extent a customer contract is terminated prior to its contractual end, the customer is subject to termination fees. The Company vigorously seeks payment of these termination fees. The Company recognizes revenue for termination fees as they are collected. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months |  | Three Months
​ | ​ | Ended | ​ | Ended
(in thousands) | ​ | March 31, 2025 | ​ | March 31, 2024
Service revenue recognized from deferred revenue balance at beginning of period | ​ | $ | 2,252 | ​ | $ | 3,085
Amortization expense for contract costs | ​ |  | 5,373 | ​ | ​ | 4,733
​ Lessor Accounting ​ The Company is a lessor for leases of owned dark fiber acquired in connection with the Transaction, that have contract terms that are accounted for as operating leases. These transactions are generally structured as indefeasible - right - of use agreements (“IRUs”), which are the exclusive right to use specified fibers for a specified term, typically 20 - 25 years. Cash consideration received on transfers of dark fiber, including upfront installation fees, is recognized on a straight - line basis to service revenue over the term of the agreement. Lease income is included in service revenue in the condensed consolidated statements of comprehensive (loss) income. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 replaced most existing lease accounting guidance. The operating lease liability under ASU 2016-02 is not considered a liability under the consolidated leverage ratio calculations in the indentures governing the Company’s senior unsecured and senior secured note obligations. The Company has made an accounting policy election to not apply the recognition requirements of ASU 2016-02 to its short-term leases - leases with a term of one year or less. The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease components on its finance and operating leases. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months |  | Three Months
​ | ​ | Ended |  | Ended
(Amounts in thousands) |  | March 31, 2025 |  | March 31, 2024
Finance lease cost |  | ​ |  | ​ | ​ | ​
Amortization of right-of-use assets | ​ | $ | 13,916 | ​ | $ | 11,564
Interest expense on finance lease liabilities | ​ |  | 11,106 | ​ | ​ | 10,411
Operating lease cost | ​ |  | 17,444 | ​ | ​ | 24,251
Total lease costs | ​ | $ | 42,466 | ​ | $ | 46,226
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months |  | Three Months | ​
​ | ​ | Ended | ​ | Ended | ​
​ | ​ | March 31, 2025 | ​ | March 31, 2024 | ​
Other lease information (amounts in thousands) | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash paid for amounts included in the measurement of lease liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating cash flows from finance leases | ​ | $ | (9,723) | ​ | $ | (10,419) | ​
Operating cash flows from operating leases | ​ | ​ | (18,665) | ​ | ​ | (24,729) | ​
Financing cash flows from finance leases | ​ | ​ | (8,003) | ​ | ​ | (23,235) | ​
Right-of-use assets obtained in exchange for new finance lease liabilities | ​ | ​ | 38,961 | ​ | ​ | 54,423 | ​
Right-of-use assets obtained in exchange for new operating lease liabilities | ​ | ​ | 7,873 | ​ | ​ | 5,151 | ​
Weighted-average remaining lease term — finance leases (in years) | ​ | ​ | 17.2 | ​ | ​ | 14.2 | ​
Weighted-average remaining lease term — operating leases (in years) | ​ | ​ | 11.1 | ​ | ​ | 12.3 | ​
Weighted-average discount rate — finance leases | ​ | ​ | 8.1 | % | ​ | 7.7 | %
Weighted-average discount rate — operating leases | ​ | ​ | 7.6 | % | ​ | 8.1 | %
​ Operating leases and finance leases The Company has entered into lease agreements with numerous providers of dark fiber under IRUs. These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The majority of these leases are finance leases. The Company also leases office space, rights-of-way, dark fiber and certain data center facilities under operating leases. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. As of March 31, 2025, the Company had committed to additional IRU agreements totaling $170.4 million in future payments to be paid over periods of up to 20 years. These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months. The future minimum payments under operating lease and finance lease agreements are as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Operating |  | Finance
For the Twelve Months Ending March 31 | ​ | Leases | ​ | Leases
2026 |  | $ | 63,812 | ​ | $ | 65,639
2027 | ​ | ​ | 59,932 | ​ | ​ | 61,187
2028 | ​ | ​ | 57,551 | ​ | ​ | 61,327
2029 | ​ | ​ | 55,098 | ​ | ​ | 59,928
2030 | ​ | ​ | 39,579 | ​ | ​ | 59,748
Thereafter | ​ | ​ | 245,191 | ​ | ​ | 759,496
Total minimum lease obligations | ​ | ​ | 521,163 | ​ | ​ | 1,067,325
Less—amounts representing interest | ​ | ​ | (169,326) | ​ | ​ | (498,788)
Present value of minimum lease obligations | ​ | ​ | 351,837 | ​ | ​ | 568,537
Current maturities | ​ | ​ | (55,973) | ​ | ​ | (24,685)
Lease obligations, net of current maturities | ​ | $ | 295,864 | ​ | $ | 543,852
​ Allowance for credit losses The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables. Based on the Company’s experience, the customer’s delinquency status is the strongest indicator of the credit quality of the underlying trade receivables, which is analyzed monthly. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Current-period |  | ​ |  | ​ | ​
​ | ​ | ​ | ​ | ​ | Provision for | ​ | Write offs | ​ | ​ | ​
​ | ​ | Beginning | ​ | Expected Credit | ​ | Charged Against | ​ | Ending
Description | ​ | Balance | ​ | Losses | ​ | Allowance | ​ | Balance
Allowance for credit losses (deducted from accounts receivable) (in thousands) | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​
Three months ended March 31, 2025 | ​ | $ | 9,762 | ​ | $ | 4,051 | ​ | $ | (4,620) | ​ | $ | 9,193
Three months ended March 31, 2024 | ​ | ​ | 3,677 | ​ | $ | 2,595 | ​ | $ | (684) | ​ | $ | 5,588
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months |  | Three Months
​ | ​ | Ended | ​ | Ended
(in thousands) | ​ | March 31, 2025 | ​ | March 31, 2024
Net bad debt expense | ​ | $ | 2,064 | ​ | $ | 2,595
Bad debt recoveries | ​ |  | 1,987 | ​ | ​ | 296

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