Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our condensed consolidated financial statements and related notes included in this report. The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Factors that could cause or contribute to these differences include those discussed in "Item 1A. Risk Factors," as well as those discussed elsewhere. You should read "Item 1A. Risk Factors" and "Special Note Regarding Forward-Looking Statements." Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include, but are not limited to:

Our acquisition of Sprint Communications, now called Cogent Fiber LLC, including difficulties integrating our business with the Cogent Fiber Business, which may result in the combined company not operating as effectively and efficiently as expected; government policies worldwide; in-office requirements, delays in the delivery of network equipment or optical fiber, loss of key right-of-way agreements, future economic instability in the global economy, including the risk of economic recession and bank failures and liquidity concerns at certain other banks, which could affect spending on Internet services; the impact of changing foreign exchange rates (in particular the Euro to US dollar and Canadian dollar to US dollar exchange rates) on the translation of our non-US dollar denominated revenues, expenses, assets and liabilities into US dollars; legal and operational difficulties in new markets; our ability to maintain our regulatory licenses that are required in the markets in which we operate; the imposition of a requirement that we contribute to the US Universal Service Fund on the basis of our Internet revenue; changes in government policy and/or regulation, including rules regarding data protection, cyber security and net neutrality; increasing competition leading to lower prices for our services; our ability to attract new customers and to increase and maintain the volume of traffic on our network; the ability to maintain our Internet peering and right-of-way arrangements on favorable terms; our ability to renew our long-term leases of optical fiber and right-of-way agreements that comprise our network; our reliance on a limited number of equipment vendors, and the potential for hardware or software problems associated with such equipment; our inability to obtain the equipment necessary for our expansion plans and customer requirements; tariffs imposed on equipment we purchase for our network or other similar government-imposed fees and charges; the dependence of our network on the quality and dependability of third-party fiber and right-of-way providers; our ability to retain certain customers that comprise a significant portion of our revenue base; the management of network failures and/or disruptions; our ability to make payments on our indebtedness as they become due including our ability to repay or refinance our 2027 unsecured notes due in June 2027 and outcomes in litigation, as well as other risks discussed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2025 and our Quarterly Reports on Form 10-Q.

Acquisition of Cogent Fiber Business

On May 1, 2023 (the "Closing Date"), Cogent Infrastructure, Inc. (now Cogent Infrastructure, LLC), a Delaware corporation and our direct wholly owned subsidiary (the "Buyer", "Cogent Infrastructure", "we" or "us"), closed on its acquisition of the U.S. long-haul fiber network (including the non-U.S. extensions thereof) of Sprint Communications and its subsidiaries (the "Cogent Fiber Business") in accordance with the terms and conditions of the Membership Interest Purchase Agreement (the "Purchase Agreement"), dated September 6, 2022, by and among us, 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"). On the Closing Date, we 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 Cogent Fiber Business (such transactions contemplated by the Purchase Agreement, collectively, the "Transaction").

Purchase Price

On the Closing Date, we 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 Cogent Fiber Business) resulted in us making a payment to the Seller of $61.1 million on the Closing Date. In April 2024, an additional Working Capital Adjustment of $5.0 million was paid to the Seller.

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Short-term Lease Payment

The Purchase Agreement provides for a payment of $28.1 million ($19.8 million net of discount) from the Seller to us 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 us 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 required some judgment.

IP Transit Services Agreement

On the Closing Date, we entered into an agreement for IP transit services ("IP Transit Services Agreement"), pursuant to which TMUSA will pay us 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 us $16.7 million during the three months ended September 30, 2026 and $75.0 million during the nine months ended September 30, 2026. The $8.3 million payment scheduled for July 2026 was paid on June 30, 2026. Under the IP Transit Services Agreement, TMUSA paid us $25.0 million during the three months ended September 30, 2025 and $75.0 million during the nine months ended September 30, 2025.

We accounted for the Transaction as a business combination under ASC Topic 805 Business Combinations ("ASC 805"). We evaluated what elements are part of the business combination and the consideration exchanged to complete the acquisition. Under ASC 805, we concluded that the $700.0 million of payments to be made represented consideration received from T-Mobile to complete the acquisition of a distressed business. We also evaluated whether the IP Transit Services Agreement was in the scope of ASU No. 2014-09 Revenue from Contracts with Customers ("ASC 606"). We 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 required some judgment.

Competitive Advantages

We believe we address many of the data communications needs of a diverse group of businesses, communications service providers and other bandwidth-intensive organizations by offering high-quality, high-speed Internet access, optical transport and optical wave services, and private network services at attractive prices. We believe that our organization has the following competitive advantages:

Low Cost of Operation. We believe that the wireline telecom industry is undergoing, and will continue to face, significant price deflation for its applications and services. This price deflation is a result of a variety of factors including increased competition, enhanced substitutability of certain products and services and increased capabilities and greater efficiency in the technology used to provide services. Faced with the backdrop of continued price deflation in our industry, we have made a series of discrete choices around our network design, operating strategy and product offerings that are consistent with our objective of becoming the low-cost operator in our industry. Since our initiation of operations, this strategy has resulted in a rapid decline in our cost to transmit bits, which has increased our margins and decreased our capital intensity, excluding capital expenditures for the repurposing of acquired Cogent Fiber Business assets, as measured by our capital expenditures per total revenues.

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Important components of our low-cost operating strategy include:

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Our IP Network is connected to a total of 3,665 buildings that are located in 309 metropolitan markets globally. These buildings include:

Our MTOBs are located in major North American cities where we offer our services to a diverse set of high-quality corporate customers within close physical proximity of each other. Our CNDCs are located in North America, Europe, Asia, South America, Oceania and Africa where our net-centric customers directly interconnect with our network.

Our optical wave network is connected to 1,151 wave enabled locations located in 156 metropolitan markets in the United States, Canada and Mexico. All of our wavelength services are on-net as they originate and terminate on our optical wave network. Our Cogent data centers, including our Cogent Edge data centers, are directly connected to our network and operate across the United States and in Europe, and comprise 1.5 million square feet of floor space, and 150 MW of power.

We believe that these network points of presence strategically position our networks to attract high levels of Internet traffic and maximize our revenue opportunities and profitability.

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We currently serve:

Because of the number of customers who distribute (content providers) and receive (access networks) content on our IP Network, we believe that the majority of all the traffic remains "on-net" by both originating and terminating on our IP Network. This control of traffic is an important differentiator as it increases our service reliability and speed of traffic delivery. The increasing share of traffic delivered from content providers to access networks also enhances our margins as we are compensated by both the originating customer and the terminating customer. The breadth of our IP Network, extensive size of our customer base, and the volume of our traffic enables us to be one of a handful of Tier 1 networks that are interconnected with other Tier 1 networks on a settlement-free basis. This Tier 1 network peering status broadens our geographic delivery capability and materially reduces our network costs.

Our Strategy

We intend to remain a leading provider of high-quality, high-speed Internet access and private network services and to continue to improve our profitability and cash flow. The principal elements of our strategy include:

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We expect that we will continue to grow our shares of these segments by offering our customers a series of attractive features including:

We believe that we offer our customers the following:

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We are actively marketing the sale or lease of the remaining 14 of the 24 data center facilities originally acquired in the Transaction that we identified to be sold.

Results of Operations

Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025

Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality and variability of our service revenue, operating results and cash flows. The following summary table presents a comparison of our results of operations with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

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Service Revenue. We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our IP Network and our optical wave network. We do this by investing capital to expand the geographic footprint of our network, increasing the number of buildings connected to our network, including CNDCs and MTOBs, and increasing our penetration rate into our existing buildings. These efforts broaden the global reach of our network and increase the size of our potential addressable market. We also seek to grow our service revenue by investing in our sales and marketing team. We typically sell corporate connections at similar pricing to our competitors, but our customers benefit from our significantly faster speeds, greater aggregate throughput, enhanced service level agreements and rapid installation times. In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.

Our service revenue decreased by 4.4% from the three months ended September 30, 2025 to the three months ended September 30, 2026. The decrease was primarily driven by cancellations of low margin and non-core customers we acquired with the Cogent Fiber Business, partially offset by the growth in customers from expanding our network, increasing our wavelength service revenue, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and gaining market share by offering our services at lower prices than our competitors. Exchange rates negatively impacted our service revenue from the three months ended September 30, 2025 to the three months ended September 30, 2026 by $0.5 million.

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Revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, gross receipts taxes, Universal Service Fund fees and certain state regulatory fees. We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our condensed consolidated statements of comprehensive income. The impact of these taxes including the Universal Service Fund resulted in a decrease to our revenues of $0.3 million from the three months ended September 30, 2025 to the three months ended September 30, 2026.

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Revenue and customer connections by customer type. Our corporate customers generally purchase their services on a price per connection basis. Our net-centric customers generally purchase their IP services on a price per megabit-metered basis and purchase their optical wavelength services on a per connection basis priced by a combination of distance, connection size and contract term. We began to serve enterprise customers in connection with our acquisition of the Cogent Fiber Business. We define "enterprise" customers as large corporations (typically, Fortune 500 companies with greater than $5 billion in annual revenue) running Wide Area Networks ("WAN") with several dozen to several hundred sites. Our enterprise customers generally purchase our services on a price per location basis.

We believe that we are in a unique position to monetize the Cogent Fiber Business and its network, and we have achieved significant cost reduction synergies and revenue synergies from the Transaction. On the Closing Date, with the Cogent Fiber Business we acquired:

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We classified the $39.5 million of May 2023 Cogent Fiber Business monthly revenue as:

Revenues from our corporate, net-centric and enterprise customers represented 42.0%, 46.3% and 11.7% of total service revenue, respectively, for the three months ended September 30, 2026 and represented 43.5%, 41.5% and 15.1% of total service revenue, respectively, for the three months ended September 30, 2025.

Our revenue from our corporate customers decreased primarily due to cancellations of low margin and non-core corporate customers acquired with the Cogent Fiber Business. Our corporate customers take advantage of our superior speeds, greater aggregate throughput, service levels and installation times compared to our competitors. Many companies have adopted a flexible work schedule permitting employees to fully or partially work from home. While these trends have adversely impacted overall occupancy rates, the impact of these vacancies has been partially offset by our corporate customers who are integrating some of the new applications that became part of the remote work environment, which benefits our corporate business as these customers upgrade their Internet access infrastructure to higher capacity connections. If and when companies discontinue flexible and remote work policies, they may return to the buildings in which we operate, and we believe it will present an opportunity for increased sales.

Our revenue from our net-centric customers increased, primarily due to growth in network traffic from our legacy net-centric customers partly offset by a reduction in revenue from net-centric customers acquired with the Cogent Fiber Business. Our net-centric customers purchase our IP services on a price per megabit basis and purchase their optical wavelength services on a per connection basis priced by a combination of distance, connection size and contract term. The net-centric market exhibits significant pricing pressure due to the continued introduction of new technology, which lowers the marginal cost of transmission and routing, and the commodity nature of the service where price is typically the only differentiating factor for these customers. Our average price per megabit of our installed base of customers decreased by 33.1% from the three months ended September 30, 2025 to the three months ended September 30, 2026. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our revenue from our enterprise customers decreased primarily due to a reduction in revenue from low-margin and non-core enterprise customers acquired with the Cogent Fiber Business.

On the Closing Date, we classified the total $39.5 million of monthly Cogent Fiber Business revenue as:

Additionally, on the Closing Date, we classified the total 46,743 Cogent Fiber Business customer connections as:

Revenues from our on-net, off-net, wavelength and non-core customers represented 59.7%, 33.1%, 6.9% and 0.3% of total service revenue, respectively, for the three months ended September 30, 2026 and represented 55.9%, 39.3%, 4.2% and 0.6% of total service revenue, respectively, for the three months ended September 30, 2025.

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Our on-net revenues increased from the three months ended September 30, 2025 to the three months ended September 30, 2026, primarily from an increase in revenues from our legacy Cogent customers. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, only 6.3% represented on-net revenue.

Our off-net revenues decreased from the three months ended September 30, 2025 to the three months ended September 30, 2026 primarily from cancellations of low-margin off-net customers that we acquired with the Cogent Fiber Business. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, 81.7% represented off-net revenue.

In connection with our acquisition of the Cogent Fiber Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network. Wavelength revenue was $16.0 million for the three months ended September 30, 2026 and $10.2 million for the three months ended September 30, 2025.

Our non-core revenues decreased from the three months ended September 30, 2025 to the three months ended September 30, 2026 from the cancellation of non-core revenues acquired in the Cogent Fiber Business. Non-core services are services, which we acquired and continue to support but do not actively sell. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, we classified 11.9% as non-core revenue.

Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management and customer support, network facilities costs, right-of-way fees, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis. Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation. The 7.8% decrease in network operations expense was primarily attributable to our efforts to reduce the network operations costs related to our acquisition of the Cogent Fiber Business. These costs primarily include leased circuit costs, including the reduction of the related "tail-circuit" costs for the reduction in off-net revenue and facilities costs.

Selling, General, and Administrative ("SG&A") Expenses. Our SG&A expenses, including non-cash equity-based compensation expense, decreased by 2.3% from the three months ended September 30, 2025 to the three months ended September 30, 2026. Our decrease in SG&A operations expense was primarily attributable to a decrease in compensation and benefits related costs from a reduction in headcount. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation.

Depreciation and Amortization Expenses. Our depreciation and amortization expense decreased by 12.0%. The decrease was primarily due to assets acquired with the Cogent Fiber Business becoming fully depreciated, in particular acquired network equipment assets and assets sold with the sale of the Ten Data Centers, more than offsetting the increase in our deployed fixed assets.

Interest Income - IP Transit Services Agreement. Under the IP Transit Services Agreement TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months. 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 amortization of the discount resulted in interest income of $2.3 million for the three months ended September 30, 2026 and $3.9 million for the three months ended September 30, 2025.

Gains on Debt Extinguishments - 2032 Notes and 2027 Notes. In the three months ended September 30, 2026, we paid $106.7 million to repurchase $118.4 million of our 2032 Notes at an average price of $90.071. In connection with these purchases, we recognized a gain of $11.3 million in the three months ended September 30, 2026. In the three months ended September 30, 2026, we paid $49.6 million to repurchase $15.0 million of our 2027 Notes and $35.0 million of our 2027 Mirror Notes at an average price of $99.250. In connection with these purchases, we recognized a gain of $0.1 million in the three months ended September 30, 2026.

Interest Expense - Including Change in Valuation of Swap Agreement. Our interest expense resulted from interest incurred on our:

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Our interest expense decreased by 2.4% from the three months ended September 30, 2025 to the three months ended September 30, 2026. Our interest expense decreased primarily due to the reduction in outstanding principal on our 2032 Notes, 2027 Notes and 2027 Mirror Notes from our note repurchases.

Income Tax Benefit. Our income tax benefit was $4.1 million for the three months ended September 30, 2026 and $11.1 million for the three months ended September 30, 2025. The change was primarily related to projected operating results related to the Cogent Fiber Business acquisition, the reversal of deferred tax liabilities acquired with the Cogent Fiber Business and the impact of the gain on the sale of the Ten Data Centers.

Buildings On-net. As of September 30, 2026 and 2025, we had a total of 3,665 and 3,537 on-net buildings connected to our network, respectively. The increase in our on-net buildings was a result of our disciplined network expansion program. We anticipate adding a similar number of buildings to our network for the next several years.

Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025

Our management reviews and analyzes several key financial measures in order to manage our business and assess the quality and variability of our service revenue, operating results and cash flows. The following summary tables present a comparison of our results of operations with respect to certain key financial measures. The comparisons illustrated in the tables are discussed in greater detail below.

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Service Revenue. We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our IP Network and our optical wave network. We do this by investing capital to expand the geographic footprint of our network, increasing the number of buildings connected to our network, including CNDCs and MTOBs, and increasing our penetration rate into our existing buildings. These efforts broaden the global reach of our network and increase the size of our potential addressable market. We also seek to grow our service revenue by investing in our sales and marketing team. We typically sell corporate connections at similar pricing to our competitors, but our customers benefit from our significantly faster speeds, greater aggregate throughput, enhanced service level agreements and rapid installation times. In the net-centric market, we offer comparable services in terms of capacity but typically at significantly lower prices.

Our service revenue decreased by 4.0% from the nine months ended September 30, 2025 to the nine months ended September 30, 2026. The decrease was primarily driven by the cancellation of low margin and non-core customers we acquired with the Cogent Fiber Business, partially offset by the growth in customers from expanding our network, increasing our wavelength service revenue, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and gaining market share by offering our services at lower prices than our competitors. Exchange rates positively impacted our service revenue from the nine months ended September 30, 2025 to the nine months ended September 30, 2026 by $3.7 million

Revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, gross receipts taxes, Universal Service Fund fees and certain state regulatory fees. We record these taxes billed to our customers on a gross basis (as service revenue and network operations expense) in our condensed consolidated statements of comprehensive income. The impact of these taxes including the Universal Service Fund resulted in a decrease to our revenues of $2.1 million from the nine months ended September 30, 2025 to the nine months ended September 30, 2026.

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Revenue and customer connections by customer type. Our corporate customers generally purchase their services on a price per connection basis. Our net-centric customers generally purchase their IP services on a price per megabit-metered basis and purchase their optical wavelength services on a per connection basis priced by a combination of distance, connection size and contract term. We began to serve enterprise customers in connection with our acquisition of the Cogent Fiber Business. We define "enterprise" customers as large corporations (typically, Fortune 500 companies with greater than $5 billion in annual revenue) running Wide Area Networks ("WAN") with several dozen to several hundred sites. Our enterprise customers generally purchase our services on a price per location basis.

We believe that we are in a unique position to monetize the Cogent Fiber Business and its network, and we expect to achieve significant cost reduction synergies and revenue synergies from the Transaction. On the Closing Date, with the Cogent Fiber Business we acquired:

We classified the $39.5 million of May 2023 Cogent Fiber Business monthly revenue as:

Revenues from our corporate, net-centric and enterprise customers represented 42.0%, 45.4% and 12.6% of total service revenue, respectively, for the nine months ended September 30, 2026 and represented 44.2%, 39.5% and 16.3% of total service revenue, respectively, for the nine months ended September 30, 2025.

Our revenue from our corporate customers decreased primarily due to cancellations of low margin and non-core corporate customers acquired with the Cogent Fiber Business. Our corporate customers take advantage of our superior speeds, greater aggregate throughput, service levels and installation times compared to our competitors. Many companies have adopted a flexible work schedule permitting employees to fully or partially work from home. While these trends have adversely impacted overall occupancy rates, the impact of these vacancies has been partially offset by our corporate customers who are integrating some of the new applications that became part of the remote work environment, which benefits our corporate business as these customers upgrade their Internet access infrastructure to higher capacity connections. If and when companies discontinue flexible and remote work policies, they may return to the buildings in which we operate, and we believe it will present an opportunity for increased sales.

Our revenue from our net-centric customers increased, primarily due to growth in network traffic from our legacy net-centric customers partly offset by a reduction in revenue from net-centric customers acquired with the Cogent Fiber Business. Our net-centric customers purchase our IP services on a price per megabit basis and purchase their optical wavelength services on a per connection basis priced by a combination of distance, connection size and contract term. The net-centric market exhibits significant pricing pressure due to the continued introduction of new technology, which lowers the marginal cost of transmission and routing, and the commodity nature of the service where price is typically the only differentiating factor for these customers. Our average price per megabit of our installed base of customers decreased by 34.6% from the nine months ended September 30, 2025 to the nine months ended September 30, 2026. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our revenue from our enterprise customers decreased primarily due to a reduction in revenue from low-margin and non-core enterprise customers acquired with the Cogent Fiber Business.

On the Closing Date, we classified the total $39.5 million of monthly Cogent Fiber Business revenue as:

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Additionally, on the Closing Date, we classified the total 46,743 Cogent Fiber Business customer connections as:

Revenues from our on-net, off-net, wavelength and non-core customers represented 57.9%, 35.4%, 6.3% and 0.4% of total service revenue, respectively, for the nine months ended September 30, 2026 and represented 54.0%, 41.4%, 3.6% and 1.0% of total service revenue, respectively, for the nine months ended September 30, 2025.

Our on-net revenues increased from the nine months ended September 30, 2025 to the nine months ended September 30, 2026, primarily from an increase in revenues from our legacy Cogent customers. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, only 6.3% was on-net revenue.

Our off-net revenues decreased from the nine months ended September 30, 2025 to the nine months ended September 30, 2026, primarily from cancellations of low-margin off-net customers and off-net customers in unlicensed markets that we acquired with the Cogent Fiber Business. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, 81.7% was off-net revenue.

In connection with our acquisition of the Cogent Fiber Business, we expanded our offerings of optical wavelength and optical transport services over our fiber network. Wavelength revenue was $44.4 million for the nine months ended September 30, 2026 and $26.4 million for the nine months ended September 30, 2025.

Our non-core revenues decreased from the nine months ended September 30, 2025 to the nine months ended September 30, 2026 from the cancellation of non-core revenues acquired in the Cogent Fiber Business. Non-core services are services, which we acquired and continue to support but do not actively sell. Of the $39.5 million of monthly revenue we acquired with the Cogent Fiber Business acquisition, we classified 11.9% as non-core revenue.

Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management and customer support, network facilities costs, right-of-way fees, fiber and equipment maintenance fees, leased circuit costs, access and facilities fees paid to building owners and excise taxes billed to our customers and recorded on a gross basis. Non-cash equity-based compensation expense is included in network operations expenses consistent with the classification of the employee's salary and other compensation. The 7.6% decrease in network operations expense was primarily attributable to our efforts to reduce the network operations costs related to our acquisition of the Cogent Fiber Business. These costs primarily include leased circuit costs, including the reduction of the related "tail-circuit" costs for the reduction in off-net revenue and facilities costs.

Selling, General, and Administrative ("SG&A") Expenses. Our SG&A expenses, including non-cash equity-based compensation expense, increased by 1.9% from the nine months ended September 30, 2025 to the nine months ended September 30, 2026. Our increase in SG&A operations expense was primarily attributable to increases in the amortization of prepaid commissions costs, certain property related taxes and a $2.3 million increase in non-cash equity-based compensation expense. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee's salary and other compensation.

Depreciation and Amortization Expenses. Our depreciation and amortization expense decreased by 24.4%. The decrease was primarily due to assets acquired with the Cogent Fiber Business becoming fully depreciated, in particular acquired network equipment assets and assets sold with the sale of Ten Data Centers, more than offsetting the increase in our deployed fixed assets.

Interest Income - IP Transit Services Agreement. Under the IP Transit Services Agreement TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months. 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 amortization of the discount resulted in interest income of $8.0 million for the nine months ended September 30, 2026 and $12.9 million for the nine months ended September 30, 2025.

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Gains on Sale of Data Center, Other Assets and Lease Terminations. On June 29, 2026, we completed the sale the Ten Data Centers for net proceeds of $224.2 million, paid in cash in full at closing. The Ten Data Centers were acquired on May 1, 2023 in connection with our acquisition of the Cogent Fiber Business. The net book value of the Ten Data Centers was $93.4 million on the closing date, resulting in a gain of $130.7 million, included in the total gain of $134.9 million for the nine months ended September 30, 2026.

Gains on Debt Extinguishments - 2032 Notes and 2027 Notes. In the nine months ended September 30, 2026, we paid $125.4 million to repurchase $138.8 million of our 2032 Notes at an average price of $90.348. In connection with these purchases, we recognized a gain of $12.9 million in the nine months ended September 30, 2026. In the nine months ended September 30, 2026, we paid $49.6 million to repurchase $50.0 million of our 2027 Notes at an average price of $99.250. In connection with these purchases, we recognized a gain of $0.1 million in the nine months ended September 30, 2026.

Loss on Debt Extinguishment - Former 2026 Notes. On June 17, 2025 we issued $600.0 million aggregate principal amount of our 2032 Notes. Our 2032 Notes were issued in connection with the extinguishment of our $500.0 million aggregate principal amount of our Former 2026 Notes. The net proceeds from the 2032 Notes offering were $597.8 million after deducting offering expenses. We used $507.3 million of the net proceeds from the 2032 Notes offering to satisfy and discharge our obligations under the Former 2026 Notes. The obligations under the Former 2026 Notes included the $500.0 million principal amount, a $5.0 million settlement payment and $2.2 million of accrued interest. As a result of the redemption of the Former 2026 Notes we incurred a loss on debt extinguishment of $5.6 million.

Interest Expense - Including Change in Valuation of Swap Agreement. Our interest expense resulted from interest incurred on our:

Our interest expense increased by 10.6% from the nine months ended September 30, 2025 to the nine months ended September 30, 2026. Our interest expense increased primarily due to the April 2025 issuance of our New IPv4 Notes, the June 2025 issuance of our 2032 Notes issued for $100.0 million of additional principal amount and at a higher interest rate compared to our extinguished Former 2026 Notes and our final $4.1 million payment on our interest rate swap agreement in February 2026.

Income Tax (Provision) Benefit. Our income tax provision was $0.9 million for the nine months ended September 30, 2026. Our income tax benefit was $46.0 million for the nine months ended September 30, 2025. The change was primarily related to projected operating results related to the Cogent Fiber Business acquisition, the reversal of deferred tax liabilities acquired with the Cogent Fiber Business and the impact of the gain on the sale of the Ten Data Centers in the nine months ended September 30, 2026.

Buildings On-net. As of September 30, 2026 and 2025, we had a total of 3,665 and 3,537 on-net buildings connected to our network, respectively. The increase in our on-net buildings was a result of our disciplined network expansion program. We anticipate adding a similar number of buildings to our network for the next several years.

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Liquidity and Capital Resources

Acquisition of Cogent Fiber Business - Cash Flow

The Cogent Fiber Business's cash flow was negative at the time of negotiations and during its recent history. Due to the dire financial condition of the Cogent Fiber Business, it was understood that a payment from T-Mobile to any potential buyer would be required to execute a transaction to give a buyer sufficient cash inflow to offset losses that would be expected until a buyer could optimize the business. Based on management's internal modeling at the culmination of the due diligence process, management determined this cash payment to be $700.0 million. Management intends to reduce the negative cash flow of the Cogent Fiber Business through the payments from the IP Transit Services Agreement, by reducing operating costs and by increasing revenue primarily by providing optical wavelength and optical transport services. We are selling these services to our existing customers, customers we acquired with the Cogent Fiber Business and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure. Our cash flow requirements related to the acquisition of the Cogent Fiber Business will be dependent upon our ability to reduce the acquired operating costs, our success in retaining the profitable acquired customers and our ability to sell optical wavelength and optical transport services over our optical wave network.

Under the IP Transit Services Agreement, TMUSA will pay us 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. Through September 30, 2026, we received monthly payments totaling $583.3 million under the IP Transit Services Agreement, reflected as cash flows from investing activities in our consolidated statements of cash flows. As our business has grown as a result of an increasing customer base, the Transaction, broader geographic coverage and increased traffic on our network, we have historically produced a growing level of cash provided by operating activities. Since we closed the Transaction, we have experienced a reduction of cash provided by operating activities from the impact of the Transaction. The cash received from the IP Transit Services Agreement was designed to offset operating losses associated with the Cogent Fiber Business. Increasing our cash provided by operating activities is, in part, dependent upon our ability to reduce the operating costs of the Cogent Fiber Business while retaining its profitable revenue, expanding our geographic footprint and increasing our revenues from our wavelength and optical network services.

Liquidity and cash obligations

In assessing our liquidity, management reviews and analyzes our current cash balances, payments under the IP Transit Services Agreement, accounts receivable, accounts payable, accrued liabilities, capital expenditure commitments, and required finance lease and debt payments and other obligations.

We have had success in raising capital by issuing notes and arranging financing and entering into leases that have had a lower cost and more flexible terms. The combination of our operating performance and access to capital has enhanced our financial flexibility and increased our ability to make distributions to stockholders in the form of cash dividends or through share repurchases. Since our initial public offering, we have returned $1.8 billion to our stockholders through share repurchases and dividends. We will continue to assess our capital and liquidity needs and, where appropriate, return capital to our stockholders.

Over the next several years, we have significant contractual and anticipated cash outlays including our maturing debt obligations, interest payments on our debt obligations, our indicative dividend payments on our common stock and our projected capital expenditure requirements in order to help execute our business plan including the continued integration of the Cogent Fiber Business.

Our long-term debt interest obligations and maturity dates of our long-term debt obligations are as follows:

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We may need to, or elect to, refinance all or a portion of our indebtedness at or before maturity, and we cannot provide assurances that we will be able to refinance any such indebtedness on commercially reasonable terms or at all. In addition, we may elect to secure additional capital in the future, at acceptable terms, to improve our liquidity or fund acquisitions or for general corporate purposes. In addition, in an effort to reduce future cash interest payments as well as future amounts due at maturity or to extend debt maturities, we or our affiliates may, from time to time, issue new debt, enter into interest rate swap agreements, enter into debt for debt or debt for equity exchanges, or cash transactions to purchase our outstanding debt securities in the open market, through privately negotiated transactions or otherwise. We will evaluate any such transactions in light of the existing market conditions. The amounts involved in any such transaction, individually or in the aggregate, may be material. Repurchases or exchanges, if any, of our outstanding debt securities will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

In light of the economic uncertainties associated with the global economy, including due to the impact from tariffs and trade restrictions and tariffs, the cash flow requirements of the Cogent Fiber Business, and the lingering impact of the COVID-19 pandemic our executive officers and Board of Directors have continued to carefully monitor our liquidity and cash requirements. Based on current circumstances, we decreased our quarterly dividend to $0.02 per share of common stock for the dividend that was paid in the fourth quarter of 2025 through the third quarter of 2026. Beginning in the fourth quarter of 2026 we have suspended our dividend. Any future determination regarding dividends, including a decision to increase our quarterly dividend, will be at the discretion of the Board and will depend on the Company's financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends, and other factors the Board deems relevant. Given uncertainties regarding the potential impact of tariffs and trade restrictions, the global economy, lingering business impact of the pandemic, and the cash flow requirements of the Cogent Fiber Business, we will continue to monitor our capital spending. As we do each year, we will continue to monitor our future sources and uses of cash, and anticipate that we will adjust our capital allocation strategies when, as and if determined by our Board of Directors.

Addressing the 2027 Notes and 2027 Mirror Notes Maturity

We expect to address our 2027 Notes and 2027 Mirror Notes, subject to market conditions and other factors, and are working with advisors and potential financing sources to address the upcoming maturity.

Cash, cash equivalents and restricted cash

As of September 30, 2026, we had cash, cash equivalents and restricted cash of $181.3 million. Restricted cash as of September 30, 2026 was $14.4 million. The net proceeds from our 2032 Notes, after the extinguishment and redemption of our 2026 Notes, were $92.8 million. The net proceeds of our $174.4 million New IPv4 Notes that we issued in April 2025 were $170.5 million of which $72.6 million was restricted. This restricted cash becomes available to us based upon improvements in our monthly leverage ratio and our debt service coverage ratio (as defined in the IPv4 Notes Indenture). During the nine months ended September 30, 2026 and the year ended December 31, 2025, the restriction on $38.1 million and $26.9 million, respectively, of restricted cash was released primarily due to an improvement in our monthly leverage and debt service coverage ratios under the IPv4 Notes Indenture.

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Gains on debt extinguishment - 2032 Notes

In the nine months ended September 30, 2026, we paid $126.2 million to repurchase $138.8 million of our 2032 Notes at an average price of $90.348. In connection with these purchases, we recognized a gain of $12.9 million in the nine months ended September 30, 2026.

Gains on debt extinguishment - 2027 Notes

In the three months ended September 30, 2026, we paid $14.9 million to repurchase $15.0 million par value of our 2027 Notes for an average price of $99.25, and we paid $34.8 million to purchase $35.0 million par value of our 2027 Mirror Notes at an average price of $99.25. In connection with these purchases, we recognized a gain of $0.1 million in the three months ended September 30, 2026.

Supplemental Indenture - 2032 Notes

In the second quarter of 2026, we began to solicit consents from the holders of our 2032 Notes to implement revisions to our 2032 Notes indenture (the "Supplemental Indenture"). In order to be effective, approval of a majority of the holders of the outstanding par value of our 2032 Notes was required. In June 2026, we obtained the approval from a majority of the holders of our 2032 Notes who executed the Supplemental Indenture. We paid a 12.5 basis point fee, totaling $0.5 million to the holders who executed the Supplemental Indenture.

The Supplemental Indenture to the 2032 Notes includes the following provisions:

In June 2026, we sold the Ten Data Centers for net proceeds of $224.2 million. The Data Center Proceeds, as determined on an after-tax basis to the seller, from the sale of the Ten Data Centers were approximately $168.0 million.

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Continued Impact of Changing Office Occupancy Rates

While we believe that demand for office space in the buildings in which we operate will remain among the strongest in the markets in which they are located, and that most employers will eventually require their employees to return to their offices on at least a hybrid basis, the timing and scope of a return to office, particularly in a number of key markets we serve, remains uncertain. In some markets, office occupancy rates may never return to pre-2020 levels. As a result, we may continue to experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities. These trends may negatively impact our revenue growth, cash flows and profitability.

Cash Flows

The following table sets forth our consolidated cash flows:

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Net Cash Provided by (Used in) Operating Activities. Our primary source of operating cash is receipts from our customers who are billed on a monthly basis for our services. Our primary uses of operating cash are payments made to our vendors, payments to employees and interest payments made to our finance lease vendors and our note holders. Our changes in cash provided by operating activities are primarily due to changes in our operating profit and changes in our interest payments. Interest payments on our note obligations were $87.5 million and $55.0 million for the nine months ended September 30, 2026 and 2025, respectively. Interest payments on our note obligations for the nine months ended September 30, 2026 included our initial $21.0 million interest payment on our 2032 Notes.

Net Cash Provided by (Used in) Investing Activities. Our primary use of cash for investing activities is for purchases of property and equipment. Purchases of property and equipment were $121.1 million and $150.5 million for the nine months ended September 30, 2026 and 2025, respectively. The changes in purchases of property and equipment were primarily due to the timing and scope of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Cogent Fiber Business, costs associated with providing wave services, conversion costs related to acquired data centers and adding buildings to our network. The reduction in purchases of property and equipment from the nine months ended September 30, 2025 to the nine months ended September 30, 2026 was primarily due to the completion of the conversion of the acquired data centers.

On the Closing Date, we entered into the IP Transit Services Agreement pursuant to which TMUSA will pay us an aggregate of $700.0 million, consisting of (i) $350.0 million in equal monthly installments during the first year after the Closing Date and (ii) $350.0 million in equal monthly installments over the subsequent 42 months. During the nine months ended September 30, 2026 and 2027 we were paid $75.0 million under the IP Transit Services Agreement.

On June 29, 2026, we completed the sale of the Ten Data Centers for net proceeds of $224.2 million, paid in cash in full at closing. The Ten Data Centers were acquired on May 1, 2023 in connection with our acquisition of the Cogent Fiber Business. The net book value of the Ten Data Centers was $93.4 million on the closing date, resulting in a gain of $130.7 million included in the total gain on asset sales of $134.9 million for the nine months ended September 30, 2026.

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Net Cash (Used in) Provided by Financing Activities. Our primary uses of cash for financing activities are for dividend payments, purchases of our common stock, redemptions of our debt obligations and principal payments under our finance lease obligations. Our primary sources of cash for financing activities are issuances of note obligations. During the nine months ended September 30, 2026 and 2025 we paid $4.9 million and $147.8 million for our quarterly dividend payments, respectively. In the fourth quarter of 2025, we reduced our quarterly dividend payment to $0.02 per share. Purchases of our common stock under our stock buyback program were $16.7 million for the nine months ended September 30, 2025. There were no purchases of our common stock in the nine months ended September 30, 2026. Principal payments under our finance lease obligations were $30.1 million and $25.3 million for the nine months ended September 30, 2026 and 2025, respectively. Changes in our principal payments under our finance lease obligations were primarily due to the timing and extent of our network expansion and reconfiguration activities including geographic expansion, purchases related to our acquisition of the Cogent Fiber Business associated with providing wave services and adding buildings to our network.

We paid $125.4 million to purchase $138.8 million par value of our 2032 Notes, paid $14.9 million to purchase $15.0 million par value of our 2027 Notes and paid $34.7 million to purchase $35.0 million par value of our 2027 Mirror Notes in the nine months ended September 30, 2026.

We completed a series of debt issuances in the nine months ended September 30, 2025.

On April 11, 2025 we issued $174.4 million aggregate principal amount of 6.646% secured IPv4 address revenue notes, Series 2025-1 Class A-2 (collectively, the "New IPv4 Notes"), with an anticipated repayment date in April 2030, in an offering exempt from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). The net proceeds of the New IPv4 Notes, after offering expenses were $170.5 million, of which $72.6 million was restricted cash. Certain of the restricted cash net proceeds becomes available to us based upon improvements in our monthly leverage ratio and debt service coverage ratio (both as defined in the IPv4 Notes Indenture). During the nine months ended September 30, 2026 and the year ended December 31, 2025, the restriction on $14.2 million and $26.9 million, respectively, of restricted cash was released primarily due to an improvement in our monthly leverage and debt service coverage ratios under the IPv4 Notes Indenture.

Interest on the New IPv4 Notes is paid on a monthly basis. From and after the monthly payment date in April of 2030, principal payments will also be required to be made on the New IPv4 Notes on a monthly basis. No principal payments will be due on the New IPv4 Notes prior to the monthly payment date in April of 2030, unless certain rapid amortization, events of default, mandatory prepayment or acceleration triggers are activated.

On June 17, 2025 (the "2032 Notes Closing Date"), we issued $600.0 million of 2032 Notes in a private placement not registered under the Securities Act. The net proceeds from the offering were $597.8 million after deducting offering expenses. On the 2032 Notes Closing Date, we used $507.3 million of the net proceeds from the offering to redeem in full, and satisfy and discharge our obligations under our Former 2026 Notes. The obligations paid under the indenture governing our Former 2026 Notes included:

Cash Position and Indebtedness

At September 30, 2026, our total indebtedness, at par, was $2.2 billion, and our total cash, cash equivalents and restricted cash ($14.4 million) was $181.3 million. Our total indebtedness at September 30, 2026 includes $622.1 million of finance lease obligations for dark fiber under long-term IRU agreements.

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Summarized Financial Information of Holdings

Neither Holdings nor any of its subsidiaries that is not also a subsidiary of Group is a "Restricted Subsidiary" as defined under the indentures governing our 2032 Notes, our 2027 Notes or our 2027 Mirror Notes (the "Indentures"). Holdings is a guarantor under these notes, but none of its subsidiaries that is not also a subsidiary of Group is a guarantor under these notes. Under the Indentures, we are required to disclose certain reasonably related information of Holdings and its subsidiaries that is not attributable to Group and its subsidiaries, relating to Holdings' assets, liabilities and operating results ("Holdings Financial Information"). The Holdings Financial Information as of and for the three and nine months ended September 30, 2026 is detailed below (in thousands):

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Stock Buyback Program

Our Board of Directors has approved purchases of shares of our common stock under a buyback program (the "Buyback Program"). There were no purchases of our common stock in the three or nine months ended September 30, 2026. In the nine months ended September 30, 2025, the Company purchased 341,818 shares of its common stock for $16.7 million under its Buyback Program. As of September 30, 2026, there was a total of $105.8 million available under the Buyback Program that is authorized to continue through December 31, 2027.

Dividends on Common Stock and Return of Capital Program

The payment of any future dividends and any other returns of capital, including stock buybacks, will be at the discretion of our Board of Directors and may be reduced, eliminated or increased and will be dependent upon our financial position, results of operations, available cash, cash flow, capital requirements, limitations under our Indentures and other factors deemed relevant by our Board of Directors. We are a Delaware corporation and under the General Corporation Law of the State of Delaware, distributions may be restricted including a restriction that distributions, including stock purchases and dividends, do not result in an impairment of a corporation's capital, as defined under Delaware law. The Indentures limit our ability to return cash to our stockholders. See Note 3 of our interim condensed consolidated financial statements for additional discussion of limitations on distributions.

Future Capital Requirements

We believe that our cash on hand and cash generated from our operating activities and cash from the IP Transit Services Agreement will be adequate to meet our working capital, capital expenditure, debt service, dividend payments and other cash requirements for the next 12 months and beyond the next 12 months if we execute our business plan, which includes addressing the maturity of our 2027 Notes and our 2027 Mirror Notes.

Any future acquisitions or other significant unplanned costs or cash requirements in excess of amounts we currently hold may require that we raise additional funds through the issuance of debt or equity. Our 2027 Notes and our 2027 Mirror Notes will mature in June 2027. Subject to market conditions and other factors, we expect to address the 2027 Notes and 2027 Mirror Notes, which we expect will require us to issue additional indebtedness, and are working with advisors and potential financing sources to address the upcoming maturity. We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all. Insufficient funds may require us to delay or scale back the number of buildings and markets that we add to our network, reduce our planned increase in our sales and marketing efforts, or require us to otherwise alter our business plan or take other actions that could have a material adverse effect on our business, results of operations and financial condition. If issuing equity securities raises additional funds, substantial dilution to existing stockholders may result.

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We may need to, or elect to, refinance all or a portion of our other indebtedness at or before maturity and we cannot provide assurances that we will be able to refinance any such indebtedness on commercially reasonable terms or at all. In addition, we may elect to secure additional capital in the future, at acceptable terms, to improve our liquidity or fund acquisitions or for general corporate purposes. In addition, in an effort to reduce future cash interest payments as well as future amounts due at maturity or to extend debt maturities, we or our affiliates may, from time to time, issue new debt, enter into debt for debt or debt for equity exchanges, or cash transactions to purchase our outstanding debt securities in the open market, through privately negotiated transactions or otherwise. We will evaluate any such transactions in light of the existing market conditions. The amounts involved in any such transaction, individually or in the aggregate, may be material.

Off-Balance Sheet Arrangements

We do not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Estimates

Management believes that as of September 30, 2026, there have been no material changes to our critical accounting policies and significant estimates from those listed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the year ended December 31, 2025.

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