10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-51829

COGENT COMMUNICATIONS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	46-5706863
(State of Incorporation)	(I.R.S. Employer
	Identification Number)

2450 N Street N.W.

Washington, D.C. 20037

(Address of Principal Executive Offices and Zip Code)

(202) 295-4200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $0.001 per share	CCOI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧  No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.001 par value 47,251,320 Shares Outstanding as of October 31, 2020

INDEX

	PART I
	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets of Cogent Communications Holdings, Inc., and Subsidiaries as of September 30, 2020 (Unaudited) and December 31, 2019	3
	Condensed Consolidated Statements of Comprehensive Income of Cogent Communications Holdings, Inc., and Subsidiaries for the Three Months Ended September 30, 2020 and September 30, 2019 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income of Cogent Communications Holdings, Inc., and Subsidiaries for the Nine Months Ended September 30, 2020 and September 30, 2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows of Cogent Communications Holdings, Inc., and Subsidiaries for the Nine Months Ended September 30, 2020 and September 30, 2019 (Unaudited)	6
	Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
	PART II
	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
SIGNATURES		36
CERTIFICATIONS

2

PART I FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(IN THOUSANDS, EXCEPT SHARE DATA)

	September 30,		December 31,
	2020		2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	393,293	$	399,422
Accounts receivable, net of allowance for credit losses of $2,204 and $1,771, respectively		42,053		40,484
Prepaid expenses and other current assets		40,007		35,822
Total current assets		475,353		475,728
Property and equipment, net		421,251		368,929
Right-of-use leased assets		90,400		73,460
Deposits and other assets		13,910		14,007
Total assets	$	1,000,914	$	932,124
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,983	$	11,075
Accrued and other current liabilities		47,714		51,301
Installment payment agreement, current portion, net of discounts of $245 and $350, respectively		8,292		9,063
Current maturities, operating lease liabilities		12,006		10,101
Current maturities, finance lease obligations		15,252		8,154
Total current liabilities		95,247		89,694
Senior secured 2022 notes, net of unamortized debt costs of $1,267 and $1,897, respectively and including premiums of $656 and $985, respectively		444,389		444,088
Senior unsecured 2024 Euro notes, net of unamortized debt costs of $3,166 and $1,410, respectively and net of discounts of $1,164 and $0, respectively		406,034		150,001
Senior unsecured 2021 notes, net of unamortized debt costs of $857		—		188,368
Operating lease liabilities, net of current maturities		101,447		86,690
Finance lease obligations, net of current maturities		197,688		161,635
Other long term liabilities		16,800		15,327
Total liabilities		1,261,605		1,135,803
Commitments and contingencies:
Stockholders’ equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,284,336 and 46,840,434 shares issued and outstanding, respectively		47		47
Additional paid-in capital		513,454		493,178
Accumulated other comprehensive income — foreign currency translation		(7,498)		(12,326)
Accumulated deficit		(766,694)		(684,578)
Total stockholders’ deficit		(260,691)		(203,679)
Total liabilities and stockholders’ deficit	$	1,000,914	$	932,124

The accompanying notes are an integral part of these condensed consolidated balance sheets.

3

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months		Three Months
	Ended		Ended
	September 30, 2020		September 30, 2019
	(Unaudited)		(Unaudited)
Service revenue	$	142,302	$	136,942
Operating expenses:
Network operations (including $346 and $282 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)		54,519		55,253
Selling, general, and administrative (including $6,176 and $4,515 of equity-based compensation expense, respectively)		39,722		35,971
Depreciation and amortization		21,619		20,006
Total operating expenses		115,860		111,230
Loss on finance leases amendment		(505)		—
Gains on equipment transactions		99		87
Operating income		26,036		25,799
Interest expense		(15,760)		(15,191)
Unrealized foreign exchange (loss) gain on 2024 Euro Notes		(17,315)		6,162
Interest income and other, net		484		2,185
(Loss) income before income taxes		(6,555)		18,955
Income tax benefit (provision)		1,600		(5,254)
Net (loss) income	$	(4,955)	$	13,701
Comprehensive income:
Net (loss) income	$	(4,955)	$	13,701
Foreign currency translation adjustment		5,408		(4,709)
Comprehensive income	$	453	$	8,992
Net (loss) income per common share:
Basic net (loss) income per common share	$	(0.11)	$	0.30
Diluted net (loss) income per common share	$	(0.11)	$	0.30
Dividends declared per common share	$	0.705	$	0.620
Weighted-average common shares - basic		45,815,718		45,438,656
Weighted-average common shares - diluted		45,815,718		46,019,691

The accompanying notes are an integral part of these condensed consolidated statements.

4

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Nine Months		Nine Months
	Ended		Ended
	September 30, 2020		September 30, 2019
	(Unaudited)		(Unaudited)
Service revenue	$	424,205	$	405,866
Operating expenses:
Network operations (including $903 and $688 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)		164,326		163,811
Selling, general, and administrative (including $16,776 and $12,832 of equity-based compensation expense, respectively)		119,232		110,396
Depreciation and amortization		61,022		60,246
Total operating expenses		344,580		334,453
Loss on finance lease amendments		(423)		—
Gains on equipment transactions		343		808
Operating income		79,545		72,221
Interest expense		(46,481)		(42,243)
Realized foreign exchange gain on issuance of 2024 Euro Notes		2,547		—
Unrealized (loss) gain on foreign exchange on 2024 Euro Notes		(17,827)		6,339
Interest income and other, net		430		5,588
Loss on debt extinguishment and redemption- 2021 Notes		(638)		—
Income before income taxes		17,576		41,905
Income tax provision		(4,740)		(11,851)
Net income	$	12,836	$	30,054
Comprehensive income:
Net income	$	12,836	$	30,054
Foreign currency translation adjustment		4,828		(4,748)
Comprehensive income	$	17,664	$	25,306
Net income per common share:
Basic net income per common share	$	0.28	$	0.66
Diluted net income per common share	$	0.28	$	0.65
Dividends declared per common share	$	2.045	$	1.800
Weighted-average common shares - basic		45,818,677		45,428,305
Weighted-average common shares - diluted		46,598,870		45,948,331

The accompanying notes are an integral part of these condensed consolidated statements.

5

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

(IN THOUSANDS)

	Nine months		Nine months
	Ended		Ended
	September 30, 2020		September 30, 2019
	(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net income	$	12,836	$	30,054
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		61,022		60,246
Amortization of debt costs, discounts and premiums		1,426		1,328
Equity-based compensation expense (net of amounts capitalized)		17,679		13,520
Loss on debt extinguishment and redemption – 2021 Notes		638		—
Unrealized losses (gains) on foreign exchange		17,281		(6,305)
Realized foreign exchange gain on issuance of 2024 Notes		(2,547)		—
Gains - equipment transactions and other, net		80		(131)
Deferred income taxes		2,100		9,285
Changes in operating assets and liabilities:
Accounts receivable		(1,102)		(43)
Prepaid expenses and other current assets		(3,253)		(4,862)
Accounts payable, accrued liabilities and other long-term liabilities		(2,783)		1,350
Deposits and other assets		(628)		(1,730)
Net cash provided by operating activities		102,749		102,712
Cash flows from investing activities:
Purchases of property and equipment		(40,092)		(37,059)
Net cash used in investing activities		(40,092)		(37,059)
Cash flows from financing activities:
Dividends paid		(94,952)		(82,871)
Purchases of common stock		(270)		—
Redemption and extinguishment of 2021 Notes		(189,225)		—
Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of $2,137 and $1,556, respectively		240,285		152,128
Principal payments on installment payment agreement		(7,855)		(7,348)
Principal payments of finance lease obligations		(19,392)		(7,035)
Proceeds from exercises of stock options		1,175		1,270
Net cash (used in) provided by financing activities		(70,234)		56,144
Effect of exchange rates changes on cash		1,448		(1,619)
Net (decrease) increase in cash and cash equivalents		(6,129)		120,178
Cash and cash equivalents, beginning of period		399,422		276,093
Cash and cash equivalents, end of period	$	393,293	$	396,271
Supplemental disclosure of non-cash investing and financing activities:
Non-cash component of network equipment obtained in exchange transactions	$	310	$	771
PP&E obtained for installment payment agreement	$	5,771	$	8,945
Finance lease obligations incurred	$	61,504	$	11,342
Fair value of equipment acquired in leases	$	536	$	1,207

The accompanying notes are an integral part of these condensed consolidated statements.

6

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  Description of the business and recent developments:

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. (“Group”), a Delaware corporation, 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. and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc. and its subsidiaries. Group and its subsidiaries represent the operating subsidiaries of Cogent and the vast majority of Cogent's assets, contractual arrangements, and operations are executed by Group and its subsidiaries.

Description of business

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. Our network is specifically designed and optimized to transmit packet switched data. We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa. We are a Delaware corporation and we are headquartered in Washington, DC.

We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises. We offer our on-net services to customers located in buildings that are physically connected to our network. As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service. Our on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.

We provide our on-net Internet access and private network services to our corporate and net-centric customers. Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses. Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. Access customers include over 7,200 access networks comprised of other Internet access providers, telephone companies, and cable television companies that collectively provide internet access to a substantial number of broadband subscribers across the world. These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers. We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.

In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide 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 our network. We also provide certain non-core services that resulted from acquisitions. We continue to support but do not actively sell these non-core services.

7

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 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, 2019.

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 United States generally accepted accounting principles 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 September 30, 2020, the carrying amount of cash and cash equivalents, 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 at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2— market approach) at September 30, 2020 the fair value of the Company’s $445.0 million senior secured notes was $455.0 million and the fair value of the Company’s €350.0 million Euro ($410.4 million USD) senior unsecured notes was $416.5 million.

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 revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $3.9 million and $4.0  million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.9 million and $10.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Basic and diluted net income per common share

Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (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.

8

The following details the determination of diluted weighted average shares:

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Weighted average common shares - basic	45,815,718	45,438,656	45,818,677	45,428,305
Dilutive effect of stock options	—	34,593	99,581	32,179
Dilutive effect of restricted stock	—	546,442	680,612	487,847
Weighted average common shares - diluted	45,815,718	46,019,691	46,598,870	45,948,331

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	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Unvested shares of restricted common stock	1,472,572	1,379,446	1,472,572	1,379,446
Anti-dilutive options for common stock	87,214	37,606	24,453	50,928
Anti-dilutive shares of restricted common stock	925,866	—	191	50,292

Stockholders’ Deficit

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts):

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2020	47,279,201	$	47	$	506,391	$	(12,906)	$	(729,082)	$	(235,550)
Forfeitures of shares granted to employees	(4,932)		—		—		—		—		—
Equity-based compensation	—		—		7,147		—		—		7,147
Foreign currency translation	—		—		—		5,408		—		5,408
Issuances of common stock	10,500		—		—		—		—		—
Exercises of options	4,134		—		185		—		—		185
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(32,657)		(32,657)
Net loss	—		—		—		—		(4,955)		(4,955)
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

9

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2019	46,806,370	$	47	$	481,734	$	(10,967)	$	(647,404)	$	(176,590)
Forfeitures of shares granted to employees	(4,508)		—		—		—		—		—
Equity-based compensation	—		—		5,311		—		—		5,311
Foreign currency translation	—		—		—		(4,709)		—		(4,709)
Issuances of common stock	10,572		—		—		—		—		—
Exercises of options	9,152		—		351		—		—		351
Dividends paid	—		—		—		—		(28,565)		(28,565)
Net income	—		—		—		—		13,701		13,701
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2019	46,840,434	$	47	$	493,178	$	(12,326)	$	(684,578)	$	(203,679)
Forfeitures of shares granted to employees	(42,212)		—		—		—		—		—
Equity-based compensation	—		—		19,371		—		—		19,371
Foreign currency translation	—		—		—		4,828		—		4,828
Issuances of common stock	465,530		—		—		—		—		—
Exercises of options	25,151		—		1,174		—		—		1,174
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(94,952)		(94,952)
Net income	—		—		—		—		12,836		12,836
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2018	46,336,499	$	46	$	471,331	$	(10,928)	$	(609,451)	$	(149,002)
Forfeitures of shares granted to employees	(8,394)		—		—		—		—		—
Equity-based compensation	—		—		14,796		—		—		14,796
Foreign currency translation	—		—		—		(4,748)		—		(4,748)
Issuances of common stock	459,550		1		—		—		—		1
Exercises of options	33,931		—		1,269		—		—		1,269
Dividends paid	—		—		—		—		(82,871)		(82,871)
Net income	—		—		—		—		30,054		30,054
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

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. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606. The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions. Management assesses these costs for impairment at least quarterly and as "triggering" events occur that indicate it is more likely than not that an impairment exists.

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The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months. The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.

To achieve this core principle, the Company follows the following five steps:

1) Identification of the contract, or contracts with a customer

2) Identification of the performance obligations in the contract

3) Determination of the transaction price

4) Allocation of the transaction price to the performance obligations in the contract

5) Recognition of revenue when, or as, we satisfy a performance obligation

Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above. 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 amounts. The Company recognizes revenue for these amounts as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2020 was $1.6 million and during the three months ended September 30, 2019 was $1.7 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $3.9  million and during the nine months ended September 30, 2019 was $5.1 million. Amortization expense for contract costs was $4.2  million for the three months ended September 30, 2020 and $4.3 million for the three months ended September 30, 2019. Amortization expense for contract costs was $12.6  million for the nine months ended September 30, 2020 and $13.0  million for the nine months ended September 30, 2019.

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Recent Accounting Pronouncements— Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 replaced most existing lease accounting guidance. In July 2018 the FASB approved an Accounting Standards Update which, among other changes, allowed a company to elect to adopt ASU 2016-02 using the modified retrospective method applying the transition provisions at the beginning of the period of adoption, rather than at the beginning of the earliest comparative period presented in these financial statements. ASU 2016-02 was effective for the Company beginning on January 1, 2019 and required the Company to record a right-of-use asset and a lease liability for most of its facilities leases. These leases were previously treated as operating leases. The effect of ASU 2016-02 was to record a cumulative-effect adjustment on January 1, 2019 as a right-of-use asset and an operating lease liability totaling $97.3 million. The operating lease liability 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 nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.

	Three Months		Three Months
	Ended		Ended
	September 30, 2020		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,382	$	4,963
Interest expense on finance lease liabilities		4,804		4,414
Operating lease cost		4,269		3,716
Total lease costs	$	15,455	$	13,093

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2020			September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	16,117		$	14,851
Interest expense on finance lease liabilities		13,794			13,230
Operating lease cost		12,860			10,497
Total lease costs	$	42,771		$	38,578
Other lease information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	(14,150)		$	(12,957)
Operating cash flows from operating leases		(13,785)			(8,443)
Financing cash flows from finance leases		(19,392)			(7,035)
Right-of-use assets obtained in exchange for new finance lease liabilities		61,504			11,342
Right-of-use assets obtained in exchange for new operating lease liabilities		24,866			6,912
Weighted-average remaining lease term — finance leases (in years)		12.3			14.5
Weighted-average remaining lease term — operating leases (in years)		20.4			21.7
Weighted average discount rate — finance leases		10.5	%		10.5	%
Weighted average discount rate — operating leases		5.4	%		5.7	%

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Finance leases—fiber lease agreements

The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs). These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of September 30, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $20.7 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 (principal and interest) under these finance leases are as follows (in thousands):

For the twelve months ending September 30,
2021	$	33,471
2022		32,638
2023		31,650
2024		31,753
2025		28,495
Thereafter		225,320
Total minimum finance lease obligations		383,327
Less—amounts representing interest		(170,387)
Present value of minimum finance lease obligations		212,940
Current maturities		(15,252)
Finance lease obligations, net of current maturities	$	197,688

Operating leases

The Company leases office space and certain data center facilities under operating leases. In certain cases the Company also enters into short term operating leases for dark fiber. 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. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company. Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments are recorded as an operating lease liability and a right-of-use leased asset. Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

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The future minimum payments under these operating lease agreements are as follows (in thousands):

For the twelve months ending September 30,
2021	$	17,579
2022		16,535
2023		15,674
2024		14,198
2025		12,124
Thereafter		103,809
Total minimum operating lease obligations		179,919
Less—amounts representing interest		(66,466)
Present value of minimum operating lease obligations		113,453
Current maturities		(12,006)
Lease obligations, net of current maturities	$	101,447

Adopted accounting pronouncements

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") later codified as Accounting Standards Codification ("ASC") 326 ("ASC 326"), using the modified retrospective transition approach. This guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses ("CECL") on its trade receivables arising from the failure of customers to make contractual payments. 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. Adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures and no cumulative adjustment was recorded.

			Current-period
	Balance at		Provision for		Write offs		Balance at
	June 30,		Expected Credit		Charged Against		September 30,
Description	2020		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Three months ending September 30, 2020	$	2,115	$	1,174	$	(1,085)	$	2,204

			Current-period
	Balance at		Provision for		Write offs		Balance at
	December 31,		Expected Credit		Charged Against		September 30,
Description	2019		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Nine months ending September 30, 2020	$	1,771	$	3,942	$	(3,509)	$	2,204

Net bad debt expense for the three months ended September 30, 2020 was $0.8 million which is net of bad debt recoveries of $0.4 million. Net bad debt expense for the nine months ended September 30, 2020 was $3.2 million which is net of bad debt recoveries of $0.8 million.

2.  Property and equipment:

Depreciation and amortization expense related to property and equipment and finance leases was $21.6 million and $20.0 million for the three months ended September 30, 2020, and 2019 respectively, and $61.0 million and $60.2  million for the nine months ended September 30, 2020 and 2019, respectively. The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $3.0 million and $2.7 million for the three months ended

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September 30, 2020 and 2019, respectively, and $8.9 million and $8.0 million for the nine months ended September 30, 2020 and 2019, respectively.

Exchange agreement

In the three and nine months ended September 30, 2020 and 2019, the Company exchanged certain used network equipment and cash consideration for new network equipment. The fair value of the equipment received was estimated to be $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. After considering the cash component the transactions resulted in gains of $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively. The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3).

Installment payment agreement

In March 2015, the Company entered into an installment payment agreement (“IPA”) with a vendor. Under the IPA the Company was allowed to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term until July 2020 when additional borrowings under the IPA expired. There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term. As of September 30, 2020, and December 31, 2019 there was $10.4 million and $12.5 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment. The Company recorded the assets purchased and the net present value of the note obligation utilizing an imputed interest rate. The resulting discount was $0.3 million and $0.4 million as of September 30, 2020 and December 31, 2019, respectively, and is being amortized over the note term using the effective interest rate method.

3.  Long-term debt:

The Company has $445.0 million of senior secured notes (the "2022 Notes") and €350.0 million ($410.4 million USD as of September 30, 2020) of senior unsecured notes (the "2024 Notes") outstanding. The 2022 Notes are due on March 1, 2022 and bear interest at a rate of 5.375% per year. Interest on the 2022 Notes is paid semi-annually on March 1 and September 1. The 2024 Notes are due on June 30, 2024 and bear interest at a rate of 4.375% per year. Interest on the 2024 Notes is paid semi-annually on June 30 and December 30.

2024 Notes issuances

In June 2020, Group completed an offering of €215.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2020 offering, after deducting offering expenses, were $240.3 million. In June 2019, Group completed an offering of €135.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2019 offering, after deducting offering expenses, were $152.1 million. The Company expects to use the proceeds from these offerings for general corporate purposes, to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

The 2024 Notes bear interest at a rate of 4.375% per annum. Interest began to accrue on the 2024 Notes issued in June 2020, on June 4, 2020 and interest began to accrue on the 2024 Notes issued in June 2019 on June 25, 2019. Interest is paid semi-annually in arrears on June 30 and December 30 of each year. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024. The June 2020 issuance of €215.0 million 2024 Notes were issued at a discount of 99.5% for €213.9 million Euros ($240.0 million USD) on June 3, 2020 at a Euro to USD rate of $1.112. The discount is amortized to interest expense to the maturity date under the effective interest rate method. The Company received proceeds in USD on the June 2020 2024 Notes on June 9, 2020 at a Euro to USD rate of $1.133 resulting in a realized gain on foreign exchange of $2.5 million. The June 2019 issuance of 2024 Notes were issued at par for €135.0 million on June 25, 2019. The issuances of the 2024 Notes were in Euros and are reported in the Company’s reporting currency – US Dollars. As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million. The unrealized (loss) gain on foreign exchange on the Company’s 2024 Notes from converting the 2024 Notes into USD was $(17.3) million for the three months ended September 30, 2020 and $6.2 million for the three months ended September 30, 2019 and was $(17.8) million for the nine months ended September 30, 2020 and was $6.3 million for the nine months ended September 30, 2019.

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Debt extinguishment and redemption 2021 Notes

In June 2020, Group redeemed its 5.625% senior unsecured notes due in 2021 (the "2021 Notes") with the proceeds from its June 2020 issuance of €215.0 million 2024 Notes. The Company redeemed the entire outstanding amount of the 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount plus $1.6 million of accrued interest. As a result of this transaction the Company incurred a loss on debt extinguishment and redemption of $0.6 million from the amortization of the remaining unamortized notes cost and certain transaction expenses.

Limitations under the indentures

The indentures governing the 2024 Notes and 2022 Notes among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates. Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if the Company’s consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes. Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if the Company’s consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes. The indentures prohibit certain payments, such as dividends and stock purchases, when the Company’s consolidated leverage ratio, as defined by the indentures, is greater than 4.25. A certain amount of such unrestricted payments is permitted notwithstanding this prohibition. The unrestricted payment amount may be increased by the Company’s consolidated cash flow, as defined in the indentures, as long as the Company’s consolidated leverage ratio is less than 4.25. The Company’s consolidated leverage ratio was above 4.25 as of September 30, 2020. As of September 30, 2020, a total of $132.6 million was permitted for investment payments including dividends and stock purchases.

4.  Commitments and contingencies:

Current and potential litigation

In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $3.3 million in excess of the amount accrued at September 30, 2020.

The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $9.0 million for Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015. The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability. The arbitration is being conducted by the Civil and Commercial Arbitration Court (CIMA) in Madrid, Spain.

In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company’s financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

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5.  Income taxes:

The components of (loss) income before income taxes consist of the following (in thousands):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Domestic	$	(4,084)	$	24,452	$	27,818	$	59,537
Foreign		(2,471)		(5,497)		(10,242)		(17,632)
Total	$	(6,555)	$	18,955	$	17,576	$	41,905

6.  Common stock buyback program stock option and award plan:

The Company’s Board of Directors has approved purchases of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2021. At September 30, 2020, there was approximately $34.6 million remaining for purchases under the Buyback Program. In the three and nine months ended September 30, 2020 the Company purchased 4,567 shares of its common stock for $0.3 million. There were no purchases of common stock during the three and nine months ended September 30, 2019. Subsequent to September 30, 2020 the Company purchased 53,516 shares of its common stock for $3.1 million under the Buyback Program.

In the first quarter of 2020 the Company granted 319,750 shares of common stock to its executive employees and directors valued at $23.7 million. Included in this first quarter grant were 94,050 performance shares that vest subject to certain Company performance conditions and 35,000 performance shares granted to the Company’s CEO that are subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index. In the second quarter of 2020 the Company granted 135,280 shares of common stock to its employees and directors valued at $10.6 million. Shares granted to the Company’s directors vest upon grant and the shares granted to the Company’s employees that are not subject to performance conditions generally vest over periods ending in December 2023.

7.  Dividends on common stock:

On November 4, 2020, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.73 per common share. This estimated $33.5 million dividend payment is expected to be paid on December 4, 2020.

The payment of any future dividends and any other returns of capital, including stock buybacks will be at the discretion of the Company’s Board of Directors and may be reduced, eliminated or increased and will be dependent upon the Company’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under the Company’s debt indentures and other factors deemed relevant by the Company’s Board of Directors. The Company is a Delaware corporation and under the General Corporate 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 governing the Company’s notes limit the Company’s ability to return cash to its stockholders.

8.  Related party transactions:

Office leases

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer. The fixed annual rent for the headquarters building is $1.0 million per year plus an allocation of taxes and utilities. The lease began in May 2015 and the original lease term was for five years which was cancellable by the Company upon 60 days’ notice. In February 2020 the lease term was extended to May 2025. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid $0.5 million and $0.3 million in the three months ended September 30, 2020 and 2019, respectively, and $1.3 million and $1.2 million in the nine months ended September 30, 2020 and 2019, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.

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9.  Segment information:

The Company operates as one operating segment. The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands):

Three months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	82,730	$	32,416	$	107	$	115,253
Europe		19,966		4,422		12		24,400
South America		599		14		—		613
Asia Pacific		1,786		240		—		2,026
Africa		10		—		—		10
Total	$	105,091	$	37,092	$	119	$	142,302

Three months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	80,176	$	33,172	$	104	$	113,452
Europe		17,921		4,053		4		21,978
South America		139		5		—		144
Asia Pacific		1,180		188		—		1,368
Africa		—		—		—		—
Total	$	99,416	$	37,418	$	108	$	136,942

Nine months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	247,679	$	97,951	$	369	$	345,999
Europe		58,433		12,781		32		71,246
South America		1,344		34		—		1,378
Asia Pacific		4,880		692		—		5,572
Africa		10		—		—		10
Total	$	312,346	$	111,458	$	401	$	424,205

Nine months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	236,636	$	98,670	$	300	$	335,606
Europe		53,889		12,192		45		66,126
South America		244		8		—		252
Asia Pacific		3,300		582		—		3,882
Africa		—		—		—		—
Total	$	294,069	$	111,452	$	345	$	405,866

	September 30,		December 31,
	2020		2019
Long-lived assets, net
North America	$	305,648	$	269,364
Europe and other		115,619		99,582
Total	$	421,267	$	368,946

The majority of North American revenue consists of services delivered within the United States.

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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. 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:

The COVID-19 pandemic and accompanying government policies worldwide; future economic instability in the global economy, 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; 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 arrangements on favorable terms; our ability to renew our long-term leases of optical fiber that comprise our network; our reliance on an equipment vendor, Cisco Systems Inc., and the potential for hardware or software problems associated with such equipment; the dependence of our network on the quality and dependability of third-party fiber 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 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 Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and our Annual Report on Form 10-K for the year ended December 31, 2019.

General Overview

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. Our network is specifically designed and optimized to transmit packet switched data. We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa. We are a Delaware corporation and we are headquartered in Washington, DC.

We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises. We offer our on-net services to customers located in buildings that are physically connected to our network. As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service. Our on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.

We provide our on-net Internet access and private network services to our corporate and net-centric customers. Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses. Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. Our access customers include over 7,200 access networks comprised of other Internet access 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 our services in carrier neutral colocation facilities and in our data centers. We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.

In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide 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 our network. We also provide certain non-core services that resulted from acquisitions. We continue to support but do not actively sell these non-core services.

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Competitive Advantages

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

Low Cost of Operation. We have made a series of choices around our network design, operating strategy and product offering designed to provide us with a lower cost of operation. Our single network design allows us to avoid many of the costs that our competitors who operate, circuit-switched, TDM and hybrid fiber coaxial networks incur related to provisioning, monitoring and maintaining multiple transport protocols. Utilizing only one network protocol enables us to benefit from the continued rapid improvement in price and performance of our key network equipment and creates scale advantages in the installation and maintenance of that equipment. We have acquired optical fiber from the excess inventory of existing networks which reduces the capital intensity and operating costs of our intercity and metro networks. Our streamlined set of products reduces our service delivery costs in terms of customer and product support and the investment required to train our sales representatives. We believe that our low cost of operation gives us greater pricing flexibility and a significant advantage in a competitive environment characterized by falling Internet access prices.

Greater Control and Superior Delivery. Our on-net service does not rely on circuits that must be provisioned by a third party carrier. In on-net multi-tenant office buildings we provide our customers the entire network, including the “last mile” and the in-building wiring connecting to our customer’s suite. In carrier neutral data centers we are collocated with our customers so only a connection within the data center, known as a cross connect, is required to provide our services. The structure of our on-net service provides us more control over our service, quality and pricing. It also allows us to provision services more quickly and efficiently than provisioning services on a third-party carrier network.

High Quality, Reliable Service. We are able to offer high-quality Internet service due to our network design and composition. We believe that we deliver a high level of technical performance because our network is optimized for packet switched traffic. Its design increases the speed and throughput of our network and reduces the number of data packets dropped during transmission compared to traditional circuit-switched networks. We believe that our network is more reliable and carries traffic at lower cost than networks built as overlays to traditional circuit-switched, or TDM networks.

Large Addressable Market. We have systematically evaluated and chosen our network extensions to buildings, data centers and markets based upon a rigorous set of criteria to evaluate the economic opportunity of network locations. Additional factors relevant to our pursuit of new buildings include the willingness of building owners to grant us access rights, the availability of optical fiber networks to serve those buildings, the costs to connect buildings to our network and equipment availability. Our network is connected to 2,884 total buildings. These buildings include 1,783 large multi-tenant office buildings (totaling 968.4 million square feet of office space) in major North American cities where we offer our services to a diverse set of high-quality, low churn corporate customers within close physical proximity of each other. These buildings also include 1,047 carrier neutral colocation and unique data center buildings in North America, Europe, Asia , South America and Africa where our net-centric customers directly interconnect with our network. In our multi-tenant office buildings and carrier neutral data centers we connect to a total of 3,148 unique points-of-presence. In our 1,047 carrier neutral data centers we connect to 1,225 points-of-presence as certain carrier neutral data center buildings include multiple data centers. We also operate 54 data centers across the United States and in Europe which comprise over 606,000 square feet of floor space and are directly connected to our network. We believe that these network points of presence strategically position our network to attract high levels of Internet traffic, and maximize our revenue opportunities and profitability.

Balanced, High Traffic Network. Since its inception, our network has grown significantly in terms of its geographic reach, customer connections, and traffic. We currently serve over 7,200 access networks including numerous large and small content providers and over 47,700 corporate customer connections. As a result of these growing bases of customers who distribute (content providers) and receive (access networks) content on our network, we believe that the majority of all the traffic on our network originates and terminates on our network. This control of traffic increases our reliability, speed of delivery and enhances our margins. The breadth of our network, extensive size of our customer base, and volume of our traffic enables us to be one of a handful of Tier One networks that are interconnected on a settlement free basis. This peering status broadens our geographic delivery capability and materially reduces our network costs.

Proven and Experienced Management Team. Our senior management team is composed of seasoned executives with extensive expertise in the telecommunications industry as well as knowledge of the markets in which we operate. The members of our senior management team have an average of over 20 years of experience in the telecommunications industry and many have been

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working together at the Company for several years. Several members of the senior management team have been working together at the Company since 2000. Our senior management team has designed and built our network and during our formative years led the integration of network assets we acquired through 13 significant acquisitions and managed the expansion and growth of our business.

Our Strategy

We intend to become the 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:

Grow our Corporate Customer Base. Our on-net corporate customers are typically small to medium sized businesses connected to our network in one of our 1,783 multi-tenant office buildings, totaling 968.4 million square feet of office space, or are connected to our network in one of our 1,047 carrier neutral data centers. We generally sell two types of services to our corporate customers: dedicated internet access and private network services. We typically sell dedicated internet access at the same price per connection as our competitors but our clients benefit from our significantly faster speeds and rapid installation times. These customers are increasingly integrating data centers into their IT infrastructure in order to take advantage of the safety, security and redundancy that is offered by locating company processing power, storage and software at a data center. An important part of this new infrastructure is a high speed, dedicated internet connection from the corporate premises to the data center and the Internet and from one corporate premises to another corporate premises. We believe that the importance of data centers will increasingly lead tenants to reconfigure their communications infrastructure to include dedicated internet access across their locations.

Increase our Share of the Net-centric Market. We are currently a leading provider of high speed internet access to a variety of content providers and over 7,200 access networks across the world. We expect that we will continue to grow our share of the net-centric market as a result of the geographic breadth and depth of our network, which offers service in 47 countries and access to over 200 metro markets, a dedicated net-centric salesforce of over 200 professionals located in offices around the world, and a competitive pricing strategy designed to gain market share. We intend to further load our high capacity network to respond to the growing demand for high speed internet access generated by bandwidth-intensive applications such as OTT media services, online gaming, video, Internet of Things (IoT), voice over IP (VOIP), remote data storage, and other services. We expect that we will continue to grow our shares of these segments by broadening our geographic reach and by continuing to offer our high-speed and high-capacity services at competitive prices.

Pursue On-Net Customer Growth. Our high-capacity network provides us with the ability to add a significant number of customers to our network with minimal direct incremental costs. We intend to increase usage of our network and operational infrastructure by adding customers in our existing on-net buildings, as well as developing additional markets and connecting more multi-tenant office buildings and carrier neutral data centers to our network. We emphasize our on-net services because our on-net services generate greater profit margins and we have more control over service levels, quality, pricing and our on-net services are provisioned in considerably less time than our off-net services. Our fiber network connects directly to our on-net customers’ premises and we pay no local access (“last mile”) charges to other carriers to provide our on-net services.

Grow and Improve our Sales Efforts. A critical factor in our success has been our growing investment and focus on our sales and marketing efforts. Over the past five years we have increased the size of our quota bearing salesforce by 39% from 363 to 597. We seek to pair this growth in the size our salesforce with a consistent level of productivity as measured by the number of connections sold per salesperson per month, taking into account adjustments to the changing mix of products sold as measured by monthly connections sold by salesperson per month. In order to gain market share in our targeted businesses, we expect to continue to increase our sales efforts including increasing the number of sales representatives, implementing strategies to optimize sales productivity and expanding our on-net addressable market by adding service locations to our network.

Selectively Pursue Acquisition Opportunities. In addition to adding customers through our sales and marketing efforts, we will continue to seek out acquisition opportunities that increase our customer base, allowing us to take advantage of the unused capacity on our network and to add revenues with minimal incremental costs. We may pursue acquisition opportunities that we believe expand our footprint, and generate positive cash flow. These acquisition opportunities may include off-net as well as on-net customers and complementary businesses including those offering over the top applications such as VOIP. We may also make opportunistic acquisitions of network assets. Given our record of successful asset integration, we believe we can continue to successfully integrate new businesses as they are acquired. We are very selective in reviewing acquisition opportunities and have not completed an acquisition in over a decade.

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Results of Operations

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

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.

	Three months ended
	September 30,				Percent
	2020		2019		Change
	(in thousands)
Service revenue	$	142,302	$	136,942	3.9	%
On-net revenue		105,091		99,416	5.7	%
Off-net revenue		37,092		37,418	(0.9)	%
Network operations expenses (1)		54,519		55,253	(1.3)	%
Selling, general, and administrative expenses (2)		39,722		35,971	10.4	%
Depreciation and amortization expenses		21,619		20,006	8.1	%
Interest expense		15,760		15,191	3.7	%
Unrealized (loss) gain on 2024 Notes		(17,315)		6,162	NM
Income tax benefit (provision)		1,600		(5,254)	NM

(1) Includes equity-based compensation expenses of $346 and $282 in the three months ended September 30, 2020 and 2019, respectively.

(2) Includes equity-based compensation expenses of $6,176 and $4,515 in the three months ended September 30, 2020 and 2019, respectively.

NM – not meaningful

	Three months ended
	September 30,				Percent
	2020		2019		Change
	(in thousands)
Other Operating Data
Average Revenue Per Unit (ARPU)
ARPU—on-net	$	460	$	453	1.6	%
ARPU—off-net	$	1,044	$	1,093	(4.5)	%
Average Price per Megabit — installed base	$	0.45	$	0.61	(26.5)	%
Customer Connections—end of period
On-net		76,338		73,870	3.3	%
Off-net		11,849		11,503	3.0	%

Service Revenue. We continually work to grow our total service revenue by increasing the number of potential customers that we can reach on our network. We do this by investing capital to expand the geographic footprint of our network and by increasing the number of buildings that we are connected to including carrier neutral data centers and multi-tenant office buildings. These efforts broaden the global reach of our network and increases the size of our potential addressable market. We also seek to grow our service revenue by investing in our sales and marketing team. Over the last five years we have grown our quota bearing salesforce by 39% to 597 full time equivalent salespeople. We typically sell corporate connections at similar pricing to our competitors but our clients benefit from significantly faster speeds, 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 increased 3.9% for the three months ended September 30, 2020 from the three months ended September 30, 2019. The impact of exchange rates resulted in an increase in revenues for the three months ended September 30, 2020 of approximately $1.1 million. All foreign currency comparisons herein reflect our third quarter 2020 results translated at the average foreign currency exchange rates for the third quarter of 2019. We increased our total service revenue by increasing the number of sales representatives selling our services, expanding our network, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and by gaining market share by offering our services at lower prices than our competitors.

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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 consolidated statements of operations. The impact of these taxes including the Universal Service Fund resulted in a decrease in our revenues for the three months ended September 30, 2020 from the three months ended September 30, 2019 of approximately $0.1 million.

Our corporate customers purchase their services on a price per connection basis. Our net-centric customers purchase their services on a price per megabit basis. Revenues from our corporate and net-centric customers represented 67.3% and 32.7% of total service revenue, respectively, for the three months ended September 30, 2020 and represented 69.0% and 31.0% of total service revenue, respectively, for the three months ended September 30, 2019. Revenues from corporate customers increased 1.3% to $95.7 million for the three months ended September 30, 2020 from the three months ended September 30, 2019. Revenues from our net-centric customers increased by 9.6% to $46.6 million for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to an increase in our number of net-centric customers partly offset by a decline in our average price per megabit.

Our revenue from our corporate customers has increased as our corporate customers take advantage of our superior speeds, service levels and installation times versus our competitors. The growing trend of customers installing second lines for redundancy and in order to supplement their VPN capabilities has also led to our growing corporate revenues. However, in the three months ended September 30, 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic. We also witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals. Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce. As a result, during the three months ended September 30, 2020, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth. While we believe that demand for office space in the buildings in which we operate will remain among the strongest in our markets, we may experience increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities which would negatively impact our corporate revenue growth.

Our net-centric customers purchase our services based upon a price per megabit basis. The net-centric market exhibits significant pricing pressure due to the continued introduction of new technology which lowers the marginal cost of transmitting bits, and the commodity nature of the service where price is typically the only differentiating factor for these customers. Our average price per megabit declined by 26.5% from the three months ended September 30, 2019 to the three months ended September 30, 2020. We expect that our average price per megabit for the net-centric market will continue to decline at similar rates. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our on-net revenues increased 5.7% for the three months ended September 30, 2020 from the three months ended September 30, 2019. We increased the number of our on-net customer connections by 3.3% at September 30, 2020 from September 30, 2019. Our on-net ARPU increased by 1.6% from the three months ended September 30, 2019 to the three months ended September 30, 2020. ARPU is determined by dividing revenue for the period by the average customer connections for that period. Our average price per megabit for our installed base of customers declined by 26.5% from the three months ended September 30, 2019 to the three months ended September 30, 2020. Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers.

Our off-net revenues decreased by 0.9% for the three months ended September 30, 2020 from the three months ended September 30, 2019. We increased the number of our off-net customer connections by 3.0% at September 30, 2020 from September 30, 2019. Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 4.5% decrease in our off-net ARPU.

Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management and customer support, network facilities costs, 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. Our network operations expenses, including non-cash equity-based compensation expense, decreased 1.3% for the three months ended September 30, 2020 from the three months ended September 30, 2019. We were connected to 3.3% more customer connections and we were connected to 113, or 4.1%, more on-net buildings as of September 30, 2020 compared to

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September 30, 2019. The decrease in network operations expense is primarily attributable to an increase in costs related to our network and facilities expansion activities offset by price reductions obtained in certain of our circuit costs, fewer operating leases for fiber and the impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020. Under the accounting for the IRU lease renewal, the future minimum lease payments were capitalized as a finance lease and right-of-use leased asset totaling $34.0 million. The $1.8 million of quarterly maintenance and co-location fees under the IRU agreement were previously accounted for as network operations expenses.

Selling, General, and Administrative (“SG&A”) Expenses. Our SG&A expenses, including non-cash equity-based compensation expense, increased by 10.4% for the three months ended September 30, 2020 from the three months ended September 30, 2019. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee’s salary and other compensation and was $6.2 million for the three months ended September 30, 2020 and $4.5 million for the three months ended September 30, 2019. SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and the increase in our sales efforts. Our total sales force headcount increased from 667 at September 30, 2019 to 740 at September 30, 2020, our quota bearing sales force increased from 530 at September 30, 2019 to 597 at September 30, 2020 and our total headcount increased from 1,036 at September 30, 2019 to 1,110 at September 30, 2020.

Depreciation and Amortization Expenses. Our depreciation and amortization expense increased by 8.1% for the three months ended September 30, 2020 from the three months ended September 30, 2019. The increase is primarily due to an increase in our deployed fixed assets.

Interest Expense. Our interest expense resulted from interest incurred on our $445.0 million of senior secured notes (“2022 Notes”), interest incurred on our $189.2 million of senior unsecured notes (“2021 Notes") until redeemed in June 2020, interest on our installment payment agreement, interest on our finance lease obligations and interest on our €350.0 million ($410.4 million) aggregate principal amount of 4.375% senior unsecured notes (“2024 Notes’). We issued €215.0 million of our 2024 Notes in June 2020 and €135.0 million of our 2024 Notes in June 2019. In June 2020 we redeemed and extinguished our 2021 Notes at par value. Our interest expense increased by 3.7% for the three months ended September 30, 2020 from the three months ended September 30, 2019 primarily due to an increase in our finance lease obligations and the issuances of our 2024 Notes, partly offset by the redemption of our 2021 Notes.

Unrealized (Loss) Gain on 2024 Notes. In June 2020, we completed an offering of our €215.0 million principal amount of 2024 Notes. In June 2019, we completed an offering of our €135.0 million principal amount of our 2024 Notes. Our 2024 Notes were issued in Euros and are reported in our reporting currency – US Dollars. As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million. Our unrealized (loss) gain on foreign exchange on our 2024 Notes from converting our 2024 Notes into USD was $(17.3) million for the three months ended September 30, 2020 and $6.2 million for the three months ended September 30, 2019. We do not enter into hedges for our foreign currency obligations.

Income Tax Benefit (Provision). Our income tax benefit (provision) was $1.6 million for the three months ended September 30, 2020 and ($5.3) million for the three months ended September 30, 2019. The change in our income tax benefit (provision) is primarily related due to changes in our income before income taxes including the change in the unrealized (loss) gain on foreign exchange on our 2024 Notes.

Buildings On-net. As of September 30, 2020 and 2019, we had a total of 2,884 and 2,771 on-net buildings connected to our network, respectively. The increase in 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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Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

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.

	Nine months ended
	September 30,				Percent
	2020		2019		Change
	(in thousands)
Service revenue	$	424,205	$	405,866	4.5	%
On-net revenue		312,346		294,069	6.2	%
Off-net revenue		111,458		111,452	0.0	%
Network operations expenses (1)		164,326		163,811	0.3	%
Selling, general, and administrative expenses (2)		119,232		110,396	8.0	%
Depreciation and amortization expenses		61,022		60,246	1.3	%
Loss on debt extinguishment and redemption		638		—	NM
Interest expense		46,481		42,243	10.0	%
Realized gain on foreign exchange – 2024 Notes		2,547		—	NM
Unrealized (loss) gain on 2024 Notes		(17,827)		6,339	NM
Income tax provision		4,740		11,851	(60.0)	%

(1) Includes equity-based compensation expenses of $903 and $688 in the nine months ended September 30, 2020 and 2019, respectively.

(2) Includes equity-based compensation expenses of $16,776 and $12,832 in the nine months ended September 30, 2020 and 2019, respectively.

NM – not meaningful

	Nine Months Ended
	September 30,				Percent
	2020		2019		Change
Other Operating Data
Average Revenue Per Unit (ARPU)
ARPU—on-net	$	460	$	458	0.4	%
ARPU—off-net	$	1,054	$	1,102	(4.4)	%
Average Price per Megabit — installed base	$	0.48	$	0.64	(24.4)	%
Customer Connections—end of period
On-net		76,338		73,870	3.3	%
Off-net		11,849		11,503	3.0	%

Service Revenue. Our service revenue increased 4.5% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019. The impact of exchange rates resulted in a decrease in revenues for the nine months ended September 30, 2020 of approximately $0.3 million. All foreign currency comparisons herein reflect our results for the nine months ended September 30, 2020 translated at the average foreign currency exchange rates for the nine months ended September 30, 2019. We increased our total service revenue by increasing the number of sales representatives selling our services, expanding our network, adding additional buildings to our network, increasing our penetration into the buildings connected to our network and by gaining market share by offering our services at lower prices than our competitors.

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 consolidated statements of operations. The impact of these taxes including the Universal Service Fund resulted in an increase in our revenues for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 of approximately $0.4 million.

Our net-centric customers tend to purchase their service on a price per megabit basis. Our corporate customers tend to utilize a small portion of their allocated bandwidth on their connections and tend to purchase their service on a per connection basis. Revenues from our corporate and net-centric customers represented 68.3% and 31.7% of total service revenue, respectively, for the

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nine months ended September 30, 2020 and represented 68.2% and 31.8% of total service revenue, respectively, for the nine months ended September 30, 2019. Revenues from corporate customers increased 4.6% to $289.7 million for the nine months ended September 30, 2020 from the nine months ended September 30, 2019. Our revenue from our corporate customers has increased as our corporate customers take advantage of our superior speeds, service levels and installation times versus our competitors. The growing trend of customers installing second lines for redundancy and in order to supplement their VPN capabilities has also led to our growing corporate revenues. However, primarily during the third quarter of 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic. We also witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals. Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce. As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth for the nine months ended September 30, 2019. While we believe that demand for office space in the buildings in which we operate will remain among the strongest in our markets, we may experience increased corporate customer turnover, fewer upgrades of existing corporate customer configurations and fewer new tenant opportunities which would negatively impact our corporate revenue growth. Revenues from our net-centric customers increased by 4.3% to $134.5 million for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to an increase in our number of net-centric customers, being partially offset by a decline in our average price per megabit and the impact of foreign exchange rates.

Our revenue from our net-centric customers has declined as a percentage of our total revenue and grew at a slower rate than our corporate customer revenue because net-centric customers purchase our services based upon a price per megabit basis and our average price per megabit declined by 24.4% from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. Additionally, the net-centric market experiences a greater level of pricing pressure than the corporate market and net-centric customers who renew their service with us expect their renewed service to be at a lower price than their current price. We expect that our average price per megabit will continue to decline at similar rates. The impact of foreign exchange rates has a more significant impact on our net-centric revenues.

Our on-net revenues increased 6.2% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019. We increased the number of our on-net customer connections by 3.3% at September 30, 2020 from September 30, 2019. Our on-net ARPU increased by 0.4% from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. ARPU is determined by dividing revenue for the period by the average customer connections for that period. Our average price per megabit for our installed base of customers is determined by dividing the aggregate monthly recurring fixed charges for those customers by the aggregate committed data rate for the same customers. On-net customers who cancel their service from our installed base of customers, in general, have an ARPU that is greater than the ARPU for our new customers due to declining prices primarily for our on-net services sold to our net-centric customers. These trends resulted in a 24.4% decline in our average price per megabit for our installed base of customers.

Our off-net revenues were $111.5 million for the nine months ended September 30, 2020 and $111.5 million for the nine months ended September 30, 2019. We increased the number of our off-net customer connections by 3.0% at September 30, 2020 from September 30, 2019. Our off-net customer connections increased at a greater rate than our off-net revenue primarily due to the 4.4% decrease in our off-net ARPU.

Network Operations Expenses. Network operations expenses include the costs of personnel associated with service delivery, network management and customer support, network facilities costs, 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. Our network operations expenses, including non-cash equity-based compensation expense, increased 0.3% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019. We incurred the cost of being connected to 3.3% more customer connections and 113, or 4.1%, more on-net buildings as of September 30, 2020 compared to September 30, 2019 that was partially offset by price reductions in certain circuit costs and fewer operating leases for fiber and the impact of a renewal of an IRU fiber lease agreement in the second quarter of 2020. Under the accounting for the IRU lease renewal, the future minimum lease payments were capitalized as a finance lease and right-of-use leased asset totaling $34.0 million. The $1.8 million of quarterly maintenance and co-location fees under the IRU agreement were previously accounted for as network operations expenses.

Selling, General, and Administrative (“SG&A”) Expenses. Our SG&A expenses, including non-cash equity-based compensation expense, increased by 8.0% for the nine months ended September 30, 2020 from the nine months ended September 30,

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2019. Non-cash equity-based compensation expense is included in SG&A expenses consistent with the classification of the employee’s salary and other compensation and was $16.8 million for the nine months ended September 30, 2020 and $12.8 million for the nine months ended September 30, 2019. SG&A expenses increased primarily from an increase in salaries and related costs required to support our expansion and the increase in our sales efforts. Our sales force headcount increased from 667 at September 30, 2019 to 740 at September 30, 2020, our quota bearing sales force increased from 530 at September 30, 2019 to 597 at September 30, 2020 and our total headcount increased from 1,036 at September 30, 2019 to 1,110 at September 30, 2020.

Depreciation and Amortization Expenses. Our depreciation and amortization expense increased by 1.3% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019. The increase is primarily due to an increase in our deployed fixed assets.

Interest Expense and Loss on Debt Extinguishment & Redemption. Our interest expense resulted from interest incurred on our $445.0 million of senior secured notes (“2022 Notes”), interest incurred on our $189.2 million of senior unsecured notes (“2021 Notes ") until redeemed in June 2020, interest on our installment payment agreement, interest on our finance lease obligations and interest on our €350.0 million ($410.4 million) aggregate principal amount of 4.375% senior unsecured notes (“2024 Notes’). We issued €215.0 million of our 2024 Notes in June 2020 and €135.0 million of our 2024 Notes in June 2019. We redeemed our 2021 Notes in June 2020 at par value resulting in a loss on debt extinguishment of $0.6 million in the nine months ended September 30, 2020. Our interest expense increased by 10.0% for the nine months ended September 30, 2020 from the nine months ended September 30, 2019 primarily due to an increase in our finance lease obligations and the issuances of our 2024 Notes partly offset by the redemption of our 2021 Notes.

Realized Gain and Unrealized Gain (Loss) on Foreign Exchange – 2024 Notes. In June 2020, we completed an offering of our €215.0 million principal amount of 2024 Notes. In June 2019, we completed an offering of our €135.0 million principal amount of 2024 Notes. In June 2020 our €215.0 million 2024 Notes were issued at a Euro to USD rate of $1.112. We received proceeds in USD on the 2024 Notes on June 9, 2020 at a Euro to USD rate of $1.133 resulting in a realized gain on foreign exchange of $2.5 million. Our 2024 Notes were issued in Euros and are reported in our reporting currency – US Dollars. As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million. Our unrealized (loss) gain on foreign exchange on our 2024 Notes from converting our 2024 Notes into USD was $(17.8) million for the nine months ended September 30, 2020 and $6.3 million for the nine months ended September 30, 2019. We do not enter into hedges for our foreign currency obligations.

Income Tax Provision. Our income tax provision was $4.7 million for the nine months ended September 30, 2020 and $11.9 million for the nine months ended September 30, 2019. The change in our income tax provision is primarily related to changes in our income before income taxes including the change in the unrealized (loss) gain on foreign exchange on our 2024 Notes.

Buildings On-net. As of September 30, 2020 and 2019, we had a total of 2,884 and 2,771 on-net buildings connected to our network, respectively. The increase in 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.

Liquidity and Capital Resources

As our business has grown as a result of an increasing customer base, broader geographic coverage and increased traffic, we have produced a growing level of operating cash flow. As a result of the operating leverage of our network, our annual capital expenditures as measured as a percentage of revenues has fallen over the last decade. We have also had increasing success in raising capital by issuing notes and arranging financing and leases that have had a lower cost and more flexible terms. The combination of this improved operating performance and access to capital has enhanced our financial flexibility and increased our ability to make distributions to shareholders in the form of cash dividends or through share repurchases. Since our initial public offering, we have returned over $858 million to shareholders through share repurchases and dividends. We intend on continuing to assess our capital and liquidity needs and where appropriate return capital to shareholders.

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

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, 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.

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In light of the economic uncertainties associated with the COVID-19 pandemic, our executive officers and Board have continued to carefully monitor our liquidity and cash requirements. Based on current circumstances, we plan to continue our current dividend policy. Given uncertainties regarding the duration of the pandemic and timing for economic recovery, 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 make adjustments to our capital allocation strategies when, as and if determined by our Board of Directors.

Impact of COVID-19 on Our Liquidity and Operating Performance

In late March 2020, we adopted a mandatory work-from-home policy through which we required all employees to work from home and follow shelter in place guidelines issued by state and local authorities. We believe we have been able to continue to operate effectively with the use of laptops, remote connectivity and the continued support of our critical support employees. Further, we severely curtailed all business travel and adopted new safety procedures for our on-site technical personnel and customers accessing our data centers. While we are contemplating a voluntary return to in-office presence for a small number of our offices, we expect to continue to have the vast majority of our workforce to work remotely for the foreseeable future. We believe the policies followed by our workforce and the support provided by our IT and other groups has enabled our employees to continue to perform tasks and activities that are essential for the operation of our network, our sales and marketing efforts and other support functions.

We experienced some delays with respect to the installation of new services in March 2020 when certain multi-tenant office buildings were closed to our personnel. We worked with local authorities and building owners to categorize our employees as essential workers who need priority access to buildings. We believe that our disruption in access to buildings was effectively mitigated throughout our second and third quarters.

In April and May 2020, we waived late fees for customers who were unable to pay their bills due to the pandemic. We have not encountered any material change in the payment profile of our customers or seen any significant increase in customer turnover since the beginning of the pandemic. There can be no assurance that we will continue to experience normal operations as economic dislocations may adversely affect our customers and may lead to higher customer turnover, bad debt expense and lower revenue and profitability.

We continue to operate with a high level of liquidity and as of September 30, 2020 we had cash and cash equivalents of approximately $394.8 million. During the three months ended September 30, 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic. We witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals. Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce. As a result, during the three months ended September 30, 2020, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth. While we believe that demand for office space in the buildings in which we operate will remain among the strongest in our markets, we may 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.

Shortly after COVID-19 began its rapid spread around the world, domestic and worldwide capital markets ceased operating for a short period. While they have remained unstable or unpredictable since then, particularly for non-investment grade issuers, legislative bodies and reserve banks have taken various actions in response to the pandemic that have impacted the capital markets, and we expect that these efforts may continue. In June 2020, we issued an additional €215 million of our 4.375% Senior Notes due 2024. The COVID-19 pandemic has not impacted our credit rating to date, nor do we believe that it has materially changed our cost of capital. We believe we are able to timely service our debt obligations and will not require any concessions to do so. We believe we will have access to additional capital from a variety of sources and the public capital markets for debt and equity.

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Cash Flows

The following table sets forth our consolidated cash flows.

	Nine months ended
	September 30,
(in thousands)	2020		2019
Net cash provided by operating activities	$	102,749	$	102,712
Net cash used in investing activities		(40,092)		(37,059)
Net cash (used in) provided by financing activities		(70,234)		56,144
Effect of exchange rates changes on cash		1,448		(1,619)
Net (decrease) increase in cash and cash equivalents	$	(6,129)	$	120,178

Net Cash Provided by Operating Activities. Our primary sources of operating cash are 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, 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. Cash provided by operating activities for the nine months ended September 30, 2020 and 2019 includes interest payments on our note obligations of $32.5 million and $29.2 million, respectively.

Net Cash 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 $40.1 million and $37.1 million for the nine months ended September 30, 2020 and 2019, respectively. The changes in purchases of property and equipment are primarily due to the timing and scope of our network expansion activities including geographic expansion and adding buildings to our network.

Net Cash (Used in) Provided by Financing Activities. Our primary uses of cash for financing activities are for principal payments under our finance lease obligations, debt obligations, and our installment payment agreement, purchases of our common stock and dividend payments. Principal payments under our finance lease obligations were $19.4 million and $7.0 million for the nine months ended September 30, 2020 and 2019, respectively. Principal payments under our installment payment agreement were $7.9 million and $7.3 million for the nine months ended September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020 and 2019 we paid $95.0 million and $82.9 million, respectively, for our quarterly dividend payments. In June 2019 we completed an offering of €135.0 million of our 2024 Notes. The net proceeds from the offering, after deducting offering expenses, were $152.1 million. In June 2020 we completed an offering of €215.0 million of our 2024 Notes. The net proceeds from the offering, after deducting offering expenses, were $240.3 million. In June 2020 we redeemed our $189.2 million of our 2021 Notes at par value.

Cash Position and Indebtedness

Our total cash and cash equivalents at September 30, 2020 were $393.3 million. We believe this level of liquidity reduces our exposure to refinancing risk, potential underperformance of the business or other unforeseen challenges and enhances our ability to pursue acquisitions or operating opportunities. We intend upon holding levels of cash and cash equivalents sufficient to maintain our ability to fund operations, refinance indebtedness and make dividend payments to our shareholders.

Our total indebtedness at September 30, 2020, at par value, was $1.1 billion. Our total indebtedness at September 30, 2020 includes $212.9 million of finance lease obligations for dark fiber under long term IRU agreements.

Summarized Financial Information of Holdings

Holdings is not a restricted subsidiary as defined under the indentures governing our 2022 Notes and 2024 Notes. Holdings is a guarantor under these notes. Under the indentures we are required to disclose financial information of Holdings including its assets,

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liabilities and its operating results (“Holdings Financial Information”). The Holdings Financial Information as of and for the nine months ended September 30, 2020 is detailed below (in thousands).

	September 30, 2020
	(Unaudited)
Cash and cash equivalents	$	134,277
Accrued interest receivable		8
Total assets	$	134,285
Investment from subsidiaries	$	283,036
Common stock		47
Accumulated deficit		(148,798)
Total equity	$	134,285

	Nine Months
	Ended
	September 30, 2020
	(Unaudited)
Equity-based compensation expense	$	19,369
Interest income		550
Net loss	$	(18,819)

Common Stock Buyback Program

Our Board of Directors has approved purchases of our common stock under a buyback program (the “Buyback Program”). In the three and nine months ended September 30, 2020 we purchased 4,567 shares of our common stock for $0.3 million. There were no purchases of our common stock in the three and nine months ended September 30, 2019. As of September 30, 2020, there was a total of $34.6 million available under the Buyback Program which is authorized to continue through December 31, 2021.

Subsequent to September 30, 2020 we purchased 53,516 shares of common stock for $3.1 million under the Buyback Program.

Dividends on Common Stock and Return of Capital Program

Dividends are recorded as a reduction to retained earnings. On November 4, 2020, our Board of Directors approved the payment of our quarterly dividend of $0.73 per common share. This estimated $33.5 million dividend payment is expected to be paid on December 4, 2020.

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 debt indentures and other factors deemed relevant by the our Board of Directors. We are a Delaware corporation and under the General Corporate 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 governing our notes 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.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments included 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, 2019 except as follows.

In June 2020, Group completed an offering of €215.0 million principal amount of our 2024 Notes at 99.5% of par value. The net proceeds from the offering, after deducting offering expenses, were $240.3 million. We expect to use the remaining proceeds, after repayment of our 2021 Notes, for general corporate purposes including the repurchase of our common stock or for special or recurring

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dividends to our stockholders. The 2024 Notes bear interest at a rate of 4.375% per annum. Interest on the 2024 Notes is paid semi-annually in arrears on June 30 and December 30 of each year. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024.

In June 2020, Group redeemed its 2021 Notes with the proceeds from its June 2020 issuance of its 2024 Notes. Group redeemed its 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount thereof plus $1.6 million of accrued interest. As a result of this transaction we incurred a loss on debt extinguishment and redemption of $0.6 million resulting from the amortization of the remaining unamortized notes cost plus certain transaction expenses.

In July 2020 we entered into an agreement to purchase network equipment for a three-year period ending in July 2023. Under the agreement we are required to purchase $35.0 million of network equipment exclusively from the vendor per year.

Future Capital Requirements

We believe that our cash on hand and cash generated from our operating activities will be adequate to meet our working capital, capital expenditure, debt service, dividend payments and other cash requirements for the next twelve months if we execute our business plan.

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. 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.

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 may, from time to time, issue new debt, enter into debt for debt, or cash transactions to purchase our outstanding debt securities in the open market or through privately negotiated transactions. 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 risks that could arise if we had engaged in these relationships.

Critical Accounting Policies and Significant Estimates

Management believes that as of September 30, 2020, 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, 2019.

ITEM 3.              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management believes that as of September 30, 2020, there have been no material changes to our exposures to market risk from those disclosed in Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” of our annual report on Form 10-K for the year ended December 31, 2019.

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ITEM 4.              CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), an evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and our principal financial officer, concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1.              LEGAL PROCEEDINGS

We are involved in legal proceedings in the ordinary course of our business that we do not expect to have a material impact on our operations or results of operations. Note 4 of our interim condensed consolidated financial statements includes information on these proceedings.

ITEM 1A.           RISK FACTORS

The risk factor presented below supplement the risk factors previously disclosed in Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2019, our quarterly report on Form 10-Q for the quarter ended March 31, 2020 and our quarterly report on Form 10-Q for the quarter ended June 30, 2020.

The impact of the spread of COVID-19 continues to create significant uncertainty for our business, financial condition and results of operations.

We provide services in 47 countries, most located in regions significantly impacted by COVID-19. The extent of the impact of the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market. Such future uncertain and unpredictable developments include the duration and scope of the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and global economic conditions during and after the pandemic.

Approximately 67% of our revenue is from our corporate customers. Corporate customers are located in multi-tenant office buildings, almost exclusively in the United States and Canada. Authorities in many of these markets have implemented numerous measures to stall the spread and ameliorate the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place and stay-at-home orders, business shutdowns and closures, and have also implemented multi-step polices with the goal of re-opening these markets. These measures have impacted and continue to impact us and our employees, customers, suppliers and other third parties with whom we do business. The areas in which we operate are in varying stages of restrictions or re-opening. Some jurisdictions have re-opened while other jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases. Considerable uncertainty exists regarding how current and future health and safety measures implemented in response to the pandemic will impact our business, including whether such measures will result in further changes in demand for our services, impair our ability to access buildings to install our services or maintain our network or impact our supply chain. The continuing impact of existing or new mandates, restrictions, laws or regulations could have a material adverse impact on our operations and the operations of our customers or others with which we do business.

Moreover, even as authorities have relaxed restrictions, a significant number of our corporate customers have continued remote work policies instituted at the beginning of the COVID-19 pandemic, slowed the pace of opening new offices and closed offices due to global economic conditions. As a result, during the three months ended September 30, 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a continued reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic. We witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals. Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce. As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth. In the future we may 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.

Protective measures we have implemented to protect for our workforce from the COVID-19 virus may not be effective and may expose us to additional risks.

We have taken measures to protect our workforce and minimize their exposure to the COVID-19 virus, such as requiring our entire workforce to work remotely whenever possible, establishing safety procedures for our on-site technical personnel and severely curtailing all business travel. As a result, we have incurred increased costs as a result of COVID-19, such as one-time costs associated with the provision of laptops to all employees as well as the recurring costs of obtaining and maintaining adequate supplies and other sanitizing equipment for our offices, should future conditions permit a return to the office.

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If a significant percentage of our workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions, social distancing requirements or other governmental restrictions or voluntarily adopted practices, our operations will be negatively impacted. As we consider a future return to our offices, even on a strictly voluntary basis, compliance with governmental measures imposed in response to COVID-19 has caused and will continue to cause us to incur additional costs, and any inability to comply with such measures may subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business.

In addition, the shift to our workforce working remotely has amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks, may adversely affect our business.

ITEM 2.              UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Our Board of Directors has authorized a plan to permit the repurchase of our common stock in negotiated and open market transactions through December 31, 2021. We may purchase shares from time to time depending on market, economic, and other factors.

The following table summarizes our common stock repurchases during the third quarter of 2020 made pursuant to this authorization. During the quarter, we did not purchase shares outside of this program, and all purchases were made by or on behalf of the Company and not by any "affiliated purchaser" (as defined by Rule 10b-18 of the Securities Exchange Act of 1934). Subsequent to September 30, 2020 we purchased 53,516 shares of our common stock for $3.1 million under the Buyback Program.

Issuer Purchases of Equity Securities

				Total Number	Approximate
	Total			of Shares	Dollar Value of
	Number of			Purchased as Part of	Shares
	Shares	Average Price		Publicly Announced	that May Yet Be Purchased
Period	Purchased	Paid per Share		Plans or Programs	Under the Plans or Programs
July 1-31, 2020	—	$	—	—	$	34,904,594
August 1-31, 2020	—	$	—	—	$	34,904,594
September 1-30, 2020	4,567	$	59.01	4,567	$	34,635,083
Total	4,567	$	59.01	4,567

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ITEM 6.              EXHIBITS

(a) Exhibits

Exhibit Number	Description
31.1	Certification of Chief Executive Officer (filed herewith)
31.2	Certification of Chief Financial Officer (filed herewith)
32.1	Certification of Chief Executive Officer (furnished herewith)
32.2	Certification of Chief Financial Officer (furnished herewith)
101.1	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline Extensible Business Reporting Language (iXBRL), include: (i) the Condensed Consolidated Statements of Comprehensive Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes (filed herewith).
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the iXBRL document).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 5, 2020	COGENT COMMUNICATIONS HOLDINGS, INC.
	By:	/s/ David Schaeffer
		Name:	David Schaeffer
		Title:	Chief Executive Officer
Date: November 5, 2020	By:	/s/ Sean Wallace
		Name:	Sean Wallace
		Title:	Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

Certification of Chief Executive Officer

I, David Schaeffer, certify that:

1.                          I have reviewed this quarterly report on Form 10-Q of Cogent Communications Holdings, Inc.;

2.                          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.                          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.                          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)                             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)                             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)                             evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)                             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2020
/s/ David Schaeffer
Name:	David Schaeffer
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Sean Wallace, certify that:

1.                          I have reviewed this quarterly report on Form 10-Q of Cogent Communications Holdings, Inc.;

2.                          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.                          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.                          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)                             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)                             designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)                             evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)                             disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                             all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 5, 2020
/s/ Sean Wallace
Name:	Sean Wallace
Title:	ChiefFinancialOfficer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Holdings, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)                             the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and

(ii)                            the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2020

/s/ David Schaeffer

David Schaeffer

Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Holdings, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)                             the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), of the Securities Exchange Act of 1934, (15 U.S.C. 78m or 78o(d)); and

(ii)                            the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2020

/s/ Sean Wallace

Sean Wallace

Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Oct. 31, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2020
Entity File Number	000-51829
Entity Registrant Name	COGENT COMMUNICATIONS HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-5706863
Entity Address, Address Line One	2450 N Street N.W.
Entity Address, Country	US
Entity Address, City or Town	Washington, D.C
Entity Address, Postal Zip Code	20037
City Area Code	202
Local Phone Number	295-4200
Title of 12(b) Security	Common Stock
Trading Symbol	CCOI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		47,251,320
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001158324
Amendment Flag	false

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 393,293	$ 399,422
Accounts receivable, net of allowance for credit losses of $2,204 and $1,771, respectively	42,053	40,484
Prepaid expenses and other current assets	40,007	35,822
Total current assets	475,353	475,728
Property and equipment, net	421,251	368,929
Right-of-use leased assets	90,400	73,460
Deposits and other assets	13,910	14,007
Total assets	1,000,914	932,124
Current liabilities:
Accounts payable	11,983	11,075
Accrued and other current liabilities	47,714	51,301
Installment payment agreement, current portion, net of discounts of $245 and $350, respectively	8,292	9,063
Current maturities, operating lease liabilities	12,006	10,101
Current maturities, finance lease obligations	15,252	8,154
Total current liabilities	95,247	89,694
Operating lease liabilities, net of current maturities	101,447	86,690
Finance lease obligations, net of current maturities	197,688	161,635
Other long term liabilities	16,800	15,327
Total liabilities	1,261,605	1,135,803
Commitments and contingencies:
Stockholders' equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 47,284,336 and 46,840,434 shares issued and outstanding, respectively	47	47
Additional paid-in capital	513,454	493,178
Accumulated other comprehensive income - foreign currency translation	(7,498)	(12,326)
Accumulated deficit	(766,694)	(684,578)
Total stockholders' deficit	(260,691)	(203,679)
Total liabilities and stockholders' deficit	1,000,914	932,124
Senior secured 2022 notes
Current liabilities:
Senior secured 2022 notes, net of unamortized debt costs of $1,267 and $1,897, respectively and including premiums of $656 and $985, respectively	444,389	444,088
Senior unsecured 2024 notes
Current liabilities:
Senior unsecured notes	$ 406,034	150,001
Senior unsecured 2021 notes
Current liabilities:
Senior unsecured notes		$ 188,368

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets
Accounts receivable, allowance for credit losses (in dollars)	$ 2,204	$ 1,771
Liabilities and stockholders' equity
Installment payment agreement, current portion, net of discounts	$ 245	$ 350
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	47,284,336	46,840,434
Common stock, shares outstanding	47,284,336	46,840,434
Senior secured 2022 notes
Liabilities and stockholders' equity
Unamortized debt costs	$ 1,267	$ 1,897
Unamortized debt premium	656	985
Senior unsecured 2024 notes
Liabilities and stockholders' equity
Unamortized debt costs	3,166	1,410
Unamortized debt premium	1,164	$ 0
Senior unsecured 2021 notes
Liabilities and stockholders' equity
Unamortized debt costs	$ 857

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Service revenue	$ 142,302	$ 136,942	$ 424,205	$ 405,866
Operating expenses:
Network operations	54,519	55,253	164,326	163,811
Selling, general, and administrative	39,722	35,971	119,232	110,396
Depreciation and amortization	21,619	20,006	61,022	60,246
Total operating expenses	115,860	111,230	344,580	334,453
Loss on finance lease amendment	(505)		(423)
Gains on equipment transactions	99	87	343	808
Operating income	26,036	25,799	79,545	72,221
Interest expense	(15,760)	(15,191)	(46,481)	(42,243)
Realized foreign exchange gain on issuance on 2024 Euro Notes			2,547
Unrealized foreign exchange (loss) gain on 2024 Euro Notes	(17,315)	6,162	(17,827)	6,339
Interest income and other, net	484	2,185	430	5,588
Loss on debt extinguishment and redemption- 2021 Notes			(638)
(Loss) Income before income taxes	(6,555)	18,955	17,576	41,905
Income tax benefit (provision)	1,600	(5,254)	(4,740)	(11,851)
Net (loss) income	(4,955)	13,701	12,836	30,054
Comprehensive income:
Net (loss) income	(4,955)	13,701	12,836	30,054
Foreign currency translation adjustment	5,408	(4,709)	4,828	(4,748)
Comprehensive income	$ 453	$ 8,992	$ 17,664	$ 25,306
Net (loss) income per common share:
Basic net (loss) income per common share (in dollars per share)	$ (0.11)	$ 0.30	$ 0.28	$ 0.66
Diluted net (loss) income per common share (in dollars per share)	(0.11)	0.30	0.28	0.65
Dividends declared per common share (in dollars per share)	$ 0.705	$ 0.620	$ 2.045	$ 1.800
Weighted-average common shares - basic (in shares)	45,815,718	45,438,656	45,818,677	45,428,305
Weighted-average common shares - diluted (in shares)	45,815,718	46,019,691	46,598,870	45,948,331

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Equity-based compensation expense			$ 17,679	$ 13,520
Network operations
Equity-based compensation expense	$ 346	$ 282	903	688
Selling, general and administrative
Equity-based compensation expense	$ 6,176	$ 4,515	$ 16,776	$ 12,832

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net income	$ 12,836	$ 30,054
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	61,022	60,246
Amortization of debt costs, discounts and premiums	1,426	1,328
Equity-based compensation expense (net of amounts capitalized)	17,679	13,520
Loss on debt extinguishment and redemption - 2021 Notes	638
Unrealized losses (gains) on foreign exchange	17,281	(6,305)
Realized foreign exchange gain on issuance on 2024 Euro Notes	(2,547)
Gains - equipment transactions and other, net	80	(131)
Deferred income taxes	2,100	9,285
Changes in operating assets and liabilities:
Accounts receivable	(1,102)	(43)
Prepaid expenses and other current assets	(3,253)	(4,862)
Accounts payable, accrued liabilities and other long-term liabilities	(2,783)	1,350
Deposits and other assets	(628)	(1,730)
Net cash provided by operating activities	102,749	102,712
Cash flows from investing activities:
Purchases of property and equipment	(40,092)	(37,059)
Net cash used in investing activities	(40,092)	(37,059)
Cash flows from financing activities:
Dividends paid	(94,952)	(82,871)
Purchases of common stock	(270)
Redemption and extinguishment of 2021 Notes	(189,225)
Net proceeds from issuance of senior unsecured 2024 Euro Notes - net of debt costs of $2,137 and $1,556, respectively	240,285	152,128
Principal payments on installment payment agreement	(7,855)	(7,348)
Principal payments of finance lease obligations	(19,392)	(7,035)
Proceeds from exercises of stock options	1,175	1,270
Net cash (used in) provided by financing activities	(70,234)	56,144
Effect of exchange rates changes on cash	1,448	(1,619)
Net (decrease) increase in cash and cash equivalents	(6,129)	120,178
Cash and cash equivalents, beginning of period	399,422	276,093
Cash and cash equivalents, end of period	393,293	396,271
Supplemental disclosure of non-cash investing and financing activities:
Non-cash component of network equipment obtained in exchange transactions	310	771
PP&E obtained for installment payment agreement	5,771	8,945
Finance lease obligations incurred	61,504	11,342
Fair value of equipment acquired in leases	$ 536	$ 1,207

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Senior unsecured 2024 notes
Debt costs	$ 2,137	$ 1,556

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Description of the business and recent developments:

9 Months Ended

Sep. 30, 2020

Description of the business and recent developments:

Description of the business and recent developments:

1.  Description of the business and recent developments:

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. (“Group”), a Delaware corporation, 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. and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc. and its subsidiaries. Group and its subsidiaries represent the operating subsidiaries of Cogent and the vast majority of Cogent's assets, contractual arrangements, and operations are executed by Group and its subsidiaries.

Description of business

We are a facilities-based provider of low-cost, high-speed Internet access, private network services, and data center colocation space. Our network is specifically designed and optimized to transmit packet switched data. We deliver our services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 47 countries across North America, Europe, Asia, South America, Australia and Africa. We are a Delaware corporation and we are headquartered in Washington, DC.

We offer on-net Internet access services exclusively through our own facilities, which run from our network to our customers’ premises. We offer our on-net services to customers located in buildings that are physically connected to our network. As a result, we are not dependent on local telephone companies or cable TV companies to serve our customers for our on-net Internet access and private network service. Our on- net service consists of high-speed Internet access and private network services offered at speeds ranging from 100 Megabits per second to 100 Gigabits per second.

We provide our on-net Internet access and private network services to our corporate and net-centric customers. Our corporate customers are located in multi-tenant office buildings and typically include law firms, financial services firms, advertising and marketing firms as well as health care providers, educational institutions and other professional services businesses. Our net-centric customers include bandwidth-intensive users which leverage our network to either deliver content to end users or to provide access to residential or commercial internet users. Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers. Access customers include over 7,200 access networks comprised of other Internet access providers, telephone companies, and cable television companies that collectively provide internet access to a substantial number of broadband subscribers across the world. These net-centric customers generally receive our services in carrier neutral colocation facilities and in our data centers. We operate data centers throughout North America and Europe that allow our customers to collocate their equipment and access our network.

In addition to providing our on-net services, we provide Internet access and private network services to customers that are not located in buildings directly connected to our network. We provide 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 our network. We also provide certain non-core services that resulted from acquisitions. We continue to support but do not actively sell these non-core services.

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 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, 2019.

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 United States generally accepted accounting principles 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 September 30, 2020, the carrying amount of cash and cash equivalents, 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 at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2— market approach) at September 30, 2020 the fair value of the Company’s $445.0 million senior secured notes was $455.0 million and the fair value of the Company’s €350.0 million Euro ($410.4 million USD) senior unsecured notes was $416.5 million.

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 revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $3.9 million and $4.0  million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.9 million and $10.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Basic and diluted net income per common share

Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (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 Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Weighted average common shares - basic	45,815,718	45,438,656	45,818,677	45,428,305
Dilutive effect of stock options	—	34,593	99,581	32,179
Dilutive effect of restricted stock	—	546,442	680,612	487,847
Weighted average common shares - diluted	45,815,718	46,019,691	46,598,870	45,948,331

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	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Unvested shares of restricted common stock	1,472,572	1,379,446	1,472,572	1,379,446
Anti-dilutive options for common stock	87,214	37,606	24,453	50,928
Anti-dilutive shares of restricted common stock	925,866	—	191	50,292

Stockholders’ Deficit

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts):

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2020	47,279,201	$	47	$	506,391	$	(12,906)	$	(729,082)	$	(235,550)
Forfeitures of shares granted to employees	(4,932)		—		—		—		—		—
Equity-based compensation	—		—		7,147		—		—		7,147
Foreign currency translation	—		—		—		5,408		—		5,408
Issuances of common stock	10,500		—		—		—		—		—
Exercises of options	4,134		—		185		—		—		185
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(32,657)		(32,657)
Net loss	—		—		—		—		(4,955)		(4,955)
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2019	46,806,370	$	47	$	481,734	$	(10,967)	$	(647,404)	$	(176,590)
Forfeitures of shares granted to employees	(4,508)		—		—		—		—		—
Equity-based compensation	—		—		5,311		—		—		5,311
Foreign currency translation	—		—		—		(4,709)		—		(4,709)
Issuances of common stock	10,572		—		—		—		—		—
Exercises of options	9,152		—		351		—		—		351
Dividends paid	—		—		—		—		(28,565)		(28,565)
Net income	—		—		—		—		13,701		13,701
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2019	46,840,434	$	47	$	493,178	$	(12,326)	$	(684,578)	$	(203,679)
Forfeitures of shares granted to employees	(42,212)		—		—		—		—		—
Equity-based compensation	—		—		19,371		—		—		19,371
Foreign currency translation	—		—		—		4,828		—		4,828
Issuances of common stock	465,530		—		—		—		—		—
Exercises of options	25,151		—		1,174		—		—		1,174
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(94,952)		(94,952)
Net income	—		—		—		—		12,836		12,836
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2018	46,336,499	$	46	$	471,331	$	(10,928)	$	(609,451)	$	(149,002)
Forfeitures of shares granted to employees	(8,394)		—		—		—		—		—
Equity-based compensation	—		—		14,796		—		—		14,796
Foreign currency translation	—		—		—		(4,748)		—		(4,748)
Issuances of common stock	459,550		1		—		—		—		1
Exercises of options	33,931		—		1,269		—		—		1,269
Dividends paid	—		—		—		—		(82,871)		(82,871)
Net income	—		—		—		—		30,054		30,054
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

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. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606. The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions. Management assesses these costs for impairment at least quarterly and as "triggering" events occur that indicate it is more likely than not that an impairment exists.

The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months. The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.

To achieve this core principle, the Company follows the following five steps:

1) Identification of the contract, or contracts with a customer

2) Identification of the performance obligations in the contract

3) Determination of the transaction price

4) Allocation of the transaction price to the performance obligations in the contract

5) Recognition of revenue when, or as, we satisfy a performance obligation

Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above. 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 amounts. The Company recognizes revenue for these amounts as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2020 was $1.6 million and during the three months ended September 30, 2019 was $1.7 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $3.9  million and during the nine months ended September 30, 2019 was $5.1 million. Amortization expense for contract costs was $4.2  million for the three months ended September 30, 2020 and $4.3 million for the three months ended September 30, 2019. Amortization expense for contract costs was $12.6  million for the nine months ended September 30, 2020 and $13.0  million for the nine months ended September 30, 2019.

Recent Accounting Pronouncements— Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 replaced most existing lease accounting guidance. In July 2018 the FASB approved an Accounting Standards Update which, among other changes, allowed a company to elect to adopt ASU 2016-02 using the modified retrospective method applying the transition provisions at the beginning of the period of adoption, rather than at the beginning of the earliest comparative period presented in these financial statements. ASU 2016-02 was effective for the Company beginning on January 1, 2019 and required the Company to record a right-of-use asset and a lease liability for most of its facilities leases. These leases were previously treated as operating leases. The effect of ASU 2016-02 was to record a cumulative-effect adjustment on January 1, 2019 as a right-of-use asset and an operating lease liability totaling $97.3 million. The operating lease liability 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 nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.

	Three Months		Three Months
	Ended		Ended
	September 30, 2020		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,382	$	4,963
Interest expense on finance lease liabilities		4,804		4,414
Operating lease cost		4,269		3,716
Total lease costs	$	15,455	$	13,093

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2020			September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	16,117		$	14,851
Interest expense on finance lease liabilities		13,794			13,230
Operating lease cost		12,860			10,497
Total lease costs	$	42,771		$	38,578
Other lease information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	(14,150)		$	(12,957)
Operating cash flows from operating leases		(13,785)			(8,443)
Financing cash flows from finance leases		(19,392)			(7,035)
Right-of-use assets obtained in exchange for new finance lease liabilities		61,504			11,342
Right-of-use assets obtained in exchange for new operating lease liabilities		24,866			6,912
Weighted-average remaining lease term — finance leases (in years)		12.3			14.5
Weighted-average remaining lease term — operating leases (in years)		20.4			21.7
Weighted average discount rate — finance leases		10.5	%		10.5	%
Weighted average discount rate — operating leases		5.4	%		5.7	%

Finance leases—fiber lease agreements

The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs). These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of September 30, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $20.7 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 (principal and interest) under these finance leases are as follows (in thousands):

For the twelve months ending September 30,
2021	$	33,471
2022		32,638
2023		31,650
2024		31,753
2025		28,495
Thereafter		225,320
Total minimum finance lease obligations		383,327
Less—amounts representing interest		(170,387)
Present value of minimum finance lease obligations		212,940
Current maturities		(15,252)
Finance lease obligations, net of current maturities	$	197,688

Operating leases

The Company leases office space and certain data center facilities under operating leases. In certain cases the Company also enters into short term operating leases for dark fiber. 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. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company. Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments are recorded as an operating lease liability and a right-of-use leased asset. Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

The future minimum payments under these operating lease agreements are as follows (in thousands):

For the twelve months ending September 30,
2021	$	17,579
2022		16,535
2023		15,674
2024		14,198
2025		12,124
Thereafter		103,809
Total minimum operating lease obligations		179,919
Less—amounts representing interest		(66,466)
Present value of minimum operating lease obligations		113,453
Current maturities		(12,006)
Lease obligations, net of current maturities	$	101,447

Adopted accounting pronouncements

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") later codified as Accounting Standards Codification ("ASC") 326 ("ASC 326"), using the modified retrospective transition approach. This guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses ("CECL") on its trade receivables arising from the failure of customers to make contractual payments. 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. Adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures and no cumulative adjustment was recorded.

			Current-period
	Balance at		Provision for		Write offs		Balance at
	June 30,		Expected Credit		Charged Against		September 30,
Description	2020		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Three months ending September 30, 2020	$	2,115	$	1,174	$	(1,085)	$	2,204

			Current-period
	Balance at		Provision for		Write offs		Balance at
	December 31,		Expected Credit		Charged Against		September 30,
Description	2019		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Nine months ending September 30, 2020	$	1,771	$	3,942	$	(3,509)	$	2,204

Net bad debt expense for the three months ended September 30, 2020 was $0.8 million which is net of bad debt recoveries of $0.4 million. Net bad debt expense for the nine months ended September 30, 2020 was $3.2 million which is net of bad debt recoveries of $0.8 million.

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Property and equipment:

9 Months Ended

Sep. 30, 2020

Property and equipment:

Property and equipment:

2.  Property and equipment:

Depreciation and amortization expense related to property and equipment and finance leases was $21.6 million and $20.0 million for the three months ended September 30, 2020, and 2019 respectively, and $61.0 million and $60.2  million for the nine months ended September 30, 2020 and 2019, respectively. The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $3.0 million and $2.7 million for the three months ended

September 30, 2020 and 2019, respectively, and $8.9 million and $8.0 million for the nine months ended September 30, 2020 and 2019, respectively.

Exchange agreement

In the three and nine months ended September 30, 2020 and 2019, the Company exchanged certain used network equipment and cash consideration for new network equipment. The fair value of the equipment received was estimated to be $0.2 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $1.1 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. After considering the cash component the transactions resulted in gains of $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively. The estimated fair value of the equipment received was based upon the cash consideration price the Company pays for the new network equipment on a standalone basis (Level 3).

Installment payment agreement

In March 2015, the Company entered into an installment payment agreement (“IPA”) with a vendor. Under the IPA the Company was allowed to purchase network equipment in exchange for interest free note obligations each with a twenty-four month term until July 2020 when additional borrowings under the IPA expired. There are no payments under each note obligation for the first six months followed by eighteen equal installment payments for the remaining eighteen month term. As of September 30, 2020, and December 31, 2019 there was $10.4 million and $12.5 million, respectively, of note obligations outstanding under the IPA, secured by the related equipment. The Company recorded the assets purchased and the net present value of the note obligation utilizing an imputed interest rate. The resulting discount was $0.3 million and $0.4 million as of September 30, 2020 and December 31, 2019, respectively, and is being amortized over the note term using the effective interest rate method.

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Long-term debt:

9 Months Ended

Sep. 30, 2020

Long-term debt:

Long-term debt:

3.  Long-term debt:

The Company has $445.0 million of senior secured notes (the "2022 Notes") and €350.0 million ($410.4 million USD as of September 30, 2020) of senior unsecured notes (the "2024 Notes") outstanding. The 2022 Notes are due on March 1, 2022 and bear interest at a rate of 5.375% per year. Interest on the 2022 Notes is paid semi-annually on March 1 and September 1. The 2024 Notes are due on June 30, 2024 and bear interest at a rate of 4.375% per year. Interest on the 2024 Notes is paid semi-annually on June 30 and December 30.

2024 Notes issuances

In June 2020, Group completed an offering of €215.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2020 offering, after deducting offering expenses, were $240.3 million. In June 2019, Group completed an offering of €135.0 million aggregate principal amount of 4.375% senior unsecured notes. The net proceeds from the June 2019 offering, after deducting offering expenses, were $152.1 million. The Company expects to use the proceeds from these offerings for general corporate purposes, to repay debt obligations, to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

The 2024 Notes bear interest at a rate of 4.375% per annum. Interest began to accrue on the 2024 Notes issued in June 2020, on June 4, 2020 and interest began to accrue on the 2024 Notes issued in June 2019 on June 25, 2019. Interest is paid semi-annually in arrears on June 30 and December 30 of each year. Unless earlier redeemed, the 2024 Notes will mature on June 30, 2024. The June 2020 issuance of €215.0 million 2024 Notes were issued at a discount of 99.5% for €213.9 million Euros ($240.0 million USD) on June 3, 2020 at a Euro to USD rate of $1.112. The discount is amortized to interest expense to the maturity date under the effective interest rate method. The Company received proceeds in USD on the June 2020 2024 Notes on June 9, 2020 at a Euro to USD rate of $1.133 resulting in a realized gain on foreign exchange of $2.5 million. The June 2019 issuance of 2024 Notes were issued at par for €135.0 million on June 25, 2019. The issuances of the 2024 Notes were in Euros and are reported in the Company’s reporting currency – US Dollars. As of September 30, 2020 the carrying value of our 2024 Notes was $410.4 million. The unrealized (loss) gain on foreign exchange on the Company’s 2024 Notes from converting the 2024 Notes into USD was $(17.3) million for the three months ended September 30, 2020 and $6.2 million for the three months ended September 30, 2019 and was $(17.8) million for the nine months ended September 30, 2020 and was $6.3 million for the nine months ended September 30, 2019.

Debt extinguishment and redemption 2021 Notes

In June 2020, Group redeemed its 5.625% senior unsecured notes due in 2021 (the "2021 Notes") with the proceeds from its June 2020 issuance of €215.0 million 2024 Notes. The Company redeemed the entire outstanding amount of the 2021 Notes at a redemption price of 100.00% of the $189.2 million principal amount plus $1.6 million of accrued interest. As a result of this transaction the Company incurred a loss on debt extinguishment and redemption of $0.6 million from the amortization of the remaining unamortized notes cost and certain transaction expenses.

Limitations under the indentures

The indentures governing the 2024 Notes and 2022 Notes among other things, limit the Company’s ability to incur indebtedness; to pay dividends or make other distributions; to make certain investments and other restricted payments; to create liens; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; to incur restrictions on the ability of a subsidiary to pay dividends or make other payments; and to enter into certain transactions with its affiliates. Limitations on the ability to incur additional indebtedness (excluding IRU agreements incurred in the normal course of business) include a restriction on incurring additional indebtedness if the Company’s consolidated leverage ratio, as defined in the indentures, is greater than 6.0 for the 2024 Notes and greater than 5.0 for the 2022 Notes. Limitations on the ability to incur additional secured indebtedness include a restriction on incurring additional secured indebtedness if the Company’s consolidated secured leverage ratio, as defined in the indentures, is greater than 4.0 for the 2024 Notes and greater than 3.5 for the 2022 Notes. The indentures prohibit certain payments, such as dividends and stock purchases, when the Company’s consolidated leverage ratio, as defined by the indentures, is greater than 4.25. A certain amount of such unrestricted payments is permitted notwithstanding this prohibition. The unrestricted payment amount may be increased by the Company’s consolidated cash flow, as defined in the indentures, as long as the Company’s consolidated leverage ratio is less than 4.25. The Company’s consolidated leverage ratio was above 4.25 as of September 30, 2020. As of September 30, 2020, a total of $132.6 million was permitted for investment payments including dividends and stock purchases.

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Commitments and contingencies:

9 Months Ended

Sep. 30, 2020

Commitments and contingencies:

Commitments and contingencies:

4.  Commitments and contingencies:

Current and potential litigation

In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $3.3 million in excess of the amount accrued at September 30, 2020.

The Company is engaged in an arbitration proceeding in Spain in which a former provider of optical fiber to the Company is seeking approximately $9.0 million for Company’s early termination of the optical fiber leases, which amount the Company accrued in 2015. The Company has counterclaimed for damages and is contesting its obligation to pay the termination liability. The arbitration is being conducted by the Civil and Commercial Arbitration Court (CIMA) in Madrid, Spain.

In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company’s financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

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Income taxes:

9 Months Ended

Sep. 30, 2020

Income taxes:

Income taxes:

5.  Income taxes:

The components of (loss) income before income taxes consist of the following (in thousands):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Domestic	$	(4,084)	$	24,452	$	27,818	$	59,537
Foreign		(2,471)		(5,497)		(10,242)		(17,632)
Total	$	(6,555)	$	18,955	$	17,576	$	41,905

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Common stock buyback program stock option and award plan:

9 Months Ended

Sep. 30, 2020

Common stock buyback program stock option and award plan:

Common stock buyback program stock option and award plan:

6.  Common stock buyback program stock option and award plan:

The Company’s Board of Directors has approved purchases of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2021. At September 30, 2020, there was approximately $34.6 million remaining for purchases under the Buyback Program. In the three and nine months ended September 30, 2020 the Company purchased 4,567 shares of its common stock for $0.3 million. There were no purchases of common stock during the three and nine months ended September 30, 2019. Subsequent to September 30, 2020 the Company purchased 53,516 shares of its common stock for $3.1 million under the Buyback Program.

In the first quarter of 2020 the Company granted 319,750 shares of common stock to its executive employees and directors valued at $23.7 million. Included in this first quarter grant were 94,050 performance shares that vest subject to certain Company performance conditions and 35,000 performance shares granted to the Company’s CEO that are subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index. In the second quarter of 2020 the Company granted 135,280 shares of common stock to its employees and directors valued at $10.6 million. Shares granted to the Company’s directors vest upon grant and the shares granted to the Company’s employees that are not subject to performance conditions generally vest over periods ending in December 2023.

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Dividends on common stock:

9 Months Ended

Sep. 30, 2020

Dividends on common stock:

Dividends on common stock:

7.  Dividends on common stock:

On November 4, 2020, the Company’s Board of Directors approved the payment of a quarterly dividend of $0.73 per common share. This estimated $33.5 million dividend payment is expected to be paid on December 4, 2020.

The payment of any future dividends and any other returns of capital, including stock buybacks will be at the discretion of the Company’s Board of Directors and may be reduced, eliminated or increased and will be dependent upon the Company’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under the Company’s debt indentures and other factors deemed relevant by the Company’s Board of Directors. The Company is a Delaware corporation and under the General Corporate 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 governing the Company’s notes limit the Company’s ability to return cash to its stockholders.

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Related party transactions:

9 Months Ended

Sep. 30, 2020

Related party transactions:

Related party transactions:

8.  Related party transactions:

Office leases

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer. The fixed annual rent for the headquarters building is $1.0 million per year plus an allocation of taxes and utilities. The lease began in May 2015 and the original lease term was for five years which was cancellable by the Company upon 60 days’ notice. In February 2020 the lease term was extended to May 2025. The Company’s audit committee reviews and approves all transactions with related parties. The Company paid $0.5 million and $0.3 million in the three months ended September 30, 2020 and 2019, respectively, and $1.3 million and $1.2 million in the nine months ended September 30, 2020 and 2019, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.

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Segment information:

9 Months Ended

Sep. 30, 2020

Segment information:

Segment information:

9.  Segment information:

The Company operates as one operating segment. The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands):

Three months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	82,730	$	32,416	$	107	$	115,253
Europe		19,966		4,422		12		24,400
South America		599		14		—		613
Asia Pacific		1,786		240		—		2,026
Africa		10		—		—		10
Total	$	105,091	$	37,092	$	119	$	142,302

Three months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	80,176	$	33,172	$	104	$	113,452
Europe		17,921		4,053		4		21,978
South America		139		5		—		144
Asia Pacific		1,180		188		—		1,368
Africa		—		—		—		—
Total	$	99,416	$	37,418	$	108	$	136,942

Nine months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	247,679	$	97,951	$	369	$	345,999
Europe		58,433		12,781		32		71,246
South America		1,344		34		—		1,378
Asia Pacific		4,880		692		—		5,572
Africa		10		—		—		10
Total	$	312,346	$	111,458	$	401	$	424,205

Nine months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	236,636	$	98,670	$	300	$	335,606
Europe		53,889		12,192		45		66,126
South America		244		8		—		252
Asia Pacific		3,300		582		—		3,882
Africa		—		—		—		—
Total	$	294,069	$	111,452	$	345	$	405,866

	September 30,		December 31,
	2020		2019
Long-lived assets, net
North America	$	305,648	$	269,364
Europe and other		115,619		99,582
Total	$	421,267	$	368,946

The majority of North American revenue consists of services delivered within the United States.

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Description of the business and recent developments: (Policies)

9 Months Ended

Sep. 30, 2020

Description of the business and recent developments:

Basis of presentation

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 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, 2019.

The accompanying unaudited condensed consolidated financial statements include all wholly owned subsidiaries. All inter-company accounts and activity have been eliminated.

Use of estimates

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles 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

Financial instruments

At September 30, 2020, the carrying amount of cash and cash equivalents, 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 at amortized cost, which approximates fair value based upon quoted market prices (Level 1). Based upon recent trading prices (Level 2— market approach) at September 30, 2020 the fair value of the Company’s $445.0 million senior secured notes was $455.0 million and the fair value of the Company’s €350.0 million Euro ($410.4 million USD) senior unsecured notes was $416.5 million.

Gross receipts taxes, universal service fund and other surcharges

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 revenues and costs of network operations. Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense) were $3.9 million and $4.0  million for the three months ended September 30, 2020 and September 30, 2019, respectively, and $10.9 million and $10.6 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Basic and diluted net income per common share

Basic and diluted net income per common share

Basic earnings per share (“EPS”) excludes dilution for common stock equivalents and is computed by dividing net income or (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 Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Weighted average common shares - basic	45,815,718	45,438,656	45,818,677	45,428,305
Dilutive effect of stock options	—	34,593	99,581	32,179
Dilutive effect of restricted stock	—	546,442	680,612	487,847
Weighted average common shares - diluted	45,815,718	46,019,691	46,598,870	45,948,331

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	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Unvested shares of restricted common stock	1,472,572	1,379,446	1,472,572	1,379,446
Anti-dilutive options for common stock	87,214	37,606	24,453	50,928
Anti-dilutive shares of restricted common stock	925,866	—	191	50,292

Stockholders' Deficit

Stockholders’ Deficit

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts):

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2020	47,279,201	$	47	$	506,391	$	(12,906)	$	(729,082)	$	(235,550)
Forfeitures of shares granted to employees	(4,932)		—		—		—		—		—
Equity-based compensation	—		—		7,147		—		—		7,147
Foreign currency translation	—		—		—		5,408		—		5,408
Issuances of common stock	10,500		—		—		—		—		—
Exercises of options	4,134		—		185		—		—		185
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(32,657)		(32,657)
Net loss	—		—		—		—		(4,955)		(4,955)
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2019	46,806,370	$	47	$	481,734	$	(10,967)	$	(647,404)	$	(176,590)
Forfeitures of shares granted to employees	(4,508)		—		—		—		—		—
Equity-based compensation	—		—		5,311		—		—		5,311
Foreign currency translation	—		—		—		(4,709)		—		(4,709)
Issuances of common stock	10,572		—		—		—		—		—
Exercises of options	9,152		—		351		—		—		351
Dividends paid	—		—		—		—		(28,565)		(28,565)
Net income	—		—		—		—		13,701		13,701
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2019	46,840,434	$	47	$	493,178	$	(12,326)	$	(684,578)	$	(203,679)
Forfeitures of shares granted to employees	(42,212)		—		—		—		—		—
Equity-based compensation	—		—		19,371		—		—		19,371
Foreign currency translation	—		—		—		4,828		—		4,828
Issuances of common stock	465,530		—		—		—		—		—
Exercises of options	25,151		—		1,174		—		—		1,174
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(94,952)		(94,952)
Net income	—		—		—		—		12,836		12,836
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2018	46,336,499	$	46	$	471,331	$	(10,928)	$	(609,451)	$	(149,002)
Forfeitures of shares granted to employees	(8,394)		—		—		—		—		—
Equity-based compensation	—		—		14,796		—		—		14,796
Foreign currency translation	—		—		—		(4,748)		—		(4,748)
Issuances of common stock	459,550		1		—		—		—		1
Exercises of options	33,931		—		1,269		—		—		1,269
Dividends paid	—		—		—		—		(82,871)		(82,871)
Net income	—		—		—		—		30,054		30,054
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

Revenue recognition

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. Under ASC 606 installation fees for contracts with terms longer than month-to-month are recognized over the contract term. The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month. The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606. The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions. Management assesses these costs for impairment at least quarterly and as "triggering" events occur that indicate it is more likely than not that an impairment exists.

The Company’s service offerings consist of on-net and off-net telecommunications services. Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears. Amounts billed are due upon receipt and contract lengths range from month to month to 60 months. The Company satisfies its performance obligations to provide services to customers over time as the services are rendered. In accordance with ASC 606, revenue is recognized when a customer obtains the promised service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. The Company has adopted the practical expedient related to certain performance obligation disclosures since it has a right to consideration from its customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.

To achieve this core principle, the Company follows the following five steps:

1) Identification of the contract, or contracts with a customer

2) Identification of the performance obligations in the contract

3) Determination of the transaction price

4) Allocation of the transaction price to the performance obligations in the contract

5) Recognition of revenue when, or as, we satisfy a performance obligation

Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above. 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 amounts. The Company recognizes revenue for these amounts as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2020 was $1.6 million and during the three months ended September 30, 2019 was $1.7 million. Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2020 was $3.9  million and during the nine months ended September 30, 2019 was $5.1 million. Amortization expense for contract costs was $4.2  million for the three months ended September 30, 2020 and $4.3 million for the three months ended September 30, 2019. Amortization expense for contract costs was $12.6  million for the nine months ended September 30, 2020 and $13.0  million for the nine months ended September 30, 2019.

Recent Accounting Pronouncements-Adopted

Recent Accounting Pronouncements— Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 replaced most existing lease accounting guidance. In July 2018 the FASB approved an Accounting Standards Update which, among other changes, allowed a company to elect to adopt ASU 2016-02 using the modified retrospective method applying the transition provisions at the beginning of the period of adoption, rather than at the beginning of the earliest comparative period presented in these financial statements. ASU 2016-02 was effective for the Company beginning on January 1, 2019 and required the Company to record a right-of-use asset and a lease liability for most of its facilities leases. These leases were previously treated as operating leases. The effect of ASU 2016-02 was to record a cumulative-effect adjustment on January 1, 2019 as a right-of-use asset and an operating lease liability totaling $97.3 million. The operating lease liability 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 nonlease components on its finance and operating leases, not reassessing whether any existing contracts contained leases, not reconsidering lease classification, not reassessing initial direct costs and using hindsight in determining the lease reasonably certain term of its leases.

	Three Months		Three Months
	Ended		Ended
	September 30, 2020		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,382	$	4,963
Interest expense on finance lease liabilities		4,804		4,414
Operating lease cost		4,269		3,716
Total lease costs	$	15,455	$	13,093

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2020			September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	16,117		$	14,851
Interest expense on finance lease liabilities		13,794			13,230
Operating lease cost		12,860			10,497
Total lease costs	$	42,771		$	38,578
Other lease information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	(14,150)		$	(12,957)
Operating cash flows from operating leases		(13,785)			(8,443)
Financing cash flows from finance leases		(19,392)			(7,035)
Right-of-use assets obtained in exchange for new finance lease liabilities		61,504			11,342
Right-of-use assets obtained in exchange for new operating lease liabilities		24,866			6,912
Weighted-average remaining lease term — finance leases (in years)		12.3			14.5
Weighted-average remaining lease term — operating leases (in years)		20.4			21.7
Weighted average discount rate — finance leases		10.5	%		10.5	%
Weighted average discount rate — operating leases		5.4	%		5.7	%

Finance leases—fiber lease agreements

The Company has entered into lease agreements with numerous providers of dark fiber under indefeasible-right-of use agreements (“IRUs). These IRUs typically have initial terms of 15- 20 years and include renewal options after the initial lease term. The Company establishes the number of renewal option periods used in determining the lease term based upon its assessment at the inception of the lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the dark fiber provider and the Company. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as finance leases are recorded as a finance lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the Company’s incremental borrowing rate for the reasonably certain lease term. Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets. As of September 30, 2020, the Company had committed to additional dark fiber IRU lease agreements totaling $20.7 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 (principal and interest) under these finance leases are as follows (in thousands):

For the twelve months ending September 30,
2021	$	33,471
2022		32,638
2023		31,650
2024		31,753
2025		28,495
Thereafter		225,320
Total minimum finance lease obligations		383,327
Less—amounts representing interest		(170,387)
Present value of minimum finance lease obligations		212,940
Current maturities		(15,252)
Finance lease obligations, net of current maturities	$	197,688

Operating leases

The Company leases office space and certain data center facilities under operating leases. In certain cases the Company also enters into short term operating leases for dark fiber. 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. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors including level of collateralization and term to align with the term of the lease. Certain of the Company’s leases include options to extend or terminate the lease. The Company establishes the number of renewal option periods used in determining the operating lease term based upon its assessment at the inception of the operating lease of the number of option periods for which failure to renew the lease imposes a penalty in such amount that renewal appears to be reasonably certain. The option to renew may be automatic, at the option of the Company or mutually agreed to between the landlord or dark fiber provider and the Company. Once the Company has accepted the related fiber route or the facility lease term has begun, the present value of the aggregate future minimum operating lease payments are recorded as an operating lease liability and a right-of-use leased asset. Lease incentives and deferred rent liabilities for facilities operating leases are presented with the right-of-use leased asset. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

The future minimum payments under these operating lease agreements are as follows (in thousands):

For the twelve months ending September 30,
2021	$	17,579
2022		16,535
2023		15,674
2024		14,198
2025		12,124
Thereafter		103,809
Total minimum operating lease obligations		179,919
Less—amounts representing interest		(66,466)
Present value of minimum operating lease obligations		113,453
Current maturities		(12,006)
Lease obligations, net of current maturities	$	101,447

Adopted accounting pronouncement

Adopted accounting pronouncements

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") later codified as Accounting Standards Codification ("ASC") 326 ("ASC 326"), using the modified retrospective transition approach. This guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses ("CECL") on its trade receivables arising from the failure of customers to make contractual payments. 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. Adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures and no cumulative adjustment was recorded.

			Current-period
	Balance at		Provision for		Write offs		Balance at
	June 30,		Expected Credit		Charged Against		September 30,
Description	2020		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Three months ending September 30, 2020	$	2,115	$	1,174	$	(1,085)	$	2,204

			Current-period
	Balance at		Provision for		Write offs		Balance at
	December 31,		Expected Credit		Charged Against		September 30,
Description	2019		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Nine months ending September 30, 2020	$	1,771	$	3,942	$	(3,509)	$	2,204

Net bad debt expense for the three months ended September 30, 2020 was $0.8 million which is net of bad debt recoveries of $0.4 million. Net bad debt expense for the nine months ended September 30, 2020 was $3.2 million which is net of bad debt recoveries of $0.8 million.

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Description of the business: (Tables)

9 Months Ended

Sep. 30, 2020

Description of the business and recent developments:

Schedule of diluted weighted average shares

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Weighted average common shares - basic	45,815,718	45,438,656	45,818,677	45,428,305
Dilutive effect of stock options	—	34,593	99,581	32,179
Dilutive effect of restricted stock	—	546,442	680,612	487,847
Weighted average common shares - diluted	45,815,718	46,019,691	46,598,870	45,948,331

Schedule of unvested and anti-dilutive shares

	Three Months	Three Months	Nine Months	Nine Months
	Ended	Ended	Ended	Ended
	September 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Unvested shares of restricted common stock	1,472,572	1,379,446	1,472,572	1,379,446
Anti-dilutive options for common stock	87,214	37,606	24,453	50,928
Anti-dilutive shares of restricted common stock	925,866	—	191	50,292

Schedule of Stockholders' Deficit

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2020 and September 30, 2019 (in thousands except share amounts):

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2020	47,279,201	$	47	$	506,391	$	(12,906)	$	(729,082)	$	(235,550)
Forfeitures of shares granted to employees	(4,932)		—		—		—		—		—
Equity-based compensation	—		—		7,147		—		—		7,147
Foreign currency translation	—		—		—		5,408		—		5,408
Issuances of common stock	10,500		—		—		—		—		—
Exercises of options	4,134		—		185		—		—		185
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(32,657)		(32,657)
Net loss	—		—		—		—		(4,955)		(4,955)
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at June 30, 2019	46,806,370	$	47	$	481,734	$	(10,967)	$	(647,404)	$	(176,590)
Forfeitures of shares granted to employees	(4,508)		—		—		—		—		—
Equity-based compensation	—		—		5,311		—		—		5,311
Foreign currency translation	—		—		—		(4,709)		—		(4,709)
Issuances of common stock	10,572		—		—		—		—		—
Exercises of options	9,152		—		351		—		—		351
Dividends paid	—		—		—		—		(28,565)		(28,565)
Net income	—		—		—		—		13,701		13,701
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2019	46,840,434	$	47	$	493,178	$	(12,326)	$	(684,578)	$	(203,679)
Forfeitures of shares granted to employees	(42,212)		—		—		—		—		—
Equity-based compensation	—		—		19,371		—		—		19,371
Foreign currency translation	—		—		—		4,828		—		4,828
Issuances of common stock	465,530		—		—		—		—		—
Exercises of options	25,151		—		1,174		—		—		1,174
Common stock purchases and retirement	(4,567)		—		(269)		—		—		(269)
Dividends paid	—		—		—		—		(94,952)		(94,952)
Net income	—		—		—		—		12,836		12,836
Balance at September 30, 2020	47,284,336	$	47	$	513,454	$	(7,498)	$	(766,694)	$	(260,691)

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity (Deficit)
Balance at December 31, 2018	46,336,499	$	46	$	471,331	$	(10,928)	$	(609,451)	$	(149,002)
Forfeitures of shares granted to employees	(8,394)		—		—		—		—		—
Equity-based compensation	—		—		14,796		—		—		14,796
Foreign currency translation	—		—		—		(4,748)		—		(4,748)
Issuances of common stock	459,550		1		—		—		—		1
Exercises of options	33,931		—		1,269		—		—		1,269
Dividends paid	—		—		—		—		(82,871)		(82,871)
Net income	—		—		—		—		30,054		30,054
Balance at September 30, 2019	46,821,586	$	47	$	487,396	$	(15,676)	$	(662,268)	$	(190,501)

Schedule of lease cost

	Three Months		Three Months
	Ended		Ended
	September 30, 2020		September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	6,382	$	4,963
Interest expense on finance lease liabilities		4,804		4,414
Operating lease cost		4,269		3,716
Total lease costs	$	15,455	$	13,093

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2020			September 30, 2019
Finance lease cost
Amortization of right-of-use assets	$	16,117		$	14,851
Interest expense on finance lease liabilities		13,794			13,230
Operating lease cost		12,860			10,497
Total lease costs	$	42,771		$	38,578
Other lease information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	(14,150)		$	(12,957)
Operating cash flows from operating leases		(13,785)			(8,443)
Financing cash flows from finance leases		(19,392)			(7,035)
Right-of-use assets obtained in exchange for new finance lease liabilities		61,504			11,342
Right-of-use assets obtained in exchange for new operating lease liabilities		24,866			6,912
Weighted-average remaining lease term — finance leases (in years)		12.3			14.5
Weighted-average remaining lease term — operating leases (in years)		20.4			21.7
Weighted average discount rate — finance leases		10.5	%		10.5	%
Weighted average discount rate — operating leases		5.4	%		5.7	%

Schedule of future minimum payments under finance leases

The future minimum payments (principal and interest) under these finance leases are as follows (in thousands):

For the twelve months ending September 30,
2021	$	33,471
2022		32,638
2023		31,650
2024		31,753
2025		28,495
Thereafter		225,320
Total minimum finance lease obligations		383,327
Less—amounts representing interest		(170,387)
Present value of minimum finance lease obligations		212,940
Current maturities		(15,252)
Finance lease obligations, net of current maturities	$	197,688

Schedule of future minimum payments under operating lease agreements

The future minimum payments under these operating lease agreements are as follows (in thousands):

For the twelve months ending September 30,
2021	$	17,579
2022		16,535
2023		15,674
2024		14,198
2025		12,124
Thereafter		103,809
Total minimum operating lease obligations		179,919
Less—amounts representing interest		(66,466)
Present value of minimum operating lease obligations		113,453
Current maturities		(12,006)
Lease obligations, net of current maturities	$	101,447

Schedule of impact on financial statement line items from adopting ASC 606

			Current-period
	Balance at		Provision for		Write offs		Balance at
	June 30,		Expected Credit		Charged Against		September 30,
Description	2020		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Three months ending September 30, 2020	$	2,115	$	1,174	$	(1,085)	$	2,204

			Current-period
	Balance at		Provision for		Write offs		Balance at
	December 31,		Expected Credit		Charged Against		September 30,
Description	2019		Losses		Allowance		2020
Allowance for credit losses (deducted from accounts receivable)
Nine months ending September 30, 2020	$	1,771	$	3,942	$	(3,509)	$	2,204

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Income taxes: (Tables)

9 Months Ended

Sep. 30, 2020

Income taxes:

Schedule of components of (loss) income before income taxes

The components of (loss) income before income taxes consist of the following (in thousands):

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Domestic	$	(4,084)	$	24,452	$	27,818	$	59,537
Foreign		(2,471)		(5,497)		(10,242)		(17,632)
Total	$	(6,555)	$	18,955	$	17,576	$	41,905

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Segment information: (Tables)

9 Months Ended

Sep. 30, 2020

Segment information:

Schedule of service revenue by geographic region and product class and long lived assets by geographic region

Three months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	82,730	$	32,416	$	107	$	115,253
Europe		19,966		4,422		12		24,400
South America		599		14		—		613
Asia Pacific		1,786		240		—		2,026
Africa		10		—		—		10
Total	$	105,091	$	37,092	$	119	$	142,302

Three months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	80,176	$	33,172	$	104	$	113,452
Europe		17,921		4,053		4		21,978
South America		139		5		—		144
Asia Pacific		1,180		188		—		1,368
Africa		—		—		—		—
Total	$	99,416	$	37,418	$	108	$	136,942

Nine months Ended September 30, 2020
Revenues	On-net		Off-net		Non-core		Total
North America	$	247,679	$	97,951	$	369	$	345,999
Europe		58,433		12,781		32		71,246
South America		1,344		34		—		1,378
Asia Pacific		4,880		692		—		5,572
Africa		10		—		—		10
Total	$	312,346	$	111,458	$	401	$	424,205

Nine months Ended September 30, 2019
Revenues	On-net		Off-net		Non-core		Total
North America	$	236,636	$	98,670	$	300	$	335,606
Europe		53,889		12,192		45		66,126
South America		244		8		—		252
Asia Pacific		3,300		582		—		3,882
Africa		—		—		—		—
Total	$	294,069	$	111,452	$	345	$	405,866

	September 30,		December 31,
	2020		2019
Long-lived assets, net
North America	$	305,648	$	269,364
Europe and other		115,619		99,582
Total	$	421,267	$	368,946

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Description of the business and recent developments: (Details)	9 Months Ended
	Sep. 30, 2020 country customer MB GB
Number of countries operating in | country	47
Access networks | customer	7,200
Minimum
Speed per second of bandwidth (in megabits and gigabits) | MB	100
Maximum
Speed per second of bandwidth (in megabits and gigabits) | GB	100

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Description of the business and recent developments: Financial instruments (Details) - Sep. 30, 2020 € in Millions, $ in Millions	USD ($)	EUR (€)
Senior secured 2022 notes
Financial instruments
Senior notes	$ 445.0
Senior secured 2022 notes | Level 2
Financial instruments
Senior notes, fair value	455.0
Senior unsecured 2024 notes
Financial instruments
Senior notes	410.4	€ 350.0
Senior unsecured 2024 notes | Level 2
Financial instruments
Senior notes, fair value	$ 416.5

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Description of the business and recent developments: Gross receipts taxes, universal service fund and other surcharges (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Description of the business and recent developments:
Excise taxes and surcharge	$ 3.9	$ 4.0	$ 10.9	$ 10.6

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Description of the business and recent developments: Basic and diluted net income per common share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Diluted weighted average shares
Weighted-average common shares - basic (in shares)	45,815,718	45,438,656	45,818,677	45,428,305
Weighted average common shares-diluted	45,815,718	46,019,691	46,598,870	45,948,331
Stock options
Diluted weighted average shares
Dilutive effect (options or restricted stock)		34,593	99,581	32,179
Anti-dilutive effects
Anti-dilutive (options or restricted stock)	87,214	37,606	24,453	50,928
Restricted stock
Diluted weighted average shares
Dilutive effect (options or restricted stock)		546,442	680,612	487,847
Anti-dilutive effects
Unvested shares of restricted common stock	1,472,572	1,379,446	1,472,572	1,379,446
Anti-dilutive (options or restricted stock)	925,866		191	50,292

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Description of the business and recent developments: Stockholders' deficit (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Increase (Decrease) in Stockholders' Equity
Balance	$ (235,550)	$ (176,590)	$ (203,679)	$ (149,002)
Balance (in shares)			46,840,434
Equity-based compensation	7,147	5,311	$ 19,371	14,796
Foreign currency translation	5,408	(4,709)	4,828	(4,748)
Issuances of common stock				1
Exercises of options	185	351	1,174	1,269
Common stock purchases and retirement	(269)		(269)
Dividends paid	(32,657)	(28,565)	(94,952)	(82,871)
Net (loss) income	(4,955)	13,701	12,836	30,054
Balance	$ (260,691)	(190,501)	$ (260,691)	(190,501)
Balance (in shares)	47,284,336		47,284,336
Common Stock
Increase (Decrease) in Stockholders' Equity
Balance	$ 47	$ 47	$ 47	$ 46
Balance (in shares)	47,279,201	46,806,370	46,840,434	46,336,499
Forfeitures of shares granted to employees (in shares)	(4,932)	(4,508)	(42,212)	(8,394)
Issuances of common stock				$ 1
Issuances of common stock (in shares)	10,500	10,572	465,530	459,550
Exercises of options (in shares)	4,134	9,152	25,151	33,931
Common stock purchases and retirement (in shares)	(4,567)		(4,567)
Balance	$ 47	$ 47	$ 47	$ 47
Balance (in shares)	47,284,336	46,821,586	47,284,336	46,821,586
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity
Balance	$ 506,391	$ 481,734	$ 493,178	$ 471,331
Equity-based compensation	7,147	5,311	19,371	14,796
Exercises of options	185	351	1,174	1,269
Common stock purchases and retirement	(269)		(269)
Balance	513,454	487,396	513,454	487,396
Accumulated Other Comprehensive Income (Loss)
Increase (Decrease) in Stockholders' Equity
Balance	(12,906)	(10,967)	(12,326)	(10,928)
Foreign currency translation	5,408	(4,709)	4,828	(4,748)
Balance	(7,498)	(15,676)	(7,498)	(15,676)
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity
Balance	(729,082)	(647,404)	(684,578)	(609,451)
Dividends paid	(32,657)	(28,565)	(94,952)	(82,871)
Net (loss) income	(4,955)	13,701	12,836	30,054
Balance	$ (766,694)	$ (662,268)	$ (766,694)	$ (662,268)

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Description of the business and recent developments: Revenue recognition (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Recent accounting pronouncements- adopted
Service revenue recognized	$ 1.6	$ 1.7	$ 3.9	$ 5.1
Amortization expense for contract costs	$ 4.2	$ 4.3	$ 12.6	$ 13.0
ASU 2014-09
Recent accounting pronouncements- adopted
Maximum contract lengths for billing due upon receipts (in months)			60 months

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Description of the business and recent developments: Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Jan. 01, 2019
Finance leases-fiber lease agreements
Additional finance lease future payments due	$ 20,700		$ 20,700
Cash paid for amounts included in the measurement of lease liabilities
Finance lease cost Amortization of right-of-use assets	6,382	$ 4,963	16,117	$ 14,851
Interest expense on finance lease liabilities	4,804	4,414	13,794	13,230
Operating lease cost	4,269	3,716	12,860	10,497
Total lease costs	$ 15,455	$ 13,093	42,771	38,578
Operating cash flows from finance leases			(14,150)	(12,957)
Operating cash flows from operating leases			(13,785)	(8,443)
Financing cash flows from finance leases			(19,392)	(7,035)
Right-of-use assets obtained in exchange for new finance lease liabilities			61,504	11,342
Right-of-use assets obtained in exchange for new operating lease liabilities			$ 24,866	$ 6,912
Weighted-average remaining lease term - finance leases (in years)	12 years 3 months 18 days	14 years 6 months	12 years 3 months 18 days	14 years 6 months
Weighted-average remaining lease term - operating leases (in years)	20 years 4 months 24 days	21 years 8 months 12 days	20 years 4 months 24 days	21 years 8 months 12 days
Weighted average discount rate - finance leases	10.50%	10.50%	10.50%	10.50%
Weighted average discount rate - operating leases	5.40%	5.70%	5.40%	5.70%
Future minimum payments (principal and interest) under these finance leases
2021	$ 33,471		$ 33,471
2022	32,638		32,638
2023	31,650		31,650
2024	31,753		31,753
2025	28,495		28,495
Thereafter	225,320		225,320
Total minimum finance lease obligations	383,327		383,327
Less-amounts representing interest	(170,387)		(170,387)
Present value of minimum finance lease obligations	212,940		212,940
Current maturities, finance lease obligations	(15,252)		(15,252)		$ (8,154)
Finance lease obligations, net of current maturities	197,688		197,688		161,635
Future minimum payments under these operating lease agreements
2021	17,579		17,579
2022	16,535		16,535
2023	15,674		15,674
2024	14,198		14,198
2025	12,124		12,124
Thereafter	103,809		103,809
Total minimum operating lease obligations	179,919		179,919
Less-amounts representing interest	(66,466)		(66,466)
Present value of minimum operating lease obligations	113,453		113,453
Current maturities, operating lease liabilities	(12,006)		(12,006)		(10,101)
Lease obligations, net of current maturities	$ 101,447		$ 101,447		$ 86,690
Asset and lease liability						$ 97,300
Minimum
Finance leases-fiber lease agreements
Initial terms	15 years		15 years
Maximum
Finance leases-fiber lease agreements
Initial terms	20 years		20 years

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Description of the business and recent developments: Allowance for credit losses (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020
Description of the business and recent developments:
Balance	$ 2,115	$ 1,771
Current-period Provision for Expected Credit Losses	1,174	3,942
Write offs Charged Against Allowance (Write-offs)	(1,085)	(3,509)
Balance	2,204	2,204
Bad debt expense, net of recoveries	800	3,200
Bad debt recoveries	$ 400	$ 800

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Property and equipment: (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property and equipment:
Depreciation and amortization	$ 21,619	$ 20,006	$ 61,022	$ 60,246
Capitalized salaries and related benefits of employees	$ 3,000	$ 2,700	$ 8,900	$ 8,000

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Property and equipment: Exchange agreement (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property and equipment
Cash component of network equipment obtained in exchange transactions	$ 0.1	$ 0.1	$ 0.3	$ 0.8
Level 3
Property and equipment
Fair value of new equipment	$ 0.2	$ 0.3	$ 1.1	$ 2.6

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Property and equipment: Installment payment agreement (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($) payment	Dec. 31, 2019 USD ($)
Installment payment agreement
Unamortized discount	$ 245	$ 350
Network equipment | Note obligations
Installment payment agreement
Term of debt (in months)	24 months
Number of payments first six months | payment	0
Number of equal payments | payment	18
Outstanding obligation	$ 10,400	12,500
Unamortized discount	$ 300	$ 400

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Long-term debt: 2024 Notes issuances (Details) $ in Thousands, € in Millions		1 Months Ended		3 Months Ended		9 Months Ended
	Jun. 09, 2020 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 EUR (€)	Jun. 30, 2020 EUR (€)	Jun. 03, 2020 EUR (€)	Jun. 30, 2019 EUR (€)
Long-term debt
Realized foreign exchange gain on issuance on 2024 Euro Notes						$ 2,547
Foreign Currency Transaction Gain Loss Unrealized On 2024 Euro Notes				$ (17,315)	$ 6,162	(17,827)	$ 6,339
Net proceeds from issuance of senior unsecured 2024 Euro Notes						240,285	152,128
Redemption and extinguishment of 2021 Notes						(189,225)
Senior secured 2022 notes
Long-term debt
Face amount				$ 445,000		$ 445,000
Interest rate (as a percent)				5.375%		5.375%		5.375%
Senior secured 2022 notes | Level 2
Long-term debt
Senior notes, fair value				$ 455,000		$ 455,000
Senior unsecured 2024 notes
Long-term debt
Face amount				410,400		410,400		€ 350.0	€ 135.0	€ 215.0	€ 135.0
Interest rate (as a percent)		4.375%							4.375%		4.375%
Discount rate (as a percent)		99.50%
Original amount issued at a discount		$ 240,000							€ 213.9
Foreign currency exchange rate at Euro to USD	1.133	1.112							1.112
Realized foreign exchange gain on issuance on 2024 Euro Notes	$ 2,500
Foreign Currency Transaction Gain Loss Unrealized On 2024 Euro Notes				(17,300)	$ 6,200	(17,800)	$ 6,300
Net proceeds from issuance of senior unsecured 2024 Euro Notes		$ 240,300	$ 152,100
Senior unsecured 2024 notes | Level 2
Long-term debt
Face amount				410,400		410,400
Senior notes, fair value				$ 416,500		$ 416,500
Senior unsecured 2021 notes
Long-term debt
Face amount		$ 189,200
Interest rate (as a percent)		5.625%							5.625%

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Long-term debt: Debt extinguishment and redemption 2021 Notes (Details) $ in Thousands, € in Millions	1 Months Ended		9 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 EUR (€)	Jun. 30, 2020 EUR (€)	Jun. 03, 2020 EUR (€)	Jun. 30, 2019 EUR (€)
Long-term debt
Net proceeds from issuance of senior unsecured 2024 Euro Notes			$ 240,285	$ 152,128
Senior unsecured 2021 notes
Long-term debt
Interest rate (as a percent)	5.625%					5.625%
Principal amount plus accrued and unpaid interest (as a percent)	100.00%
Face amount	$ 189,200
Accrued interest	$ 1,600
Senior unsecured 2024 notes
Long-term debt
Interest rate (as a percent)	4.375%					4.375%		4.375%
Net proceeds from issuance of senior unsecured 2024 Euro Notes	$ 240,300	$ 152,100
Face amount			$ 410,400		€ 350.0	€ 135.0	€ 215.0	€ 135.0
Loss on debt purchase	$ 600

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Long-term debt: Limitations under the Indentures (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020 USD ($)
Long-term debt
Amount permitted for investment payments	$ 132.6
Restriction on incurring additional indebtedness | Senior secured 2022 notes | Minimum
Long-term debt
Consolidated secured leverage ratio	3.5
Restriction on incurring additional indebtedness | Senior unsecured 2024 notes | Minimum
Long-term debt
Consolidated leverage ratio	6.0
Consolidated secured leverage ratio	4.0
Restriction on incurring additional indebtedness | Senior secured 2022 Notes and 2021 Notes | Minimum
Long-term debt
Consolidated leverage ratio	5.0
Consolidated secured leverage ratio	4.25
Restriction on dividends and stock purchases | Minimum
Long-term debt
Consolidated leverage ratio	4.25
Increase in unrestricted payment amount | Maximum
Long-term debt
Consolidated leverage ratio	4.25

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Commitments and contingencies: Current and potential litigation (Details) - USD ($) $ in Millions	Sep. 30, 2020	Mar. 31, 2015
Commitments and contingencies
Estimate of possible loss in excess of accrual	$ 3.3
Spain
Commitments and contingencies
Estimate of possible loss		$ 9.0

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Income taxes: Components of income before income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Components of income before income taxes
Domestic	$ (4,084)	$ 24,452	$ 27,818	$ 59,537
Foreign	(2,471)	(5,497)	(10,242)	(17,632)
(Loss) Income before income taxes	$ (6,555)	$ 18,955	$ 17,576	$ 41,905

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Common stock buyback program stock option and award plan: (Details) - USD ($) $ in Millions		3 Months Ended				9 Months Ended
	Oct. 01, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Remaining authorized amount for common stock repurchases		$ 34.6				$ 34.6
Repurchase of common stock (in shares)	53,516	4,567			0	4,567	0
Cost of shares of common stock	$ 3.1	$ 0.3				$ 0.3
Performance conditions
Stock Repurchase Program, Number of Shares Authorized to be Repurchased				94,050
Executive employees and directors
Shares issue (in shares)			135,280	319,750
Shares issued, Value			$ 10.6	$ 23.7
CEO | Performance conditions
Stock Repurchase Program, Number of Shares Authorized to be Repurchased				35,000

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Dividends on common stock: (Details) - USD ($) $ / shares in Units, $ in Thousands			9 Months Ended
	Dec. 04, 2020	Nov. 04, 2020	Sep. 30, 2020	Sep. 30, 2019
Dividends on common stock and return of capital program
Quarterly dividend payment approved (per share)		$ 0.73
Dividends paid	$ 33,500		$ 94,952	$ 82,871

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Related party transactions: (Details) - CEO - Lease - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2015	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Office lease
Fixed annual rent				$ 1.0
Lease term (in years)	5 years
Notice period for cancellation of lease	60 days
Payment for rent and related costs (in dollars)		$ 0.5	$ 0.3	$ 1.3	$ 1.2

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Segment information: (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Geographic information
Number of operating segments | segment			1
Revenues	$ 142,302	$ 136,942	$ 424,205	$ 405,866
Long-lived assets, net	421,267		421,267		$ 368,946
On-net
Geographic information
Revenues	105,091	99,416	312,346	294,069
Off-net
Geographic information
Revenues	37,092	37,418	111,458	111,452
Non-core
Geographic information
Revenues	119	108	401	345
North America
Geographic information
Revenues	115,253	113,452	345,999	335,606
Long-lived assets, net	305,648		305,648		269,364
North America | On-net
Geographic information
Revenues	82,730	80,176	247,679	236,636
North America | Off-net
Geographic information
Revenues	32,416	33,172	97,951	98,670
North America | Non-core
Geographic information
Revenues	107	104	369	300
Europe
Geographic information
Revenues	24,400	21,978	71,246	66,126
Europe | On-net
Geographic information
Revenues	19,966	17,921	58,433	53,889
Europe | Off-net
Geographic information
Revenues	4,422	4,053	12,781	12,192
Europe | Non-core
Geographic information
Revenues	12	4	32	45
Europe and other
Geographic information
Long-lived assets, net	115,619		115,619		$ 99,582
South America
Geographic information
Revenues	613	144	1,378	252
South America | On-net
Geographic information
Revenues	599	139	1,344	244
South America | Off-net
Geographic information
Revenues	14	5	34	8
Asia Pacific
Geographic information
Revenues	2,026	1,368	5,572	3,882
Asia Pacific | On-net
Geographic information
Revenues	1,786	1,180	4,880	3,300
Asia Pacific | Off-net
Geographic information
Revenues	240	$ 188	692	$ 582
Africa
Geographic information
Revenues	10		10
Africa | On-net
Geographic information
Revenues	$ 10		$ 10