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Smart People Buy Dumb Pipes

Non-GAAP EBITDA and non-GAAP EBITDA, as adjusted, reconciled to GAAP cash flows provided by operating activities Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 ($ in 000's) unaudited Net cash flows provided by operating activities Changes in operating assets and liabilities Cash interest expense and income tax expense EBITDA (1) PLUS: Sprint (T-Mobile Wireline) acquisition costs. $49,411 $34,403 $53,570 $36,323 (6,294) 5,108 (13,017) 4,152 $35,821 1,435 $82,654 $(90,373) 14,038 18,946 17,320 16,663 18,797 $57,155 $58,457 $57,873 $57,138 $56,053 31,875 $24,156 $(52,433) $51,064 44,956 $43,587 2,004 244 400 $739 $351 PLUS: Cash payments made to the Company under IP Transit Services Agreement EBITDA, as adjusted for Sprint (T-Mobile Wireline) acquisition costs and IP Transit Services Agreement (1) = = = 29,167 87,500 $57,155 $58,457 $59,877 $57,382 $56,453 $54,062 $131,438 EBITDA margin (1) 38.3% 39.4% 38.6% 37.6% 36.5% 10.1% 15.8% EBITDA, as adjusted for Sprint (T-Mobile Wireline) acquisition costs and IP Transit Services Agreement, margin (1) 38.3% 39.4% 39.9% 37.8% 36.8% 22.5% 47.7% Non-GAAP gross profit and non-GAAP gross margin reconciled to GAAP gross profit and GAAP gross margin Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 ($ in 000's) unaudited Service revenue total $149,175 $148,450 $150,000 $151,979 $153,588 $239,806 $275,429 Minus - Network operations expense including equity-based compensation and including depreciation and amortization expense 80,137 79,585 80,117 80,535 83,798 190,013 260,328 GAAP Gross Profit (2) $69,038 $68,865 Plus Equity-based compensation - network operations expense 144 145 $69,883 176 $71,444 $69,790 88 149 $49,793 231 $15,101 370 Plus Depreciation and amortization expense Non-GAAP Gross Profit (3) 22,688 $91,870 23,071 $92,081 22,897 $92,956 GAAP Gross Margin (2) Non-GAAP Gross Margin (3) 46.3% 61.6% 46.4% 62.0% 46.6% 62.0% 23,563 $95,095 47.0% 62.6% 25,160 $95,099 $52,511 $102,535 $86,734 $102,205 45.4% 20.8% 5.5% 61.9% 42.8% 37.1% (1) (2) (3) EBITDA represents net cash flows provided by operating activities plus changes in operating assets and liabilities, cash interest expense and cash income tax expense. Management believes the most directly comparable measure to EBITDA calculated in accordance with generally accepted accounting principles in the United States, or GAAP, is net cash provided by operating activities. The Company also believes that EBITDA is a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of issuers. EBITDA, as adjusted for Sprint acquisition costs and cash payments under IP Transit Services Agreement, represents EBITDA plus costs related to the Company's acquisition of Sprint's Wireline Business. EBITDA margin is defined as EBITDA divided by total service revenue. EBITDA, as adjusted for Sprint acquisition costs and cash payments under IP Transit Services Agreement margin is defined as EBITDA, as adjusted for Sprint (T-Mobile Wireline) acquisition costs and IP Transit Agreement, divided by total service revenue. GAAP gross profit is defined as total service revenue less network operations expense, depreciation and amortization and equity based compensation included in network operations expense. GAAP gross margin is defined as GAAP gross profit divided by total service revenue. Non-GAAP gross profit represents service revenue less network operations expense, excluding equity-based compensation and amounts shown separately (depreciation and amortization expense). Non-GAAP gross margin is defined as non-GAAP gross profit divided by total service revenue. Management believes that non-GAAP gross profit and non-GAAP gross margin are relevant metrics to provide to investors, as they are metrics that management uses to measure the margin and amount available to the Company after network service costs, in essence these are measures of the efficiency of the Company's network. cogent Smart People Buy Dumb Pipes 27
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