COI Cogent Comm Grp.

WASHINGTON, Aug. 12 /PRNewswire-FirstCall/ -- Cogent Communications Group, Inc. (AMEX:COI) today announced net service revenue of $33.8 million for the three months ended June 30, 2005, an increase of 65.8% over $20.4 million for the three months ended June 30, 2004. On-net revenue was $18.9 million for the three months ended June 30, 2005, an increase of 38.9% over $13.6 million for the three months ended June 30, 2004. On-net service is provided to customers located in buildings that are physically connected to Cogent's network by Cogent-owned facilities. (Logo: http://www.newscom.com/cgi-bin/prnh/20020204/DCM032LOGO ) Net service revenue increased 65.0% from $41.3 million for the six months ended June 30, 2004 to $68.2 million for the six months ended June 30, 2005. On-net revenue increased 37.0% from $27.1 million for the six months ended June 30, 2004 to $37.2 million for the six months ended June 30, 2005. Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, was $2.3 million for the three months ended June 30, 2005 compared to ($2.4) million for the three months ended June 30, 2004. EBITDA, as adjusted, was $7.0 million for the six months ended June 30, 2005 compared to ($6.8) million for the six months ended June 30, 2004. Net cash used in operating activities was $1.5 million for the three months ended June 30, 2005 as compared to $6.3 million for the three months ended June 30, 2004. Net cash used in operating activities was $8.2 million for the six months ended June 30, 2005 as compared to $17.7 million for the six months ended June 30, 2004. Customer connections were 9,468 as of June 30, 2005 compared to 4,707 as of June 30, 2004. On-net buildings were 1,009 as of June 30, 2005 as compared to 930 as of June 30, 2004. Basic and diluted net loss applicable to common stock was ($0.47) for the three months ended June 30, 2005 compared to ($29.51) for the three months ended June 30, 2004. Basic and diluted net loss applicable to common stock was ($1.24) for the six months ended June 30, 2005 compared to ($95.99) for the six months ended June 30, 2004. Weighted average common shares outstanding -- basic and diluted -- were 34,489,085 for the three months ended June 30, 2005 as compared to 753,130 for the three months ended June 30, 2004. Weighted average common shares outstanding -- basic and diluted -- were 25,156,397 for the six months ended June 30, 2005 as compared to 712,794 for the six months ended June 30, 2004. Outlook -- Full Year 2005 Estimates * Cogent is amending its previously released full year 2005 estimate for net service revenue to between $135.0 million and $140.0 million from the previously issued guidance of between $140.0 million to $150.0 million. Net service revenue was $91.3 million for 2004. * Cogent is amending its previously released full year 2005 estimate for EBITDA, as adjusted, to between $10.0 million and $12.0 million from its previously issued guidance of between $7.0 million and $18.0 million. EBITDA, as adjusted, was ($15.2) million for 2004. Outlook -- Third Quarter 2005 Estimates * Cogent estimates net service revenue for the third quarter of 2005 to be between $33.0 million and $34.0 million as compared to $21.7 million for the third quarter of 2004. * Cogent estimates EBITDA, as adjusted, for the third quarter of 2005 to be between $1.5 million to $2.5 million as compared to ($3.8) million for the third quarter of 2004. COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES Summary of Financial and Operational Results Metric ($ in 000's, Q1 2005 Q2 2005 except per share data) - unaudited On-Net Revenue $18,216 $18,936 % Change from previous Qtr. 10.1% 4.0% Off-Net Revenue $12,747 $11,718 % Change from previous Qtr. 54.9% -8.1% Non-Core revenue (1) $3,451 $3,152 % Change from previous Qtr. 0.0% -8.7% Net service revenue - total $34,414 $33,806 % Change from previous Qtr. 22.0% -1.8% Network operations expenses (2) $22,937 $21,319 % Change from previous Qtr. 13.8% -7.1% Selling, general and administrative expenses (3) $10,296 $10,096 % Change from previous Qtr. -15.4% -1.9% Depreciation and amortization expenses $13,680 $12,795 % Change from previous Qtr. -8.7% -6.5% Basic and diluted net loss per common share applicable to common stock $(0.92) $(0.47) % Change from previous Qtr. 96.3% 48.9% Weighted average common shares - basic and diluted 16,260,654 34,489,085 % Change from previous Qtr. 1,882.7% 112.1% EBITDA, as adjusted (4) $4,657 $2,311 % Change from previous Qtr. 202.7% -50.4% Cash used in operating activities $(6,622) $(1,539) % Change from previous Qtr. -42.8% 76.8% Capital expenditures $3,092 $5,058 % Change from previous Qtr. -18.6% 63.6% Customer Connections - end of period On-Net 3,245 3,587 % Change from previous Qtr. 14.3% 10.5% Off-Net 4,469 4,302 % Change from previous Qtr. -0.3% -3.7% Non Core 1,721 1,579 % Change from previous Qtr. -7.4% -8.3% Total 9,435 9,468 % Change from previous Qtr. 2.8% 0.3% Other - end of period Buildings On Net 1,000 1,009 Employees 291 285 Metric ($ in 000's, Q1 2004 Q2 2004 Q3 2004 Q4 2004 except per share data) - unaudited On-Net Revenue $13,479 $13,632 $14,285 $16,538 % Change from previous Qtr. 1.1% 4.8% 15.8% Off-Net Revenue $4,892 $4,332 $5,107 $8,228 % Change from previous Qtr. -11.4% 17.9% 61.1% Non-Core revenue (1) $2,574 $2,423 $2,344 $3,452 % Change from previous Qtr. -5.9% -3.3% 47.3% Net service revenue - total $20,945 $20,387 $21,736 $28,218 % Change from previous Qtr. -2.7% 6.6% 29.8% Network operations expenses (2) $15,735 $13,273 $14,303 $20,155 % Change from previous Qtr. -15.6% 7.8% 40.9% Selling, general and administrative expenses (3) $9,581 $9,538 $9,089 $12,174 % Change from previous Qtr. -0.4% -4.7% 33.9% Depreciation and amortization expenses $14,536 $13,749 $13,369 $14,991 % Change from previous Qtr. -5.4% -2.8% 12.1% Basic and diluted net loss per common share applicable to common stock $(68.70) $(29.51) $(32.87) $(24.66) % Change from previous Qtr. 57.0% -11.4% 25.0% Weighted average common shares - basic and diluted 672,457 753,130 806,151 820,125 % Change from previous Qtr. 12.0% 7.0% 1.7% EBITDA, as adjusted (4) $(4,371) $(2,424) $(3,831) $(4,536) % Change from previous Qtr. 44.5% -58.0% -18.4% Cash used in operating activities $(11,582) $(6,344) $(3,863) $(4,636) % Change from previous Qtr. 45.2% 39.1% -20.0% Capital expenditures $1,833 $2,205 $2,297 $3,800 % Change from previous Qtr. 20.3% 4.2% 65.4% Customer Connections - end of period On-Net 2,092 2,258 2,496 2,838 % Change from previous Qtr. 7.9% 10.5% 13.7% Off-Net 1,134 1,140 1,427 4,481 % Change from previous Qtr. 0.5% 25.2% 214.0% Non Core 1,468 1,309 1,305 1,859 % Change from previous Qtr. -10.8% -0.3% 37.1% Total 4,694 4,707 5,228 9,178 % Change from previous Qtr. 0.3% 11.1% 75.6% Other - end of period Buildings On Net 877 930 961 989 Employees 230 235 265 297 (1) Consists of legacy services of companies whose assets or business were acquired by Cogent, including email, retail dial-up Internet access, shared web hosting, managed web hosting, managed security, voice services (only provided in Toronto, Canada), point to point private line services, managed modem services and until December 31, 2004 services provided to LambdaNet Germany under a network sharing arrangement as discussed in Cogent's SEC filings. (2) Excludes amortization of deferred compensation of $212, $213, $207, $226, $96 and $95 in the three months ended March 31, 2004, June 30, 2004, September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005, respectively. (3) Excludes amortization of deferred compensation of $2,820, $2,832, $2,753, $2,999, $3,099 and $3,080 in the three months ended March 31, 2004, June 30, 2004, September 30, 2004, December 31, 2004, March 31, 2005 and June 30, 2005, respectively. (4) See schedule of non-GAAP metrics below for definition and reconciliation to GAAP measures. EBITDA, as adjusted, includes net gains from the disposition of assets of $750 and $3,476 in the three months ended March 31, 2004 and March 31, 2005, respectively and excludes gains on debt and lease restructurings. Schedule of Non-GAAP Measures -- EBITDA and EBITDA, as adjusted EBITDA represents net (loss) income before income taxes, net interest expense, depreciation and amortization. Management believes the most directly comparable measure to EBITDA, as adjusted, calculated in accordance with GAAP is cash flows (used in) provided by operating activities. EBITDA, as adjusted, represents EBITDA less gains on debt and lease restructurings. The Company has excluded these gains on restructurings because they relate to its capital structure and these transactions did not have an effect on its cash flows. The Company believes EBITDA, as adjusted, is a useful measure of its ability to service debt, fund capital expenditures, expand its business and make bonus determinations for its employees. EBITDA, as adjusted, is an integral part of the internal reporting and planning system used by management as a supplement to GAAP financial information. The Company also believes that EBITDA is a frequently used measure by securities analysts, investors, and other interested parties in their evaluation of issuers. EBITDA and EBITDA, as adjusted, are not recognized terms under generally accepted accounting principles in the United States, or GAAP, and accordingly, should not be viewed in isolation or as a substitute for the analysis of results as reported under GAAP, but rather as a supplemental measure to GAAP. For example, EBITDA is not intended to reflect the Company's free cash flow, as it does not consider certain current or future cash requirements, such as capital expenditures, contractual commitments, changes in working capital needs, interest expenses and debt service requirements. The Company's calculations of EBITDA and EBITDA, as adjusted, may also differ from the calculation of EBITDA and EBITDA, as adjusted, by its competitors and other companies and as such, its utility as a comparative measure is limited. COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES EBITDA and EBITDA, as adjusted, are calculated in the table below. ($ In 000's) Q1 2005 Q2 2005 Q3 2005 2005 - unaudited Estimated Estimated Cash flows (used in) provided by operating activities $(6,622) ($1,539) 1,100 $(6,000) Changes in working capital 5,386 1,217 (850) $5,100 Cash interest expense, net 2,417 2,633 1,750 8,750 Gains, debt and lease restructurings and asset sales, net 3,476 842 - 4,000 -------- -------- -------- -------- EBITDA, including gains $4,657 $3,153 2,000 $11,850 Gains, debt and lease restructurings - (842) - (850) -------- -------- -------- -------- EBITDA, as adjusted $4,657 $2,311 2,000 $11,000 ======== ======== ======== ======== ($ In 000's) Q1 2004 Q2 2004 Q3 2004 Q4 2004 - unaudited Cash flows (used in) provided by operating activities $(11,582) $(6,344) $(3,863) $(4,636) Changes in working capital 4,461 1,161 (2,569) (2,447) Cash interest expense, net 2,000 2,759 2,601 2,465 Gains, debt and lease restructurings and asset sales, net 750 - - 5,374 -------- -------- -------- -------- EBITDA, including gains $(4,371) $(2,424) $(3,831) $756 Gains, debt and lease restructurings - - - (5,292) -------- -------- -------- -------- EBITDA, as adjusted $(4,371) ($2,424) ($3,831) $(4,536) ======== ======== ======== ======== Cogent's SEC filings are available online via the Investor Relations section of http://www.cogentco.com/ or on the Securities and Exchange website at http://www.sec.gov/. COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND JUNE 30, 2005 (IN THOUSANDS, EXCEPT SHARE DATA) December 31, June 30, 2004 2005 (Unaudited) Assets Current assets: Cash and cash equivalents $13,844 $38,592 Restricted cash - 4,000S Short term investments ($355 and $775 restricted, respectively) 509 921 Accounts receivable, net of allowance for doubtful accounts of $3,229 and $2,419, respectively 13,564 14,439 Prepaid expenses and other current assets 4,224 4,621 --------- --------- Total current assets 32,141 62,573 Property and equipment: Property and equipment 475,775 478,161 Accumulated depreciation and amortization (138,500) (164,088) --------- --------- Total property and equipment, net 337,275 314,073 Intangible assets: Intangible assets 30,240 29,879 Accumulated amortization (27,115) (28,821) --------- --------- Total intangible assets, net 3,125 1,058 Asset held for sale 1,220 - Other assets ($1,370 and $1,421 restricted, respectively) 4,825 4,805 --------- --------- Total assets $378,586 $382,509 ========= ========= Liabilities and stockholders' equity Current liabilities: Accounts payable $16,090 $10,826 Accrued liabilities 20,669 16,324 Capital lease obligations, current maturities 7,488 7,071 Total current liabilities 44,247 34,221 Amended and Restated Cisco Note - related party 17,842 - Convertible subordinated notes, net of discount of $5,026 and $4,326, respectively 5,165 5,865 Capital lease obligations, net of current maturities 95,887 89,556 Other long-term liabilities 2,955 2,413 --------- --------- Total liabilities 166,096 132,055 ========= ========= Commitments and contingencies: Stockholders' equity: Convertible preferred stock, Series F, $0.001 par value; 11,000 shares authorized, issued, and outstanding at December 31, 2004; none at June 30, 2005 10,904 - Convertible preferred stock, Series G, $0.001 par value; 41,030 shares authorized, 41,021 shares issued and outstanding at December 31, 2004; none at June 30, 2005 40,778 - Convertible preferred stock, Series H, $0.001 par value; 84,001 shares authorized; 45,821 shares issued and outstanding at December 31, 2004; none at June 30, 2005 44,309 - Convertible preferred stock, Series I, $0.001 par value; 3,000 shares authorized, 2,575 shares issued and outstanding at December 31, 2004; none at June 30, 2005 2,545 - Convertible preferred stock, Series J, $0.001 par value; 3,891 shares authorized, issued and outstanding at December 31, 2004; none at June 30, 2005 19,421 - Convertible preferred stock, Series K, $0.001 par value; 2,600 shares authorized, issued and outstanding at December 31, 2004; none at June 30, 2005 2,588 - Convertible preferred stock, Series L, $0.001 par value; 185 shares authorized, issued and outstanding at December 31, 2004; none at June 30, 2005 927 - Convertible preferred stock, Series M, $0.001 par value; 3,701 shares authorized, issued and outstanding at December 31, 2004; none at June 30, 2005 18,353 Common stock, $0.001 par value; 75,000,000 shares authorized; 827,487 and 43,888,212 shares outstanding, respectively 1 44 Additional paid-in capital 236,692 439,904 Deferred compensation (22,533) (15,919) Stock purchase warrants 764 764 Treasury stock, 61,462 shares (90) (90) Accumulated other comprehensive income - foreign currency translation adjustment 1,515 559 Accumulated deficit (143,684) (174,808) --------- --------- Total stockholders' equity 212,490 250,454 --------- --------- Total liabilities and stockholders' equity $378,586 $382,509 ========= ========= COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2005 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) Three Months Three Months Ended Ended June 30, 2004 June 30, 2005 (Unaudited) (Unaudited) Net service revenue $20,387 $33,806 Operating expenses: Network operations (including $213 and $95 of amortization of deferred compensation, respectively, exclusive of amounts shown separately) 13,486 21,494 Selling, general, and administrative (including $2,832 and $3,080 of amortization of deferred compensation, respectively) 12,370 13,176 Depreciation and amortization 13,749 12,795 --------- --------- Total operating expenses 39,605 47,465 --------- --------- Operating loss (19,218) (13,659) Gain on Cisco debt repayment - 842 Interest income and other, net 120 162 Interest expense (3,127) (3,496) --------- --------- Net loss $(22,225) $(16,151) ========= ========= Net loss per common share: Basic and diluted net loss per common share $(29.51) $(0.47) ========= ========== Weighted-average common shares-basic and diluted 753,130 34,489,085 ========= ========== COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2005 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) Six Months Six Months Ended Ended June 30, 2004 June 30, 2005 (Unaudited) (Unaudited) Net service revenue $41,332 $68,219 Operating expenses: Network operations (including $425 and $191 of amortization of deferred compensation, respectively, exclusive of amounts shown separately) 29,433 44,526 Selling, general, and administrative (including $5,652 and $6,179 of amortization of deferred compensation, respectively) 24,771 26,570 Depreciation and amortization 28,285 26,476 ---------- ---------- Total operating expenses 82,489 97,572 ---------- ---------- Operating loss (41,157) (29,353) Gains on disposition of assets, net - 3,372 Gain on Cisco debt repayment - 842 Interest income and other, net 1,132 370 Interest expense (6,370) (6,355) ---------- ---------- Net loss $(46,395) $(31,124) ========== ========== Beneficial conversion charges (22,028) - ---------- ---------- Net loss applicable to common stock $(68,423) $(31,124) ========== ========== Net loss per common share: Basic and diluted net loss per common share $(65.09) $(1.24) ========== ========== Beneficial conversion charges (30.90) - ---------- ---------- Basic and diluted net loss per common share applicable to common stock (95.99) (1.24) ========== =========== Weighted-average common shares - basic and diluted 712,794 25,156,397 ========== =========== COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2005 (IN THOUSANDS) Six Months Six Months Ended Ended June 30, 2004 June 30, 2005 (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $(46,395) $(31,124) Adjustments to reconcile net loss to net cash used in operating activities: Gains - dispositions of assets and debt, net (737) (3,981) Depreciation and amortization 28,285 26,476 Amortization of debt discount-convertible notes 478 700 Amortization of deferred compensation 6,077 6,370 Changes in assets and liabilities, net of acquisitions: Accounts receivable 4,884 (1,557) Prepaid expenses and other current assets 913 (598) Other assets 189 (410) Accounts payable, accrued and other liabilities (11,323) (4,037) -------- -------- Net cash used in operating activities (17,629) (8,161) -------- -------- Cash flows from investing activities: Purchases of property and equipment (4,038) (8,150) Purchase of German network assets - (932) Maturities (purchases) of short term investments 2,276 (164) Restricted cash - collateral under credit facility - (4,000) Cash acquired - Cogent Europe 2,159 - Proceeds from other acquired assets 596 - Purchases of intangible assets (161) - Proceeds from dispositions of assets 3,682 5,122 -------- -------- Net cash provided by (used in) investing activities 4,514 (8,124) -------- -------- Cash flows from financing activities: Proceeds from sale of common stock, net - 63,723 Cash acquired - mergers 21,966 - Proceeds from issuance of subordinated note - related party - 10,000 Repayment of subordinated note - related party - (10,000) Borrowings under credit facility - 10,000 Repayments under credit facility - (10,000) Repayment of Cisco note - related party - (17,000) Repayment of advances from LNG Holdings - related party (1,227) - Repayments of capital lease obligations (2,081) (5,024) -------- -------- Net cash provided by financing activities 18,658 41,699 -------- -------- Effect of exchange rate changes on cash (418) (666) -------- -------- Net increase in cash and cash equivalents 5,125 24,748 ======== ======== Cash and cash equivalents, beginning of period 7,875 13,844 -------- -------- Cash and cash equivalents, end of period $13,000 $38,592 ======== ======== Conference Call and Web site Information Cogent will host a conference call with financial analysts at 8:30 a.m. (EDT) today to discuss Cogent's operating results for the second quarter 2005. Investors and other interested parties may access a live audio webcast of the earnings call under "Events" at the Investor Relations section of Cogent's website at http://www.cogentco.com/. A replay of the webcast, together with the press release, will be available on the website following the earnings call. About Cogent Communications Cogent Communications (AMEX:COI) is a multinational, Tier 1 facilities-based ISP recently ranked by Ovum-RHK as the largest provider of Ethernet services in the United States. Cogent specializes in providing businesses with high speed Internet access and point-to-point transport services. Cogent's facilities-based, all-optical IP network backbone spans 12 countries and provides IP services in over 85 markets located in North America and Europe. Cogent Communications is headquartered at 1015 31st Street, NW, Washington, D.C. 20007. For more information, visit http://www.cogentco.com/. Cogent Communications can be reached in the United States at (202) 295-4200 or via email at . Except for historical information and discussion contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The specific forward-looking statements cover Cogent's expectations for revenue and EBITDA, as adjusted, for the third quarter of 2005 and fiscal year 2005. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations. Numerous factors could cause or contribute to such differences. Some of the factors and risks associated with our business are discussed in Cogent's filings with the Securities and Exchange Commission. http://www.newscom.com/cgi-bin/prnh/20020204/DCM032LOGO http://photoarchive.ap.org/ DATASOURCE: Cogent Communications Group, Inc. CONTACT: For Public Relations: Jeff Henriksen, +1-202-295-4200, , or for Investor Relations: John Chang, +1-202-295-4212, , both of Cogent Communications Group, Inc. Web site: http://www.cogentco.com/

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