Cogent Communications (CCOI) 8-K Cogent Communications Reports Second Quarter 2006 Results

Cogent Contacts:
For Public Relations:	For Investor Relations:
Jeff Henriksen + 1 (202) 295-4388 jhenriksen@cogentco.com	John Chang + 1 (202) 295-4252 investor.relations@cogentco.com

COGENT COMMUNICATIONS REPORTS SECOND QUARTER 2006 RESULTS

[WASHINGTON, D.C. August 8, 2006]Cogent Communications Group, Inc. (NASDAQ: CCOI) today announced net service revenue of $36.2 million for the three months ended June 30, 2006, compared with $33.8 million for the three months ended June 30, 2005. On-net revenue was $25.1 million for the three months ended June 30, 2006, an increase of 32.8% over $18.9 million for the three months ended June 30, 2005. On-net service is provided to customers located in buildings that are physically connected to Cogent’s network by Cogent-owned facilities. Off-net revenue was $8.6 million for the three months ended June 30, 2006, a decrease of 26.8% from $11.7 million for the three months ended June 30, 2005. Off-net customers are located in buildings directly connected to Cogent’s network using other carriers’ facilities to provide the last mile portion of the link from the customers’ premises to Cogent’s network. Non-core revenue was $2.4 million for the three months ended June 30, 2006, a decrease of 22.9% from $3.2 million for the three months ended June 30, 2005. Non-core services are legacy services, which Cogent acquired and continues to support but does not actively sell.

Gross profit, excluding equity-based compensation expense, increased 29.6% from $12.4 million for the three months ended June 30, 2005 to $16.1 million for the three months ended June 30, 2006. Gross profit margin, excluding equity-based compensation expense, expanded from 36.7% for the three months ended June 30, 2005 to 44.5% for the three months ended June 30, 2006.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, was $4.5 million for the three months ended June 30, 2006 compared to $2.3 million for the three months ended June 30, 2005.

Basic and diluted net loss applicable to common stock was ($0.34) per share for the three months ended June 30, 2006 compared to ($0.48) per share for the three months ended June 30, 2005. Weighted average common shares outstanding – basic and diluted — were 45.1 million for the three months ended June 30, 2006 as compared to 34.0 million for the three months ended June 30, 2005.

Total customer connections were 10,641 as of June 30, 2006 compared to 9,468 as of June 30, 2005 an increase of 12.4%. On-net customer connections were 6,051 as of June 30, 2006 compared to 3,587 as of June 30, 2005 an increase of 68.7%. Off-net customer connections were 3,461 as of June 30, 2006 compared to 4,302 as of June 30, 2005 a decrease of 19.5%. Non-core customer connections were 1,129 as of June 30, 2006 compared to 1,579 as of June 30, 2005 a decrease of 28.5%.

The number of on-net buildings was 1,076 as of June 30, 2006 as compared to 1,009 as of June 30, 2005.

Outlook — Full Year 2006 Estimates

• Cogent is reaffirming its previously released full year 2006 estimate for net service revenue of between $150.0 million and $155.0 million.

• Cogent is reaffirming its previously released full year EBITDA, as adjusted, estimate for fiscal 2006 to be between $20.0 million and $22.0 million.

• Cogent is reaffirming its previously released estimate that its percentage of on-net revenues will be between 70.0% and 75.0% for the year ended December 31, 2006.

• Cogent is amending its previously released estimate for its full year net loss per basic and diluted common share to be between $(1.30) and $(1.45) from its previously issued guidance of between $(1.40) and $(1.60) for the year ended December 31, 2006. Cogent’s 2006 guidance includes $1.0 million to $1.5 million of non-cash equity based compensation expense related to the adoption of FASB Statement No. 123®, “Share Based Payment” and assumes 46.6 million weighted average common shares outstanding. The increase in weighted average common shares outstanding from the previous estimate of 44.0 million weighted average common shares outstanding is due to Cogent’s sale of 4.35 million shares of common stock in a public offering in June 2006.

Outlook — Third Quarter 2006 Estimates

• Cogent estimates net service revenue for the third quarter of 2006 to be between $37.5 million and $38.5 million.

• Cogent estimates EBITDA, as adjusted, for the third quarter of 2006 to be between $5.5 million and $6.5 million.

• Cogent estimates that its net loss per basic and diluted common share to be between $(0.30) and $(0.35) for the third quarter of 2006. Cogent’s guidance includes the expected $0.3 million to $0.4 million impact of non-cash equity-based compensation expense related to the adoption of FASB Statement No. 123®, and assumes approximately 48.5 million weighted average common shares outstanding.

Conference Call and Web site Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (EDT) on August 9, 2006 to discuss Cogent’s operating results for the second quarter of 2006 and expectations for the third quarter and remainder of 2006. Investors and other interested parties may access a live audio web cast of the earnings call under “Events” at the Investor Relations section of Cogent’s website atwww.cogentco.com. A replay of the web cast, together with the press release, will be available on the website following the earnings call.

About Cogent Communications
Cogent Communications (NASDAQ: CCOI) is a multinational, Tier 1 facilities-based ISP. 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 14 countries and provides IP services in over 90 markets located in North America and Europe.

Cogent Communications is headquartered at 1015 31st Street, NW, Washington, D.C. 20007. For more information, visit www.cogentco.com. Cogent Communications can be reached in the United States at (202) 295-4200 or via email atinfo@cogentco.com.

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
Summary of Financial and Operational Results

	Q1 2005			Q2 2005			Q3 2005			Q4 2005			Q1 2006			Q2 2006
Metric ($ in 000’s, except share and per share data) — unaudited
On-Net Revenue	$	18,216		$	18,936		$	20,181		$	20,995		$	22,693		$	25,142
% Change from previous Qtr.		10.1	%		4.0	%		6.6	%		4.0	%		8.1	%		10.8	%
Off-Net Revenue	$	12,747		$	11,718		$	10,553		$	9,624		$	9,114		$	8,583
% Change from previous Qtr.		54.9	%		-8.1	%		-9.9	%		-8.8	%		-5.3	%		-5.8	%
Non-Core revenue (1)	$	3,451		$	3,152		$	3,038		$	2,603		$	2,640		$	2,430
% Change from previous Qtr.		0.0	%		-8.7	%		-3.6	%		-14.3	%		1.4	%		-8.0	%
Net service revenue — total	$	34,414		$	33,806		$	33,772		$	33,222		$	34,447		$	36,155
% Change from previous Qtr.		22.0	%		-1.8	%		-0.1	%		-1.6	%		3.7	%		5.0	%
Network operations expenses (2)	$	22,937		$	21,399		$	21,495		$	19,964		$	20,337		$	20,076
% Change from previous Qtr.		13.8	%		-6.7	%		0.4	%		-7.1	%		1.9	%		-1.3	%
Gross profit (2)	$	11,477		$	12,407		$	12,277		$	13,258		$	14,110		$	16,079
% Change from previous Qtr.		42.3	%		8.1	%		-1.0	%		8.0	%		6.4	%		14.0	%
Gross profit margin		33.3	%		36.7	%		36.4	%		39.9	%		41.0	%		44.5	%
Selling, general and administrative expenses (3)	$	10,296		$	10,096		$	10,176		$	10,776		$	10,785		$	11,594
% Change from previous Qtr.		-15.4	%		-1.9	%		0.8	%		5.9	%		0.1	%		7.5	%
Depreciation and amortization expenses	$	13,680		$	12,795		$	12,432		$	16,693		$	14,144		$	14,658
% Change from previous Qtr.		-8.7	%		-6.5	%		-2.8	%		34.3	%		-15.3	%		3.6	%
Equity-based compensation expense	$	3,195		$	3,175		$	3,164		$	3,770		$	3,499		$	3,372
% Change from previous Qtr.		-0.9	%		-0.6	%		-0.3	%		19.2	%		-7.2	%		-3.6	%
Net loss	$	(14,973	)	$	(16,151	)	$	(16,106	)	$	(20,288	)	$	(16,441	)	$	(15,491	)
% Change from previous Qtr.		26.0	%		-7.9	%		0.3	%		-26.0	%		19.0	%		5.8	%
Basic and diluted net loss per common share	$	(0.96	)	$	(0.48	)	$	(0.37	)	$	(0.47	)	$	(0.38	)	$	(0.34	)
% Change from previous Qtr.		96.1	%		50.0	%		23.5	%		-28.1	%		19.1	%		10.5	%
Weighted average common shares – basic and diluted		15,610,772			33,963,566			43,474,555			43,619,506			43,841,837			45,099,826
% Change from previous Qtr.		1,803.5	%		117.6	%		28.0	%		0.3	%		0.5	%		2.9	%
EBITDA, as adjusted (4)	$	4,657		$	2,311		$	2,102		$	2,482		$	3,325		$	4,485
% Change from previous Qtr.		213.3	%		-50.4	%		-9.0	%		18.1	%		34.0	%		34.9	%
Cash (used in) provided by operating activities	$	(6,622	)	$	(1,539	)	$	1,839		$	(2,740	)	$	(1,591	)	$	4,918
% Change from previous Qtr.		-42.8	%		76.8	%		219.5	%		-249.0	%		41.9	%		409.1	%
Capital expenditures	$	3,092		$	5,058		$	3,998		$	5,194		$	4,662		$	7,097
% Change from previous Qtr.		-18.6	%		63.6	%		-21.0	%		29.9	%		-10.2	%		52.2	%
Customer Connections – end of period
On-Net		3,245			3,587			4,064			4,657			5,267			6,051
% Change from previous Qtr.		14.3	%		10.5	%		13.3	%		14.6	%		13.1	%		14.9	%
Off-Net		4,469			4,302			4,108			4,027			3,614			3,461
% Change from previous Qtr.		-0.3	%		-3.7	%		-4.5	%		-2.0	%		-10.3	%		-4.2	%
Non Core		1,721			1,579			1,437			1,304			1,185			1,129
% Change from previous Qtr.		-7.4	%		-8.3	%		-9.0	%		-9.3	%		-9.1	%		-4.7	%
Total		9,435			9,468			9,609			9,988			10,066			10,641
% Change from previous Qtr.		2.8	%		0.3	%		1.5	%		3.9	%		0.8	%		5.7	%
Other – end of period
Buildings On-Net		1,000			1,009			1,026			1,040			1,053			1,076
Employees		291			285			307			325			334			337

(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent, including voice services (only provided in Toronto, Canada), point-to-point private line services and managed modem services.

(2) Excludes equity-based compensation expense of $96, $95, $95, $113, $105 and $101 in the three months ended March 31, 2005, June 30, 2005, September 30, 2005, December 31, 2005, March 31, 2006, and June 30, 2006, respectively.

(3) Excludes equity-based compensation expense of $3,099, $3,080, $3,069, $3,657, $3,394 and $3,271 in the three months ended March 31, 2005, June 30, 2005, September 30, 2005, December 31, 2005, March 31, 2006 and June 30, 2006, 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 $3,476 and $27 in the three months ended March 31, 2005 and three months ended March 31, 2006, respectively. EBITDA, as adjusted excludes gains on debt and capital lease restructurings of $842 and $844 for the three months ended June 30, 2005 and September 30, 2005, respectively. EBITDA as adjusted, also excludes a restructuring charge related to the lease termination costs for the Company’s’ Paris office lease of $1,319 taken during the three months ended September 30, 2005.

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 calculated in accordance with GAAP is cash flows (used in) provided by operating activities.

EBITDA, as adjusted, represents EBITDA less gains on debt and capital lease restructurings and restructuring charges. The Company has excluded these gains because they relate to its capital structure and the restructuring charges because they are non-cash charges. 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 reconciled to cash flows (used in) provided by operating
activities in the table below.

	Q1 2005			Q2 2005			Q3 2005			Q4 2005			Q1 2006			Q2 2006			Q3 2006		2006
																			Estimated		Estimated
($ In 000’s) – unaudited
Cash flows (used in) provided by operating activities	$	(6,622	)	$	(1,539	)	$	1,839		$	(2,740	)	$	(1,591	)	$	4,918		$	1,000	$	8,500
Changes in operating assets and liabilities		5,386			1,217			(2,782	)		3,352			3,261			(1,854	)		3,500		6,500
Cash interest expense, net		2,417			2,633			1,726			1,870			1,628			1,421			1,500		6,000
Gains on debt and capital lease restructurings and asset sales, net		3,476			842			844			—			27			—			—		—
EBITDA, including gains and restructuring charge	$	4,657		$	3,153		$	1,627		$	2,482		$	3,325		$	4,485		$	6,000	$	21,000
Gains on debt and capital lease restructurings		—			(842	)		(844	)		—			—			—			—		—
Restructuring charge		—			—			1,319			—			—			—			—		—
EBITDA, as adjusted	$	4,657		$	2,311		$	2,102		$	2,482		$	3,325		$	4,485		$	6,000	$	21,000

Cogent’s SEC filings are available online via the Investor Relations section ofwww.cogentco.com or on the Securities and Exchange website atwww.sec.gov.

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2005 AND JUNE 30, 2006

(IN THOUSANDS, EXCEPT SHARE DATA)

	December 31,			June 30,
	2005			2006
				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,883		$	54,182
Short term investments — restricted		1,283			630
Accounts receivable, net of allowance for doubtful accounts of $1,437 and $1,364, respectively		16,452			19,106
Prepaid expenses and other current assets		3,959			4,174
Total current assets		51,577			78,092
Property and equipment, net		292,787			279,370
Intangible assets, net		2,554			1,802
Other assets ($1,118 restricted)		4,455			4,326
Total assets	$	351,373		$	363,590
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,521		$	15,065
Accrued liabilities		16,275			14,703
Convertible subordinated notes, net of discount of $2,453 – due June 2007		—			7,738
Capital lease obligations, current maturities		6,698			6,187
Total current liabilities		34,494			43,693
Convertible subordinated notes, net of discount of $3,478		6,713			—
Capital lease obligations, net of current maturities		85,694			83,777
Other long-term liabilities		3,471			2,827
Total liabilities		130,372			130,297
Commitments and contingencies:
Stockholders’ equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 44,092,652 and 48,495,367 shares outstanding, respectively		44			48
Additional paid-in capital		440,500			474,304
Deferred compensation		(9,680	)		—
Stock purchase warrants		764			764
Treasury stock, 61,462 shares		(90	)		(90	)
Accumulated other comprehensive income — foreign currency translation adjustment		665			1,401
Accumulated deficit		(211,202	)		(243,134	)
Total stockholders’ equity		221,001			233,293
Total liabilities and stockholders’ equity	$	351,373		$	363,590

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2006

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months			Three Months
	Ended			Ended
	June 30, 2005			June 30, 2006
	(Unaudited)			(Unaudited)
Net service revenue	$	33,806		$	36,155
Operating expenses:
Network operations (including $95 and $101 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		21,494			20,177
Selling, general, and administrative (including $3,080 and $3,271 of equity-based compensation expense, respectively, and $2,050 and $815 of bad debt expense, net of recoveries, respectively)		13,176			14,865
Depreciation and amortization		12,795			14,658
Total operating expenses		47,465			49,700
Operating loss		(13,659	)		(13,545	)
Gain on Cisco debt repayment		842			—
Interest income and other, net		162			691
Interest expense		(3,496	)		(2,637	)
Net loss	$	(16,151	)	$	(15,491	)
Net loss per common share:
Basic and diluted net loss per common share	$	(0.48	)	$	(0.34	)
Weighted-average common shares—basic and diluted		33,963,566			45,099,826

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2006

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

	Six Months			Six Months
	Ended			Ended
	June 30, 2005			June 30, 2006
	(Unaudited)			(Unaudited)
Net service revenue	$	68,219		$	70,602
Operating expenses:
Network operations (including $191 and $206 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		44,526			40,619
Selling, general, and administrative (including $6,179 and $6,665 of equity-based compensation expense, respectively, and $2,971 and $1,147 of bad debt expense, net of recoveries, respectively)		26,570			29,044
Depreciation and amortization		26,476			28,801
Total operating expenses		97,572			98,464
Operating loss		(29,353	)		(27,862	)
Gain on disposal of assets, net		3,372			—
Gain on Cisco debt repayment		842			—
Interest income and other, net		370			1,183
Interest expense		(6,355	)		(5,253	)
Net loss	$	(31,124	)	$	(31,932	)
Net loss per common share:
Basic and diluted net loss per common share	$	(1.25	)	$	(0.72	)
Weighted-average common shares—basic and diluted		24,880,454			44,534,992

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2006

(IN THOUSANDS)

	Six Months			Six Months
	Ended			Ended
	June 30, 2005			June 30, 2006
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	(8,16)1		$	3,327
Cash flows from investing activities:
Purchases of property and equipment		(8,150	)		(11,803	)
Purchase of German network assets		(932	)		—
(Purchases) maturities of short term investments		(164	)		653
Restricted cash-collateral under credit facility		(4,000	)		—
Proceeds from dispositions of assets		5,122			93
Net cash used in investing activities		(8,124	)		(11,057	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		63,723			36,534
Proceeds from exercise of stock options		—			85
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	)		—
Repayments of capital lease obligations		(5,024	)		(4,945	)
Net cash provided by financing activities		41,699			31,674
Effect of exchange rate changes on cash		(666	)		355
Net increase in cash and cash equivalents		24,748			24,299
Cash and cash equivalents, beginning of period		13,844			29,883
Cash and cash equivalents, end of period	$	38,592		$	54,182

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, EBITDA, as adjusted, earnings per share and percentage of on-net revenues for the third quarter of 2006 and fiscal year 2006. 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.

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