Cogent Communications (CCOI) 8-K Cogent Communications Reports Second Quarter 2007 Results

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FOR IMMEDIATE RELEASE

Cogent Contacts:
For Public Relations:	For Investor Relations:
Jeff Henriksen + 1 (202) 295-4388 jhenriksen@cogentco.com	John Chang + 1 (202) 295-4212 investor.relations@cogentco.com

COGENT COMMUNICATIONS REPORTS SECOND QUARTER 2007 RESULTS

WASHINGTON, D.C. August 7, 2007Cogent Communications Group, Inc. (NASDAQ: CCOI) today announced net service revenue of $45.1 million for the three months ended June 30, 2007, compared with $36.2 million for the three months ended June 30, 2006. On-net revenue was $35.3 million for the three months ended June 30, 2007, an increase of 40.4% over $25.1 million for the three months ended June 30, 2006. 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 $7.9 million for the three months ended June 30, 2007, a decrease of 7.5% from $8.6 million for the three months ended June 30, 2006. 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 $1.9 million for the three months ended June 30, 2007, a decrease of 22.8% from $2.4 million for the three months ended June 30, 2006. 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 47.3% from $16.1 million for the three months ended June 30, 2006 to $23.7 million for the three months ended June 30, 2007. Gross profit margin, excluding equity-based compensation expense, expanded from 44.5% for the three months ended June 30, 2006 to 52.5% for the three months ended June 30, 2007.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, was $11.1 million for the three months ended June 30, 2007, an increase of 146.5%, over $4.5 million for the three months ended June 30, 2006.

Basic and diluted net loss applicable to common stock was $(0.19) per share for the three months ended June 30, 2007 compared to $(0.34) per share for the three months ended June 30, 2006. Weighted average common shares outstanding – basic and diluted — were 48.4 million for the three months ended June 30, 2007 as compared to 45.1 million for the three months ended June 30, 2006.

Total customer connections were 13,786 as of June 30, 2007 compared to 10,641 as of June 30, 2006, an increase of 29.6%. On-net customer connections were 9,773 as of June 30, 2007 compared to 6,051 as of June 30, 2006, an increase of 61.5%. Off-net customer connections were 3,128 as of June 30, 2007 compared to 3,461 as of June 30, 2006, a decrease of 9.6%. Non-core customer connections were 885 as of June 30, 2007 compared to 1,129 as of June 30, 2006, a decrease of 21.6%.

The number of on-net buildings was 1,159 as of June 30, 2007 as compared to 1,076 as of June 30, 2006.

Outlook – Third Quarter 2007 Estimates

• Cogent estimates net service revenue for the third quarter of 2007 to be between $46.5 million and $47.5 million.

• Cogent estimates EBITDA, as adjusted, for the third quarter of 2007 to be between $11.5 million and $12.5 million.

• Cogent estimates its net loss per basic and diluted common share for the third quarter of 2007 to be between $(0.18) and $(0.23). Cogent’s guidance includes the expected $3.0 million to $4.0 million impact of estimated non-cash equity-based compensation expense and assumes approximately 48.0 million weighted average common shares outstanding.

Outlook — Full Year 2007 Estimates

• Cogent is reaffirming the following previously released fiscal year 2007 estimates:

• Net service revenue for fiscal year 2007 is expected to be between $180.0 million and $190.0 million.

• On-net revenues are expected to increase from fiscal year 2006 to fiscal year 2007 by 35% to 40%.

• EBITDA, as adjusted, for fiscal year 2007 is expected to be between $45.0 million and $50.0 million.

• Cogent is updating the following previously released fiscal year 2007 estimates for net loss per basic and diluted common share and estimated depreciation and amortization expense and is providing an estimate of 2007 net interest expense:

• Net loss per basic and diluted common share for fiscal year 2007 is expected to be between $(0.65) and $(0.85) updated from its previously released guidance of between $(0.70) and $(1.00) primarily due to a revision in estimated depreciation and amortization expense and the estimated impact on net interest expense from the June 2007 issuance of Cogent’s $200 million 1% senior convertible notes and the net proceeds of $145.5 million after a $50.0 million share repurchase. Cogent’s net loss per basic and diluted common share estimates assume approximately 48.0 million weighted average common shares outstanding. The reduction to the previously estimated 49.0 million weighted average common shares outstanding reflects the estimated impact on weighted average common shares outstanding from Cogent’s June 2007 $50.0 million purchase of approximately 1.8 million of its common             shares.

• Cogent’s updated fiscal year 2007 guidance includes $68.0 million to $70.0 million of estimated depreciation and amortization expense updated from its previously released guidance of estimated depreciation and amortization expense of between $70.0 and $75.0 million and includes 2007 guidance of between $4.0 million and $5.0 million of estimated net interest expense.

Conference Call and Web site Information
Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on August 7, 2007 to discuss Cogent’s operating results for the second quarter of 2007 and Cogent’s expectations for the third quarter of 2007 and fiscal year 2007. 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 athttp://www.cogentco.com/htdocs/events.php. 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 19 countries and provides IP services in over 100 markets located in North America and Europe.

Cogent Communications is headquartered at 1015 31st Street, NW, Washington, D.C. 20007. For more information, visitwww.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 2006			Q2 2006			Q3 2006			Q4 2006			Q1 2007			Q2 2007
Metric ($ in 000’s, except share and per share data) — unaudited
On-Net revenue	$	22,693		$	25,142		$	27,465		$	29,976		$	33,153		$	35,295
% Change from previous Qtr.		8.1	%		10.8	%		9.2	%		9.1	%		10.6	%		6.5	%
Off-Net revenue	$	9,114		$	8,583		$	8,296		$	8,422		$	8,460		$	7,938
% Change from previous Qtr.		-5.3	%		-5.8	%		-3.3	%		1.5	%		0.5	%		-6.2	%
Non-Core revenue (1)	$	2,640		$	2,430		$	2,193		$	2,117		$	2,008		$	1,875
% Change from previous Qtr.		1.4	%		-8.0	%		-9.7	%		-3.5	%		-5.1	%		-6.6	%
Net service revenue — total	$	34,447		$	36,155		$	37,954		$	40,515		$	43,621		$	45,108
% Change from previous Qtr.		3.7	%		5.0	%		5.0	%		6.7	%		7.7	%		3.4	%
Network operations expenses (2)	$	20,337		$	20,076		$	19,353		$	20,340		$	21,015		$	21,428
% Change from previous Qtr.		1.9	%		-1.3	%		-3.6	%		5.1	%		3.3	%		2.0	%
Gross profit (2)	$	14,110		$	16,079		$	18,601		$	20,175		$	22,606		$	23,680
% Change from previous Qtr.		6.4	%		14.0	%		15.7	%		8.5	%		12.0	%		4.8	%
Gross profit margin (2)		41.0	%		44.5	%		49.0	%		49.8	%		51.8	%		52.5	%
Selling, general and administrative expenses (3)	$	10,785		$	11,594		$	11,749		$	12,465		$	12,562		$	12,625
% Change from previous Qtr.		0.1	%		7.5	%		1.3	%		6.1	%		0.8	%		0.5	%
Depreciation and amortization expenses	$	14,144		$	14,658		$	14,878		$	14,735		$	15,907		$	16,332
% Change from previous Qtr.		-15.3	%		3.6	%		1.5	%		-1.0	%		8.0	%		2.7	%
Equity-based compensation expense	$	3,499		$	3,372		$	2,619		$	1,019		$	1,619		$	2,466
% Change from previous Qtr.		-7.2	%		-3.6	%		-22.3	%		-61.1	%		58.9	%		52.3	%
Net loss	$	(16,441	)	$	(15,491	)	$	(11,854	)	$	(9,971	)	$	(9,404	)	$	(9,192	)
% Change from previous Qtr.		19.0	%		5.8	%		23.5	%		15.9	%		5.7	%		2.3	%
Basic and diluted net loss per common share	$	(0.38	)	$	(0.34	)	$	(0.24	)	$	(0.21	)	$	(0.19	)	$	(0.19	)
% Change from previous Qtr.		19.1	%		10.5	%		29.4	%		12.5	%		9.5	%		0.0	%
Weighted average common shares – basic and diluted		43,841,837			45,099,826			48,463,130			48,510,716			48,655,385			48,378,853
% Change from previous Qtr.		0.5	%		2.9	%		7.5	%		0.1	%		0.3	%		-0.6	%
EBITDA, as adjusted (4)	$	3,325		$	4,485		$	6,852		$	7,964		$	10,057		$	11,055
% Change from previous Qtr.		34.0	%		34.9	%		52.8	%		16.2	%		26.3	%		9.9	%
EBITDA, as adjusted margin (4)		9.7	%		12.4	%		18.1	%		19.7	%		23.1	%		24.5	%
Cash (used in) provided by operating activities	$	(1,591	)	$	4,918		$	1,498		$	460		$	13,627		$	10,286
% Change from previous Qtr.		41.9	%		409.1	%		-69.5	%		-69.3	%		2,862.4	%		-24.5	%
Capital expenditures	$	4,662		$	7,097		$	6,138		$	3,585		$	7,580		$	9,548
% Change from previous Qtr.		-10.2	%		52.2	%		-13.5	%		-41.6	%		111.4	%		26.0	%
Customer Connections – end of period
On-Net		5,267			6,051			6,919			7,778			8,565			9,773
% Change from previous Qtr.		13.1	%		14.9	%		14.3	%		12.4	%		10.1	%		14.1	%
Off-Net		3,614			3,461			3,356			3,528			3,433			3,128
% Change from previous Qtr.		-10.3	%		-4.2	%		-3.0	%		5.1	%		-2.7	%		-8.9	%
Non Core		1,185			1,129			1,097			1,009			941			885
% Change from previous Qtr.		-9.1	%		-4.7	%		-2.8	%		-8.0	%		-6.7	%		-6.0	%
Total		10,066			10,641			11,372			12,315			12,939			13,786
% Change from previous Qtr.		0.8	%		5.7	%		6.9	%		8.3	%		5.1	%		6.5	%
Other – end of period
Buildings On-Net		1,053			1,076			1,094			1,107			1,129			1,159
Employees		334			337			361			372			372			394

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(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 $105, $101, $79, $31, $49 and $74 in the three months ended March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006, March 31, 2007 and June 30, 2007, respectively.

(3) Excludes equity-based compensation expense of $3,394, $3,271, $2,540, $988, $1,570 and $2,392 in the three months ended March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006, March 31, 2007 and June 30, 2007, 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 $27, $254 and $13 in the three months ended March 31, 2006, December 31, 2006 and March 31, 2007, respectively. EBITDA, as adjusted, excludes gain on capital lease restructurings of $255 and $154 for the three months ended September 30, 2006 and March 31, 2007, respectively.

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 capital lease restructurings. The Company has excluded these gains because they relate to its capital structure. 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, and 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 2006			Q2 2006			Q3 2006			Q4 2006		Q1 2007			Q2 2007			Q3 2007		2007
																		Midpoint		Midpoint
																		Estimated		Estimated
($ In 000’s) – unaudited
Cash flows (used in) provided by operating activities	$	(1,591	)	$	4,918		$	1,498		$	460	$	13,627		$	10,286		$	10,000	$	47,000
Changes in operating assets and liabilities		3,261			(1,854	)		4,489			5,710		(4,947	)		(144	)		2,000		(1,500	)
Cash interest expense, net		1,628			1,421			865			1,540		1,364			913			—		2,000
Gains on capital lease restructurings and asset sales, net		27			—			255			254		167			—			—		200
EBITDA, including gains	$	3,325		$	4,485		$	7,107		$	7,964	$	10,211		$	11,055		$	12,000	$	47,700
Gains on capital lease restructurings		—			—			(255	)		—		(154	)		—			—		(200	)
EBITDA, as adjusted	$	3,325		$	4,485		$	6,852		$	7,964	$	10,057		$	11,055		$	12,000	$	47,500

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

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2006 AND JUNE 30, 2007
(IN THOUSANDS, EXCEPT SHARE DATA)

	December 31,			June 30,
	2006			2007
				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	42,642		$	181,754
Short term investments ($0 and $650 restricted, respectively)		80			650
Accounts receivable, net of allowance for doubtful accounts of $1,233 and $949, respectively		20,053			18,124
Prepaid expenses and other current assets		5,339			6,544
Total current assets		68,114			207,072
Property and equipment, net		263,268			252,251
Intangible assets, net		1,150			599
Deposits and other assets ($1,118 and $468 restricted, respectively)		4,344			3,745
Total assets	$	336,876		$	463,667
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,096		$	10,519
Accrued liabilities		12,614			15,193
Convertible subordinated notes, net of discount of $1,213 - due June 2007		8,978			—
Current maturities, capital lease obligations		6,027			6,776
Total current liabilities		36,715			32,488
Convertible senior notes, net of discount of $4,448 - due June 2027		—			195,552
Capital lease obligations, net of current maturities		82,019			81,243
Other long term liabilities		2,510			2,239
Total liabilities		121,244			311,522
Commitments and contingencies:
Stockholders’ equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 48,928,108 and 48,270,730 shares issued and outstanding , respectively		49			48
Additional paid-in capital		478,140			432,607
Stock purchase warrants		764			764
Accumulated other comprehensive income—foreign currency translation adjustment		1,638			2,281
Accumulated deficit		(264,959	)		(283,555	)
Total stockholders’ equity		215,632			152,145
Total liabilities and stockholders’ equity	$	336,876		$	463,667

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2007
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months			Three Months
	Ended			Ended
	June 30, 2006			June 30, 2007
	(Unaudited)			(Unaudited)
Net service revenue	$	36,155		$	45,108
Operating expenses:
Network operations (including $101 and $74 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		20,177			21,502
Selling, general, and administrative (including $3,271 and $2,392 of equity-based compensation expense, respectively, and $815 and $707 of bad debt expense, net of recoveries, respectively)		14,865			15,017
Depreciation and amortization		14,658			16,332
Total operating expenses		49,700			52,851
Operating loss		(13,545	)		(7,743	)
Interest income and other, net		691			1,091
Interest expense		(2,637	)		(2,540	)
Net loss	$	(15,491	)	$	(9,192	)
Net loss per common share:
Basic and diluted net loss per common share	$	(0.34	)	$	(0.19	)
Weighted-average common shares—basic and diluted		45,099,826			48,378,853

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2007
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Six Months			Six Months
	Ended			Ended
	June 30, 2006			June 30, 2007
	(Unaudited)			(Unaudited)
Net service revenue	$	70,602		$	88,729
Operating expenses:
Network operations (including $206 and $123 of equity-based compensation expense, respectively, exclusive of amounts shown separately)		40,619			42,566
Selling, general, and administrative (including $6,665 and $3,961 of equity-based compensation expense, respectively, and $1,147 and $907 of bad debt expense, net of recoveries, respectively)		29,044			29,148
Depreciation and amortization		28,801			32,238
Total operating expenses		98,464			103,952
Operating loss		(27,862	)		(15,223	)
Interest income and other, net		1,183			1,880
Interest expense		(5,253	)		(5,253	)
Net loss	$	(31,932	)	$	(18,596	)
Net loss per common share:
Basic and diluted net loss per common share	$	(0.72	)	$	(0.38	)
Weighted-average common shares—basic and diluted		44,534,992			48,535,502

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2007
(IN THOUSANDS)

	Six Months			Six Months
	Ended			Ended
	June 30, 2006			June 30, 2007
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net cash provided by operating activities	$	3,327		$	23,913
Cash flows from investing activities:
Purchases of property and equipment		(11,803	)		(17,128	)
Maturities (purchases) of short term investments		653			(570	)
Proceeds from dispositions of assets		93			14
Net cash used in investing activities		(11,057	)		(17,684	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		36,534			—
Proceeds from issuance of senior convertible notes, net		—			195,500
Repayment of convertible notes		—			(10,187	)
Purchase of common stock		—			(50,052	)
Proceeds from exercises of stock options		85			435
Repayments of capital lease obligations		(4,945	)		(3,205	)
Net cash provided by financing activities		31,674			132,491
Effect of exchange rate changes on cash		355			392
Net increase in cash and cash equivalents		24,299			139,112
Cash and cash equivalents, beginning of period		29,883			42,642
Cash and cash equivalents, end of period	$	54,182		$	181,754

Except for historical information and discussion contained herein, statements contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “projects” and similar expressions. The statements in this release are based upon the current beliefs and expectations of Cogent’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. 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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