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Press Release -- February 25th, 2010
Source: Cogent Communications
Tags: Earnings, Equipment, Exchange

COGENT COMMUNICATIONS REPORTS FOURTH QUARTER 2009 AND FULL YEAR 2009 RESULTS

Financial and Business Highlights

  • Service revenue for Q4 2009 of $62.5 million — an increase of 3.8% from $60.2 million for Q3 2009 and an increase of 13.8% from $54.9 million for Q4 2008
  • Foreign exchange positively impacts revenue growth from Q3 2009 to Q4 2009 by $0.6 million and positively impacts revenue growth from Q4 2008 to Q4 2009 by $2.2 million
  • Service revenue for 2009 of $235.8 million — an increase of 9.4% from $215.5 million for  2008
  • Foreign exchange negatively impacts revenue growth from 2008 to 2009 by $3.9 million — excluding this impact, service revenue from 2008 to 2009 increased by 11.2%
  • Traffic growth of 23% from Q3 2009 to Q4 2009, traffic growth of 86% from Q4 2008 to Q4 2009 and traffic growth of 75% from 2008 to 2009
  • EBITDA, as adjusted, of $17.4 million for Q4 2009 - an increase of 2.2% from $17.0 million for Q3 2009 and an increase of 18.6% from $14.7 million for Q4 2008
  • EBITDA, as adjusted, of $64.9 million for 2009 - an increase of 8.2% from $60.0 million for 2008
  • Operating income for Q4 2009 of $1.4 million - an increase from $0.5 million for Q3 2009 and an increase from an operating (loss) of $(4.6) million for Q4 2008
  • 21,349 customer connections on the Cogent network at the end of 2009 - an increase of 19.9%  from 17,800 customer connections at the end of 2008
  • 1,451 on-net buildings on the Cogent network at the end of 2009 - an increase of 125 on-net buildings and 9.4% from 1,326 on-net buildings at the end of 2008
  • Cash and cash equivalents increased by $4.8 million from September 30, 2009 to December 31, 2009


[WASHINGTON, D.C. February 25, 2010] Cogent Communications Group, Inc. (NASDAQ:CCOI, news, filings) today announced service revenue of $62.5 million for the three months ended December 31, 2009, an increase of 3.8% over $60.2 million for the three months ended September 30, 2009 and an increase of 13.8% over $54.9 million for the three months ended December 31, 2008.  Service revenue was $235.8 million for the year ended December 31, 2009, an increase of 9.4% over $215.5 million for the year ended December 31, 2008.

On-net revenue was $49.7 million for the three months ended December 31, 2009, an increase of 3.4% over $48.1 million for the three months ended September 30, 2009 and an increase of 11.0% over $44.8 million for the three months ended December 31, 2008. On-net revenue was $188.5 million for the year ended December 31, 2009, an increase of 7.1% over $176.0 million for the year ended December 31, 2008.  On-net service is provided to customers located in buildings that are physically connected to Cogent’s network by Cogent facilities.

Off-net revenue was $11.8 million for the three months ended December 31, 2009, an increase of 6.0% over $11.1 million for the three months ended September 30, 2009 and an increase of 28.7% over $9.2 million for the three months ended December 31, 2008. Off-net revenue was $43.3 million for the year ended December 31, 2009, an increase of 25.3% over $34.6 million for the year ended December 31, 2008.  Off-net customers are located in buildings directly connected to Cogent’s network using other carriers’ facilities and services to provide the last mile portion of the link from the customers’ premises to Cogent’s network.

Non-core revenue was $1.1 million for the three months ended December 31, 2009, $1.1 million for the three months ended September 30, 2009 and $1.0 million for the three months ended December 31, 2008.  Non-core revenue was $4.0 million for the year ended December 31, 2009, a decrease of 17.6% from $4.8 million for the year ended December 31, 2008.  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 3.1% to $34.9 million for the three months ended December 31, 2009 from $33.9 million for the three months ended September 30, 2009 and increased 12.0% from $31.2 million for the three months ended December 31, 2008. Gross profit, excluding equity-based compensation expense, was $133.2


million for the year ended December 31, 2009, an increase of 8.5% over $122.8 million for the year ended December 31, 2008.  Gross profit margin, excluding equity-based compensation expense, was 55.9% for the three months ended December 31, 2009, 56.2% for the three months ended September 30, 2009, and 56.7% for the three months ended December 31, 2008.  Gross profit margin, excluding equity-based compensation expense, was 56.5% for the year ended December 31, 2009 and 57.0% for the year ended December 31, 2008.

Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, increased 2.2% to $17.4 million for the three months ended December 31, 2009 from $17.0 million for the three months ended September 30, 2009 and increased 18.6% from $14.7 million for the three months ended December 31, 2008.  EBITDA, as adjusted, margin was 27.8% for the three months ended December 31, 2009, 28.2% for the three months ended September 30, 2009, and 26.7% for the three months ended December 31, 2008. Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, increased 8.2% to $64.9 million for the year ended December 31, 2009 from $60.0 million for the year ended December 31, 2008.  EBITDA, as adjusted, margin was 27.5% for the year ended December 31, 2009 and 27.9% for the year ended December 31, 2008.

Basic and diluted net (loss) per share was $(0.03) for the three months ended December 31, 2009 and $(0.07) for the three months ended September 30, 2009. Basic and diluted net income per share was $0.25 and $0.24, respectively, for the three months ended December 31, 2008.  Basic and diluted net (loss) income per share was $(0.39) for the year ended December 31, 2009 and $(0.34) for the year ended December 31, 2008.  Included in the net income per share and net (loss) per share for the three months and year ended December 31, 2008 were gains of $19.8 million (representing $0.46 per basic and diluted share) and $23.1 million (representing $0.52 per basic and diluted share), respectively, related to purchases of convertible notes. Included in the net (loss) per share for the three months and year ended December 31, 2009 was a tax benefit of $1.5 million related to a partial reversal of a deferred tax asset valuation allowance and representing $0.03 per basic and diluted share for the three months ended December 31, 2009 and $0.03 per basic and diluted share for the year ended December 31, 2009.

Total customer connections increased 1.7% to 21,349 as of December 31, 2009 from 20,988 as of September 30, 2009 and increased 19.9% from 17,800 as of December 31, 2008. On-net


customer connections increased 3.3% to 17,188 as of December 31, 2009 from 16,633 as of September 30, 2009 and increased 21.5% from 14,148 as of December 31, 2008.  Off-net customer connections were 3,236 as of December 31, 2009, 3,290 as of September 30, 2009 and 3,040 as of December 31, 2008.  Non-core customer connections were 925 as of December 31, 2009, 1,065 as of September 30, 2009 and 612 as of December 31, 2008.

The number of on-net buildings increased by 30 on-net buildings to 1,451 on-net buildings as of December 31, 2009 from 1,421 on-net buildings as of September 30, 2009, and increased by 125 on-net buildings from 1,326 on-net buildings as of December 31, 2008.

Conference Call and Website Information

Cogent will host a conference call with financial analysts at 8:30 a.m. (ET) on February 25, 2010 to discuss Cogent’s operating results for the fourth quarter of 2009 and 2009 and Cogent’s expectations for full year 2010.  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/us/ir_events.php.  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 (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 provides IP services in over 140 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 at info@cogentco.com.

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COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

Summary of Financial and Operational Results

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009
Metric ($ in 000’s, except share and per share data) – unaudited
On-Net revenue $ 42,811 $ 44,215 $ 44,243 $ 44,764 $ 44,293 $ 46,453 $ 48,050 $ 49,667
% Change from previous Qtr. 5.7 % 3.3 % 0.1 % 1.2 % -1.1 % 4.9 % 3.4 % 3.4 %
Off-Net revenue $ 7,994 $ 8,459 $ 8,995 $ 9,159 $ 9,867 $ 10,562 $ 11,127 $ 11,791
% Change from previous Qtr. 0.3 % 5.8 % 6.3 % 1.8 % 7.7 % 7.0 % 5.3 % 6.0 %
Non-Core revenue (1) $ 1,305 $ 1,185 $ 1,356 $ 1,003 $ 916 $ 976 $ 1,052 $ 1,053
% Change from previous Qtr. -12.2 % -9.2 % 14.4 % -26.0 % -8.7 % 6.6 % 7.8 % 0.1 %
Service revenue – total $ 52,110 $ 53,859 $ 54,594 $ 54,926 $ 55,076 $ 57,991 $ 60,229 $ 62,511
% Change from previous Qtr. 4.3 % 3.4 % 1.4 % 0.6 % 0.3 % 5.3 % 3.9 % 3.8 %
Network operations expenses (2) $ 21,958 $ 22,952 $ 24,059 $ 23,758 $ 24,118 $ 24,511 $ 26,375 $ 27,597
% Change from previous Qtr. -2.0 % 4.5 % 4.8 % -1.3 % 1.5 % 1.6 % 7.6 % 4.6 %
Gross profit (2) $ 30,152 $ 30,907 $ 30,535 $ 31,168 $ 30,958 $ 33,480 $ 33,854 $ 34,914
% Change from previous Qtr. 9.4 % 2.5 % -1.2 % 2.1 % -0.7 % 8.1 % 1.1 % 3.1 %
Gross profit margin (2) 57.9 % 57.4 % 55.9 % 56.7 % 56.2 % 57.7 % 56.2 % 55.9 %
Selling, general and administrative expenses (3) $ 15,550 $ 14,448 $ 16,403 $ 16,517 $ 17,068 $ 16,962 $ 16,847 $ 17,593
% Change from previous Qtr. 8.7 % -7.1 % 13.5 % 0.7 % 3.3 % -0.6 % -0.7 % 4.4 %
Depreciation and amortization expense $ 16,296 $ 15,828 $ 15,494 $ 14,970 $ 14,576 $ 15,271 $ 15,282 $ 14,784
% Change from previous Qtr. -2.8 % -2.9 % -2.1 % -3.4 % -2.6 % 4.8 % 0.1 % -3.3 %
Asset impairment $ 1,592 $ $ $ $ $ $ $
% Change from previous Qtr. 100.0 % -100.0 % % % % % % %
Equity-based compensation expense $ 5,425 $ 4,166 $ 4,023 $ 4,262 $ 3,814 $ 2,350 $ 1,267 $ 1,176
% Change from previous Qtr. 67.5 % -23.2 % -3.4 % 5.9 % -10.5 % -38.4 % -46.1 % -7.2 %
Operating (loss) income $ (8,711 ) $ (3,535 ) $ (5,385 ) $ (4,581 ) $ (4,500 ) $ (1,103 ) $ 458 $ 1,361
% Change from previous Qtr. -29.0 % 59.4 % -52.3 % 14.9 % 1.8 % 75.5 % 141.5 % 197.2 %


Gains on purchases of convertible notes (5) $ $ $ 3,245 $ 19,830 $ $ $ $
% Change from previous Qtr. % % 100.0 % 511.1 % -100.0 % % % %
Net (loss) income (5) $ (11,573 ) $ (7,635 ) $ (6,501 ) $ 10,487 $ (8,160 ) $ (4,453 ) $ (3,279 ) $ (1,259 )
% Change from previous Qtr. -65.2 % 34.0 % 14.9 % 261.3 % -177.8 % 45.4 % 26.4 % 61.6 %
Basic net (loss) income per common share (5) $ (0.25 ) $ (0.17 ) $ (0.15 ) $ 0.25 $ (0.19 ) $ (0.10 ) $ (0.07 ) $ (0.03 )
% Change from previous Qtr. -66.7 % 32.0 % 11.8 % 266.7 % -176.0 % 47.4 % 30.0 % 57.1 %
Diluted net (loss) income per common share (5) $ (0.25 ) $ (0.17 ) $ (0.15 ) $ 0.24 $ (0.19 ) $ (0.10 ) $ (0.07 ) $ (0.03 )
% Change from previous Qtr. -66.7 % 32.0 % 11.8 % 260.0 % -179.2 % 47.4 % 30.0 % 57.1 %
Weighted average common shares – basic 46,265,575 45,397,919 43,593,205 42,799,786 42,758,372 43,689,747 43,894,098 44,242,791
% Change from previous Qtr. -1.3 % -1.9 % -4.0 % -1.8 % -0.1 % 2.2 % 0.5 % 0.8 %
Weighted average common shares – diluted (5) 46,265,575 45,397,919 43,593,205 43,395,989 42,758,372 43,689,747 43,894,098 44,242,791
% Change from previous Qtr. -1.3 % -1.9 % -4.0 % -0.5 % -1.5 % 2.2 % 0.5 % 0.8 %
EBITDA, as adjusted (4) $ 14,618 $ 16,585 $ 14,166 $ 14,653 $ 13,890 $ 16,670 $ 17,007 $ 17,379
% Change from previous Qtr. 9.6 % 13.5 % -14.6 % 3.4 % -5.2 % 20.0 % 2.0 % 2.2 %
EBITDA, as adjusted margin (4) 28.1 % 30.8 % 25.9 % 26.7 % 25.2 % 28.7 % 28.2 % 27.8 %
Cash provided by operating activities $ 11,492 $ 14,223 $ 17,828 $ 10,793 $ 12,816 $ 13,031 $ 14,751 $ 16,346
% Change from previous Qtr. -14.6 % 23.8 % 25.3 % -39.5 % 18.7 % 1.7 % 13.2 % 10.8 %
Capital expenditures $ 9,778 $ 9,029 $ 9,515 $ 5,188 $ 11,746 $ 13,378 $ 16,676 $ 7,707
% Change from previous Qtr. 128.2 % -7.7 % 5.4 % -45.5 % 126.4 % 13.9 % 24.7 % -53.8 %
Customer Connections – end of period
On-Net 11,849 12,502 13,307 14,148 14,674 15,988 16,633 17,188
% Change from previous Qtr. 5.9 % 5.5 % 6.4 % 6.3 % 3.7 % 9.0 % 4.0 % 3.3 %
Off-Net 3,003 2,994 2,996 3,040 3,008 3,291 3,290 3,236
% Change from previous Qtr. 0.6 % -0.3 % 0.1 % 1.5 % -1.1 % 9.4 % % -1.6 %
Non Core (1) 744 685 651 612 564 1,149 1,065 925
% Change from previous Qtr. -7.5 % -7.9 % -5.0 % -6.0 % -7.8 % 103.7 % -7.3 % -13.1 %
Total 15,596 16,181 16,954 17,800 18,246 20,428 20,988 21,349
% Change from previous Qtr. 4.1 % 3.8 % 4.8 % 5.0 % 2.5 % 12.0 % 2.7 % 1.7 %


Other – end of period
Buildings On-Net 1,247 1,274 1,301 1,326 1,355 1,389 1,421 1,451
Employees 460 483 509 540 548 536 569 578


(1) Consists of legacy services of companies whose assets or businesses were acquired by Cogent, primarily including voice services (only provided in Toronto, Canada) and dial-up Internet access services.

(2) Excludes equity-based compensation expense of $85, $83, $80, $80, $76, $47, $25 and $24 in the three months ended March 31, 2008, June 30, 2008, September 30, 2008, December 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and December 31, 2009, respectively.

(3) Excludes equity-based compensation expense of $5,340, $4,083, $3,943, $4,182, $3,738, $2,303, $1,242 and $1,152 in the three months ended March 31, 2008, June 30, 2008, September 30, 2008, December 31, 2008, March 31, 2009, June 30, 2009, September 30, 2009 and December 31, 2009, 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 and acquisition of assets of $16, $126, $34, $2, $152 and $58 in the three months ended March 31, 2008, June 30, 2008, September 30, 2008, December 31, 2008, June 30, 2009 and December 31, 2009, respectively. EBITDA, as adjusted, excludes gains on the purchases of convertible notes of $3,245 and $19,830 for the three months ended September 30, 2008 and December 31, 2008, respectively.

(5) Amounts have been restated to reflect the adoption of Accounting Standards Codification (“ASC”) Subtopic 470-20, Debt, “Debt with Conversion and Other Options”.

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 provided by operating activities.

EBITDA, as adjusted, represents EBITDA less gains on convertible note purchases. 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 and expand its business.  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 provided by operating activities in the table below.

Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
YEAR
2008
YEAR
2009
($ In 000’s) – unaudited
Cash flows provided by operating activities $ 11,492 $ 14,223 $ 17,828 $ 10,793 $ 12,816 $ 13,031 $ 14,751 $ 16,346 $ 54,336 $ 56,944
Changes in operating assets and liabilities 2,439 250 (5,848 ) 489 (1,486 ) 1,109 (333 ) (530 ) (2,665 ) (1,240 )
Cash interest expense and income tax expense 671 1,986 2,159 3,369 2,560 2,378 2,589 1,505 8,174 9,030
Gains on note purchases, asset purchases and other (1) 16 126 3,272 19,832 152 58 23,253 210
EBITDA, including gains (1) $ 14,618 $ 16,585 $ 17,411 $ 34,483 $ 13,890 $ 16,670 $ 17,007 $ 17,379 $ 83,098 $ 64,944
Gains on note purchases (1) (3,245 ) (19,830 ) (23,075 )
EBITDA, as adjusted $ 14,618 $ 16,585 $ 14,166 $ 14,653 $ 13,890 $ 16,670 $ 17,007 $ 17,379 $ 60,023 $ 64,944



(1) Amounts have been restated to reflect the adoption of ASC Subtopic 470-20, Debt, “Debt with Conversion and Other Options”.

Impact of foreign currencies on service revenue

($ In 000’s) – unaudited YEAR
2008
YEAR
2009
Service Revenue as reported $ 215,489 $ 235,807
Impact of foreign currencies on service revenue (1) (3,234 ) 3,916
Service revenue - as adjusted $ 212,255 $ 239,723
Increase from 2008 to 2009 - (Service revenue as adjusted for 2009 less service revenue as reported for 2008. $ 24,234
Percent increase (Increase from 2008 to 2009 divided by service revenue as reported for 2008) 11.2 %


(1) Service revenue as adjusted is determined by translating the service revenue for the year ended December 31, 2009 at the average foreign currency exchange rates for the year ended December 31, 2008 and translating the service revenue for the year ended December 31, 2008 at the average foreign currency exchange rates for the year ended December 31, 2007.

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


COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2009

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2008
(Adjusted)
2009
Assets
Current assets:
Cash and cash equivalents $ 71,291 $ 55,929
Short term investments—restricted 62
Accounts receivable, net of allowance for doubtful accounts of $1,914 and $2,516, respectively 22,174 22,877
Prepaid expenses and other current assets 6,389 8,045
Total current assets 99,916 86,851
Property and equipment:
Property and equipment 618,008 695,437
Accumulated depreciation and amortization (374,069 ) (431,653 )
Total property and equipment, net 243,939 263,784
Deposits and other assets ($1,091 and $469 restricted, respectively) 3,938 4,360
Total assets $ 347,793 $ 354,995
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 12,795 $ 12,781
Accrued and other current liabilities 14,756 17,609
Current maturities, capital lease obligations 5,940 5,643
Total current liabilities 33,491 36,033
Capital lease obligations, net of current maturities 98,253 104,021
Convertible senior notes, net of discount of $30,253 and $25,708, respectively 61,725 66,270
Other long term liabilities 3,374 4,187
Total liabilities 196,843 210,511
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 75,000,000 shares authorized; 44,318,949 and 44,853,974 shares issued and outstanding, respectively 44 45
Additional paid-in capital 465,114 475,158
Stock purchase warrants 764
Accumulated other comprehensive income—foreign currency translation adjustment 572 1,976
Accumulated deficit (315,544 ) (332,695 )
Total stockholders’ equity 150,950 144,484
Total liabilities and stockholders’ equity $ 347,793 $ 354,995

The consolidated balance sheet as of December 31, 2008 has been restated for the retrospective application of ASC 470-20, Debt, “Debt with Conversion and Other Options.”


COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2009

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2008
(Adjusted)
2009
Service revenue $ 215,489 $ 235,807
Operating expenses:
Network operations (including $328 and $172 of equity-based compensation expense, respectively, exclusive of amounts shown separately) 93,055 102,775
Selling, general, and administrative (including $17,548 and $8,435 of equity-based compensation expense, respectively) 80,465 76,905
Asset impairment 1,592
Depreciation and amortization 62,589 59,913
Total operating expenses 237,701 239,593
Operating loss (22,212 ) (3,786 )
Gains—purchases of senior convertible notes 23,075
Gains—purchase and dispositions of assets 178 210
Interest income and other 3,847 898
Interest expense (18,574 ) (15,720 )
Net loss before income taxes (13,686 ) (18,398 )
Income tax (provision) benefit (1,536 ) 1,247
Net loss $ (15,222 ) $ (17,151 )
Basic and diluted net loss per common share $ (0.34 ) $ (0.39 )
Weighted-average common shares—basic & diluted 44,563,727 44,028,736

The consolidated statement of operations for the year ended December 31, 2008 has been restated for the retrospective application of ASC 470-20, Debt, “Debt with Conversion and Other Options.”


COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2009

(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Three months ended
December 31, 2008
(Adjusted)
Three months ended
December 31, 2009
Service revenue $ 54,926 $ 62,511
Operating expenses:
Network operations (including $80 and $24 of equity-based compensation expense, respectively, exclusive of amounts shown separately) 23,838 27,621
Selling, general, and administrative (including $4,182 and $1,152 of equity-based compensation expense, respectively) 20,699 18,745
Depreciation and amortization 14,970 14,784
Total operating expenses 59,507 61,150
Operating (loss) income (4,581 ) 1,361
Gains—purchases of senior convertible notes 19,830
Interest income and other 512 171
Interest expense (4,125 ) (4,063 )
Net income (loss) before income taxes 11,636 (2,531 )
Income tax (provision) benefit (1,149 ) 1,272
Net income (loss) $ 10,487 $ (1,259 )
Basic net income (loss) per common share $ 0.25 $ (0.03 )
Weighted-average common shares—basic 42,799,786 44,242,791
Diluted net income (loss) per common share $ 0.24 $ (0.03 )
Weighted-average common shares—diluted 43,395,989 44,242,791

The consolidated statement of operations for the three months ended December 31, 2008 has been restated for the retrospective application of ASC 470-20, Debt, “Debt with Conversion and Other Options.”


COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2009

(UNAUDITED AND IN THOUSANDS)

2008
(Adjusted)
2009
Cash flows from operating activities:
Net cash provided by operating activities 54,336 56,944
Cash flows from investing activities:
Purchases of property and equipment (33,510 ) (49,507 )
Maturities of short-term investments 750 62
Purchase of other assets (246 )
Proceeds from asset sales 221 338
Net cash used in investing activities (32,539 ) (49,353 )
Cash flows from financing activities:
Purchases of senior convertible notes (48,553 )
Repayment of capital lease obligations (17,959 ) (23,167 )
Purchases of common stock (59,273 ) (730 )
Proceeds from exercises of common stock options 147 357
Net cash used in financing activities (125,638 ) (23,540 )
Effect of exchange rate changes on cash (1,889 ) 587
Net decreases in cash and cash equivalents (105,730 ) (15,362 )
Cash and cash equivalents, beginning of year 177,021 71,291
Cash and cash equivalents, end of year $ 71,291 $ 55,929

The consolidated statement of cash flows for the year ended December 31, 2008 has been restated for the retrospective application of ASC 470-20, Debt, “Debt with Conversion and Other Options.”

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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