FiberNet Reports Second Quarter 2008 Results

Second Quarter of 2008 Revenues Increase 19.4% and EBITDA Increases 50.5% Over
Comparable Period in 2007

NEW YORK, Aug. 5 /PRNewswire-FirstCall/ -- FiberNet Telecom Group, Inc.
(Nasdaq: FTGX), a leading provider of complex interconnection services, today
announced its results for the second quarter ended June 30, 2008.
Revenues for the second quarter of 2008 increased to $14.4 million, up
19.4% from $12.1 million for the second quarter of 2007 and up 6.3% from $13.6
million for the first quarter of 2008.
EBITDA (as defined) for the second quarter of 2008 was $2.8 million, up
50.5% from $1.9 million for the second quarter of 2007 and up 11.1% from $2.5
million for the first quarter of 2008.
FiberNet continued to achieve consistent revenue growth in its core
product offerings of transport and colocation services. For the second
quarter of 2008, revenues from transport and colocation services (excluding
revenues from access management services) grew by 19.7% over the second
quarter of 2007.
Transport services remained the most significant component of FiberNet's
revenues, accounting for 76.8% of the total revenues generated in the second
quarter of 2008. On-net transport revenues were 44.9%, and off-net transport
revenues were 31.9% of the total revenues.
Colocation services and access management services represented 22.1% and
1.1% of total revenue generated in the second quarter, respectively. Off-net
transport revenues were the fastest growing area for the Company in the second
quarter of 2008, increasing by 33.6% from the second quarter of 2007 and by
13.3% from the first quarter of 2008. Colocation revenues increased by 25.9%
in the second quarter of 2008 from the second quarter of 2007 and by 4.1% from
the first quarter of 2008.
FiberNet's customer count also increased to 284 as of June 30, 2008, up
from 243 at the end of the second quarter of 2007 and 265 at the end of the
first quarter of 2008.
Jon A. DeLuca, President and Chief Executive Officer, stated, "We
delivered another strong quarter of results. Our colocation expansion
projects are performing well, and we are progressing on our network expansion
initiatives. All areas of our business continue to be solid, and our overall
cash flow generation demonstrates that."
Cost of services for the second quarter of 2008 was $7.4 million, compared
to $6.3 million for the second quarter of 2007 and $6.9 million for the first
quarter of 2008. These increases were due, in part, to increased off-net
connectivity costs and increased occupancy costs from our colocation expansion
projects.
Selling, general and administrative expenses for the second quarter of
2008 were $4.8 million, compared to $4.1 million in the second quarter of 2007
and $4.5 million in the first quarter of 2008. Included in the selling,
general and administrative expenses for the second quarter of 2008 was a
one-time, non-cash charge of $0.2 million for stock related expense.
The net loss applicable to common stockholders for the second quarter of
2008 was $(0.7) million, or $(0.09) per share, compared to $(1.0) million, or
$(0.14) per share, for the second quarter of 2007. The net loss applicable to
common stockholders for the first quarter of 2008 was $(0.6) million, or
$(0.08) per share.
Capital expenditures for the second quarter of 2008 were $3.2 million,
compared to $1.1 million in the first quarter of 2008 and $1.2 million in the
second quarter of 2007. In the second quarter of 2008, $1.0 million of capital
expenditures were made primarily for the implementation of customer specific
orders and the implementation of network infrastructure to support new
initiatives, and $2.2 million were invested in colocation expansion projects.
In 2008, the Company expects to invest approximately $3.5 million in
capital expenditures for customer order activity, expansion of certain
facilities, new product initiatives and an upgrade to certain information
technology systems and key operating systems. The Company also expects to
invest approximately $3.0 million to complete the two colocation expansion
projects that it began last year. These include its new facility at 60 Hudson
Street in New York City and its power upgrade at its facility at 165 Halsey
Street in Newark, New Jersey. In 2007, the Company invested $0.9 million in
these colocation projects. In addition, the Company intends to invest
approximately $2.0 million for the national network expansion projects that it
recently announced. These projects include capacity expansions to its metro
networks in New York / New Jersey and Los Angeles, a capacity expansion to its
metro Ethernet network and extending its network reach to the new markets of
Chicago, Miami and San Francisco.
As of June 30, 2008, FiberNet had total assets of $68.6 million and total
stockholders' equity of $38.2 million. As of August 5, 2008, the Company had
approximately 7.4 million shares of common stock outstanding, or 8.2 million
shares of common stock outstanding on a fully-diluted basis, assuming the
exercise of all outstanding options and warrants. Of the approximately 0.7
million outstanding options and warrants, 0.1 million are out-of-the-money as
of August 5, 2008.
The Company presents the financial metric EBITDA (as defined) because it
is utilized in the determination of the majority of the financial covenants in
its credit agreement, and the metric is calculated in accordance with its
credit agreement. As of June 30, 2008, FiberNet was in full compliance with
all of the financial covenants in its credit agreement.
FiberNet Teleconference:
FiberNet will hold a teleconference today, Tuesday, August 5, 2008, at
11:00 a.m. EDT. To participate in the teleconference please call:
866-202-1971 and enter pass code 51492232, and from outside the U.S. call
617-213-8842 and enter the pass code.
A replay of the teleconference will be available beginning Tuesday, August
5, 2008 at 1:00 p.m. EDT through Tuesday, August 19, 2008. To listen to the
replay by phone, call 888-286-8010 and enter pass code 91573459, and from
outside the U.S. call 617-801-6888 and enter the pass code.
About FiberNet Telecom Group, Inc.
FiberNet Telecom Group, Inc. owns and operates integrated interconnection
facilities and diverse transport routes in the two gateway markets of
New York / New Jersey and Los Angeles, designed to provide comprehensive
broadband interconnectivity enabling the exchange of traffic over multiple
networks. FiberNet's customized connectivity infrastructure provides an
advanced, high bandwidth, fiber-optic solution to support the demand for
network capacity and to facilitate the interconnection of multiple carriers'
and customers' networks. For additional information about FiberNet, visit the
company's website at www.ftgx.com.
Financial Information and Forward-Looking Statements:
This partial discussion of the statements of financial condition and
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's annual
report on Form 10-K for the year ended December 31, 2007 as filed with the
Securities and Exchange Commission on March 28, 2008.
Investors are cautioned that EBITDA (as defined) is not a financial
measure under generally accepted accounting principles. EBITDA (as defined)
is defined as net loss before income taxes, net interest expense, depreciation
and amortization, stock related expense and other non-cash or non-recurring
charges. The Company does not, nor does it suggest investors should, consider
such a non-GAAP financial measure in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. EBITDA (as defined)
should not be construed as an alternative to operating income or cash flows
from operating activities, both of which are determined in accordance with
GAAP, or as a measure of liquidity. Because it is not calculated under GAAP,
FiberNet's EBITDA (as defined) may not be comparable to similarly titled
measures used by other companies. EBITDA (as defined) is commonly used in the
communications industry and by financial analysts, and others who follow the
industry, as a measure of operating performance. The Company believes that it
is appropriate to present this financial measure because certain of the
financial covenants in the Company's credit agreement are based upon it.
Various remarks about the Company's future expectations, plans and
prospects constitute forward-looking statements for purposes of the safe
harbor provisions under The Private Securities Litigation Reform Act of 1995.
Such remarks are valid only as of today, and the Company disclaims any
obligation to update this information. Actual results may differ materially
from those indicated by these forward-looking statements as a result of
various important factors, including those discussed in the Company's most
recent Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

Reconciliation of Non-GAAP Financial Metric:

Consolidated Financial Data
(in thousands)
(unaudited)
Three Months Ended
-----------------------------------------------
June 30, June 30, March 31,
2008 2007 2008
------------- ------------- ------------
Calculation of EBITDA
(as defined):

Net loss $ (667) $ (1,040) $ (614)

Plus:
Operating expenses:
Stock related expense for
selling, general, and
administrative matters 580 227 347
Depreciation and
amortization 2,549 2,342 2,439

Interest expense, net 362 348 370
---------- ----------- ---------
EBITDA (as defined) $ 2,824 $ 1,877 $ 2,542

FIBERNET TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except for per share amounts)

Six months Ended June 30,
--------------------------
2008 2007
----------- -----------
Revenues $ 27,960 $ 23,695
Operating expenses:
Cost of services (exclusive of items shown
separately below) 14,283 12,164
Selling, general and administrative expense 9,238 8,305
Depreciation and amortization 4,988 4,639
----------- -----------
Total operating expenses 28,509 25,108
----------- -----------
Loss from operations (549) (1,413)
Loss on early extinguishment of debt - (1,146)
Interest income 69 114
Interest expense (801) (992)
----------- ------------
Net loss $ (1,281) $ (3,437)
=========== ============
Net loss per share -- basic and diluted $ (0.17) $ (0.47)
Weighted average common shares
outstanding -- basic and diluted 7,540 7,312

FIBERNET TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

Three months ended
June 30,
-------------------------
2008 2007
---------- -----------
Revenues $ 14,405 $ 12,060
Operating expenses:
Cost of services 7,394 6,266
Selling, general and administrative expense 4,767 4,145
Depreciation and amortization 2,549 2,342
---------- -----------
Total operating expenses 14,710 12,753
---------- -----------
Loss from operations (305) (693)
Interest income 23 51
Interest expense (385) (398)
---------- -----------
Net loss $ (667) $ (1,040)
========== ===========
Net loss per share -- basic and diluted $ (0.09) $ (0.14)
Weighted average common shares
outstanding -- basic and diluted 7,501 7,353

FIBERNET TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, December 31,
2008 2007
---------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 6,145 $ 8,220
Accounts receivable, net of allowance of $361 4,340 3,818
Prepaid expenses 693 612
---------- -----------
Total current assets 11,178 12,650
Property, plant and equipment, net 54,112 54,921
Other Assets:
Deferred charges, net of accumulated
amortization of $261 and $160 767 845
Goodwill 1,613 1,613
Other assets 950 883
---------- -----------
Total other assets 3,330 3,341
---------- -----------
TOTAL ASSETS $ 68,620 $ 70,912
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,121 $ 3,553
Accrued expenses 5,088 7,227
Notes payable, current portion 1,400 700
Deferred revenues, current portion 1,191 1,282
---------- -----------
Total current liabilities 11,800 12,762
Long Term Liabilities:
Notes payable 12,600 13,300
Deferred revenue, long term 3,557 3,351
Other long term liabilities 2,488 2,201
---------- -----------
Total Long Term Liabilities 18,645 18,852
---------- -----------
Total Liabilities 30,445 31,614

Stockholders' Equity:
Common stock, $0.001 par value, 2,000,000,000
shares authorized and 7,469,506 and 7,554,309
shares issued and outstanding 7 8
Additional paid-in-capital 445,440 445,368
Deferred rent (warrants) (1,299) (1,386)
Accumulated deficit (405,973) (404,692)
---------- -----------
Total stockholders' equity 38,175 39,298
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 68,620 $ 70,912
========== ===========

FIBERNET TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

Six months ended
June 30,
-----------------------
2008 2007
---------- ----------
Cash flows from operating activities:
Net loss $ (1,281) $ (3,437)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 4,988 4,639
Stock related expense 928 454
Deferred rent expense 87 87
Loss on early extinguishment of debt -- 1,146
Other non-cash items 99 269
Change in assets and liabilities:
(Increase) decrease in accounts receivables (522) 628
Increase in prepaid expenses (81) (49)
(Increase) decrease in other assets (130) 38
Increase (decrease) in accounts payable 382 (820)
Increase (decrease) in accrued expenses
and other long-term liabilities 170 (315)
Increase (decrease) in deferred revenues 115 (571)
---------- ----------
Cash provided by operating activities 4,755 2,069
Cash flows from investing activities:
Common stock repurchases (2,470) --
Capital expenditures (4,338) (1,586)
---------- ----------
Cash used in investing activities (6,808) (1,586)
Cash flows from financing activities:
Proceeds from debt financings -- 14,000
Proceeds from warrant exercises -- 626
Repayment of debt financings -- (14,160)
Payment of financing costs of debt financings (22) (1,067)
---------- ----------
Cash used in financing activities (22) (601)
---------- ----------
Net decrease in cash and cash equivalents (2,075) (118)
Cash and cash equivalents at beginning of period 8,220 6,802
---------- ----------
Cash and cash equivalents at end of period $ 6,145 $ 6,684
========== ==========
Supplemental disclosures of cash flow
information:
Interest paid $ 810 $ 1,021

SOURCE FiberNet Telecom Group, Inc.

Norma I. Salcido, Director, Marketing and Communications, FiberNet Telecom
Group, Inc., +1-212-405-6200, norma.salcido@ftgx.com