2014

Tucows Inc. Reports Continuing Strong Financial Results for First Quarter of 2012

- Company Reports 8th Consecutive Quarter of Record Revenue and Strong Cash Flow from Operations -

TORONTO, May 8, 2012 /PRNewswire/ - Tucows Inc. (NYSE AMEX: TCX, TSX:TC), a global provider of domain names and other Internet services, today reported its financial results for the first quarter ended March 31, 2012. All figures are in U.S. dollars. 

Summary Financial Results
(Numbers in Thousands of US Dollars, Except Per Share Data)

  3 Months Ended
March 31, 2012
(unaudited)
3 Months Ended
March 31, 2011
(unaudited)
Net revenue 27,537 22,555
Income before provision for income taxes and change in fair value of forward exchange contracts  1,950  512
Net income for the period 1,664 728
Net earnings per common share 0.04 0.01
Net cash provided by operating activities 2,081 763

Summary of Revenues and Cost of Revenues
(Numbers in Thousands of US Dollars)

  Revenue Cost of Revenue
  3 Months Ended
March 31, 2012
(unaudited)
3 Months Ended
March 31, 2011
(unaudited)
3 Months Ended
March 31, 2012
(unaudited)
3 Months Ended
March 31, 2011
(unaudited)
Wholesale        
 Domain Service 21,108 17,540 17,620 14,573
 Value-Added Services 2,689 2,266 507 513
Total Wholesale 23,797 19,806 18,127 15,086
         
Retail 1,850 1,195 930 419
Portfolio 1,891 1,554 210 190
         
Network, other costs - - 1,257 1,263
Network, depreciation and amortization costs - - 183 256
Total revenue/cost of revenue 27,537 22,555 20,707 17,214

NOTE: Beginning in the first quarter of 2012, Tucows has reclassified its revenue streams into three distinct service offerings: Wholesale, Retail and Portfolio1. The realignment is intended to better reflect the manner in which these revenue streams are generated and assessed by management.

"The first quarter of 2012 was a solid Tucows quarter - growth across all areas of our business, strong cash generation from operations, consistency and reliability," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "We generated growth in revenue and gross margin far in excess of the growth in operating expenses, demonstrating the leverage in our business. We think that consistent growth and continued leverage will serve us well throughout 2012."

Net revenue for the first quarter of 2012 increased 22% to a record $27.5 million from $22.6 million for the first quarter of 2011 and was driven by growth in each of the Company's three service offerings.

Net income for the first quarter of 2012 was $1.7 million, or $0.04 per share, compared with net income for the first quarter of 2011 of $0.7 million, or $0.01 per share.  Net income for the first quarter of 2012 benefitted from other income of $0.5 million resulting from the sale of certain intangible assets with no book value.

Deferred revenue at the end of the first quarter of 2012 was $73.0 million, an increase of 12% from $64.9 million at the end of the first quarter of 2011 and $69.2 from the end of the fourth quarter of 2011.

Cash and cash equivalents at the end of the first quarter of 2012 were $6.4 million compared with $4.2 million at the end of the first quarter of 2011 and relatively unchanged from the end of the fourth quarter of 2011.  During the first quarter of 2012, the Company generated cash flow from operations of $2.1 million, as well as $0.5 million in cash proceeds from the aforementioned sale of intangible assets.  In addition, the Company utilized $4.0 million from its credit facility to partially fund the $5.9 million cost of the share repurchases under the modified Dutch auction tender completed in January of this year.  The Company also used $0.5 million for principal repayments under its credit facility and invested $0.2 million in equipment purchases.

1Service Offerings:  Wholesale, primarily branded as OpenSRS, is composed of revenue generated by the OpenSRS Domain Service and Other Value-Added Services, including hosted email, SSL and other trust certificates, bulk sale of domain names and advertising from the OpenSRS Domain Expiry Stream, web publishing tools, mobile phone services, third-party marketing funds, and billing software for ISPs.  Retail is primarily composed of services to individuals and small businesses, including Hover, which generates revenue from the sale of domain name registration and email, and Ting, which generates revenue from mobile phone services. Portfolio includes revenue generated by the resale of names from the domain name portfolio and advertising revenue from the Company's domain name portfolio and two large advertising-supported websites.

Conference Call

Tucows management will host a conference call today, Tuesday, May 8, 2012 at 5:00 p.m. (ET) to discuss the Company's first quarter 2012 results. Participants can access the conference call via the Internet at www.tucowsinc.com/investors.

For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 416-849-0833 or 1-855-859-2056 and enter the pass code 74551438 followed by the pound key.  The telephone replay will be available until Tuesday, May 15, 2012 at midnight. To access the archived conference call as an MP3 via the Internet, go to http://tucowsinc.com/investors

About Tucows

Tucows is a global Internet services company. OpenSRS (http://opensrs.com) manages over twelve million domain names and millions of value-added services through a reseller network of over 12,000 web hosts and ISPs. Hover (http://hover.com) is the easiest way for individuals and small businesses to manage their domain names and email addresses. Ting.com (https://ting.com) is a mobile phone service provider dedicated to bringing clarity and control to US mobile phone users. YummyNames (http://yummynames.com) owns and operates premium domain names that generate revenue through advertising or resale. More information can be found on Tucows' corporate website (http://tucows.com).

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995.  In particular, this release includes forward looking statements regarding our expectations as to our financial results and the impact of our consistent growth and leverage. These statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements.  Information about potential factors that could affect Tucows' business, results of operations and financial condition is included in the Risk Factors sections of Tucows' filings with the Securities and Exchange Commission. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements are based on information available to Tucows as of the date they are made.  Tucows assumes no obligation to update any forward-looking statements, except as may be required by law.

Tucows, OpenSRS, Hover, Ting, and YummyNames are registered trademarks of Tucows Inc. or its subsidiaries.

  Tucows  Inc.      
  Consolidated Balance Sheets      
  (Dollar amounts in U.S. dollars)      
         
    March 31,   December 31,
    2012   2011
    (unaudited)   (unaudited)
         
Assets        
         
Current assets:        
  Cash and cash equivalents   $ 6,366,302   $ 6,408,209
  Accounts receivable   4,894,913   3,880,184
  Prepaid expenses and deposits   5,070,003   3,961,905
  Derivative instrument asset, current portion   137,973   -
  Prepaid domain name registry and ancillary services fees, current portion   45,727,148   43,209,033
  Income taxes recoverable   284,082   867,093
   Total current assets   62,480,421   58,326,424
         
Derivative instrument asset, long-term portion   127,391   87,023
Prepaid domain name registry and ancillary services fees, long-term portion   13,001,462   12,600,154
Property and equipment   1,365,438   1,437,564
Deferred financing charges   800   2,300
Deferred tax asset, long-term portion   6,811,757   6,880,377
Intangible assets   17,215,576   17,482,590
Goodwill   18,873,127   18,873,127
   Total assets   $ 119,875,972   $ 115,689,559
         
         
Liabilities and Stockholders' Equity        
         
Current liabilities:        
  Accounts payable   $ 1,864,847   $ 1,051,115
  Accrued liabilities   2,243,550   2,081,968
  Customer deposits   4,459,899   4,202,899
  Derivative instrument liability, current portion   263,004   781,027
  Loan payable, current portion   4,311,667   850,000
  Deferred revenue, current portion   55,962,976   52,683,546
  Accreditation fees payable, current portion   600,227   555,869
  Deferred tax liability, current portion   1,051,376   880,008
  Income taxes payable   194,320   158,258
   Total current liabilities   70,951,866   63,244,690
         
Derivative instrument liability, long-term portion   -   5,479
Deferred revenue, long-term portion   17,036,557   16,492,155
Accreditation fees payable, long-term portion   153,657   156,061
Deferred rent, long-term portion   33,756   26,487
Deferred tax liability, long-term portion   5,317,800   5,345,700
         
Stockholders' equity:        
  Preferred stock - no par value, 1,250,000 shares authorized; none issued and outstanding   -   -
  Common stock - no par value, 250,000,000 shares authorized;
  46,221,565 shares issued and outstanding as of   March 31, 2012 and
  53,497,584 shares issued and outstanding as of December 31, 2011
  9,952,314   11,358,959
  Additional paid-in capital   36,700,388   40,994,013
  Deficit   (20,270,366)   (21,933,985)
   Total stockholders' equity   26,382,336   30,418,987
Total liabilities and stockholders' equity   $ 119,875,972   $115,689,559

      Tucows  Inc.  
      Consolidated Statements of Operations  
      (Dollar amounts in U.S. dollars)  
         
      Three months ended March 31,  
    2012   2011
      (unaudited)  
         
Net revenues $ 27,537,306 $ 22,555,207
         
Cost of revenues:        
  Cost of revenues   19,267,125   15,695,140
  Network expenses (*)   1,256,890   1,262,828
  Depreciation of property and equipment   147,418   236,681
  Amortization of intangible assets   35,910   19,290
   Total cost of revenues   20,707,343   17,213,939
         
Gross profit   6,829,963   5,341,268
         
Expenses:        
  Sales and marketing (*)   2,184,635   2,024,703
  Technical operations and development (*)   1,113,145   1,199,236
  General and administrative (*) (note 1)   1,783,453   1,563,774
  Depreciation of property and equipment   47,415   46,187
  Amortization of intangible assets   219,030   306,990
  Loss (gain) on currency forward contracts (note 1)   (562,109)   (354,144)
   Total expenses   4,785,569   4,786,746
         
Income from operations   2,044,394   554,522
         
Other income (expenses):        
  Interest (expense) income, net   (40,969)   (11,540)
  Other income   508,800   323,329
   Total other income (expenses)   467,831   311,789
         
Income before provision for income taxes   2,512,225   866,311
         
Provision for income taxes   848,606   138,365
Net income and comprehensive income for the period $ 1,663,619 $ 727,946
         
         
Basic earnings per common share $ 0.04 $ 0.01
         
Shares used in computing basic earnings per common share   46,221,465   53,437,672
         
Diluted earnings per common share $ 0.03 $ 0.01
         
Shares used in computing diluted earnings per common share   48,954,451   55,747,952
         
(Note 1) The Company accounts for the fair value of currency forward contracts within the consolidated Balance Sheet as a derivative financial asset or liability and the corresponding change in fair value is recorded in the consolidated Statement of Operations.  In prior periods, the Company recorded the realized gain or loss upon settlement of the currency forward contracts in "General and administrative expenses" and recorded the unrealized gain or loss in "Loss (gain) on change in fair value of forward contracts".  The Company has determined that both of these amounts are more appropriately classified in expenses as "Loss (gain) on currency forward contracts" and as a result a gain of $0.5 million for the three months endedMarch 31, 2011 has been reclassified from "General and administrative expense" to "Loss (gain) on currency forward contracts". As a result of this reclassification, there was no change to previously reported net income (loss), income from operations, net revenues, gross profit, reported cash flows or the amounts recorded in the consolidated Balance Sheets.      
         
         
(*) Stock-based compensation has been included in expenses as follows:        
  Network expenses $ 6,046 $ 6,013
  Sales and marketing $ 22,782 $ 25,333
  Technical operations and development $ 12,843 $ 15,708
  General and administrative $ 20,794 $ 27,277

      Tucows  Inc.  
      Consolidated Statements of Cash Flows  
      (Dollar amounts in U.S. dollars)  
         
      Three months ended March 31,  
    2012   2011
Cash provided by (used in):     (unaudited)  
Operating activities:        
  Net income for the period $ 1,663,619 $ 727,946
  Items not involving cash:        
    Depreciation of property and equipment   194,833   282,868
    Amortization of deferred financing charges   1,500   4,400
    Amortization of intangible assets   254,940   326,280
    Deferred income taxes   212,088  
    Deferred rent   7,269   6,945
    Acquisition of domain names   (3,664)  
    Disposal of domain names   15,738   13,195
    Gain on disposition of intangible assets   (508,800)  
    (Gain) loss on currency forward contracts   (701,843)   112,704
    Stock-based compensation   62,465   74,331
  Changes in non-cash operating working capital:        
    Accounts receivable   (1,014,729)   (1,232,805)
    Prepaid expenses and deposits   (1,108,098)   (521,647)
    Prepaid fees for domain name registry and ancillary services fees   (2,919,423)   (2,000,239)
    Income taxes recoverable/payable   619,073   135,000
    Accounts payable   913,969   253,897
    Accrued liabilities   268,911   316,472
    Customer deposits   257,000   (91,433)
    Deferred revenue   3,823,832   2,318,399
    Accreditation fees payable   41,954   36,183
  Net cash provided by operating activities   2,080,634   762,496
         
Financing activities:        
  Proceeds received on exercise of stock options   130,712   3,460
  Repurchase of common stock   (5,893,447)  
  Proceeds received on loan payable   4,000,000  
  Repayment of loan payable   (538,333)   (478,561)
  Net cash used in financing activities   (2,301,068)   (475,101)
         
Investing activities:        
  Additions to property and equipment   (330,273)   (328,958)
  Proceeds on disposition of intangible assets   508,800  
  Net cash provided by (used in) investing activities   178,527   (328,958)
         
Decrease in cash and cash equivalents   (41,907)   (41,563)
         
Cash and cash equivalents, beginning of period   6,408,209   4,205,729
Cash and cash equivalents, end of period $ 6,366,302 $ 4,164,166
         
Supplemental cash flow information:        
Interest paid $ 41,176 $ 11,589
         
Supplementary disclosure of non-cash investing activity:        
Property and equipment acquired during the period not yet paid for $ 50,401 $ 105,136

 

 

SOURCE Tucows Inc.



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