Tucows Inc. reports financial results for second quarter 2010
TORONTO, Aug. 11 /PRNewswire-FirstCall/ - Tucows Inc. (NYSEAMEX:TCX, TSX:TC), a global provider of domain names, email and other Internet services, today reported its financial results for the second quarter ended June 30, 2010. All figures are in U.S. dollars.
Summary Financial Results
(Numbers in Thousands of US Dollars, Except Per Share Data)
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3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
(unaudited) (unaudited) (unaudited) (unaudited)
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Net revenue 20,847 20,022 41,292 40,114
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Net (loss)
income for
the period (772) 4,379 (203) 5,407
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Net (loss)
earnings per
common share (0.01) 0.06 (0.00) 0.08
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Net cash
provided by
operating
activities 1,173 2,591 2,552 3,504
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Summary of Revenue and Cost of Revenue before Network Costs
(Numbers in Thousands of US Dollars)
-------------------------------------------------------------------------
Revenue Cost of Revenue
-------------------------------------------------------------------------
3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended
June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
(unaudited) (unaudited) (unaudited) (unaudited)
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OpenSRS:
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Domain
Services 15,749 14,738 13,090 11,944
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Email Services 581 874 117 153
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Other Services 1,085 1,092 400 411
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Total OpenSRS
Services 17,415 16,704 13,607 12,508
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YummyNames 1,632 1,455 254 251
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Hover 1,111 1,259 350 475
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Butterscotch 689 604 25 1
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Total 20,847 20,022 14,236 13,235
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"Our second quarter results continue to demonstrate the consistency of our business," said Elliot Noss, President and CEO of Tucows. "Revenue from our core revenue drivers, domain registrations through OpenSRS and domain sales through YummyNames, was up on a year-over-year basis. Meanwhile, two of our growth opportunities, Hover and Butterscotch, continued to trend favorably across key metrics. The reliable performance of our core offerings allowed us to invest in our emerging units, positioning us for solid performance in the future while supporting our goal of returning capital to shareholders."
Net revenue for the second quarter of 2010 increased 4.1% to $20.8 million from $20.0 million for the second quarter of 2009.
Net loss for the second quarter of 2010 was $0.8 million, or $0.01 per share, compared with net income of $4.4 million, or $0.06 per share, for the second quarter of 2009. Net loss and net loss from operations for the second quarter of 2010 were negatively impacted by a mark to market loss on foreign exchange of $1.9 million. Net income and net income from operations for the second quarter of 2009 were positively impacted by a mark to market gain on foreign exchange of $1.9 million. Additionally, net income for the second quarter of 2009 included other income of $2.0 million related to the sale of the Company's equity stake in Afilias and $0.6 million related to patents that the Company assigned to a third party.
Deferred revenue at the end of the second quarter of fiscal 2010 was $60.0 million, an increase of 5.5% from $56.9 million at the end of the second quarter of fiscal 2009 and 0.9% from $59.5 million in the first quarter of 2010.
Cash and cash equivalents at the end of the second quarter of 2010 were $4.1 million compared with $7.4 million at the end of the second quarter of 2009 and $5.2 million at the end of first quarter of 2010. The decrease in cash compared with the first quarter of 2010 is primarily the result of the use of $1.7 million for the repurchase of common stock under the Company's current open market share repurchase program that was initiated in February 2010, as well as the repayment of $0.5 million of the Company's bank loan. This use of funds was partially offset by cash flow from operating activities for the second quarter of 2010 of $1.2 million. Cash flow from operating activities, before changes in non-cash operating working capital, for the second quarter of 2010 was $2.0 million, which was partially offset by the use of $0.8 million for changes in non-cash operating working capital.
During the second quarter of 2010, the Company repurchased an additional 2,453,300 common shares under its open market stock repurchase plan, which commenced in February 2010. During the first half of 2010, the Company repurchased an aggregate of 9,750,770 common shares (including shares purchased in its modified Dutch auction tender offer earlier this year), representing 14.5% of the Company's outstanding common shares at the end of 2009. Since January 2009, the Company has repurchased a total of 15,825,006 shares representing 21.7% of the Company's total shares outstanding at the end of 2008.
Conference Call
Tucows management will host a conference call today, Wednesday, August 11, 2010, at 5:00 p.m. (ET) to discuss the second quarter fiscal 2010 results. Participants can access the conference call via the Internet at http://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 1-800-642-1687 and enter the pass code 90444604 followed by the pound key. The telephone replay will be available until Wednesday, August 18, 2010 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 manages over ten million domain names and millions of email boxes through a reseller network of over 10,000 web hosts and ISPs. Hover is the easiest way for individuals and small businesses to manage their domain names and email addresses. YummyNames owns premium domain names that generate revenue through advertising or resale. Butterscotch.com is an online video network building on the foundation of Tucows.com. More information can be found at http://tucowsinc.com.
TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.
Tucows Inc.
Consolidated Balance Sheets
(Dollar amounts in U.S. dollars)
June 30, December 31,
2010 2009
------------- -------------
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,067,668 $ 9,632,394
Accounts receivable 3,385,650 2,822,045
Prepaid expenses and deposits 2,927,409 2,498,922
Derivative instrument asset,
current portion 664,765 2,107,825
Prepaid domain name registry and
ancillary services fees, current portion 34,476,972 31,596,236
Income taxes recoverable 382,000 674,000
------------- -------------
Total current assets 45,904,464 49,331,422
Derivative instrument asset, long-term
portion - 112,553
Prepaid domain name registry and ancillary
services fees, long-term portion 12,676,451 12,126,515
Property and equipment 1,509,105 1,986,768
Deferred financing charges 26,900 41,000
Deferred tax asset, long-term portion 3,664,728 3,907,476
Intangible assets 17,773,663 18,656,353
Goodwill 17,990,807 17,990,807
------------- -------------
Total assets $ 99,546,118 $104,152,894
------------- -------------
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,261,526 $ 1,547,863
Accrued liabilities 1,857,296 1,889,980
Customer deposits 3,461,557 3,624,317
Derivative instrument liability,
current portion 111,875 -
Loan payable, current portion 2,263,004 3,220,125
Deferred revenue, current portion 43,330,579 40,211,766
Accreditation fees payable, current
portion 560,369 530,656
Deferred tax liability, current portion 664,728 907,476
------------- -------------
Total current liabilities 53,510,934 51,932,183
Derivative instrument liability,
long-term portion 159,232 15,708
Deferred revenue, long-term portion 16,716,150 16,098,812
Accreditation fees payable, long-term portion 168,224 169,620
Deferred tax liability, long-term portion 4,840,000 4,840,000
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; 57,362,611 shares
issued and outstanding as of June 30,
2010 and 67,080,353 shares issued and
outstanding as of December 31, 2009 12,107,580 14,030,384
Additional paid-in capital 42,468,074 47,287,351
Deficit (30,424,076) (30,221,164)
------------- -------------
Total stockholders' equity 24,151,578 31,096,571
------------- -------------
Total liabilities and stockholders' equity $ 99,546,118 $104,152,894
------------- -------------
------------- -------------
Tucows Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
Three months ended June 30, Six months ended June 30,
2010 2009 2010 2009
------------- ------------- ------------- -------------
(unaudited) (unaudited)
Net revenues $ 20,846,598 $ 20,022,119 $ 41,291,751 $ 40,113,543
------------- ------------- ------------- -------------
Cost of revenues:
Cost of
revenues(*) 15,455,986 14,386,048 30,380,860 28,171,446
Depreciation of
property and
equipment 253,057 576,419 563,115 969,367
Amortization of
intangible
assets 74,802 29,199 149,604 58,398
------------- ------------- ------------- -------------
Total cost
of revenues 15,783,845 14,991,666 31,093,579 29,199,211
------------- ------------- ------------- -------------
Gross profit 5,062,753 5,030,453 10,198,172 10,914,332
Expenses:
Sales and
marketing(*) 1,786,893 1,339,167 3,649,229 2,692,343
Technical
operations and
development(*) 1,189,937 1,175,355 2,432,950 2,279,494
General and
administra-
tive(*) 600,776 1,592,325 1,416,356 3,462,221
Depreciation of
property and
equipment 43,431 92,363 87,320 174,816
Amortization
of intangible
assets 360,540 360,540 721,080 721,080
Loss (gain) on
change in fair
value of forward
exchange
contracts 1,924,985 (1,938,821) 1,811,012 (2,024,164)
------------- ------------- ------------- -------------
Total expenses 5,906,562 2,620,929 10,117,947 7,305,790
------------- ------------- ------------- -------------
(Loss) income
from operations (843,809) 2,409,524 80,225 3,608,542
Other (expenses)
income:
Interest (expense)
income, net (33,727) 2,550,870 (72,895) 2,487,408
------------- ------------- ------------- -------------
Total other
(expenses)
income (33,727) 2,550,870 (72,895) 2,487,408
------------- ------------- ------------- -------------
(Loss) income
before provision
for income taxes (877,536) 4,960,394 7,330 6,095,950
(Recovery of)
provision for
income taxes (105,758) 581,651 210,242 689,076
------------- ------------- ------------- -------------
Net (loss) income
for the period $ (771,778) $ 4,378,743 $ (202,912) $ 5,406,874
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic (loss)
earnings per
common share $ (0.01) $ 0.06 $ (0.00) $ 0.08
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing basic
(loss) earnings
per common share 59,193,180 68,923,313 60,223,815 70,778,950
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted (loss)
earnings per
common share $ (0.01) $ 0.06 $ (0.00) $ 0.08
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in
computing diluted
(loss) earnings
per common share 59,193,180 69,092,946 60,223,815 70,785,712
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(*)Stock-based
compensation has
been included in
expenses as
follows:
Cost of revenues $ 5,574 $ 3,367 $ 9,202 $ 8,367
Sales and
marketing $ 25,545 $ 15,057 $ 41,231 $ 29,957
Technical
operations and
development $ 18,264 $ 11,121 $ 32,845 $ 21,721
General and
administrative $ 51,890 $ 53,193 $ 74,624 $ 71,893
Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
Three months ended June 30, Six months ended June 30,
2010 2009 2010 2009
------------- ------------- ------------- -------------
(unaudited) (unaudited)
Cash provided by
(used in):
Operating
activities:
Net (loss)
income for
the period $ (771,778) $ 4,378,743 $ (202,912) $ 5,406,874
Items not
involving cash:
Depreciation
of property
and equipment 296,488 668,782 650,435 1,144,183
Amortization
of deferred
financing
charges 6,700 9,700 14,100 20,100
Amortization
of intangible
assets 435,342 389,739 870,684 779,478
Gain on
disposal of
investment
in Afilias - (2,010,395) - (2,010,395)
Disposal of
domain names 4,434 974 12,006 1,947
Unrealized
loss (gain)
in the fair
value of
forward
contracts 1,924,985 (1,938,821) 1,811,012 (2,024,164)
Stock-based
compensation 101,273 82,738 157,902 131,938
Changes in
non-cash
operating
working capital:
Accounts
receivable 311,895 252,927 (563,605) (264,066)
Prepaid
expenses and
deposits (66,785) (310,655) (428,487) (889,223)
Prepaid fees
for domain
name registry
and ancillary
services fees (815,103) (496,502) (3,430,672) (2,621,901)
Income taxes
recoverable/
payable (24,000) 750,216 292,000 835,398
Accounts payable (385,999) 561,228 (199,430) 380,407
Accrued
liabilities 94,120 (125,130) (32,684) 3,643
Customer
deposits (433,559) 161,969 (162,760) (147,533)
Deferred
revenue 531,558 249,615 3,736,151 2,712,991
Accreditation
fees payable (36,080) (34,302) 28,317 44,305
------------- ------------- ------------- -------------
Net cash provided
by operating
activities 1,173,491 2,590,826 2,552,057 3,503,982
------------- ------------- ------------- -------------
Financing
activities:
Proceeds
received on
exercise of
stock options 10,308 25,422 14,809 25,422
Repurchase of
common stock (1,702,520) - (6,914,792) (1,811,179)
Repayment of
loan payable (478,560) (1,203,560) (957,121) (1,682,121)
------------- ------------- ------------- -------------
Net cash used
in financing
activities (2,170,772) (1,178,138) (7,857,104) (3,467,878)
------------- ------------- ------------- -------------
Investing
activities:
Cost of domain
names acquired - - - (5,900)
Additions to
property and
equipment (116,947) (102,770) (259,679) (145,010)
Proceeds on
disposal of
investment
in Afilias - 2,110,395 - 2,110,395
------------- ------------- ------------- -------------
Net cash (used
in) provided
by investing
activities (116,947) 2,007,625 (259,679) 1,959,485
------------- ------------- ------------- -------------
(Decrease)
increase in
cash and cash
equivalents (1,114,228) 3,420,313 (5,564,726) 1,995,589
Cash and cash
equivalents,
beginning of
period 5,181,896 4,002,743 9,632,394 5,427,467
------------- ------------- ------------- -------------
Cash and cash
equivalents,
end of period $ 4,067,668 $ 7,423,056 $ 4,067,668 $ 7,423,056
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Supplemental
cash flow
information:
Interest paid $ 33,521 $ 62,508 $ 72,797 $ 128,029
Supplementary
disclosure of
non-cash
investing
activity:
Property and
equipment
acquired
during the
period not
yet paid for $ 6,687 $ 250,734 $ 6,687 $ 250,734
SOURCE Tucows Inc.
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