Tucows Reports Continuing Strong Financial Results for Second Quarter of 2012

- Company Achieves Ninth Consecutive Quarter of Record Revenue -

TORONTO, Aug. 13, 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 second quarter ended June 30, 2012. All figures are in U.S. dollars. 

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




3 Months
Ended
 June 30, 2012 
(unaudited)
3 Months
Ended
 June 30, 2011 
(unaudited)
6 Months
Ended
 June 30, 2012 
(unaudited)
6 Months
Ended
 June 30, 2011 
(unaudited)
Net revenue 28,153 23,046 55,690 45,601
Income before provision for income taxes and change  
in fair value of forward exchange contracts 
1,409 638 3,359 1,151
Net income for the period 696 566 2,360 1,294
Net earnings per common share 0.02 0.01 0.05 0.02
Net cash provided by operating activities 4 825 2,084 1,587

Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)

  Revenue Cost of Revenue



3 Months
Ended
 June 30, 2012 
(unaudited)
3 Months
Ended
 June 30, 2011 
(unaudited)
3 Months
Ended
 June 30, 2012 
(unaudited)
3 Months
Ended
 June 30, 2011 
(unaudited)
Wholesale        
  Domain Service 21,668 18,220 18,011 15,101
  Value-Added Services   2,589 2,208 537 507
Total Wholesale 24,257 20,428 18,548 15,608
Retail 2,298 1,278 1,357 419
Portfolio 1,598 1,340 216 198
Network, other costs   1,214 1,235
Network, depreciation and amortization costs     192 220
Total revenue/cost of revenue 28,153 23,046 21,526 17,680

NOTE: Beginning in the first quarter of 2012, Tucows 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 second quarter was our ninth consecutive quarter of record revenue, up 22% year-over-year," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "Our strong performance was driven by meaningful growth in each of our three service categories. Wholesale continues to benefit from new service introductions and customer wins. Retail continues to grow as a result of our relentless focus on customer experience. Our Portfolio is providing predictable revenue streams with strong inventory sales."

Mr. Noss continued, "With this kind of consistency in our performance and leverage in our business model, plus promising new opportunities on the horizon like gTLDs and Ting, Tucows is well positioned to deliver continued growth and to return capital to shareholders over the long term."

Net revenue for the second quarter of 2012 increased 22% to a record $28.2 million from $23.0 million for the second quarter of 2011 and was driven by growth in each of the Company's three service categories.

Net income for the second quarter of 2012 was $0.7 million, or $0.02 per share, compared with net income for the second quarter of 2011 of $0.6 million, or $0.01 per share.

Deferred revenue at the end of the second quarter of 2012 was $74.5 million, an increase of 12% from $66.8 million at the end of the second quarter of 2011 and an increase of 2% from $73.0 at the end of the first quarter of 2012.

Cash and cash equivalents at the end of the second quarter of 2012 were $4.5 million compared with $6.4 million at the end of the first quarter of 2012 and relatively unchanged from the end of the second quarter of 2011.  During the second quarter of 2012, the Company generated cash flow from operations of $4,000 compared with $825,000 for the same quarter of 2011. Cash flow from operations during the second quarter of 2012 was impacted by the Company investing $1.1 million in applications to own and operate six new gTLD registries under ICANN's new gTLD program. In addition, the Company used $1.6 million for the repurchase of stock under its ongoing normal course issuer bid, $0.3 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, Monday, August 13, 2012 at 5:00 p.m. (ET) to discuss the Company's second 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 99525100 followed by the pound key.  The telephone replay will be available until Monday, August 20, 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)      
                   
        June 30,     December 31,
        2012     2011
        (unaudited)     (unaudited)
                   
Assets                  
                   
Current assets:                  
  Cash and cash equivalents         $ 4,511,561       $ 6,408,209
  Accounts receivable         4,917,015       3,880,184
  Prepaid expenses and deposits         5,853,373       3,961,905
  Derivative instrument asset, current portion         97,718       -
  Prepaid domain name registry and ancillary services fees, current portion         47,001,530       43,209,033
  Income taxes recoverable         634,661       867,093
    Total current assets         63,015,858       58,326,424
                   
Derivative instrument asset, long-term portion         -       87,023
Prepaid domain name registry and ancillary services fees, long-term portion         13,105,851       12,600,154
Property and equipment         1,330,274       1,437,564
Deferred financing charges         100       2,300
Deferred tax asset, long-term portion         6,743,137       6,880,377
Intangible assets         16,953,335       17,482,590
Goodwill         18,873,127       18,873,127
    Total assets         $ 120,021,682       $ 115,689,559
                   
                   
Liabilities and Stockholders' Equity                  
                   
Current liabilities:                  
  Accounts payable         $ 1,547,897       $ 1,051,115
  Accrued liabilities         2,498,804       2,081,968
  Customer deposits         4,268,497       4,202,899
  Derivative instrument liability, current portion         340,835       781,027
  Loan payable, current portion         4,000,000       850,000
  Deferred revenue, current portion         57,441,960       52,683,546
  Accreditation fees payable, current portion         585,155       555,869
  Deferred tax liability, current portion         903,510       880,008
  Income taxes payable         166,407       158,258
    Total current liabilities         71,753,065       63,244,690
                   
Derivative instrument liability, long-term portion         -       5,479
Deferred revenue, long-term portion         17,018,389       16,492,155
Accreditation fees payable, long-term portion         151,954       156,061
Deferred rent, long-term portion         39,687       26,487
Deferred tax liability, long-term portion         5,289,900       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; 45,484,997 shares issued
and outstanding as of June 30, 2012 and 53,497,584 shares issued and outstanding as of
December 31, 2011
        10,233,628       11,358,959
  Additional paid-in capital         35,109,427       40,994,013
  Deficit         (19,574,368)       (21,933,985)
    Total stockholders' equity         25,768,687       30,418,987
Total liabilities and stockholders' equity         $ 120,021,682       $ 115,689,559
                   
                   

Tucows  Inc.
Consolidated Statements of Operations
(Dollar amounts in U.S. dollars)
                                               
            Three months ended June 30,     Six months ended June 30,
            2012     2011       2012       2011
            (unaudited)     (unaudited)
                                               
Net revenues           $   28,152,614         23,045,923     $   55,689,920     $   45,601,130
                                               
Cost of revenues:                                              
  Cost of revenues               20,120,211         16,224,936         39,387,336         31,920,076
  Network expenses (*)               1,213,864         1,235,498         2,470,754         2,498,326
  Depreciation of property and equipment               155,638         213,089         303,056         449,770
  Amortization of intangible assets               35,910         6,430         71,820         25,720
     Total cost of revenues               21,525,623         17,679,953         42,232,966         34,893,892
                                               
Gross profit               6,626,991         5,365,970         13,456,954         10,707,238
                                               
Expenses:                                              
  Sales and marketing (*)               2,065,729         1,771,971         4,250,364         3,796,674
  Technical operations and development (*)               1,105,575         1,231,593         2,218,720         2,430,829
  General and administrative (*) (note 1)               1,748,402         1,443,773         3,531,855         3,007,547
  Depreciation of property and equipment               45,522         45,495         92,937         91,682
  Amortization of intangible assets               219,030         277,750         438,060         584,740
  Loss (gain) on currency forward contracts (note 1)               383,838         (117,229)         (178,271)         (471,373)
     Total expenses               5,568,096         4,653,353         10,353,665         9,440,099
                                               
Income from operations               1,058,895         712,617         3,103,289         1,267,139
                                               
Other income (expenses):                                              
  Interest (expense) income, net               (54,513)         (8,657)         (95,482)         (20,197)
  Other income               20,911         51,648         529,711         374,977
     Total other income (expenses)               (33,602)         42,991         434,229         354,780
                                               
Income before provision for income taxes               1,025,293         755,608         3,537,518         1,621,919
                                               
Provision for income taxes               329,295         189,949         1,177,901         328,314
Net income and comprehensive income for the period           $   695,998     $   565,659     $   2,359,617     $   1,293,605
                                               
                                               
Basic earnings per common share           $   0.02     $   0.01     $   0.05     $   0.02
                                               
Shares used in computing basic earnings per common share               45,912,459         53,444,841         47,003,016         53,441,276
                                               
Diluted earnings per common share           $   0.01     $   0.01     $   0.05     $   0.02
                                               
Shares used in computing diluted earnings per common share               49,449,430         55,796,435         50,203,163         55,784,998
                                               
(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 $0.3 million for the three months ended June 30, 2011 and a gain of
$0.8 million for the six months ended June 30, 2011, has been reclassified from "General and administrative expense" to "Loss (gain) on currency forward
contracts" respectively. 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           $   6,329     $   5,349     $   12,375     $   11,362
  Sales and marketing           $   20,149     $   19,127     $   42,931     $   44,460
  Technical operations and development           $   15,047     $   11,394     $   27,890     $   27,102
  General and administrative           $   21,571     $   17,529     $   42,365     $   44,805
                                                 
                                             

Tucows Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in U.S. dollars)
                                               
            Three months ended June 30,     Six months ended June 30,
            2012     2011     2012     2011
Cash provided by (used in):           (unaudited)     (unaudited)
Operating activities:                                              
                                               
  Net income for the period           $   695,998     $   565,659     $   2,359,617     $   1,293,605
  Items not involving cash:                                              
    Depreciation of property and equipment               201,160         258,584         395,993         541,452
    Amortization of deferred financing charges               700         3,700         2,200         8,100
    Amortization of intangible assets               254,940         284,180         509,880         610,460
    Deferred income taxes               (107,146)                 104,942        
    Deferred rent               5,931         7,019         13,200         13,964
    Acquisition of domain names                               (3,664)        
    Disposal of domain names               7,301         7,896         23,039         21,091
    Gain on disposition of intangible assets                               (508,800)        
    (Gain) loss on currency forward contracts               245,477         193,157         (456,366)         305,861
    Stock-based compensation               63,096         53,399         125,561         127,730
  Changes in non-cash operating working capital:                                              
    Accounts receivable               (22,102)         104,241         (1,036,831)         (1,128,564)
    Prepaid expenses and deposits               (783,370)         (702,002)         (1,891,468)         (1,223,649)
    Prepaid fees for domain name registry and ancillary services fees               (1,378,771)         (1,749,343)         (4,298,194)         (3,749,582)
    Income taxes recoverable/payable               (378,492)         25,000         240,581         160,000
    Accounts payable               (308,892)         (50,074)         605,077         203,823
    Accrued liabilities               255,254         65,095         524,165         381,567
    Customer deposits               (191,402)         (166,270)         65,598         (257,703)
    Deferred revenue               1,460,816         1,938,868         5,284,648         4,257,267
    Accreditation fees payable               (16,775)         (14,391)         25,179         21,792
  Net cash provided by operating activities               3,723         824,718         2,084,357         1,587,214
                                               
Financing activities:                                              
  Proceeds received on exercise of stock options               219,000                 349,712         3,460
  Repurchase of common stock               (1,591,743)                 (7,485,190)        
  Proceeds received on loan payable                               4,000,000        
  Repayment of loan payable               (311,667)         (478,560)         (850,000)         (957,121)
  Net cash used in financing activities               (1,684,410)         (478,560)         (3,985,478)         (953,661)
                                               
Investing activities:                                              
  Additions to property and equipment               (174,054)         (162,068)         (504,327)         (491,026)
  Proceeds on disposition of intangible assets                               508,800        
  Net cash provided by (used in) investing activities               (174,054)         (162,068)         4,473         (491,026)
                                               
(Decrease) increase in cash and cash equivalents               (1,854,741)         184,090         (1,896,648)         142,527
                                               
Cash and cash equivalents, beginning of period               6,366,302         4,164,166         6,408,209         4,205,729
Cash and cash equivalents, end of period           $   4,511,561     $   4,348,256     $   4,511,561     $   4,348,256
                                               
Supplemental cash flow information:                                              
  Interest paid           $   54,655     $   8,718     $   95,831     $   20,307
                                               
Supplementary disclosure of non-cash investing activity:                                              
  Property and equipment acquired during the period not yet paid for           $   42,343     $   67,068     $   42,343     $   67,068

 

 

 

 

SOURCE Tucows Inc.



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