2014

Tucows Reports Financial Results for the Third Quarter of 2013

- Company Achieves Fourteenth Consecutive Quarter of Record Revenue/Ting Continues Strong Momentum -

TORONTO, Nov. 13, 2013 /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 third quarter ended September 30, 2013. All figures are in U.S. dollars.

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

  3 Months
 Ended Sept. 
30, 2013
(unaudited)
3 Months
 Ended Sept. 
30, 2012
(unaudited)
9 Months
 Ended Sept. 
30, 2013
(unaudited)
9 Months
 Ended Sept. 
30, 2012
(unaudited)
Net revenue 35,637 29,246 96,795 84,936
Income before provision for income taxes and
change in fair value of forward exchange contracts 
3,565 1,597 4,944 4,956
Net income 2,593 1,635 3,258 3,995
Net earnings per common share $0.06 $0.04 $0.08 $0.09
Net cash provided by operating activities 3,664 2,237 7,052 4,321

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

  Revenue Cost of Revenue
   3 Months Ended 
Sept. 30, 2013
(unaudited)
 3 Months Ended 
Sept. 30, 2012
(unaudited)
 3 Months Ended 
Sept. 30, 2013
(unaudited)
 3 Months Ended 
Sept. 30, 2012
(unaudited)
Wholesale        
  Domain Services 22,003 22,268 18,581 18,645
  Value-Added Services 2,606 2,603 484 532
Total Wholesale 24,609 24,871 19,065 19,177
         
Retail 6,861 2,965 4,543 2,064
Portfolio (1) 4,167 1,410 661 205
         
Network, other costs - - 1,193 1,159
Network, depreciation and amortization costs  - - 176 193
Total revenue/cost of revenue 35,637 29,246 25,638 22,798

(1)  Portfolio revenue includes the net amounts received from the previously announced confidential arrangements related to the
Company's withdrawal of its applications under the ICANN New gTLD Program for .media and .marketing. The Company continues
to be involved in the ICANN new gTLD Program and holds a minority interest in the contested .online, .group, .tech and .store strings.

"Our financial results for the third quarter were once again demonstrative of the consistency and reliability in our business, alongside our ability to generate growth, as we delivered our fourteenth consecutive quarter of record revenue, driven by solid performance across our business," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "Each of our Wholesale, Hover and Portfolio businesses continue to perform well."

"Ting saw another quarter of tremendous customer growth, adding 11,000 accounts and 16,000 devices during the quarter, to bring these totals to 36,000 accounts and 56,000 devices at the end of September.  Importantly, we are consistently delivering on our commitment to the very highest levels of customer service, while maintaining our low customer acquisition costs and continuing to generate attractive gross margin.  All of this continues to position Ting to achieve breakeven during the fourth quarter this year."

Net revenue for the third quarter of 2013 increased 22% to a record $35.6 million from $29.2 million for the third quarter of 2012.

Net income for the third quarter of 2013 was $2.6 million, or $0.06 per share, compared with $1.6 million, or $0.04 per share, for the third quarter of 2012.  Net income for the third quarter of 2013 included the benefit of the previously announced confidential arrangements related to the Company's withdrawal of its applications under the ICANN New gTLD Program for .media and .marketing.  Net income for the third quarter included a gain on foreign exchange contracts of $28,000 compared with a gain on foreign exchange contracts of $0.6 million in the third quarter of 2012.  Net income for the third quarter of 2013 also included the incremental investment of approximately $1.2 million made during the quarter for the acquisition and support of Ting customers.

Deferred revenue at the end of the third quarter of 2013 was $72.0 million, a decrease of 2% from $73.3 million at the end of the third quarter of 2012 and a decrease of 1% from $73.0 million at the end of the second quarter of 2013.

Cash and cash equivalents at the end of the third quarter of 2013 were $11.5 million compared with $6.5 million at the end of the second quarter of 2013 and $5.0 million at the end of the third quarter of 2012.  The increase in cash and cash equivalents of $5.0 million when compared to the second quarter of 2013 resulted from the generation of $3.7 million in cash flow from operations and the receipt of $2.2 million from the exercise of stock options.  These were partially offset by the use of $0.6 million for principal repayments under the Company's credit facility and investment of $0.2 million in equipment purchases.

Conference Call

Tucows management will host a conference call today, Wednesday, November 13, 2013 at 5:00 p.m. (ET) to discuss the Company's third quarter 2013 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 91095919 followed by the pound key.  The telephone replay will be available until Wednesday, November 20, 2013 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 fourteen million domain names and millions of value-added services through a reseller network of over 13,000 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).

  Tucows  Inc.                
  Consolidated Balance Sheets                
  (Dollar amounts in U.S. dollars)                
                 
        September 30,   December 31,
        2013   2012
        (unaudited)   (unaudited)
                 
Assets                
                 
Current assets:                
  Cash and cash equivalents       $ 11,549,948   $ 6,415,679
  Accounts receivable         4,869,466     4,413,265
  Inventory         338,110     587,104
  Prepaid expenses and deposits         4,241,402     5,081,408
  Derivative instrument asset, current portion         258,188     412,944
  Prepaid domain name registry and ancillary services fees, current portion         45,801,683     45,170,167
  Deferred tax asset, current portion         672,175     -
  Income taxes recoverable         311,470     1,730,631
    Total current assets         68,042,442     63,811,198
                     
Derivative instrument asset, long-term portion         208,221     31,838
Prepaid domain name registry and ancillary services fees, long-term portion         12,031,926     12,318,723
Property and equipment         1,833,258     1,352,144
Deferred tax asset, long-term portion         5,417,075     5,970,462
Intangible assets         15,630,479     16,415,651
Goodwill         18,873,127     18,873,127
    Total assets       $ 122,036,528   $ 118,773,143
                     
                     
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable       $ 2,631,198   $ 1,928,459
  Accrued liabilities         3,187,213     2,522,229
  Customer deposits         4,072,325     4,955,671
  Derivative instrument liability, current portion         310,865     -
  Loan payable, current portion         6,900,000     3,700,000
  Deferred revenue, current portion         56,188,897     54,997,887
  Accreditation fees payable, current portion         497,404     512,847
  Deferred tax liability, current portion         -     914,429
  Income taxes payable         923,280     1,255,108
    Total current liabilities         74,711,182     70,786,630
                     
Deferred revenue, long-term portion         15,801,411     16,002,464
Accreditation fees payable, long-term portion         137,117     145,592
Deferred rent, long-term portion         71,898     54,150
Deferred tax liability, long-term portion         5,158,000     5,234,100
                 
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;
43,576,861 shares issued and outstanding as of September 30,
2013 and 44,322,159 shares issued and outstanding as of
December 31, 2012
        11,797,362     10,084,417
  Additional paid-in capital         28,520,120     33,931,529
  Deficit         (14,252,274)     (17,509,843)
  Accumulated other comprehensive income (loss)         91,712     44,104
    Total stockholders' equity         26,156,920     26,550,207
Total liabilities and stockholders' equity       $ 122,036,528   $ 118,773,143

 

    Tucows Inc.   Tucows Inc.
    Consolidated Statements of Operations   Consolidated Statements of Operations
    (Dollar amounts in U.S. dollars)       (Dollar amounts in U.S. dollars)  
                 
      Three months ended September 30,       Nine months ended September 30, 
    2013   2012   2013   2012
    (unaudited)   (unaudited)
                 
Net revenues $ 35,637,085 $ 29,246,069 $ 96,795,464 $ 84,935,989
                 
Cost of revenues:                
  Cost of revenues   24,268,961   21,446,084   69,354,366   60,833,420
  Network expenses (*)   1,192,450   1,158,885   3,716,471   3,629,639
  Depreciation of property and equipment   164,283   157,203   452,711   460,259
  Amortization of intangible assets   11,970   35,910   83,790   107,730
    Total cost of revenues   25,637,664   22,798,082   73,607,338   65,031,048
                 
Gross profit   9,999,421   6,447,987   23,188,126   19,904,941
                 
Expenses:                
  Sales and marketing (*)   2,998,419   2,037,338   8,792,091   6,287,702
  Technical operations and development (*)   1,215,327   1,010,949   3,097,294   3,229,669
  General and administrative (*) (note 1)   1,869,668   1,486,323   5,266,997   5,018,178
  Depreciation of property and equipment   52,972   46,981   158,833   139,918
  Amortization of intangible assets   219,030   219,030   657,090   657,090
  Loss (gain) on currency forward contracts (note 1)   (28,068)   (615,245)   353,209   (793,516)
    Total expenses   6,327,348   4,185,376   18,325,514   14,539,041
                 
Income from operations   3,672,073   2,262,611   4,862,612   5,365,900
                 
Other income (expenses):                
  Interest expense, net   (78,966)   (50,228)   (271,756)   (145,710)
  Other income   -   -   -   529,711
    Total other income (expenses)   (78,966)   (50,228)   (271,756)   384,001
                 
Income before provision for income taxes   3,593,107   2,212,383   4,590,856   5,749,901
                 
Provision for income taxes   999,747   577,383   1,333,287   1,755,284
Net income   2,593,360   1,635,000   3,257,569   3,994,617
                 
Other comprehensiveinc, net of tax of $257,505 for the three months
ended September 30, 2013 and $24,800 for the nine months ended
September 30, 2013
  494,334   -   47,608   -
Comprehensive income (loss) for the period  $ 3,087,694  $ 1,635,000  $  3,305,177  $ 3,994,617
                 
Basic earnings per common share $ 0.06 $ 0.04 $ 0.08 $ 0.09
                 
Shares used in computing basic earnings per common share   43,183,583   45,094,678   41,289,876   43,362,261
                 
Diluted earnings per common share $ 0.06 $ 0.03 $ 0.07 $ 0.08
                 
Shares used in computing diluted earnings per common share   45,639,900   48,411,429   44,749,232   49,603,870
                 
                 
                 
(*) Stock-based compensation has been included in expenses as follows:                
  Network expenses $ 8,755 $ 5,979 $ 22,813 $ 18,354
  Sales and marketing $ 32,681 $ 24,116 $ 93,000 $ 67,047
  Technical operations and development $ 21,549 $ 15,600 $ 57,166 $ 43,490
  General and administrative $ 99,801 $ 120,676 $ 155,904 $ 163,041
                 

 

      Tucows  Inc.       Tucows  Inc.  
      Consolidated Statements of Cash Flows   Consolidated Statements of Cash Flows
      (Dollar amounts in U.S. dollars)   (Dollar amounts in U.S. dollars)  
                 
      Three months ended September 30,   Nine months ended September 30,
    2013   2012   2013   2012
Cash provided by:   (unaudited)   (unaudited)
Operating activities:                
                 
   Net income for the period   $  2,593,360  $  1,635,000  $  3,257,569  $  3,994,617
  Items not involving cash:                
    Depreciation of property and equipment   217,255   204,184   611,544   600,177
    Amortization of deferred financing charges   -   100   -   2,300
    Amortization of intangible assets   231,000   254,940   740,880   764,820
    Deferred income taxes (recovery)   (99,786)   228,169   (78,103)   333,111
    Excess tax benefits on share-based compensation expense   (1,056,014)       (1,056,014)    
    Deferred rent   7,872   8,258   17,748   21,458
    Acquisition of domain names   -   -   -   (3,664)
    Disposal of domain names   8,923   15,142   44,292   38,181
    Gain on disposition of intangible assets   -   -   -   (508,800)
    (Gain) loss on change in the fair value of forward contracts   (204,341)   (698,781)   361,646   (1,155,147)
    Stock-based compensation   162,786   166,371   328,883   291,932
  Changes in non-cash operating working capital:                
    Accounts receivable   758,089   90,239   (456,201)   (946,592)
    Inventory   (150,686)   -   248,994   -
    Prepaid expenses and deposits   543,111   636,756   840,006   (1,254,712)
    Prepaid fees for domain name registry and ancillary services fees   1,038,268   905,807   (344,719)   (3,392,387)
    Income taxes recoverable/payable   980,969   226,304   1,087,333   466,885
    Accounts payable   92,473   43,173   700,194   648,250
    Accrued liabilities   163,300   (279,427)   664,984   244,738
    Customer deposits   (595,776)   (2,781)   (883,346)   62,817
    Deferred revenue   (986,779)   (1,144,779)   989,957   4,139,869
    Accreditation fees payable   (39,835)   (51,839)   (23,918)   (26,660)
  Net cash provided by operating activities   3,664,189   2,236,836   7,051,729   4,321,193
                 
Financing activities:                
  Proceeds received on exercise of stock options   1,136,061   14,186   1,454,255   363,898
  Excess tax benefits on share-based compensation expense   1,056,014       1,056,014    
  Repurchase of common stock   -   (1,630,643)   (6,537,616)   (9,115,833)
  Proceeds received on loan payable   -   -   5,200,000   4,000,000
  Repayment of loan payable   (600,000)   -   (2,000,000)   (850,000)
  Net cash used in financing activities   1,592,075   (1,616,457)   (827,347)   (5,601,935)
                 
Investing activities:                
  Additions to property and equipment   (171,442)   (162,207)   (1,090,113)   (666,534)
  Proceeds on disposition of intangible assets   -   -   -   508,800
  Net cash provided by (used in) investing activities   (171,442)   (162,207)   (1,090,113)   (157,734)
                 
Increase (decrease) in cash and cash equivalents   5,084,822   458,172   5,134,269   (1,438,476)
                 
Cash and cash equivalents, beginning of period   6,465,126   4,511,561   6,415,679   6,408,209
Cash and cash equivalents, end of period $ 11,549,948 $ 4,969,733 $ 11,549,948 $ 4,969,733
                 
Supplemental cash flow information:                
  Interest paid $ 92,610  $  50,511 $ 289,483  $  146,342
                 
Supplementary disclosure of non-cash investing activity:                
  Property and equipment acquired during the period not yet paid for $ 99,060 $ 167,998 $ 99,060 $ 167,998

 

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 including statements regarding our expectations regarding our future financial results and, in particular, our expectations for Ting and its impact on our financial performance. 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, including the acceptance of Ting in the market.  Information about other 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 is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.

SOURCE Tucows Inc.



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