- Company Achieves Twelfth Consecutive Quarter of Record Revenue -
TORONTO, May 15, 2013 /PRNewswire/ - Tucows Inc. (NYSEAMEX: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, 2013. All figures are in U.S. dollars.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)
| 3 Months Ended Mar. 31, 2013 (unaudited) |
3 Months Ended Mar. 31, 2012 (unaudited) |
|
| Net revenue | 29,985 | 27,537 |
| Income before provision for income taxes and change in fair value of forward exchange contracts |
431 | 1,950 |
| Net income | 77 | 1,664 |
| Net earnings per common share | $0.00 | $0.04 |
| Net cash provided by operating activities | 416 | 2,081 |
Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)
| Revenue | Cost of Revenue | ||||
| 3 Months Ended Mar. 31, 2013 (unaudited) |
3 Months Ended Mar. 31, 2012 (unaudited) |
3 Months Ended Mar. 31, 2013 (unaudited) |
3 Months Ended Mar. 31, 2012 (unaudited) |
||
| Wholesale | |||||
| Domain Services | 21,896 | 21,108 | 18,454 | 17,620 | |
| Value-Added Services | 2,689 | 2,689 | 562 | 507 | |
| Total Wholesale | 24,585 | 23,797 | 19,016 | 18,127 | |
| Retail | 4,266 | 1,849 | 2,861 | 930 | |
| Portfolio | 1,134 | 1,891 | 201 | 210 | |
| Network, other costs | - | - | 1,254 | 1,257 | |
| Network, depreciation and amortization costs | - | - | 173 | 183 | |
| Total revenue/cost of revenue | 29,985 | 27,537 | 23,505 | 20,707 | |
"The first quarter was a solid start to 2013, highlighted by our twelfth consecutive quarter of year-over-year revenue growth to another record total," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "The consistency and reliability of the more mature parts of our business have helped us return capital to shareholders while launching new growth opportunities such as Hover a few years ago and, to a greater extent, Ting just last year. Hover continues to generate healthy gross margins and year-over-year growth in excess of 20%. We are even more excited about Ting, which is now demonstrating real momentum.
Mr. Noss continued, "Everything on Ting is moving in the right direction. Our customer base grew by 2,000 in Q2 2012, 3,000 in Q3, 5,000 in Q4 and now over 6,300 in Q1 2013. Gross margin per account is growing as customers gain confidence in the service and add additional devices. More customers are referring more of their friends to Ting. Timelines are shortening between our network provider, Sprint, getting coveted devices like the HTC One and the Samsung Galaxy 4 and us offering these devices to our customers. With all these trends in our favor, we have every reason to believe our momentum will continue."
Net revenue for the first quarter of 2013 increased 9% to a record $30.0 million from $27.5 million for the first quarter of 2012.
Net income for the first quarter of 2013 was $0.1 million, or $0.00 per share, compared with $1.7 million, or $0.04 per share, for the first quarter of 2012. The decrease was primarily the result of the incremental investment of approximately $1.0 million made in the first quarter of 2013 for the acquisition and support of Ting customers, as well as the negative impact of a loss on foreign exchange contracts of $0.2 million in the first quarter of 2013 compared with a gain on foreign exchange contracts of $0.6 million in the first quarter of 2012. In addition, 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 which was not repeated in the first quarter of 2013.
Deferred revenue at the end of the first quarter of 2013 was $72.4 million, a decrease of 1% from $73.0 million at the end of the first quarter of 2012 and an increase of 2% from $71.0 million at the end of the fourth quarter of 2012.
Cash and cash equivalents at the end of the first quarter of 2013 were $4.3 million compared with $6.4 million at the end of the fourth quarter of 2012 and $6.4 million from the end of the first quarter of 2012. During the first quarter of 2013, the Company generated cash flow from operations of $0.4 million compared with $2.1 million for the same quarter of 2012. The decrease in cash flow from operations is primarily attributable to changes in working capital, due mainly to the timing of payments in the normal course of business. The Company used $6.5 million to repurchase shares under its modified "Dutch auction" tender that concluded on January 7, 2013, under which the Company repurchased 4,114,121 million shares at a purchase price of $1.50 per share. The Company also used $0.8 million for principal repayments under its credit facility and invested $0.4 million in equipment purchases. The repurchase of shares was partially funded through a drawdown of $5.2 million on the Company's credit facility.
Conference Call
Tucows management will host a conference call today, Wednesday, May 15, 2013 at 5:00 p.m. (ET) to discuss the Company's first 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 59299893 followed by the pound key. The telephone replay will be available until Wednesday, May 22, 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) | ||||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| (unaudited) | (unaudited) | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 4,286,319 | $ | 6,415,679 | ||
| Accounts receivable | 4,961,583 | 4,413,265 | ||||
| Inventory | 308,804 | 587,104 | ||||
| Prepaid expenses and deposits | 5,419,706 | 5,081,408 | ||||
| Derivative instrument asset, current portion | 83,622 | 412,944 | ||||
| Prepaid domain name registry and ancillary services fees, current portion | 46,207,926 | 45,170,167 | ||||
| Income taxes recoverable | 830,631 | 1,730,631 | ||||
| Total current assets | 62,098,591 | 63,811,198 | ||||
| Derivative instrument asset, long-term portion | - | 31,838 | ||||
| Prepaid domain name registry and ancillary services fees, long-term portion | 12,322,678 | 12,318,723 | ||||
| Property and equipment | 1,675,546 | 1,352,144 | ||||
| Deferred tax asset, long-term portion | 5,970,237 | 5,970,462 | ||||
| Intangible assets | 16,146,218 | 16,415,651 | ||||
| Goodwill | 18,873,127 | 18,873,127 | ||||
| Total assets | $ | 117,086,397 | $ | 118,773,143 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 2,599,091 | $ | 1,928,459 | ||
| Accrued liabilities | 1,998,027 | 2,522,229 | ||||
| Customer deposits | 4,394,250 | 4,955,671 | ||||
| Derivative instrument liability, current portion | 249,155 | - | ||||
| Loan payable, current portion | 8,100,000 | 3,700,000 | ||||
| Deferred revenue, current portion | 56,417,381 | 54,997,887 | ||||
| Accreditation fees payable, current portion | 561,259 | 512,847 | ||||
| Deferred tax liability, current portion | 850,039 | 914,429 | ||||
| Income taxes payable | 464,261 | 1,255,108 | ||||
| Total current liabilities | 75,633,463 | 70,786,630 | ||||
| Derivative instrument liability, long-term portion | 26,611 | - | ||||
| Deferred revenue, long-term portion | 16,002,554 | 16,002,464 | ||||
| Accreditation fees payable, long-term portion | 141,179 | 145,592 | ||||
| Deferred rent, long-term portion | 59,654 | 54,150 | ||||
| Deferred tax liability, long-term portion | 5,206,200 | 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; 40,121,797 shares issued and outstanding as of March 31, 2013 and 44,322,159 shares issued and outstanding as of December 31, 2012 |
9,297,924 | 10,084,417 | ||||
| Additional paid-in capital | 28,293,757 | 33,931,529 | ||||
| Deficit | (17,433,264) | (17,509,843) | ||||
| Accumulated other comprehensive income (loss) | (141,681) | 44,104 | ||||
| Total stockholders' equity | 20,016,736 | 26,550,207 | ||||
| Total liabilities and stockholders' equity | $ | 117,086,397 | $ | 118,773,143 | ||
| Tucows Inc. | ||||||||
| Consolidated Statements of Operations | ||||||||
| (Dollar amounts in U.S. dollars) | ||||||||
| Three months ended March 31, | ||||||||
| 2013 | 2012 | |||||||
| (unaudited) | ||||||||
| Net revenues | $ | 29,985,022 | $ | 27,537,306 | ||||
| Cost of revenues: | ||||||||
| Cost of revenues | 22,077,899 | 19,267,125 | ||||||
| Network expenses (*) | 1,254,213 | 1,256,890 | ||||||
| Depreciation of property and equipment | 137,072 | 147,418 | ||||||
| Amortization of intangible assets | 35,910 | 35,910 | ||||||
| Total cost of revenues | 23,505,094 | 20,707,343 | ||||||
| Gross profit | 6,479,928 | 6,829,963 | ||||||
| Expenses: | ||||||||
| Sales and marketing (*) | 2,847,086 | 2,184,635 | ||||||
| Technical operations and development (*) | 1,133,830 | 1,113,145 | ||||||
| General and administrative (*) (note 1) | 1,698,632 | 1,783,453 | ||||||
| Depreciation of property and equipment | 50,939 | 47,415 | ||||||
| Amortization of intangible assets | 219,030 | 219,030 | ||||||
| Loss (gain) on currency forward contracts (note 1) | 234,638 | (562,109) | ||||||
| Total expenses | 6,184,155 | 4,785,569 | ||||||
| Income (loss) from operations | 295,773 | 2,044,394 | ||||||
| Other income (expenses): | ||||||||
| Interest expense, net | (99,362) | (40,969) | ||||||
| Other income | - | 508,800 | ||||||
| Total other income (expenses) | (99,362) | 467,831 | ||||||
| Income before provision for income taxes | 196,411 | 2,512,225 | ||||||
| Provision for income taxes | 119,832 | 848,606 | ||||||
| Net income | 76,579 | 1,663,619 | ||||||
| Other comprehensive income (loss), net of tax of $96,777 | (185,785) | - | ||||||
| Comprehensive income (loss) for the period | $ | (109,206) | $ | 1,663,619 | ||||
| Basic earnings (loss) per common share | $ | - | $ | 0.04 | ||||
| Shares used in computing basic earnings (loss) per common share | 40,331,438 | 46,221,465 | ||||||
| Diluted earnings (loss) per common share | $ | - | $ | 0.03 | ||||
| Shares used in computing diluted earnings (loss) per common share | 44,311,323 | 48,954,451 | ||||||
| (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 September 30, 2011 and a gain of $1.1 million for the nine months ended September 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 | $ | 6,126 | $ | 6,046 | ||||
| Sales and marketing | $ | 26,410 | $ | 22,782 | ||||
| Technical operations and development | $ | 15,247 | $ | 12,843 | ||||
| General and administrative | $ | 27,059 | $ | 20,794 | ||||
| Tucows Inc. | ||||||
| Consolidated Statements of Cash Flows | ||||||
| (Dollar amounts in U.S. dollars) | ||||||
| Three months ended March 31, | ||||||
| 2013 | 2012 | |||||
| Cash provided by: | (unaudited) | |||||
| Operating activities: | ||||||
| Net income for the period | $ | 76,579 | $ | 1,663,619 | ||
| Items not involving cash: | ||||||
| Depreciation of property and equipment | 188,011 | 194,833 | ||||
| Amortization of deferred financing charges | - | 1,500 | ||||
| Amortization of intangible assets | 254,940 | 254,940 | ||||
| Deferred income taxes (recovery) | (92,065) | 212,088 | ||||
| Deferred rent | 5,504 | 7,269 | ||||
| Acquisition of domain names | - | (3,664) | ||||
| Disposal of domain names | 14,493 | 15,738 | ||||
| Gain on disposition of intangible assets | - | (508,800) | ||||
| (Gain) loss on change in the fair value of forward contracts | 451,141 | (701,843) | ||||
| Stock-based compensation | 74,842 | 62,465 | ||||
| Changes in non-cash operating working capital: | ||||||
| Accounts receivable | (548,318) | (1,014,729) | ||||
| Inventory | 278,300 | - | ||||
| Prepaid expenses and deposits | (338,298) | (1,108,098) | ||||
| Prepaid fees for domain name registry and ancillary services fees | (1,041,714) | (2,919,423) | ||||
| Income taxes recoverable/payable | 109,153 | 619,073 | ||||
| Accounts payable | 605,924 | 913,969 | ||||
| Accrued liabilities | (524,202) | 268,911 | ||||
| Customer deposits | (561,421) | 257,000 | ||||
| Deferred revenue | 1,419,584 | 3,823,832 | ||||
| Accreditation fees payable | 43,999 | 41,954 | ||||
| Net cash provided by operating activities | 416,452 | 2,080,634 | ||||
| Financing activities: | ||||||
| Proceeds received on exercise of stock options | 38,509 | 130,712 | ||||
| Repurchase of common stock | (6,537,616) | (5,893,447) | ||||
| Proceeds received on loan payable | 5,200,000 | 4,000,000 | ||||
| Repayment of loan payable | (800,000) | (538,333) | ||||
| Net cash used in financing activities | (2,099,107) | (2,301,068) | ||||
| Investing activities: | ||||||
| Additions to property and equipment | (446,705) | (330,273) | ||||
| Proceeds on disposition of intangible assets | - | 508,800 | ||||
| Net cash provided by (used in) investing activities | (446,705) | 178,527 | ||||
| Decrease in cash and cash equivalents | (2,129,360) | (41,907) | ||||
| Cash and cash equivalents, beginning of period | 6,415,679 | 6,408,209 | ||||
| Cash and cash equivalents, end of period | $ | 4,286,319 | $ | 6,366,302 | ||
| Supplemental cash flow information: | ||||||
| Interest paid | $ | 99,504 | $ | 41,176 | ||
| Supplementary disclosure of non-cash investing activity: | ||||||
| Property and equipment acquired during the period not yet paid for | $ | 161,223 | $ | 50,401 | ||
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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