Tucows Inc. : Tucows Reports Continuing Strong Financial Results for Second Quarter of 2012
08/13/2012| 04:05pm US/Eastern
Recommend:
- 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 | 3 Months | 6 Months | 6 Months |
| | Ended | Ended | Ended | Ended |
| | June 30, | June 30, | June 30, | June 30, 2011 |
| | 2012 | 2011 | 2012 | (unaudited) |
| |(unaudited)|(unaudited)|(unaudited)| |
|______________|___________|___________|___________|_______________|
|Net revenue | 28,153| 23,046| 55,690| 45,601|
|______________|___________|___________|___________|_______________|
|Income before | | | | |
|provision for | | | | |
|income taxes | | | | |
|and change | 1,409| 638| 3,359| 1,151|
|in fair value | | | | |
|of forward | | | | |
|exchange | | | | |
|contracts | | | | |
|______________|___________|___________|___________|_______________|
|Net income for| 696| 566| 2,360| 1,294|
|the period | | | | |
|______________|___________|___________|___________|_______________|
|Net earnings | 0.02| 0.01| 0.05| 0.02|
|per common | | | | |
|share | | | | |
|______________|___________|___________|___________|_______________|
|Net cash | 4| 825| 2,084| 1,587|
|provided by | | | | |
|operating | | | | |
|activities | | | | |
|______________|___________|___________|___________|_______________|
Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)
__________________________________________________________________
| | Revenue | Cost of Revenue |
|______________|_______________________|___________________________|
| | 3 Months | 3 Months | 3 Months | 3 Months |
| | Ended | Ended | Ended | Ended |
| | June 30, | June 30, | June 30, | June 30, 2011 |
| | 2012 | 2011 | 2012 | (unaudited) |
| |(unaudited)|(unaudited)|(unaudited)| |
|______________|___________|___________|___________|_______________|
|Wholesale | | | | |
|______________|___________|___________|___________|_______________|
| Domain | 21,668| 18,220| 18,011| 15,101|
|Service | | | | |
|______________|___________|___________|___________|_______________|
| Value-Added | 2,589| 2,208| 537| 507|
|Services | | | | |
|______________|___________|___________|___________|_______________|
|Total | 24,257| 20,428| 18,548| 15,608|
|Wholesale | | | | |
|______________|___________|___________|___________|_______________|
|Retail | 2,298| 1,278| 1,357| 419|
|______________|___________|___________|___________|_______________|
|Portfolio | 1,598| 1,340| 216| 198|
|______________|___________|___________|___________|_______________|
|Network, other| - | | 1,214| 1,235|
|costs | | | | |
|______________|___________|___________|___________|_______________|
|Network, | | | | |
|depreciation | | | | |
|and | - | | 192| 220|
|amortization | | | | |
|costs | | | | |
|______________|___________|___________|___________|_______________|
|Total | | | | |
|revenue/cost | 28,153| 23,046| 21,526| 17,680|
|of revenue | | | | |
|______________|___________|___________|___________|_______________|
NOTE: Beginning in the first quarter of 2012,
Tucows reclassified its revenue streams into three distinct service
offerings: Wholesale, Retail and Portfolio(1). 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.
(1)Service 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 (unaudited) (unaudited)
in):
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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