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. (NYSEAMEX: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. |
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(*) 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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