- Quarter Highlighted by Net Earnings of $0.24 Per Share, Continued Momentum at Ting
-
TORONTO, Nov. 12, 2014 /PRNewswire/ - Tucows Inc.
(NASDAQ:TCX, TSX:TC), a provider of network access, domain name and
other Internet services, today reported its financial results for
the third quarter ended September 30,
2014. All figures are in U.S. dollars.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)
|
3 Months
Ended
Sept. 30, 2014
(unaudited) |
3 Months
Ended
Sept. 30, 2013
(unaudited) |
9 Months
Ended
Sept. 30, 2014
(unaudited) |
9 Months
Ended
Sept. 30, 2013
(unaudited) |
Net revenue |
38,874 |
35,637 |
108,865 |
96,795 |
Income before provision for income taxes and
change in fair value of forward exchange contracts |
4,072 |
3,565 |
7,462 |
4,944 |
Net income |
2,691 |
2,593 |
4,515 |
3,258 |
Net earnings per common share1 |
$0.24 |
$0.24 |
$0.40 |
$0.32 |
Net cash provided by (used in) operating
activities |
5,014 |
3,664 |
6,110 |
7,052 |
- Net earnings per common share reflects the 1-for-4 reverse
split of common shares that became effective December 31, 2013.
Summary of Revenues and Cost of
Revenues
(In Thousands of US Dollars)
|
Revenue |
Revenue |
Cost of Revenue |
Cost of Revenue |
|
3 Months Ended
Sept. 30, 2014
(unaudited) |
3 Months Ended
Sept. 30, 2013
(unaudited) |
3 Months Ended
Sept. 30, 2014
(unaudited) |
3 Months Ended
Sept. 30, 2013
(unaudited) |
Domain Services |
|
|
|
|
Wholesale |
|
|
|
|
OpenSRS Domain
Service |
21,880 |
22,003 |
18,230 |
18,581 |
Value-Added Services |
2,350 |
2,606 |
576 |
485 |
Total Wholesale |
24,230 |
24,609 |
18,806 |
19,066 |
Retail |
2,687 |
2,143 |
1,197 |
946 |
Portfolio1 |
2,208 |
4,167 |
189 |
660 |
Total Domain Services |
29,125 |
30,919 |
20,192 |
20,672 |
Network Access Services (Ting) |
9,749 |
4,718 |
5,794 |
3,597 |
|
|
|
|
|
Network, other costs |
- |
- |
1,139 |
1,193 |
Network, depreciation and amortization costs |
- |
- |
172 |
176 |
Total revenue/cost of revenue |
38,874 |
35,637 |
27,297 |
25,638 |
- Portfolio revenue for Q3 2014 and Q3 2013 includes the net
amounts received from the previously announced confidential
arrangements related to the Company's withdrawal of its application
under the ICANN New gTLD Program for .group, and .media and
.marketing, respectively.
"In the third quarter we again saw the growing contribution from
Ting in our financial results as our Domain Services businesses
continued to deliver consistent, reliable performance," said
Elliot Noss, President and Chief
Executive Officer, Tucows Inc. "We achieved net earnings of
$0.24 per share, bringing net
earnings for the year-to-date to $0.40 per share, surpassing our total for the
entire 2013 year. Consolidated gross margin increased to 26%
from 21% a year earlier, excluding the Portfolio group, which
benefited from atypical contributions in both quarters."
"Ting continued its strong momentum in customer acquisition,
adding almost 11,000 accounts and more than 17,000 devices."
Net revenue for the third quarter of 2014 increased 9% to
$38.9 million from $35.6 million for the third quarter of 2013.
Net income for the third quarter of 2014 was $2.7 million, or $0.24 per share, compared with $2.6 million, or $0.24 per share, for the third quarter of
2013. Net income for both the third quarters of 2013 and 2014
included the contribution of confidential arrangements related to
the Company's withdrawal of certain of its applications under the
ICANN New gTLD Program.
Cash and cash equivalents at the end of the third quarter of
2014 were $13.6 million, compared
with $14.2 million at the end of the
second quarter of 2014 and $11.5
million at the end of the third quarter of 2013.
During the third quarter of 2014, the Company generated cash flow
from operating activities of $5.0
million, as well as $1.1
million from the proceeds of stock options. This was
partially offset by the use of $5.4
million for the repayment in full of the Company's bank loan
and $1.1 million for the repurchase
of shares under the Company's ongoing share buyback program.
Conference Call
Tucows management will host a conference call today, Wednesday, November 12, 2014 at 5:00 p.m. (ET) to discuss the Company's third
quarter 2014 results. Participants can access the conference call
by dialing 1-888-231-8191 or 647-427-7450 or via the Internet at
http://www.tucows.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 21916055 followed by the pound key. The telephone replay
will be available until Wednesday, November
19, 2014 at midnight. To access the archived conference call
as an MP3 via the Internet, go to
http://www.tucows.com/investors.
About Tucows
Tucows is a provider of network access, domain name and other
Internet services. Ting (https://ting.com) is a mobile phone
service provider dedicated to bringing clarity and control to US
mobile phone users. OpenSRS (http://opensrs.com) manages over
13 million domain names and millions of value-added services
through a global 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. 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, |
|
|
2014 |
|
2013 |
|
|
(unaudited) |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ 13,589,246 |
|
$ 12,418,888 |
|
Accounts receivable |
|
6,914,690 |
|
5,305,403 |
|
Inventory |
|
391,026 |
|
309,686 |
|
Prepaid expenses and deposits |
|
4,322,231 |
|
4,309,039 |
|
Prepaid domain name registry and
ancillary services fees, current portion |
|
45,985,103 |
|
44,209,591 |
|
Deferred tax asset, current
portion |
|
1,874,824 |
|
1,081,526 |
|
Income taxes recoverable |
|
526,534 |
|
475,889 |
|
|
Total current assets |
|
73,603,654 |
|
68,110,022 |
|
|
|
|
|
Prepaid domain name registry and
ancillary services fees, long-term portion |
|
11,911,238 |
|
11,838,579 |
Property and equipment |
|
1,742,305 |
|
1,757,836 |
Deferred tax asset, long-term
portion |
|
5,569,900 |
|
5,370,037 |
Intangible assets |
|
14,261,216 |
|
15,403,228 |
Goodwill |
|
18,873,127 |
|
18,873,127 |
|
|
Total assets |
|
$ 125,961,440 |
|
$ 121,352,829 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ 3,574,165 |
|
$ 2,361,481 |
|
Accrued liabilities |
|
4,957,900 |
|
3,913,034 |
|
Customer deposits |
|
4,069,332 |
|
4,500,946 |
|
Derivative instrument liability |
|
762,053 |
|
491,098 |
|
Loan payable, current portion |
|
- |
|
6,300,000 |
|
Deferred revenue, current portion |
|
57,182,978 |
|
54,379,719 |
|
Accreditation fees payable, current
portion |
|
484,989 |
|
473,811 |
|
Income taxes payable |
|
179,007 |
|
1,024,004 |
|
|
Total current liabilities |
|
71,210,424 |
|
73,444,093 |
|
|
|
|
|
Deferred revenue, long-term
portion |
|
15,795,206 |
|
15,638,517 |
Accreditation fees payable, long-term
portion |
|
130,166 |
|
135,522 |
Deferred rent, long-term portion |
|
90,191 |
|
75,979 |
Deferred tax liability, long-term
portion |
|
5,092,000 |
|
5,141,500 |
|
|
|
|
|
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; 11,301,891 shares issued and
outstanding as of September 30, 2014 and 10,907,063 shares issued
and outstanding as of December 31, 2013 (1) |
|
13,984,072 |
|
11,859,267 |
|
Additional paid-in capital |
|
28,883,823 |
|
28,632,311 |
|
Deficit |
|
(8,814,453) |
|
(13,329,379) |
|
Accumulated other comprehensive income
(loss) |
|
(409,989) |
|
(244,981) |
|
|
Total stockholders' equity |
|
33,643,453 |
|
26,917,218 |
Total liabilities and stockholders'
equity |
|
$ 125,961,440 |
|
$ 121,352,829 |
|
|
|
|
|
(1) Shares issued and outstanding at
both September 30, 2014 and December 31, 2013 reflects the 1-for-4
reverse split of common shares that became effective on December
31, 2013. |
|
|
|
|
|
|
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, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
(unaudited) |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
38,874,183 |
$ |
35,637,085 |
$ |
108,864,578 |
$ |
96,795,464 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
25,985,875 |
|
24,268,961 |
|
75,038,518 |
|
69,354,366 |
|
|
Network expenses (*) |
|
1,139,515 |
|
1,192,450 |
|
3,427,856 |
|
3,716,471 |
|
|
Depreciation of property and
equipment |
|
172,019 |
|
164,283 |
|
528,956 |
|
452,711 |
|
|
Amortization of intangible assets |
|
- |
|
11,970 |
|
- |
|
83,790 |
|
|
|
Total cost of revenues |
|
27,297,409 |
|
25,637,664 |
|
78,995,330 |
|
73,607,338 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
11,576,774 |
|
9,999,421 |
|
29,869,248 |
|
23,188,126 |
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
Sales and marketing (*) |
|
3,593,486 |
|
2,998,419 |
|
11,377,701 |
|
8,792,091 |
|
|
Technical operations and development
(*) |
|
1,041,136 |
|
1,215,327 |
|
3,238,566 |
|
3,097,294 |
|
|
General and administrative (*) |
|
2,639,868 |
|
1,869,668 |
|
6,293,987 |
|
5,266,997 |
|
|
Depreciation of property and
equipment |
|
58,685 |
|
52,972 |
|
167,527 |
|
158,833 |
|
|
Amortization of intangible assets |
|
107,230 |
|
219,030 |
|
545,290 |
|
657,090 |
|
|
Impairment of indefinite life
intangible assets |
|
- |
|
- |
|
577,145 |
|
- |
|
|
Loss on currency forward
contracts |
|
237,985 |
|
(28,068) |
|
885,901 |
|
353,209 |
|
|
|
Total expenses |
|
7,678,390 |
|
6,327,348 |
|
23,086,117 |
|
18,325,514 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
3,898,384 |
|
3,672,073 |
|
6,783,131 |
|
4,862,612 |
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(63,498) |
|
(78,966) |
|
(206,679) |
|
(271,756) |
|
|
|
Total other income (expenses) |
|
(63,498) |
|
(78,966) |
|
(206,679) |
|
(271,756) |
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
3,834,886 |
|
3,593,107 |
|
6,576,452 |
|
4,590,856 |
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
1,143,981 |
|
999,747 |
|
2,061,526 |
|
1,333,287 |
|
Net income |
|
2,690,905 |
|
2,593,360 |
|
4,514,926 |
|
3,257,569 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
Unrealized loss on hedging
activities |
|
(437,519) |
|
402,026 |
|
(602,901) |
|
(71,629) |
|
|
Net amount reclassified to
earnings |
|
57,701 |
|
92,308 |
|
437,893 |
|
119,237 |
|
Other comprehensive income (loss) net of tax of
$(197,852) and $257,505 for the three months ended September 30,
2014 and September 30, 2013, and $(85,955) and $24,800 for the nine
months ended September 30, 2014 and September 30, 2013 |
|
(379,818) |
|
494,334 |
|
(165,008) |
|
47,608 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of tax for the
period |
$ |
2,311,087 |
$ |
3,087,694 |
$ |
4,349,918 |
$ |
3,305,177 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
$ |
0.24 |
$ |
0.24 |
$ |
0.40 |
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic
earnings per common share |
|
11,321,175 |
|
10,795,896 |
|
11,190,684 |
|
10,322,469 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
$ |
0.23 |
$ |
0.23 |
$ |
0.39 |
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted earnings per
common share |
|
11,787,749 |
|
11,409,975 |
|
11,718,910 |
|
11,187,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Stock-based compensation has been included in
expenses as follows: |
|
|
|
|
|
|
|
|
|
|
|
Network expenses |
$ |
6,600 |
$ |
8,755 |
$ |
22,397 |
$ |
22,813 |
|
|
|
Sales and marketing |
$ |
37,637 |
$ |
32,681 |
$ |
104,440 |
$ |
93,000 |
|
|
|
Technical operations and development |
$ |
22,716 |
$ |
21,549 |
$ |
59,368 |
$ |
57,166 |
|
|
|
General and administrative |
$ |
163,759 |
$ |
99,801 |
$ |
230,841 |
$ |
155,904 |
|
|
|
|
|
|
|
|
|
|
|
(1) Shares used in computing earnings
per share as well as earnings per common share reflects the 1-for-4
reverse split of common shares that became effective on December
31, 2013. |
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Cash provided by: |
|
|
(unaudited) |
|
|
|
(unaudited) |
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
Net income for the period |
$ |
2,690,905 |
$ |
2,593,360 |
$ |
4,514,926 |
$ |
3,257,569 |
|
|
Items not involving cash: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
|
230,704 |
|
217,255 |
|
696,483 |
|
611,544 |
|
|
|
Amortization of intangible assets |
|
107,230 |
|
231,000 |
|
545,290 |
|
740,880 |
|
|
|
Impairment of indefinite life intangible
asset |
|
- |
|
- |
|
577,145 |
|
- |
|
|
|
Deferred income taxes recovery |
|
(49,214) |
|
(99,786) |
|
(807,691) |
|
(78,103) |
|
|
|
Excess tax benefits from share-based compensation
expense |
|
168,346 |
|
(1,056,014) |
|
(250,555) |
|
(1,056,014) |
|
|
|
Amortization of deferred rent |
|
1,832 |
|
7,872 |
|
14,212 |
|
17,748 |
|
|
|
Disposal of domain names |
|
10,708 |
|
8,923 |
|
19,577 |
|
44,292 |
|
|
|
Loss (gain) on change in the fair value of forward
contracts |
|
125,305 |
|
(204,341) |
|
19,991 |
|
361,646 |
|
|
|
Stock-based compensation |
|
230,712 |
|
162,786 |
|
417,046 |
|
328,883 |
|
|
Change in non-cash operating working
capital: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
4,440 |
|
758,089 |
|
(1,609,287) |
|
(456,201) |
|
|
|
Inventory |
|
90,114 |
|
(150,686) |
|
(81,340) |
|
248,994 |
|
|
|
Prepaid expenses and deposits |
|
613,342 |
|
543,111 |
|
(13,192) |
|
840,006 |
|
|
|
Prepaid domain name registry and ancillary
services fees |
|
573,727 |
|
1,038,268 |
|
(1,848,171) |
|
(344,719) |
|
|
|
Income taxes recoverable |
|
(227,558) |
|
980,969 |
|
(794,101) |
|
1,087,333 |
|
|
|
Accounts payable |
|
326,610 |
|
92,473 |
|
1,130,552 |
|
700,194 |
|
|
|
Accrued liabilities |
|
1,214,237 |
|
163,300 |
|
1,044,866 |
|
664,984 |
|
|
|
Customer deposits |
|
(418,539) |
|
(595,776) |
|
(431,614) |
|
(883,346) |
|
|
|
Deferred revenue |
|
(656,430) |
|
(986,779) |
|
2,959,948 |
|
989,957 |
|
|
|
Accreditation fees payable |
|
(22,510) |
|
(39,835) |
|
5,822 |
|
(23,918) |
|
|
Net cash (used in) provided by
operating activities |
|
5,013,961 |
|
3,664,189 |
|
6,109,907 |
|
7,051,729 |
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds received on exercise of stock
options |
|
343,953 |
|
1,136,061 |
|
1,385,816 |
|
1,454,255 |
|
|
Excess tax benefits from share-based
compensation expense |
|
741,512 |
|
1,056,014 |
|
1,755,312 |
|
1,056,014 |
|
|
Repurchase of common stock |
|
(1,099,571) |
|
- |
|
(1,181,857) |
|
(6,537,616) |
|
|
Proceeds received on loan payable |
|
- |
|
- |
|
- |
|
5,200,000 |
|
|
Repayment of loan payable |
|
(5,358,333) |
|
(600,000) |
|
(6,300,000) |
|
(2,000,000) |
|
|
Net cash provided by (used in)
financing activities |
|
(5,372,439) |
|
1,592,075 |
|
(4,340,729) |
|
(827,347) |
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
(216,794) |
|
(171,442) |
|
(598,820) |
|
(1,090,113) |
|
|
Net cash used in investing
activities |
|
(216,794) |
|
(171,442) |
|
(598,820) |
|
(1,090,113) |
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
(575,272) |
|
5,084,822 |
|
1,170,358 |
|
5,134,269 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
14,164,518 |
|
6,465,126 |
|
12,418,888 |
|
6,415,679 |
|
Cash and cash equivalents, end of period |
$ |
13,589,246 |
$ |
11,549,948 |
$ |
13,589,246 |
$ |
11,549,948 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
Interest paid |
$ |
64,248 |
$ |
92,610 |
$ |
207,634 |
$ |
289,483 |
|
|
Income taxes paid, net |
$ |
469,248 |
$ |
(46,057) |
$ |
1,724,976 |
$ |
141,256 |
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosure of non-cash investing and
financinag activities: |
|
|
|
|
|
|
|
|
|
|
Property and equipment acquired during
the period not yet paid for |
$ |
82,132 |
$ |
99,060 |
$ |
82,132 |
$ |
99,060 |
|
|
|
|
|
|
|
|
|
|
|
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.