– Quarter Highlighted by Adjusted EBITDA of $6.9 Million and Net Earnings of $0.25 Per Share as Ting Mobile Increasingly Contributes to Financial Results –
TORONTO, May 7, 2015 (GLOBE NEWSWIRE) -- Tucows Inc. (Nasdaq:TCX) (TSX:TC), a provider of network access, domain names and other Internet services, today reported its financial results for the first quarter ended March 31, 2015. All figures are in U.S. dollars.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data) |
|
|
3 Months Ended
Mar. 31, 2015 (unaudited) |
3 Months Ended
Mar. 31, 2014 (unaudited) |
|
Net revenue |
40,468 |
34,402 |
|
|
|
|
|
Adjusted EBITDA1 |
6,893 |
3,314 |
|
Net income |
2,834 |
477 |
|
Net earnings per common share |
$0.25 |
$0.04 |
|
Net cash provided by (used in) operating activities |
2,938 |
(39) |
|
1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table. |
|
|
Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars) |
|
|
Revenue |
Revenue |
Cost of Revenue |
Cost of Revenue |
|
3 Months Ended
Mar. 31, 2015
(unaudited) |
3 Months Ended
Mar. 31, 2014
(unaudited) |
3 Months Ended
Mar. 31, 2015
(unaudited) |
3 Months Ended
Mar. 31, 2014
(unaudited) |
|
Domain Services |
|
|
|
|
|
Wholesale |
|
|
|
|
|
OpenSRS Domain Service |
21,175 |
21,649 |
17,548 |
18,235 |
|
Value-Added Services |
2,242 |
2,604 |
536 |
541 |
|
Total Wholesale |
23,417 |
24,253 |
18,084 |
18,776 |
|
Retail |
2,876 |
2,384 |
1,220 |
1,015 |
|
Portfolio |
1,248 |
1,053 |
172 |
244 |
|
Total Domain Services |
27,541 |
27,690 |
19,476 |
20,035 |
|
Network Access Services |
12,927 |
6,712 |
7,345 |
4,281 |
|
|
|
|
|
|
|
Network, other costs |
-- |
-- |
1,222 |
1,144 |
|
Network, depreciation and amortization costs |
-- |
-- |
204 |
183 |
|
Total revenue/cost of revenue |
40,468 |
34,402 |
28,247 |
25,643 |
|
Note: Portfolio revenue for Q1 2015 includes a gain we recognized on the sale of our minority interest in .store as a result of this contested domain being resolved through a confidential private auction in February 2015. |
"Continuing our momentum of last year, the first quarter was an excellent start to 2015," said Elliot Noss, President and Chief Executive Officer, Tucows Inc. "With each quarter, the growth in Ting Mobile is having a greater impact on our financial results as we benefit from the operating leverage in our business. That impact is evident in the continued expansion of our gross margin percentage, which grew to 28%2 from 24%2 for the same quarter last year, while Adjusted EBITDA more than doubled to $6.9 million positioning us to come in comfortably above our previous guidance of $20 million for the full year. We look forward to continued growth in Ting Mobile alongside solid performance from our domains business as we ramp towards the launch of Ting Internet, our fiber-to-the-home initiative, later this year."
Net revenue for the first quarter of 2015 increased 18% to $40.5 million from $34.4 million for the first quarter of 2014.
Adjusted EBITDA for the first quarter of 2015 increased 108% to $6.9 million from $3.3 million for the first quarter of 2014. Net income for the first quarter of 2015 increased to $2.8 million, or $0.25 per share, compared with $0.5 million, or $0.04 per share, for the first quarter of 2014. Both adjusted EBITDA and net income for the first quarter of 2015 benefitted from the sale of our minority interest in .store.
Cash and cash equivalents at the end of the first quarter of 2015 were $13.7 million, up from $8.3 million at the end of the fourth quarter of 2014 and $13.5 million at the end of the first quarter of 2014. During the first quarter of 2015, Tucows generated cash flow from operating activities of $2.9 million. In addition, the Company generated $6.6 million from its previously announced agreement to amend its .online joint venture relationship to a marketing agreement and received $3.5 million under its Amended Credit Facility to fund the Company's previously announced acquisition of a controlling interest in Ting Virginia, LLC. The Company also used $7.7 million in cash to repurchase 408,000 shares of its common stock under its ongoing share buyback program and the modified "Dutch auction tender offer" that closed on January 7, 2015.
NOTES:
1. Adjusted EBITDA
Tucows reports all financial information required in accordance with United States generally accepted accounting principles (GAAP). Along with this information, to assist financial statement users in an assessment of our historical performance and to project our future earnings and cash flows, we typically disclose and discuss a non-GAAP financial measure, Adjusted EBITDA, on investor conference calls and related events that exclude non-cash and other charges as we believe that the non-GAAP information enhances investors' overall understanding of our financial performance and the comparability of our operating results from period to period.
Adjusted EBITDA is one of the primary measures we use for planning and budgeting purposes, incentive compensation and to monitor and evaluate our financial and operating results. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with generally accepted accounting principles. Because Adjusted EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. See the Consolidated Statements of Cash Flows included in the attached financial statements. Non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. The use of certain non-GAAP financial measures requires management to make estimates and assumptions regarding amounts of assets and liabilities and the amounts of revenue and expense during the reporting periods. We base our estimates on historical experience and assumptions that we believe are reasonable. Actual results could differ from these estimates.
Adjusted EBITDA excludes depreciation expense, amortization of intangibles, income tax provision, interest expense, interest income, stock-based compensation, asset impairment, net deferred revenue, which comprises the change in deferred revenue, net of prepaid domain name registry and other Internet services fees, to reflect the material amount of cash we collect and pay for domain registrations and other Internet services at the time of activation, unrealized foreign exchange gain/loss from the translation of monetary accounts denominated in non U.S. dollars to U.S. dollars as well as the revaluation of foreign exchange contracts and our foreign denominated assets and liabilities and other infrequently occurring items listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release.
2. Excludes contribution of the Portfolio group.
Conference Call
Tucows management will host a conference call today, Thursday, May 7, 2015 at 5:00 p.m. (ET) to discuss the Company's first quarter 2015 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 32328961 followed by the pound key. The telephone replay will be available until Thursday, May 14, 2015 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 names and other Internet services. Ting (https://ting.com) delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS (http://opensrs.com) manages over fourteen 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) makes it easy 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) |
|
|
|
|
|
|
March 31, |
December 31, |
|
|
2015 |
2014 |
|
|
(unaudited) |
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 13,678,191 |
$ 8,271,377 |
|
Accounts receivable |
7,119,785 |
6,789,685 |
|
Inventory |
574,119 |
393,774 |
|
Prepaid expenses and deposits |
5,085,514 |
3,697,292 |
|
Prepaid domain name registry and ancillary services fees, current portion |
46,107,333 |
44,614,858 |
|
Other Assets |
-- |
8,199,000 |
|
Deferred tax asset, current portion |
3,040,483 |
2,498,196 |
|
Income taxes recoverable |
1,772 |
997 |
|
Total current assets |
75,607,197 |
74,465,179 |
|
|
|
|
|
Prepaid domain name registry and ancillary services fees, long-term portion |
11,735,134 |
11,764,765 |
|
Property and equipment |
5,346,070 |
1,609,787 |
|
Deferred tax asset, long-term portion |
5,067,090 |
4,880,423 |
|
Intangible assets |
14,886,625 |
14,202,585 |
|
Goodwill |
21,055,143 |
18,873,127 |
|
Total assets |
$ 133,697,259 |
$ 125,795,866 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 3,883,370 |
$ 3,579,920 |
|
Accrued liabilities |
4,105,110 |
3,941,549 |
|
Customer deposits |
4,325,284 |
4,461,727 |
|
Derivative instrument liability, current portion |
2,139,268 |
1,115,805 |
|
Deferred rent, current portion |
5,317 |
-- |
|
Loan payable, current portion |
3,500,000 |
-- |
|
Deferred revenue, current portion |
57,630,217 |
55,495,566 |
|
Accreditation fees payable, current portion |
519,432 |
466,201 |
|
Income taxes payable |
1,136,023 |
473,480 |
|
Total current liabilities |
77,244,021 |
69,534,248 |
|
|
|
|
|
Deferred revenue, long-term portion |
15,659,049 |
15,610,753 |
|
Accreditation fees payable, long-term portion |
126,039 |
128,243 |
|
Deferred rent, long-term portion |
85,069 |
92,878 |
|
Other liabilities |
1,545,832 |
|
|
Deferred tax liability, long-term portion |
5,032,177 |
4,787,351 |
|
|
|
|
|
Redeemable non-controlling interest |
3,000,000 |
-- |
|
|
|
|
|
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; 10,996,733 shares issued and outstanding as of March 31, 2015 and 11,329,732 shares issued and outstanding as of December 31, 2014 |
13,975,005 |
14,130,059 |
|
Additional paid-in capital |
22,318,640 |
29,090,058 |
|
Deficit |
(4,121,340) |
(6,955,283) |
|
Accumulated other comprehensive income (loss) |
(1,167,233) |
(622,441) |
|
Total stockholders' equity |
31,005,072 |
35,642,393 |
|
Total liabilities and stockholders' equity |
$ 133,697,259 |
$ 125,795,866 |
|
|
|
|
|
Tucows Inc. |
|
|
Consolidated Statements of Operations |
|
|
(Dollar amounts in U.S. dollars) |
|
|
|
|
|
|
Three months ended March 31, |
|
|
2015 |
2014 |
|
|
(unaudited) |
|
|
|
|
|
Net revenues |
$ 40,467,833 |
$ 34,402,394 |
|
|
|
|
|
Cost of revenues: |
|
|
|
Cost of revenues |
26,821,374 |
24,316,639 |
|
Network expenses |
1,222,096 |
1,143,644 |
|
Depreciation of property and equipment |
199,642 |
182,974 |
|
Amortization of intangible assets |
3,924 |
-- |
|
Total cost of revenues |
28,247,036 |
25,643,257 |
|
|
|
|
|
Gross profit |
12,220,797 |
8,759,137 |
|
|
|
|
|
Expenses: |
|
|
|
Sales and marketing |
3,799,175 |
4,021,774 |
|
Technical operations and development |
1,114,195 |
1,089,898 |
|
General and administrative |
1,815,188 |
1,767,800 |
|
Depreciation of property and equipment |
59,262 |
56,304 |
|
Amortization of intangible assets |
53,215 |
219,030 |
|
Impairment of indefinite life intangible assets |
12,493 |
250,688 |
|
Loss on currency forward contracts |
956,858 |
551,371 |
|
Total expenses |
7,810,386 |
7,956,865 |
|
|
|
|
|
Income from operations |
4,410,411 |
802,272 |
|
|
|
|
|
Other income (expenses): |
|
|
|
Interest expense, net |
(24,775) |
(73,883) |
|
Total other income (expenses) |
(24,775) |
(73,883) |
|
|
|
|
|
Income before provision for income taxes |
4,385,636 |
728,389 |
|
|
|
|
|
Provision for income taxes |
1,551,693 |
251,600 |
|
|
|
|
|
Net income |
2,833,943 |
476,789 |
|
|
|
|
|
Other comprehensive loss, net of tax |
|
|
|
Gain (loss) on hedging activities |
(960,866) |
(442,978) |
|
Net amount reclassified to earnings |
416,074 |
227,511 |
|
|
|
|
|
Other comprehensive income (loss) net of tax of $319,878 and $112,240 for the three months ended March 31, 2015 and March 31, 2014 |
(544,792) |
(215,467) |
|
|
|
|
|
Comprehensive income for the period |
$ 2,289,151 |
$ 261,322 |
|
|
|
|
|
Basic earnings per common share |
$ 0.25 |
$ 0.04 |
|
|
|
|
|
Shares used in computing basic earnings per common share |
11,142,628 |
11,028,559 |
|
|
|
|
|
Diluted earnings per common share |
$ 0.24 |
$ 0.04 |
|
|
|
|
|
Shares used in computing diluted earnings per common share |
11,580,047 |
11,639,617 |
|
|
|
|
|
Tucows Inc. |
|
|
Consolidated Statements of Cash Flows |
|
|
(Dollar amounts in U.S. dollars) |
|
|
|
|
|
|
Three months ended March 31, |
|
|
2015 |
2014 |
|
Cash provided by: |
(unaudited) |
|
Operating activities: |
|
|
|
Net income for the period |
$ 2,833,943 |
$ 476,839 |
|
Items not involving cash: |
|
|
|
Depreciation of property and equipment |
258,904 |
239,278 |
|
Amortization of intangible assets |
57,139 |
219,030 |
|
Impairment of indefinite life intangible asset |
12,493 |
250,688 |
|
Deferred income taxes recovery |
(164,250) |
(343,231) |
|
Excess tax benefits from share-based compensation expense |
-- |
(1,013,800) |
|
Amortization of deferred rent |
(2,492) |
3,212 |
|
Disposal of domain names |
6,328 |
1,622 |
|
Loss (gain) on change in the fair value of forward contracts |
158,793 |
87,146 |
|
Stock-based compensation |
125,048 |
100,977 |
|
Change in non-cash operating working capital: |
|
|
|
Accounts receivable |
(168,585) |
(1,262,921) |
|
Inventory |
(113,150) |
(199,747) |
|
Prepaid expenses and deposits |
(1,299,778) |
(366,836) |
|
Prepaid domain name registry and ancillary services fees |
(1,462,844) |
(1,815,683) |
|
Income taxes recoverable |
661,768 |
(433,301) |
|
Accounts payable |
117,566 |
1,670,415 |
|
Accrued liabilities |
(59,220) |
(422,398) |
|
Customer deposits |
(136,443) |
(29,129) |
|
Deferred revenue |
2,061,510 |
2,748,933 |
|
Accreditation fees payable |
51,027 |
50,087 |
|
Net cash (used in) / provided by operating activities |
2,937,757 |
(38,819) |
|
|
|
|
|
Financing activities: |
|
|
|
Proceeds received on exercise of stock options |
247,983 |
911,081 |
|
Excess tax benefits from share-based compensation expense |
412,642 |
1,013,800 |
|
Repurchase of common stock |
(7,712,145) |
(82,286) |
|
Proceeds received on loan payable |
3,500,000 |
-- |
|
Repayment of loan payable |
-- |
(616,667) |
|
Net cash provided by / (used in) financing activities |
(3,551,520) |
1,225,928 |
|
|
|
|
|
Investing activities: |
|
|
|
Additions to property and equipment |
(191,762) |
(68,745) |
|
Gross proceeds on waiver of rights to .online registry |
6,619,832 |
-- |
|
Additional cost of acquisition of Ting Virginia, LLC., net of cash of $21,423 |
(407,493) |
-- |
|
Net cash provided by (used in) investing activities |
6,020,577 |
(68,745) |
|
|
|
|
|
Increase in cash and cash equivalents |
5,406,814 |
1,118,364 |
|
|
|
|
|
Cash and cash equivalents, beginning of period |
8,271,377 |
12,418,888 |
|
Cash and cash equivalents, end of period |
$ 13,678,191 |
$ 13,537,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
Interest paid |
$ 38,893 |
$ 73,949 |
|
Income taxes paid, net |
$ 564,139 |
$ 669,624 |
|
|
|
|
|
Supplementary disclosure of non-cash investing and financing activities: |
|
|
|
Property and equipment acquired during the period not yet paid for |
$ 66,798 |
$ 285,821 |
|
|
|
Tucows Inc. |
|
Reconciliation of Net income to Adjusted EBITDA |
|
(In Thousands of US Dollars) |
|
(unaudited) |
|
|
|
|
|
|
Three months ended March 31, |
|
|
2015 |
2014 |
|
|
(unaudited) |
|
|
|
|
|
Net income for the period |
$ 2,834 |
$ 477 |
|
Depreciation of property and equipment |
259 |
239 |
|
Amortization of intangible assets |
70 |
470 |
|
Interest expense, net |
25 |
74 |
|
Provision for income taxes |
1,552 |
252 |
|
Change in net deferred revenue 1 |
691 |
932 |
|
Stock-based compensation |
125 |
101 |
|
Loss (gain) on currency forward contracts |
1,337 |
769 |
|
|
|
|
|
Adjusted EBITDA |
$ 6,893 |
$ 3,314 |
|
|
|
|
|
(1) Net deferred revenue comprises the change in deferred revenue, net of prepaid domain name registry and other Internet services fees, to reflect the material amount of cash we collect and pay for domain registrations and other Internet services at the time of activation. Net deferred revenue for the three months ended March 31, 2015, includes a benefit of $0.1 million as a result of the translation of deferred revenue and prepaid domain name registry and other Internet services fees to our reporting currency of US dollars. |
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.
CONTACT: Lawrence Chamberlain
TMX Equicom
(416) 815-0700 ext. 257
lchamberlain@tmxequicom.com
