- Ting Continues Strong Momentum in Customer and
Device Additions/Domains Business Delivers Another Quarter of Solid
Performance -
TORONTO,
May 14, 2014 /CNW/ - Tucows Inc.
(NASDAQ: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, 2014.
All figures are in U.S. dollars.
Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)
|
3 Months
Ended
Mar. 31, 2014
(unaudited) |
3 Months
Ended
Mar. 31, 2013
(unaudited) |
Net revenue |
34,402 |
29,985 |
Income before provision for income taxes and
change
in fair value of forward exchange contracts |
1,280 |
431 |
Net income |
477 |
77 |
Net earnings per common share1 |
$0.04 |
$0.01 |
Net cash provided by (used in) operating
activities |
(39)2 |
416 |
- Net earnings per common share reflects the 1-for-4 reverse
split of common shares that became effective December 31, 2013.
- Net cash used in operating activities includes an excess tax
benefit from share-based compensation expenses of $1.0 million in Q1 2014. Net cash provided by
financing activities in Q1 2014 reflects the excess tax benefit as
a corresponding in-flow.
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, 2014
(unaudited) |
3 Months Ended
Mar. 31, 2013
(unaudited) |
3 Months Ended
Mar. 31, 2014
(unaudited) |
3 Months Ended
Mar. 31, 2013
(unaudited) |
Domain Services |
|
|
|
|
Wholesale |
|
|
|
|
OpenSRS
Domain
Service |
21,649 |
21,896 |
18,235 |
18,454 |
Value-Added
Services |
2,604 |
2,689 |
541 |
562 |
Total Wholesale |
24,253 |
24,585 |
18,776 |
19,016 |
Retail |
2,384 |
1,918 |
1,015 |
751 |
Portfolio |
1,053 |
1,134 |
244 |
201 |
Total Domain
Services |
27,690 |
27,637 |
20,035 |
19,968 |
Network Access
Services (Ting) |
6,712 |
2,348 |
4,281 |
2,110 |
|
|
|
|
|
Network, other costs |
- |
- |
1,144 |
1,254 |
Network,
depreciation and
amortization
costs |
- |
- |
183 |
173 |
Total
revenue/cost of
revenue |
34,402 |
29,985 |
25,643 |
23,505 |
NOTE: To better reflect the manner in which these revenue
streams are generated and assessed by management, beginning in the
first quarter of 2014, Tucows has reclassified its revenue streams
into Domain Services and Network Access Services. Domain
Services includes Wholesale OpenSRS (Domain Service and Value Added
Services), Retail (Hover) and Portfolio. Network Access
Services includes Ting.
"Our performance in the first quarter once again demonstrates
the reliability and consistency of the business, alongside our
ability to generate growth," said Elliot
Noss, President and Chief Executive Officer, Tucows
Inc. "Ting delivered another record quarter, adding more than
13,000 accounts and 20,000 devices to end the quarter at 61,000
accounts and 94,000 devices, and subsequent to quarter end, we
achieved another growth milestone, surpassing 100,000
devices. After little more than two years since launch, Ting
is on track to match and exceed the size of our Wholesale domains
business in terms of gross margin contribution later this
year."
"Our Domain Services business continues to perform well," added
Mr. Noss. "Our Wholesale channel and our Portfolio services
business both had solid quarters, while our Retail channel, Hover,
delivered yet another quarter of year-over-year growth in excess of
20%."
Net revenue for the first quarter of 2014 increased 15% to
$34.4 million from $30.0 million for the first quarter of 2013.
Net income for the first quarter of 2014 was $0.5 million, or $0.04 per share, compared with $0.08 million, or $0.01 per share, for the first quarter of
2013. Net income for the first quarter of 2014 included a
loss on foreign exchange contracts of $0.6
million compared with a loss on foreign exchange contracts
of $0.2 million in the first quarter
of 2013. Net income for the first quarter of 2014 also
included the incremental investment of approximately $1.2 million for the acquisition and support of
Ting customers as compared to the first quarter of 2013.
Deferred revenue at the end of the first quarter of 2014 was
$72.8 million, a marginal increase
from $72.4 million at the end of the
first quarter of 2013 and an increase of 4% from $70.0 million at the end of the fourth quarter of
2013.
Cash and cash equivalents at the end of the first quarter of
2014 were $13.5 million compared with
$12.4 million at the end of the
fourth quarter of 2013 and $4.3
million at the end of the first quarter of 2013. The
increase in cash and cash equivalents of $1.1 million when compared to the fourth quarter
of 2013 primarily resulted from the $1.0
million in incremental tax benefit related to share-based
compensation and the $0.9 million in
proceeds we received from the issuance of our common stock through
the exercise of stock options during the first quarter of 2014.
This was partially offset by the use of $0.6
million for principal repayments under the Company's credit
facility and investment of $0.1
million in equipment purchases.
Conference Call
Tucows management will host a conference call today, Wednesday, May 14, 2014 at 5:00 p.m. (ET) to discuss the Company's first
quarter 2014 results. Participants can access the conference call
by dialing 1-888-231-8191 or 647-427-7450 or 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 30814878 followed by the pound key. The telephone replay
will be available until Wednesday, May 21,
2014 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 (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, |
|
|
2014 |
|
2013 |
|
|
(unaudited) |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
13,537,252 |
|
$ |
12,418,888 |
|
Accounts receivable |
|
6,568,324 |
|
5,305,403 |
|
Inventory |
|
509,433 |
|
309,686 |
|
Prepaid expenses and deposits |
|
4,675,875 |
|
4,309,039 |
|
Prepaid domain name registry and
ancillary services fees, current portion |
|
45,831,314 |
|
44,209,591 |
|
Deferred tax asset, current
portion |
|
1,648,178 |
|
1,081,526 |
|
Income taxes recoverable |
|
1,210,117 |
|
475,889 |
|
|
Total current assets |
|
73,980,493 |
|
68,110,022 |
|
|
|
|
|
Prepaid domain name registry and
ancillary services fees, long-term portion |
|
12,032,539 |
|
11,838,579 |
Property and equipment |
|
1,873,124 |
|
1,757,836 |
Deferred tax asset, long-term
portion |
|
5,242,356 |
|
5,370,037 |
Intangible assets |
|
14,931,888 |
|
15,403,228 |
Goodwill |
|
18,873,127 |
|
18,873,127 |
|
|
Total assets |
|
$ |
126,933,527 |
|
$ |
121,352,829 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
4,317,717 |
|
$ |
2,361,481 |
|
Accrued liabilities |
|
3,490,636 |
|
3,913,034 |
|
Customer deposits |
|
4,471,817 |
|
4,500,946 |
|
Derivative instrument liability |
|
905,951 |
|
491,098 |
|
Loan payable, current portion |
|
5,683,333 |
|
6,300,000 |
|
Deferred revenue, current portion |
|
56,789,545 |
|
54,379,719 |
|
Accreditation fees payable, current
portion |
|
525,977 |
|
473,811 |
|
Income taxes payable |
|
311,131 |
|
1,024,004 |
|
|
Total current liabilities |
|
76,496,107 |
|
73,444,093 |
|
|
|
|
|
Deferred revenue, long-term portion |
|
15,977,624 |
|
15,638,517 |
Accreditation fees payable, long-term
portion |
|
133,443 |
|
135,522 |
Deferred rent, long-term portion |
|
79,191 |
|
75,979 |
Deferred tax liability, long-term
portion |
|
5,125,000 |
|
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; 11,192,884 shares
issued and outstanding as of March 31, 2014 and 10,907,063 shares
issued and
outstanding as of December 31, 2013 (1) |
|
13,301,296 |
|
11,859,267 |
|
Additional paid-in capital |
|
29,133,854 |
|
28,632,311 |
|
Deficit |
|
(12,852,540) |
|
(13,329,379) |
|
Accumulated other comprehensive income
(loss) |
|
(460,448) |
|
(244,981) |
|
|
Total stockholders' equity |
|
29,122,162 |
|
26,917,218 |
Total liabilities and stockholders' equity |
|
$ |
126,933,527 |
|
$ |
121,352,829 |
|
|
|
|
|
(1) Shares issued and outstanding at
both March 31, 2014 and December 31, 2013
reflects the 1-for-4 reverse split of common shares that became
effective on
December 31, 2013. |
|
|
|
|
|
Tucows
Inc. |
|
Consolidated
Statements of Operations |
|
(Dollar
amounts in U.S. dollars) |
|
|
|
Three
months ended March 31, |
|
|
2014 |
|
2013 |
|
|
(unaudited) |
|
|
|
|
|
Net revenues |
$ |
34,402,394 |
$ |
29,985,022 |
|
|
|
|
|
Cost of revenues: |
|
|
|
|
|
Cost of revenues |
|
24,316,639 |
|
22,077,899 |
|
Network expenses (*) |
|
1,143,644 |
|
1,254,213 |
|
Depreciation of property and
equipment |
|
182,974 |
|
137,072 |
|
Amortization of intangible assets |
|
- |
|
35,910 |
|
|
Total cost of revenues |
|
25,643,257 |
|
23,505,094 |
|
|
|
|
|
Gross profit |
|
8,759,137 |
|
6,479,928 |
|
|
|
|
|
Expenses: |
|
|
|
|
|
Sales and marketing (*) |
|
4,021,774 |
|
2,847,086 |
|
Technical operations and development
(*) |
|
1,089,898 |
|
1,133,830 |
|
General and administrative (*) (note
1) |
|
1,767,800 |
|
1,698,632 |
|
Depreciation of property and
equipment |
|
56,304 |
|
50,939 |
|
Amortization of intangible assets |
|
219,030 |
|
219,030 |
|
Impairment of indefinite life
intangible assets |
|
250,688 |
|
- |
|
Loss on currency forward
contracts |
|
551,371 |
|
234,638 |
|
|
Total expenses |
|
7,956,865 |
|
6,184,155 |
|
|
|
|
|
Income from operations |
|
802,272 |
|
295,773 |
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
Interest expense, net |
|
(73,833) |
|
(99,362) |
|
|
Total other income (expenses) |
|
(73,833) |
|
(99,362) |
|
|
|
|
|
Income before provision for income taxes |
|
728,439 |
|
196,411 |
|
|
|
|
|
Provision for income taxes |
|
251,600 |
|
119,832 |
Net income |
|
476,839 |
|
76,579 |
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
Unrealized loss on hedging
activities |
|
(363,181) |
|
(185,785) |
|
Net amount reclassified to
earnings |
|
147,714 |
|
- |
Other comprehensive loss, net of tax of $112,240
(2013 : $96,777) |
|
(215,467) |
|
(185,785) |
|
|
|
|
|
Comprehensive income (loss), net of tax for the
period |
$ |
261,372 |
$ |
(109,206) |
|
|
|
|
|
Basic earnings per common share |
$ |
0.04 |
$ |
0.01 |
|
|
|
|
|
Shares used in computing basic
earnings per common share |
|
11,028,559 |
|
10,082,860 |
|
|
|
|
|
Diluted earnings per common share |
$ |
0.04 |
$ |
0.01 |
|
|
|
|
|
Shares used in computing diluted earnings per
common share |
|
11,639,617 |
|
11,077,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Stock-based compensation has been included in
expenses as follows: |
|
|
|
|
|
Network expenses |
$ |
8,881 |
$ |
6,126 |
|
Sales and marketing |
$ |
35,999 |
$ |
26,410 |
|
Technical operations and
development |
$ |
18,205 |
$ |
15,247 |
|
General and administrative |
$ |
37,892 |
$ |
27,059 |
|
|
|
|
|
(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. |
|
Consolidated Statements of Cash Flows |
|
(Dollar amounts in U.S. dollars) |
|
|
|
|
|
|
Three months ended March 31, |
|
|
2014 |
|
2013 |
Cash provided by: |
|
(unaudited) |
Operating activities: |
|
|
|
|
|
|
Net income for the period |
$ |
476,839 |
$ |
76,579 |
|
Items not involving cash: |
|
|
|
|
|
|
Depreciation of property and equipment |
|
239,278 |
|
188,011 |
|
|
Amortization of deferred financing charges |
|
219,030 |
|
254,940 |
|
|
Impairment of indefinite life intangible
asset |
|
250,688 |
|
- |
|
|
Deferred income taxes (recovery) |
|
(343,231) |
|
(92,065) |
|
|
Excess tax benefits from share-based compensation
expense |
|
(1,013,800) |
|
- |
|
|
Amortization of intangible assets |
|
3,212 |
|
5,504 |
|
|
Disposal of domain names |
|
1,622 |
|
14,493 |
|
|
Loss on change in the fair value of forward
contracts |
|
87,146 |
|
451,141 |
|
|
Stock-based compensation |
|
100,977 |
|
74,842 |
|
Changes in non-cash operating working
capital: |
|
|
|
|
|
|
Accounts receivable |
|
(1,262,921) |
|
(548,318) |
|
|
Inventory |
|
(199,747) |
|
278,300 |
|
|
Prepaid expenses and deposits |
|
(366,836) |
|
(338,298) |
|
|
Prepaid fees for domain name registry and
ancillary services fees |
|
(1,815,683) |
|
(1,041,714) |
|
|
Income taxes recoverable/payable |
|
(433,301) |
|
109,153 |
|
|
Accounts payable |
|
1,670,415 |
|
605,924 |
|
|
Accrued liabilities |
|
(422,398) |
|
(524,202) |
|
|
Customer deposits |
|
(29,129) |
|
(561,421) |
|
|
Deferred revenue |
|
2,748,933 |
|
1,419,584 |
|
|
Accreditation fees payable |
|
50,087 |
|
43,999 |
|
Net cash (used in) provided by
operating activities |
|
(38,819) |
|
416,452 |
|
|
|
|
|
Financing activities: |
|
|
|
|
|
Proceeds received on exercise of stock
options |
|
911,081 |
|
38,509 |
|
Excess tax benefits on share-based
compensation expense |
|
1,013,800 |
|
- |
|
Repurchase of common stock |
|
(82,286) |
|
(6,537,616) |
|
Proceeds received on loan payable |
|
- |
|
5,200,000 |
|
Repayment of loan payable |
|
(616,667) |
|
(800,000) |
|
Net cash provided by (used in)
financing activities |
|
1,225,928 |
|
(2,099,107) |
|
|
|
|
|
Investing activities: |
|
|
|
|
|
Additions to property and
equipment |
|
(68,745) |
|
(446,705) |
|
Net cash used in investing
activities |
|
(68,745) |
|
(446,705) |
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
1,118,364 |
|
(2,129,360) |
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
12,418,888 |
|
6,415,679 |
Cash and cash equivalents, end of period |
$ |
13,537,252 |
$ |
4,286,319 |
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
Interest paid |
$ |
73,949 |
$ |
99,504 |
Income taxes paid, net |
$ |
669,624 |
$ |
11,150 |
|
|
|
|
|
Supplementary disclosure of non-cash investing
activity: |
|
|
|
|
|
Property and equipment acquired during
the period not yet paid for |
$ |
285,821 |
$ |
161,223 |
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.