- 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
  1. 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
  1. 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.

Copyright 2014 PR Newswire

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