Breaking News, Latest News, World News, India News, Cricket, Videos & Photos

Tucows Reports Financial Results for Second Quarter 2021


TORONTO, Aug. 05, 2021 (GLOBE NEWSWIRE) — Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of Fiber Internet Services, Mobile Services, Domain Name Services and other Internet services, today reported its financial results for the second quarter ended June 30, 2021. All figures are in U.S. dollars.

COVID-19:   Tucows shareholders and prospective investors are encouraged to read Tucows’ public statement regarding COVID-19, which is available here: https://bit.ly/2LavpOc

.

Note on the Financial Impact of Tucows’ Sale of Ting Mobile Customer Relationships and Transition to Mobile Services Enabler Platform:

As previously announced, effective August 1, 2020 most of Tucows’ mobile customers relationships were sold to DISH Networks (“DISH”) as part of Tucows’ transition of its mobile business to a Mobile Services Enabler (MSE) model from a Mobile Virtual Network Operator (MVNO) model, under which DISH became Tucows’ first MSE customer. Accordingly, the results of the Mobile Services segment for the second quarter of 2021 reflects operations under the new MSE model with prior periods being composed entirely of operations under Tucows’ previous MVNO model.

Under the terms of the earn out arrangement for the Ting customer base acquired by DISH, the income generated by the customer base acquired by Dish are recognized (net of expenses) as “Other Income” under the heading “Gain on Sale of Ting Customer Assets”. As a result, revenue and gross margin for the Mobile Services segment for the second quarter of 2021 are lower than those for the second quarter of 2020. Tucows will recognize fees per subscriber for customers owned by DISH under the Ting brand as well as customers under DISH’s Boost brand that are added to Tucows’ MSE platform, as Mobile Platform Services revenue under the terms of the MSE Agreement signed with DISH. For more information, see Tucows’ Financial Statements and Management Discussion and Analysis for the second quarter of 2021.

Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)

  3 Months ended June 30 6 Months ended June 30
2021
(Unaudited)
2020
(Unaudited)
% Change 2021
(Unaudited)
2020
(Unaudited)
% Change
Net revenue 75,093 82,122 (8.6%) 145,968 166,107 (12.1%)
Gross Profit 18,239 22,966 (20.6%) 35,692 48,116 (25.8%)
Gain on Sale of Ting Customer Assets1 4,808 n/a 10,203 n/a
Net income 1,807 157 1,051% 3,956 2,991 32.3%
Basic Net earnings per common share 0.17 0.01 1,600% 0.37 0.28 31.8%
Adjusted EBITDA1 11,158 12,175 (8.4%) 23,881 24,856 (3.9%)
Net cash provided by operating activities 3,518 8,939 (60.6%) 17,604 23,012 (23.5%)
  1. This Non-GAAP financial measure is described below and reconciled to GAAP net income in the accompanying table.

Summary of Revenues, Gross Profit and Adjusted EBITDA
(In Thousands of US Dollars)

  Revenue Gross Profit Adj. EBITDA1
  3 Months ended
June 30
3 Months ended
June 30
3 Months ended
June 30
  2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
Fiber Internet Services:    
Fiber Internet Services 5,825 4,414 2,799 2,749 (3,320) (1,071)
             
Mobile Services:
Retail Mobile Services 2,548 17,567 1,061 8,907    
Mobile Platform Services 2,457 2,364    
Other Professional Services 2,001 261    
Total Mobile Services 7,006 17,567 3,686 8,907 5,284  3,868 
             
Domain Services:    
Wholesale            
Domain Services 47,883 46,206 10,176 9,852    
Value Added Services 5,482 4,741 4,899 4,008    
Total Wholesale 53,365 50,947 15,075 13,860    
             
Retail 8,897 9,194 4,400 4,816    
Total Domain Services 62,262 60,141 19,475 18,676 12,750  12,351 
Network Expenses:    
Network, other costs n/a n/a 3,612 2,485 n/a n/a
Network, depreciation and amortization costs n/a n/a 4,108 3,356 n/a n/a
Network, impairment n/a n/a 1 1,525 n/a n/a
Total Network expenses n/a n/a 7,721 7,366 n/a n/a
             
Total 75,093 82,122 18,239 22,966 n/a n/a

“The second quarter marked another solid financial performance for Tucows with revenue and gross margin from our Domains Services and Fiber Internet Services businesses increasing 5% and 4%, respectively, year-over-year,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “On top of its continued consistency, our Domain Services business is benefitting from the growth in domains under management generated by the pandemic impact last year, as well as our focus on maximizing gross margin. Our Mobile Services business continues to move forward in line with our expectations. And Ting Internet once again saw record performance across key build metrics, including by far our largest capital expenditure and passed address additions in a quarter, as growth in the subscriber base gained further momentum, with net additions up 47% from Q1 and more than triple that of Q2 of last year.”

Financial Results
  
Net revenue for the second quarter of 2021 was $75.1 million compared with $82.1 million for the second quarter of 2020. The majority of the decrease was the result of the absence of Ting Mobile MVNO revenue in the second quarter of 2021 following the Company’s sale of its Ting Mobile customer relationships to DISH during the third quarter of 2020 and the related earn out being recognized as Other Income. Excluding the Mobile Services business, net revenue for the combined Domains Services and Ting Internet businesses for the second quarter of 2021 increased 5% from the second quarter of 2020.

Gross profit for the second quarter of 2021 was $18.2 million compared with $23.0 million for the second quarter of 2020. The decrease in gross profit is attributable to the same factors as the decrease in revenue. Excluding the Mobile Services business, gross margin for the combined Domains Services and Ting Internet businesses for the second quarter of 2021 increased 4% from the second quarter of 2020.

Net income for the second quarter of 2021 was $1.8 million, or $0.17 per share, compared with $0.2 million, or $0.01 per share, for the second quarter of 2020.

Adjusted EBITDA1 for the second quarter of 2021 was $11.2 million compared with $12.2 million for the second quarter of 2020. Adjusted EBITDA1 is impacted by the continued investment in Ting Fiber.

Cash and cash equivalents at the end of the second quarter of 2021 were $7.3 million compared with $8.3 million at the end of the first quarter of 2021 and $8.9 million at the end of the second quarter of 2020.

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, the Company typically discloses and discusses a non-GAAP financial measure, adjusted EBITDA, in press releases and on investor conference calls and related events that exclude certain non-cash and other charges as the Company believes that the non-GAAP information enhances investors’ overall understanding of our financial performance.

The Company believes that the provision of this supplemental non-GAAP measure allows investors to evaluate the operational and financial performance of the Company’s core business using similar evaluation measures to those used by management. The Company uses adjusted EBITDA to measure its performance and prepare its budgets. Since adjusted EBITDA is a non-GAAP financial performance measure, the Company’s calculation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. 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 liquidity measure. Non-GAAP financial measures do not reflect a comprehensive system of accounting and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies and/or analysts and may differ from period to period. The Company endeavors to compensate for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted EBITDA to net income based on U.S. GAAP, which should be considered when evaluating the Company’s results. Tucows strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

The Company’s adjusted EBITDA definition excludes depreciation, amortization of intangible assets, income tax provision, interest expense (net), accretion of contingent consideration, stock-based compensation, asset impairment, gains and losses from unrealized foreign currency transactions and costs that are one-time in nature and not indicative of on-going performance (profitability), including acquisition and transition costs. Gains and losses from unrealized foreign currency transactions removes the unrealized effect of the change in the mark-to-market values on outstanding unhedged foreign currency contracts, as well as the unrealized effect from the translation of monetary accounts denominated in non-U.S. dollars to U.S. dollars.

The following table reconciles adjusted EBITDA to income before provision for income taxes (dollars in thousands):

   3 months ended June 30 6 months ended June 30
   2021
(Unaudited)
2020
(Unaudited)
2021
(Unaudited)
2020
(Unaudited)
Adjusted EBITDA 11,158 12,175 23,881 24,856
Depreciation of property and equipment 4,211 3,155 7,970 6,145
Impairment and loss on disposition of property and equipment 6 1,525 66 1,525
Amortization of intangible assets 2,346 2,830 4,965 6,131
Impairment of definite life intangible assets 1,431 1,431
Interest expense, net 1,003 846 1,939 1,996
Accretion of contingent consideration 95 85 191 172
Stock-based compensation 1,209 847 2,231 1,648
Unrealized loss (gain) on change in fair value of forward contracts 191 (436) 357 (88)
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities 42 441 106 399
Acquisition and transition costs* 367 845 1,136 956
         
Income before provision for income taxes 1,688 606 4,920 4,541
*Acquisition and other costs represent transaction-related expenses, transitional expenses, such as redundant post-acquisition expenses, primarily related to our acquisition of Ascio in March 2019 and Cedar in January 2020 and disposition of certain Ting Mobile assets in August 2020. Expenses include severance or transitional costs associated with department, operational or overall company restructuring efforts, including geographic alignments.

Conference Call

Concurrent with the dissemination of its quarterly financial results news release at 5:05 pm ET on Thursday, August 5, management’s pre-recorded audio commentary (and transcript) discussing the quarter and outlook for the Company, will be posted to the Tucows website at http://www.tucows.com/investors/financials. In lieu of a live question and answer period, for the subsequent six days, until Wednesday, August 11, shareholders, analysts and prospective investors can submit questions to Tucows’ management at ir@tucows.com. Management will post responses to questions of general interest (audio recording and transcript) to the Company’s website at http://www.tucows.com/investors/financials/ on Tuesday, August 17, at approximately 4 pm ET. All questions will receive a response, however, questions of a more specific nature may be responded to directly.

About Tucows

Tucows is a provider of Fiber Internet Services, Mobile Services, Domain Name Services and other Internet services. Ting Internet (https://ting.com/internet) delivers fixed fiber Internet access with outstanding customer support. Tucows’ mobile services enabler (MSE) platform provides network access, provisioning and billing services for mobile virtual network operators (MVNOs). OpenSRS (https://opensrs.com), Enom (https://www.enom.com) and Ascio (https://ascio.com) combined manage approximately 26 million domain names and millions of value-added services through a global reseller network of over 36,000 web hosts and ISPs. Hover (https://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 (https://tucows.com).

           
           
Tucows Inc.  
Consolidated Balance Sheets  
(Dollar amounts in thousands of U.S. dollars)  
           
    June 30,   December 31,  
      2021     2020  
    (unaudited)   (unaudited)  
           
Assets          
           
Current assets:          
Cash and cash equivalents   $ 7,258   $ 8,311  
Accounts receivable     14,811     15,540  
Inventory     2,836     1,875  
Prepaid expenses and deposits     19,637     16,845  
Derivative instrument asset, current portion     1,704     3,860  
Deferred costs of fulfillment, current portion     96,148     93,467  
Income taxes recoverable     4,041     1,302  
Total current assets     146,435     141,200  
           
Deferred costs of fulfillment, long-term portion     18,490     17,599  
Derivative instrument asset, long-term portion     83      
Investments     2,012      
Deferred tax asset     168     226  
Property and equipment     144,187     117,530  
Right of use operating lease asset     12,541     11,238  
Contract costs     617     362  
Intangible assets     42,695     47,444  
Goodwill     116,304     116,304  
Total assets   $ 483,532   $ 451,903  
           
           
Liabilities and Stockholders’ Equity          
           
Current liabilities:          
Accounts payable   $ 7,430   $ 6,329  
Accrued liabilities     14,003     10,235  
Customer deposits     15,812     15,402  
Derivative instrument liability, current portion     110     99  
Operating lease liability, current portion     2,270     1,761  
Deferred revenue, current portion     130,094     127,336  
Accreditation fees payable, current portion     958     940  
Income taxes payable     20     863  
Total current liabilities     170,697     162,965  
           
Derivative instrument liability, long-term portion         114  
Deferred revenue, long-term portion     24,766     24,909  
Accreditation fees payable, long-term portion     183     195  
Operating lease liability, long-term portion     10,202     9,179  
Loan payable, long-term portion     139,867     121,733  
Other long-term liability     3,607     3,416  
Deferred tax liability     23,386     24,694  
           
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; 10,665,514 shares issued and outstanding as of June 30, 2021 and 10,612,414 shares issued and outstanding as of December 31, 2020     23,457     20,798  
Additional paid-in capital     2,208     1,458  
Retained earnings     84,062     80,106  
Accumulated other comprehensive income (loss)     1,097     2,336  
Total stockholders’ equity     110,824     104,698  
Total liabilities and stockholders’ equity   $ 483,532   $ 451,903  
           
                 
    Tucows Inc.
    Consolidated Statements of Operations and Comprehensive Income
    (Dollar amounts in thousands of U.S. dollars)
                 
                 
    Three months ended June 30,   Six months ended June 30,
    2021     2020     2021     2020  
    (unaudited)
  (unaudited)
                 
Net revenues $ 75,093   $ 82,122   $ 145,968   $ 166,107  
                 
Cost of revenues:                
Direct cost of revenues   49,133     51,790     95,320     104,978  
Network expenses (*)   3,612     2,485     6,850     4,901  
Depreciation of property and equipment   4,084     3,030     7,722     5,907  
Amortization of intangible assets   24     326     323     680  
Impairment of property and equipment   1     1,525     61     1,525  
Total cost of revenues   56,854     59,156     110,276     117,991  
                 
Gross profit   18,239     22,966     35,692     48,116  
                 
Expenses:                
Sales and marketing (*) $ 9,376   $ 9,218   $ 17,687   $ 18,203  
Technical operations and development (*)   3,170     3,067     6,302     5,818  
General and administrative (*)   5,210     5,465     10,163     10,206  
Depreciation of property and equipment   127     125     248     238  
Loss on disposition of property and equipment   5         5      
Amortization of intangible assets   2,322     2,504     4,642     5,451  
Impairment of definite life intangible assets       1,431         1,431  
Loss (gain) on currency forward contracts   63     (381 )   (190 )   60  
Total expenses   20,273     21,429     38,857     41,407  
                 
Income from operations   (2,034 )   1,537     (3,165 )   6,709  
                 
Other income (expenses):                
Interest expense, net   (1,003 )   (846 )   (1,939 )   (1,996 )
Gain on sale of Ting customer assets, net   4,808         10,203      
Other expense, net   (83 )   (85 )   (179 )   (172 )
Total other income (expenses)   3,722     (931 )   8,085     (2,168 )
                 
Income before provision for income taxes   1,688     606     4,920     4,541  
                 
Provision for income taxes   (119 )   449     964     1,550  
Net income for the period   1,807     157     3,956     2,991  
                 
Other comprehensive income, net of tax                
Unrealized income (loss) on hedging activities   248     1,114     616     (120 )
Net amount reclassified to earnings   (1,021 )   200     (1,855 )   243  
Other comprehensive income net of tax expense (recovery) of $(235) and $398 for the three months ended June 30, 2021 and June 30, 2020, $(375) and $32 for the six months ended June 30, 2021 and June 30, 2020   (773 )   1,314     (1,239 )   123  
                 
Comprehensive income, net of tax for the period $ 1,034   $ 1,471   $ 2,717   $ 3,114  
                 
Basic earnings per common share $ 0.17   $ 0.01   $ 0.37   $ 0.28  
                 
Shares used in computing basic earnings per common share   10,633,601     10,567,382     10,625,748     10,589,806  
                 
Diluted earnings per common share $ 0.17   $ 0.01   $ 0.37   $ 0.28  
                 
Shares used in computing diluted earnings per common share   10,797,921     10,653,527     10,794,523     10,684,304  
                 
                 
                 
(*) Stock-based compensation has been included in expenses as follows:                
Network expenses $ 144   $ 109   $ 269   $ 196  
Sales and marketing $ 550   $ 374   $ 1,056   $ 745  
Technical operations and development $ 234   $ 183   $ 401   $ 350  
General and administrative $ 281   $ 179   $ 505   $ 356  
                 
                 
  Tucows Inc.
  Consolidated Statements of Cash Flows
  (Dollar amounts in thousands of U.S. dollars)
                 
    Three months ended June 30,   Six months ended June 30,
    2021     2020     2021     2020  
Cash provided by:   (unaudited)
  (unaudited)
Operating activities:                
Net income for the period $ 1,807   $ 157   $ 3,956   $ 2,991  
Items not involving cash:                
Depreciation of property and equipment   4,211     3,155     7,970     6,145  
Impairment of property and equipment   1     1,525     61     1,525  
Amortization of debt discount and issuance costs   67     67     134     134  
Amortization of intangible assets   2,346     2,830     4,965     6,131  
Net amortization contract costs   (248 )   95     (255 )   124  
Impairment of definite life intangible assets       1,431         1,431  
Other       223         223  
Accretion of contingent consideration   95     85     191     172  
Deferred income taxes (recovery)   (660 )   (917 )   (880 )   (1,107 )
Excess tax benefits on share-based compensation expense   (372 )   (164 )   (544 )   (344 )
Net Right of use operating assets/Operating lease liability   174     291     229     112  
Loss on disposal of domain names       2     1     15  
Loss (gain) on change in the fair value of forward contracts   191     (436 )   357     (88 )
Stock-based compensation   1,209     847     2,231     1,648  
Change in non-cash operating working capital:                
Accounts receivable   1,057     401     729     2,552  
Inventory   (519 )   900     (961 )   1,804  
Prepaid expenses and deposits   (5,058 )   (3,247 )   (2,792 )   (3,222 )
Deferred costs of fulfillment   539     (2,204 )   (3,572 )   (5,057 )
Income taxes recoverable   (2,345 )   294     (3,034 )   794  
Accounts payable   568     (1,521 )   2,019     250  
Accrued liabilities   2,975     2,165     3,768     334  
Customer deposits   285     336     410     394  
Deferred revenue   (2,734 )   2,655     2,615     5,997  
Accreditation fees payable   (71 )   (31 )   6     54  
Net cash provided by operating activities   3,518     8,939     17,604     23,012  
                 
Financing activities:                
Proceeds received on exercise of stock options   1,247     29     1,476     46  
Payment of tax obligations resulting from net exercise of stock options   (80 )   (165 )   (298 )   (347 )
Repurchase of common stock       (164 )       (3,281 )
Proceeds received on loan payable   18,000         18,000      
Payment of loan payable costs   (1 )   (7 )   (1 )   (32 )
Net cash (used in) provided by financing activities   19,166     (307 )   19,177     (3,614 )
                 
Investing activities:                
Additions to property and equipment   (21,661 )   (12,150 )   (35,605 )   (22,093 )
Acquisition of Cedar Holdings Group, net of cash of $66               (8,770 )
Acquisition of intangible assets   (63 )   (69 )   (217 )   (69 )
Investment in securities   (2,012 )       (2,012 )    
Net cash used in investing activities   (23,736 )   (12,219 )   (37,834 )   (30,932 )
                 
(Decrease) increase in cash and cash equivalents   (1,052 )   (3,587 )   (1,053 )   (11,534 )
                 
Cash and cash equivalents, beginning of period   8,310     12,446     8,311     20,393  
Cash and cash equivalents, end of period $ 7,258   $ 8,859   $ 7,258   $ 8,859  
                 
Supplemental cash flow information:                
Interest paid $ 995   $ 686   $ 1,940   $ 1,840  
Income taxes paid, net $ 3,415   $ 1,243   $ 5,796   $ 2,200  
                 
Supplementary disclosure of non-cash investing and financing activities:                
Property and equipment acquired during the period not yet paid for $ 212   $ 635   $ 212   $ 635  
Fair value of shares issues for acquisition of Cedar Holdings Group     $   $   $ 2,000  
Fair value of contingent consideration for acquisition of Cedar Holdings Group     $ 7   $   $ 3,072  
                 
                 
Reconciliation of Adjusted EBITDA to Income before                
Provision for Income Taxes                
(In Thousands of U.S. Dollars)   Three months ended June 30,   Six months ended June 30,
(unaudited)   2021 (unaudited)   2020 (unaudited)   2021 (unaudited)   2020 (unaudited)
                 
Adjusted EBITDA $ 11,158 $ 12,175   $ 23,881 $ 24,856  
Depreciation of property and equipment   4,211   3,155     7,970   6,145  
Impairment and loss on disposition of property and equipment   6   1,525     66   1,525  
Amortization of intangible assets   2,346   2,830     4,965   6,131  
Impairment of definite life intangible assets     1,431       1,431  
Interest expense, net   1,003   846     1,939   1,996  
Accretion of contingent consideration   95   85     191   172  
Stock-based compensation   1,209   847     2,231   1,648  
Unrealized loss (gain) on change in fair value of forward contracts   191   (436 )   357   (88 )
Unrealized loss (gain) on foreign exchange revaluation of foreign denominated monetary assets and liabilities   42   441     106   399  
Acquisition and other costs1   367   845     1,136   956  
                 
                 
Income before provision for income taxes $ 1,688 $ 606   $ 4,920 $ 4,541  
                 
1Acquisition and other costs represents transaction-related expenses, transitional expenses, such as duplicative post-acquisition expenses. Expenses include severance and transitional costs associated with department, operational, or overall company restructuring efforts, including geographic alignments.        
         

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, including, without limitation, our expectations regarding our ability to realize synergies from the Enom acquisition and our expectation for growth of Ting Internet. 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 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, Ting, OpenSRS, Enom, Ascio and Hover are registered trademarks of Tucows Inc. or its subsidiaries.

Contact:
Lawrence Chamberlain
(416) 519-4196 | lawrence.chamberlain@loderockadvisors.com

a4c36084 7a76 4255 bc8b e6b6b069cccf



Source link

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept

Privacy & Cookies Policy