Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of network access,
domain names and other Internet services, today reported its
financial results for the third quarter ended September 30, 2020.
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
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’s first MSE customer.
Accordingly, the results of the Mobile Services business in our
Network Access segment for the third quarter of 2020 reflect two
months of operations under the new MSE model and one month of
operations under the previous MVNO model. (All comparative
prior-year periods are 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 Mobile Services
in the Network Access segment for the third quarter of 2020 are
lower than those for the third quarter of 2019. Tucows will
recognize fees paid by 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 third quarter of 2020.
Summary Financial
Results(In Thousands of US Dollars, Except Per
Share Data)
|
3 Months ended September 30 |
9 Months ended September 30 |
2020(Unaudited) |
2019(Unaudited)1 |
% Change |
2020(Unaudited) |
2019(Unaudited) |
% Change |
Net revenue |
74,311 |
88,129 |
(15.7%) |
240,418 |
251,199 |
(4.3%) |
Gross Profit |
19,941 |
27,574 |
(27.7%) |
68,057 |
74,732 |
(8.9%) |
Gain on Sale of Ting Customer
Assets2 |
1,090 |
- |
n/a |
1,090 |
- |
n/a |
Net income |
716 |
4,205 |
(83.0%) |
3,707 |
9,620 |
(61.5%) |
Basic Net earnings per common share |
0.07 |
0.40 |
(82.5%) |
0.35 |
0.90 |
(61.1%) |
Adjusted EBITDA3 |
13,270 |
14,832 |
(10.5%) |
38,124 |
35,749 |
6.6% |
Net cash provided by operating activities |
11,432 |
11,215 |
1.9% |
34,444 |
27,185 |
26.7% |
- Tucows financial results for the third quarter of 2019 include
the contribution of the bulk sale of domain names in the Company’s
Portfolio business (generating $1.9 million in revenue) as part of
its exit from that business at the end of the year.
- Gain on Sale of Ting Customer Assets for the Third Quarter of
2020, proceeds of $4.6 million under the DISH earn-out arrangement
offset by the loss on disposal of Ting Customer Assets totalling
$3.5 million.
- This Non-GAAP financial measure is described below and
reconciled to GAAP net income in the accompanying table.
Summary of Revenues and Gross
profit(In Thousands of US Dollars)
|
|
|
|
Revenue |
Gross Profit |
|
3 Months ended September 30 |
3 Months ended September 30 |
|
2020(Unaudited) |
2019(Unaudited) |
2020(Unaudited) |
2019(Unaudited) |
Network Access Services: |
Mobile Services |
|
|
|
|
Retail Mobile Services |
7,019 |
21,722 |
3,579 |
|
10,551 |
|
Mobile Platform Services |
376 |
- |
376 |
|
- |
|
Other Professional Services |
1,457 |
- |
190 |
|
- |
|
Total Mobile Services |
8,852 |
21,722 |
4,145 |
|
10,551 |
|
|
|
|
|
|
Fiber Internet Services |
4,657 |
2,890 |
2,975 |
|
1,954 |
|
Total Network Access Services |
13,509 |
24,612 |
7,120 |
|
12,505 |
|
Domain Services: |
Wholesale |
|
|
|
|
Domain Services |
47,261 |
47,259 |
10,449 |
|
8,922 |
|
Value Added Services |
4,674 |
5,154 |
3,950 |
|
4,381 |
|
Total Wholesale |
51,935 |
52,413 |
14,399 |
|
13,303 |
|
|
|
|
|
|
Retail |
8,652 |
8,713 |
4,354 |
|
4,354 |
|
Portfolio4 |
215 |
2,391 |
108 |
|
2,211 |
|
Total Domain Services |
60,802 |
63,517 |
18,861 |
|
19,868 |
|
Network Expenses: |
Network, other costs |
- |
- |
(2,612 |
) |
(2,254 |
) |
Network, depreciation and amortization costs |
- |
- |
(3,315 |
) |
(2,545 |
) |
Network, impairment |
|
|
(113 |
) |
- |
|
Total Network expenses |
- |
- |
(6,040 |
) |
(4,799 |
) |
|
|
|
|
|
Total |
74,311 |
88,129 |
19,941 |
|
27,574 |
|
4. Beginning in the first
quarter of 2020, portfolio revenue consisted of individual sales
from Tucows’ surname portfolio following the sale of the Company’s
remaining domain name portfolio in the fourth quarter of 2019.
“The third quarter was once again demonstrative of the
consistency and cash generating ability of the Tucows business,”
said Elliot Noss, President and Chief Executive Officer, Tucows
Inc. “Revenue and gross margin from our Domains and Ting Internet
businesses, excluding the impact of a large bulk domains sale from
our Domains Portfolio in the third quarter of last year, increased
2% and 10% year over year, respectively.”
“Our Domains business once again saw strong transaction
activity, although softening from the first two quarters of this
year, as micro- and small-sized businesses and start-ups continued
to establish a web presence for the first time amid the pandemic,
while we continued to benefit from our focus on the quality of our
customer base for gross margin contribution. In our Mobile Services
business, we generated our first fees under our new MSE agreement
with DISH and we look forward to increasing that revenue in the
future as DISH adds customers under the Ting Mobile brand and we
migrate DISH’s Boost customers to the MSE platform. In the Ting
Internet business, we achieved another record quarter for capital
expenditure on the network, as we continued to add passed
addresses, serviceable addresses and new customers, and grow
revenue and gross margin.”
Financial Results Net revenue for
the third quarter of 2020 was $74.3 million, a decrease of 16% from
$88.1 million for the third quarter of 2019. The majority of the
decrease was due to the absence of Ting Mobile MVNO revenue for
approximately two months of the third quarter of 2020 following the
Company’s sale of its Ting Mobile customer relationships to DISH
and the related earn out being recognized as Other Income. The
decrease was also due to a $1.9 million bulk domain sale from the
Domains Portfolio business in the third quarter of 2019 that was
not repeated in the third quarter of 2020 as the Company exited its
Portfolio business at the end of 2019. Excluding the Mobile
Services business, as well as the impact of the bulk Domains sale
in the third quarter of 2019, net revenue for the combined Domains
and Ting Internet businesses for the third quarter of 2020
increased 2% year over year.
Gross profit for the third quarter of 2020 was $19.9 million, a
decrease of 28% from $27.6 million for the third quarter of 2019.
The decrease in gross profit is attributable to the same factors as
the decline in revenue. Excluding the Mobile Services business, as
well as the impact of the bulk Domains sale in the third quarter of
2019, gross margin for the combined Domains and Ting Internet
businesses for the third quarter of 2020 increased 10% year over
year.
Net income for the third quarter of 2020 was $0.7 million, or
$0.07 per share, compared with $4.2 million, or $0.40 per share.
Net income was impacted by the one-time $3.5 million non-cash
write-down of certain assets related to the sale of the Ting Mobile
customer relationships to DISH, which was netted from the $4.6
million Gain on Sale of Ting Customer Assets under Other Income.
Excluding the after-tax impact of the write-down, net income would
have been $3.4 million, or $0.33 per share, down 19% year over
year.
Adjusted EBITDA1 for the third quarter of 2020 was $13.3 million
compared with $14.8 million for the third quarter of 2019.
Excluding the impact of an outsized Portfolio bulk domain name sale
in the third quarter of 2019, Adjusted EBITDA grew 3%.
Cash and cash equivalents at the end of the third quarter of
2020 was $10.2 million compared with $8.9 million at the end of the
second quarter of 2020 and $12.0 million at the end of the third
quarter of 2019.
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, loss on disposal of Ting Mobile customer assets,
gains and losses from unrealized foreign currency transactions and
infrequently occurring items, 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 net income to adjusted EBITDA
(dollars in thousands):
|
3 months ended September 30 |
9 months ended September 30 |
|
2020 (Unaudited) |
2019 (Unaudited) |
2020 (Unaudited) |
2019 (Unaudited) |
Net income for the period |
716 |
|
4,205 |
|
3,707 |
|
9,620 |
|
Depreciation of property and equipment |
3,110 |
|
2,348 |
|
9,255 |
|
6,445 |
|
Impairment of property and equipment |
113 |
|
- |
|
1,638 |
|
- |
|
Loss on disposition of property and equipment |
- |
|
73 |
|
- |
|
73 |
|
Amortization of intangible assets |
2,645 |
|
2,858 |
|
8,776 |
|
7,463 |
|
Impairment of definite life intangible assets |
- |
|
- |
|
1,431 |
|
- |
|
Disposal of Ting Mobile customer assets |
3,513 |
|
- |
|
3,513 |
|
- |
|
Interest expense, net |
760 |
|
1,263 |
|
2,756 |
|
3,549 |
|
Accretion of contingent consideration |
86 |
|
- |
|
258 |
|
- |
|
Provision for income taxes |
840 |
|
3,133 |
|
2,390 |
|
6,209 |
|
Stock-based compensation |
1,016 |
|
830 |
|
2,664 |
|
2,040 |
|
Unrealized loss (gain) on change in fair value of forward
contracts |
(175 |
) |
(16 |
) |
(263 |
) |
(204 |
) |
Unrealized loss (gain) on foreign exchange revaluation of foreign
denominated monetary assets and liabilities |
81 |
|
88 |
|
479 |
|
(402 |
) |
Acquisition and transition costs* |
565 |
|
50 |
|
1,520 |
|
956 |
|
|
|
|
|
|
Adjusted EBITDA |
13,270 |
|
14,832 |
|
38,124 |
|
35,749 |
|
*Acquisition and other costs represent transaction-related
expenses, transitional expenses, such as duplicative
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, November 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 five days, until
Tuesday, November 10, 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,
November 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 network access, mobile technology
services, domain names 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 25 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).
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.
|
|
|
|
|
Tucows Inc. |
September
30, |
December
31, |
|
Consolidated Balance Sheets |
2020 |
|
2019 |
|
(Dollar amounts in thousands of U.S. dollars) |
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
$ |
10,155 |
|
$ |
20,393 |
|
Accounts
receivable |
|
12,623 |
|
|
14,564 |
|
Inventory |
|
1,139 |
|
|
3,457 |
|
Prepaid
expenses and deposits |
|
13,703 |
|
|
13,478 |
|
Derivative
instrument asset, current portion |
|
2,402 |
|
|
731 |
|
Prepaid
domain name registry and ancillary services fees, current
portion |
|
95,694 |
|
|
91,252 |
|
Income taxes
recoverable |
|
3,553 |
|
|
1,800 |
|
Total
current assets |
|
139,269 |
|
|
145,675 |
|
|
|
|
|
|
Prepaid
domain name registry and ancillary services fees, long-term
portion |
|
17,546 |
|
|
17,915 |
|
Property and
equipment |
|
109,767 |
|
|
82,121 |
|
Right of use
operating lease asset |
|
11,625 |
|
|
11,335 |
|
Contract
costs |
|
359 |
|
|
1,400 |
|
Intangible
assets |
|
50,087 |
|
|
57,654 |
|
Goodwill |
|
116,270 |
|
|
109,818 |
|
Total
assets |
$ |
444,923 |
|
$ |
425,918 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
8,552 |
|
$ |
6,671 |
|
Accrued
liabilities |
|
9,525 |
|
|
9,373 |
|
Customer
deposits |
|
14,372 |
|
|
14,074 |
|
Derivative
instrument liability |
|
135 |
|
|
- |
|
Operating
lease liability, current portion |
|
1,692 |
|
|
1,413 |
|
Deferred
revenue, current portion |
|
128,569 |
|
|
123,101 |
|
Accreditation fees payable, current portion |
|
975 |
|
|
952 |
|
Income taxes
payable |
|
881 |
|
|
1,324 |
|
Total
current liabilities |
|
164,701 |
|
|
156,908 |
|
|
|
|
|
|
Derivative
instrument liability |
|
112 |
|
|
- |
|
Deferred
revenue, long-term portion |
|
25,661 |
|
|
26,202 |
|
Accreditation fees payable, long-term portion |
|
200 |
|
|
216 |
|
Operating
lease liability, long-term portion |
|
9,679 |
|
|
9,424 |
|
Loan
payable |
|
113,672 |
|
|
113,503 |
|
Other
long-term liability |
|
3,330 |
|
|
- |
|
Deferred tax
liability |
|
27,187 |
|
|
25,471 |
|
|
|
|
|
|
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; 10,593,514 shares
issued and outstanding as of September 30, 2020 and 10,585,159
shares issued and outstanding as of December 31, 2019 |
|
19,989 |
|
|
16,633 |
|
Additional
paid-in capital |
|
983 |
|
|
880 |
|
Retained
earnings |
|
78,038 |
|
|
76,208 |
|
Accumulated
other comprehensive income (loss) |
|
1,371 |
|
|
473 |
|
Total
stockholders' equity |
|
100,381 |
|
|
94,194 |
|
Total
liabilities and stockholders' equity |
$ |
444,923 |
|
$ |
425,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tucows Inc. |
|
Three months
ended September 30, |
|
Nine months
ended September 30, |
Consolidated Statements of Operations and Comprehensive
Income |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(Dollar amounts in thousands of U.S.
dollares) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
74,311 |
|
$ |
88,129 |
|
$ |
240,418 |
|
$ |
251,199 |
|
|
|
|
|
|
|
|
|
|
Cost of
revenues: |
|
|
|
|
|
|
|
|
Cost of
revenues |
|
48,330 |
|
|
55,756 |
|
|
153,308 |
|
|
162,561 |
|
Network
expenses (*) |
|
2,612 |
|
|
2,254 |
|
|
7,513 |
|
|
7,034 |
|
Depreciation
of property and equipment |
|
2,985 |
|
|
2,231 |
|
|
8,892 |
|
|
6,070 |
|
Amortization
of intangible assets |
|
330 |
|
|
314 |
|
|
1,010 |
|
|
802 |
|
Impairment
of property and equipment |
|
113 |
|
|
- |
|
|
1,638 |
|
|
- |
|
Total cost
of revenues |
|
54,370 |
|
|
60,555 |
|
|
172,361 |
|
|
176,467 |
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
19,941 |
|
|
27,574 |
|
|
68,057 |
|
|
74,732 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Sales and
marketing (*) |
|
8,318 |
|
|
8,769 |
|
|
26,521 |
|
|
26,366 |
|
Technical
operations and development (*) |
|
3,162 |
|
|
2,876 |
|
|
8,980 |
|
|
8,151 |
|
General and
administrative (*) |
|
4,868 |
|
|
4,574 |
|
|
15,074 |
|
|
13,818 |
|
Depreciation
of property and equipment |
|
125 |
|
|
117 |
|
|
363 |
|
|
375 |
|
Loss on
disposition of property and equipment |
|
- |
|
|
73 |
|
|
- |
|
|
73 |
|
Amortization
of intangible assets |
|
2,315 |
|
|
2,544 |
|
|
7,766 |
|
|
6,661 |
|
Impairment
of definite life intangible assets |
|
- |
|
|
- |
|
|
1,431 |
|
|
- |
|
Loss (gain)
on currency forward contracts |
|
(159 |
) |
|
20 |
|
|
(99 |
) |
|
(90 |
) |
Total
expenses |
|
18,629 |
|
|
18,973 |
|
|
60,036 |
|
|
55,354 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
1,312 |
|
|
8,601 |
|
|
8,021 |
|
|
19,378 |
|
|
|
|
|
|
|
|
|
|
Other income
(expenses): |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
(760 |
) |
|
(1,263 |
) |
|
(2,756 |
) |
|
(3,549 |
) |
Gain on sale
of Ting Customer Assets, net |
|
1,090 |
|
|
- |
|
|
1,090 |
|
|
- |
|
Other
income |
|
(86 |
) |
|
- |
|
|
(258 |
) |
|
- |
|
Total other
income (expenses) |
|
244 |
|
|
(1,263 |
) |
|
(1,924 |
) |
|
(3,549 |
) |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
1,556 |
|
|
7,338 |
|
|
6,097 |
|
|
15,829 |
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
840 |
|
|
3,133 |
|
|
2,390 |
|
|
6,209 |
|
Net income
for the period |
|
716 |
|
|
4,205 |
|
|
3,707 |
|
|
9,620 |
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income, net of tax |
|
|
|
|
|
|
|
|
Unrealized
income (loss) on hedging activities |
|
729 |
|
|
(175 |
) |
|
609 |
|
|
614 |
|
Net amount
reclassified to earnings |
|
46 |
|
|
26 |
|
|
289 |
|
|
167 |
|
Other
comprehensive income (loss) net of tax expense (income) of $230 and
($47) for the three months ended September 30, 2020 and September
30, 2019 and $261 and $250 for the six months ended September 30,
2020 and September 30, 2019 |
|
775 |
|
|
(149 |
) |
|
898 |
|
|
781 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax for the period |
$ |
1,491 |
|
$ |
4,056 |
|
$ |
4,605 |
|
$ |
10,401 |
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share |
$ |
0.07 |
|
$ |
0.40 |
|
$ |
0.35 |
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
Shares used
in computing basic earnings per common share |
|
10,577,731 |
|
|
10,626,754 |
|
|
10,585,785 |
|
|
10,639,544 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share |
$ |
0.07 |
|
$ |
0.39 |
|
$ |
0.35 |
|
$ |
0.89 |
|
|
|
|
|
|
|
|
|
|
Shares used
in computing diluted earnings per common share |
|
10,682,808 |
|
|
10,745,834 |
|
|
10,679,162 |
|
|
10,798,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
Stock-based compensation has been included in expenses as
follows: |
|
|
|
|
|
|
|
|
Network
expenses |
$ |
138 |
|
$ |
95 |
|
$ |
333 |
|
$ |
224 |
|
Sales and
marketing |
$ |
456 |
|
$ |
363 |
|
$ |
1,203 |
|
$ |
857 |
|
Technical
operations and development |
$ |
208 |
|
$ |
179 |
|
$ |
558 |
|
$ |
428 |
|
General and
administrative |
$ |
214 |
|
$ |
193 |
|
$ |
570 |
|
$ |
531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tucows Inc. |
|
Three months
ended September 30, |
|
Nine months
ended September 30, |
Consolidated Statements of Cash Flows |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(Dollar amounts in thousands of U.S. dollars) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Cash
provided by: |
|
|
|
|
|
|
|
|
Operating
activities: |
|
|
|
|
|
|
|
|
Net income for the period |
$ |
716 |
|
$ |
4,205 |
|
$ |
3,707 |
|
$ |
9,620 |
|
|
|
|
|
|
|
|
|
|
Items not
involving cash: |
|
|
|
|
|
|
|
|
Depreciation
of property and equipment |
|
3,110 |
|
|
2,348 |
|
|
9,255 |
|
|
6,445 |
|
Loss on
write off/impairment of property and equipment |
|
113 |
|
|
120 |
|
|
1,638 |
|
|
142 |
|
Amortization
of debt discount and issuance costs |
|
68 |
|
|
64 |
|
|
202 |
|
|
232 |
|
Amortization
of intangible assets |
|
2,645 |
|
|
2,858 |
|
|
8,776 |
|
|
7,463 |
|
Net
amortization contract costs |
|
(15 |
) |
|
(61 |
) |
|
109 |
|
|
(8 |
) |
Accretion of
contingent consideration |
|
86 |
|
|
- |
|
|
258 |
|
|
- |
|
Impairment
of definite life intangible asset |
|
- |
|
|
- |
|
|
1,431 |
|
|
- |
|
Foreign
exchange impact of impairment of definite life intangible
asset |
|
- |
|
|
- |
|
|
223 |
|
|
- |
|
Deferred
income taxes (recovery) |
|
180 |
|
|
(170 |
) |
|
(927 |
) |
|
1,741 |
|
Excess tax
benefits on share-based compensation expense |
|
(164 |
) |
|
(53 |
) |
|
(508 |
) |
|
(790 |
) |
Net Right of
use operating assets/Operating lease liability |
|
137 |
|
|
(54 |
) |
|
249 |
|
|
(5 |
) |
Loss on
disposal of domain names |
|
- |
|
|
66 |
|
|
15 |
|
|
72 |
|
Loss (gain)
on change in the fair value of forward contracts |
|
(175 |
) |
|
(16 |
) |
|
(263 |
) |
|
(204 |
) |
Disposal of
Ting Mobile customer assets |
|
3,513 |
|
|
- |
|
|
3,513 |
|
|
- |
|
Stock-based
compensation |
|
1,016 |
|
|
830 |
|
|
2,664 |
|
|
2,040 |
|
Change in
non-cash operating working capital: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
118 |
|
|
(1,763 |
) |
|
2,670 |
|
|
(1,920 |
) |
Inventory |
|
(123 |
) |
|
(644 |
) |
|
1,681 |
|
|
(128 |
) |
Prepaid
expenses and deposits |
|
2,905 |
|
|
(329 |
) |
|
(317 |
) |
|
(3,243 |
) |
Prepaid
domain name registry and ancillary services fees |
|
984 |
|
|
3,819 |
|
|
(4,073 |
) |
|
3,754 |
|
Income taxes
recoverable |
|
(2,475 |
) |
|
1,576 |
|
|
(1,681 |
) |
|
(1,299 |
) |
Accounts
payable |
|
509 |
|
|
(2,394 |
) |
|
759 |
|
|
(2,778 |
) |
Accrued
liabilities |
|
(668 |
) |
|
3,687 |
|
|
(334 |
) |
|
7,274 |
|
Customer
deposits |
|
69 |
|
|
1,394 |
|
|
463 |
|
|
873 |
|
Deferred
revenue |
|
(1,070 |
) |
|
(4,200 |
) |
|
4,927 |
|
|
(2,062 |
) |
Accreditation fees payable |
|
(47 |
) |
|
(68 |
) |
|
7 |
|
|
(34 |
) |
Net cash
provided by operating activities |
|
11,432 |
|
|
11,215 |
|
|
34,444 |
|
|
27,185 |
|
|
|
|
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
|
|
|
Proceeds
received on exercise of stock options |
|
632 |
|
|
118 |
|
|
678 |
|
|
312 |
|
Payment of
tax obligations resulting from net exercise of stock options |
|
(132 |
) |
|
(20 |
) |
|
(479 |
) |
|
(544 |
) |
Repurchase
of common stock |
|
- |
|
|
(4,986 |
) |
|
(3,281 |
) |
|
(4,986 |
) |
Proceeds
received on loan payable |
|
- |
|
|
5,000 |
|
|
- |
|
|
45,371 |
|
Repayment of
loan payable |
|
- |
|
|
3 |
|
|
- |
|
|
(4,600 |
) |
Payment of
loan payable costs |
|
- |
|
|
2 |
|
|
(32 |
) |
|
(639 |
) |
Net cash
(used in) provided by financing activities |
|
500 |
|
|
117 |
|
|
(3,114 |
) |
|
34,914 |
|
|
|
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
|
|
|
|
Additions to
property and equipment |
|
(10,636 |
) |
|
(10,308 |
) |
|
(32,729 |
) |
|
(31,157 |
) |
Acquisition
of Cedar Holdings Group (net of cash of $66) |
|
- |
|
|
- |
|
|
(8,770 |
) |
|
- |
|
Acquisition
of Ascio Technologies (net of cash of $1) |
|
- |
|
|
- |
|
|
- |
|
|
(28,024 |
) |
Acquisition
of intangible assets |
|
- |
|
|
(1,038 |
) |
|
(69 |
) |
|
(3,566 |
) |
Net cash
used in investing activities |
|
(10,636 |
) |
|
(11,346 |
) |
|
(41,568 |
) |
|
(62,747 |
) |
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents |
|
1,296 |
|
|
(14 |
) |
|
(10,238 |
) |
|
(648 |
) |
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, beginning of period |
|
8,859 |
|
|
12,003 |
|
|
20,393 |
|
|
12,637 |
|
Cash and
cash equivalents, end of period |
$ |
10,155 |
|
$ |
11,989 |
|
$ |
10,155 |
|
$ |
11,989 |
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
$ |
635 |
|
$ |
1,267 |
|
$ |
2,638 |
|
$ |
3,561 |
|
Income taxes paid, net |
$ |
3,249 |
|
$ |
1,959 |
|
$ |
5,449 |
|
$ |
6,123 |
|
|
|
|
|
|
|
|
|
|
Supplementary disclosure of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Property and equipment acquired during the period not yet paid
for |
$ |
1,697 |
|
$ |
991 |
|
$ |
1,697 |
|
$ |
991 |
|
Fair value of shares issued for acquisition of Cedar Holdings
Group |
$ |
- |
|
$ |
- |
|
$ |
2,000 |
|
$ |
- |
|
Fair value of contingent consideration for acquisition of Cedar
Holdings Group |
$ |
- |
|
$ |
- |
|
$ |
3,072 |
|
$ |
- |
|
Acquisition of intangible assets transferred from other assets |
$ |
- |
|
$ |
2,501 |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tucows Inc. |
|
Three months
ended September 30, |
|
Nine months
ended September 30, |
Reconciliation of Net income to Adjusted
EBITDA |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
(Dollar amounts in thousands of U.S. dollars) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Net income for the period |
$ |
716 |
|
$ |
4,205 |
|
$ |
3,707 |
|
$ |
9,620 |
|
Depreciation
of property and equipment |
|
3,110 |
|
|
2,348 |
|
|
9,255 |
|
|
6,445 |
|
Impairment
of property and equipment |
|
113 |
|
|
- |
|
|
1,638 |
|
|
- |
|
Loss on
disposiiton of property and equipment |
|
- |
|
|
73 |
|
|
- |
|
|
73 |
|
Amortization
of intangible assets |
|
2,645 |
|
|
2,858 |
|
|
8,776 |
|
|
7,463 |
|
Disposal of
Ting Mobile customer assets |
|
3,513 |
|
|
- |
|
|
3,513 |
|
|
- |
|
Impairment
of definite life intangible asset |
|
- |
|
|
- |
|
|
1,431 |
|
|
- |
|
Interest
expense, net |
|
760 |
|
|
1,263 |
|
|
2,756 |
|
|
3,549 |
|
Accretion of
contingent consideration |
|
86 |
|
|
- |
|
|
258 |
|
|
- |
|
Provision
for income taxes |
|
840 |
|
|
3,133 |
|
|
2,390 |
|
|
6,209 |
|
Stock-based
compensation |
|
1,016 |
|
|
830 |
|
|
2,664 |
|
|
2,040 |
|
Unrealized
loss (gain) on change in fair value of forward contracts |
|
(175 |
) |
|
(16 |
) |
|
(263 |
) |
|
(204 |
) |
Unrealized
loss (gain) on foreign exchange revaluation of foreign denominated
monetary assets and liabilities |
|
81 |
|
|
88 |
|
|
479 |
|
|
(402 |
) |
Acquisition
and other costs1 |
|
565 |
|
|
50 |
|
|
1,520 |
|
|
956 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
13,270 |
|
$ |
14,832 |
|
$ |
38,124 |
|
$ |
35,749 |
|
|
|
|
|
|
|
|
|
|
1Acquisition and other
costs represents transaction-related expenses, transitional
expenses, such as duplicative 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. |
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